EXECUTION COPY
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                             BUILDING LOAN AGREEMENT
                          Dated as of August 24th, 1999

                                      among

                           AH BATTERY PARK OWNER, LLC

                                as the Borrower,

                     THE FINANCIAL INSTITUTIONS NAMED HEREIN
                                 as the Lenders

                                       and

                           KEY CORPORATE CAPITAL, INC.
                                  as the Agent


                            AMOUNT OF BUILDING LOAN:
               THIRTY SIX MILLION FOUR HUNDRED FIFTY SIX THOUSAND
                      FOUR HUNDRED FOUR AND 00/100 DOLLARS
                               ($36,456,404.00)


                              LOCATION OF PROPERTY:

                              455 North End Avenue
                         North Residential Neighborhood
                                Battery Park City
                               New York, New York

                              SECTION:1
                              BLOCK:16
                              LOT:P/03, Site 20B


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<PAGE>




                                TABLE OF CONTENTS
                                -----------------

ARTICLE                                                                   PAGE
-------                                                                   ----

ARTICLE I

      PARTICULAR TERMS; DEFINITIONS..........................................3
      Section 1.1    Definitions.............................................3
      Section 1.2    Singular and Plural....................................16

ARTICLE II(A)

      LOAN FACILITY.........................................................16
      Section 2A.1   Loans..................................................16
      Section 2A.2   Notes..................................................17
      Section 2A.3   Interest Rate..........................................17
      Section 2A.4   Payment of Interest....................................18
      Section 2A.5   Payment of Principal...................................18
      Section 2A.6   Prepayment.............................................18
      Section 2A.7   Procedure for Payment..................................18
      Section 2A.8   Indemnification........................................19
      Section 2A.9   Reimbursement..........................................19
      Section 2A.10  Changes................................................20
      Section 2A.11  Extension Periods......................................21
      Section 2A.12  Lenders' Rights........................................22
      Section 2A.13  Acceleration of Maturity...............................22
      Section 2A.14  Costs of Collection....................................23
      Section 2A.15  Late Charges...........................................23

ARTICLE II(B)

      LOAN DISBURSEMENTS/REQUIRED EQUITY....................................23
      Section 2B.1   Procedure for Loan Borrowing and Interest Rate
                     Election...............................................23
      Section 2B.2   Amount of Disbursements for Hard Costs.................24
      Section 2B.3   Stored Materials.......................................25
      Section 2B.4   Intentionally Omitted..................................26
      Section 2B.5   Intentionally Omitted .................................26
      Section 2B.6   Intentionally Omitted..................................26
      Section 2B.7   Funding Limitations....................................26
      Section 2B.7(A)Loan Balancing.........................................27
      Section 2B.8   Retainage..............................................27
      Section 2B.9   Place of Disbursement..................................28
      Section 2B.10  Intentionally Omitted..................................28
      Section 2B.11  Expenses and Disbursements Secured by Loan Documents...28
      Section 2B.12  Other Limitations and Requirements.....................29


                                       i
<PAGE>

                                TABLE OF CONTENTS
                                -----------------

ARTICLE                                                                   PAGE
-------                                                                   ----

      Section 2B.13  Contract Verification..................................29
      Section 2B.14  Budget Reallocations...................................29
      Section 2B.15  Required Equity........................................30
      Section 2B.16  Pro Rata; Commitments..................................31
      Section 2B.17  Sharing of Setoffs.....................................31

ARTICLE III

      REPRESENTATIONS AND WARRANTIES OF BORROWER............................32
      Section 3.1    Representations and Warranties of Borrower.............32

ARTICLE IV

      COVENANTS OF BORROWER.................................................37
      Section 4.1    Affirmative Covenants of Borrower......................37
      Section 4.2    Negative Covenants of Borrower.........................45

ARTICLE V

      EVENTS OF DEFAULT.....................................................48
      Section 5.1    Events of Default......................................48
      Section 5.2    Grace Periods..........................................52
      Section 5.3    Rights of Agent and Lenders............................52
      Section 5.4    Limited Recourse Obligations...........................54

ARTICLE VI

      CONDITIONS TO LENDERS'OBLIGATIONS TO MAKE LOAN DISBURSEMENTS..........54
      Section 6.1    Conditions Precedent to First Disbursement.............54
      Section 6.2    Documents To Be Delivered..............................54
      Section 6.3    Conditions to Funding of Advances......................60
      Section 6.4    Last Disbursement of Hard Costs........................61

ARTICLE VII

      THE AGENT.............................................................63
      Section 7.1    Appointment; Powers and Immunities.....................63
      Section 7.2    Limitations on Agent...................................64
      Section 7.3    Reliance by Agent......................................67
      Section 7.4    Defaults...............................................68
      Section 7.5    Rights of Agent as a Lender............................68



                                       ii
<PAGE>

                                TABLE OF CONTENTS
                                -----------------

ARTICLE                                                                   PAGE
-------                                                                   ----

      Section 7.6    Indemnification........................................68
      Section 7.7    Consequential Damages..................................69
      Section 7.8    Payee of Note Treated as Owner.........................69
      Section 7.9    Lenders' Knowledge; Nonreliance on Agent and Other
                     Lenders................................................69
      Section 7.10   Failure to Act.........................................70
      Section 7.11   Resignation or Removal of Agent........................70
      Section 7.12   Reliance by Borrower...................................70
      Section 7.13   Apportionment of Payments..............................70
      Section 7.14   Successors and Assigns.................................71

ARTICLE VIII

      GENERAL PROVISIONS....................................................73
      Section 8.1    No Waiver; Modifications in Writing....................73
      Section 8.2    Agent's Approval.......................................73
      Section 8.3    Standing...............................................73
      Section 8.4    Notices................................................73
      Section 8.5    Amendments.............................................75
      Section 8.6    Assignment.............................................75
      Section 8.7    Governing Law..........................................75
      Section 8.8    Severability of Provisions.............................75
      Section 8.9    Headings...............................................75
      Section 8.10   Waiver of Trial by Jury................................76
      Section 8.11   Submission to Jurisdiction; Service of Process.........76
      Section 8.12   Lender's Remedies Cumulative...........................76
      Section 8.13   Counterparts...........................................77
      Section 8.14   Trust Fund.............................................77



                                      iii
<PAGE>


                                      ANNEX
                                      -----
Annex I     -     List of the Lenders


                                    EXHIBITS
                                    --------
Exhibit A   -     Legal Description

Exhibit B   -     Permitted Encumbrances

Exhibit C   -     Affidavit Pursuant to Section 22
                  of the Lien Law of the State of New York

Exhibit D   -     Architect's Certificate

Exhibit E   -     Developer's Certificate

Exhibit F   -     Occupancy Schedule/Pro Forma Rentals





                                       iv
<PAGE>

      THIS BUILDING LOAN AGREEMENT (this  "AGREEMENT") dated as of this 24th day
of August,  1999,  by and among AH BATTERY  PARK  OWNER,  LLC,  an Ohio  limited
liability company, with an office at c/o Alliance Holdings, Inc., 723 Electronic
Drive, Suite 300, Horsham,  Pennsylvania  19044 (the "BORROWER"),  Key Corporate
Capital  Inc., a Michigan  corporation  having an  administrative  office at 127
Public Square, Cleveland, Ohio 44114-1306 ("KCCI "), as agent (in such capacity,
the "AGENT"), and the financial institutions listed in Annex I hereto, including
KCCI, and each other financial  institution which has been or may be assigned an
interest  herein  pursuant to Section 7.14,  as evidenced by an  Assignment  and
Acceptance Agreement (each, a "LENDER" and, collectively, the "LENDERS").

                             W I T N E S S E T H:

      WHEREAS,  Borrower is the actual, beneficial and record ground lessee of a
certain  tract of land  consisting  of  approximately  .449 acres located in the
Borough of  Manhattan,  City and State of New York,  which is more  particularly
described in EXHIBIT A attached hereto and made a part hereof (the "LAND");

      WHEREAS,  On or about June 30,  1999,  Borrower  executed  the  commitment
letter (the "Commitment Letter") of the Lenders to make loans to finance various
construction and non-construction  costs relative to Borrower's development of a
218 unit independent  living/assisted living complex to be known as The Hallmark
at Battery Park City  containing a floor area of  approximately  219,615  square
feet of "floor  area" (as such term is defined in the Zoning  Resolution  of the
City of New York) to be built on the Land in accordance with this Agreement, and
in compliance with the Plans and all  Requirements,  as further described herein
under the  definition  of  "IMPROVEMENTS",  subject  to all the  conditions  and
requirements  of said  Commitment  Letter,  all of  which  are  incorporated  by
reference  herein,  provided,  however,  in the event of a conflict  between the
terms of the  Commitment  Letter and the terms of this  Agreement  or any of the
other Loan  Documents,  the terms of this  Agreement  and/or the Loan  Documents
shall control in all cases.

      WHEREAS,  Pursuant to the Commitment Letter, the financing will consist of
two  components;  (i) the Building Loan  (hereinafter  defined) in the amount of
$36,456,404.00,  which will be advanced ratably by the Lenders from time to time
in  accordance  with the  terms of this  Agreement,  and (ii) the Soft Cost Loan
(hereinafter  defined) in the amount of  $12,668,596.00,  which will be advanced
ratably by the Lenders to Borrower, upon and subject to the terms and conditions
set forth in that certain Soft Cost Loan Agreement of even date herewith between
Lender to Borrower (the "SOFT COST LOAN AGREEMENT").

      WHEREAS, The Building Loan will be advanced to Borrower for and on account
of Hard  Costs (as  defined  below) and the Soft Cost Loan will be  advanced  to
Borrower on account of Soft Costs (as defined below).

      WHEREAS,  This Agreement provides for the funding of Advances (hereinafter
defined)  of the  Building  Loan for Hard  Costs  and for the  repayment  of the
Building  Loan,  all upon and  subject  to the  terms and  conditions  set forth
herein.


<PAGE>


      WHEREAS,  The Building Loan is evidenced by one or more promissory  notes,
of even date herewith, in the aggregate original principal amount of $36,456,404
(individually and collectively, the "BUILDING LOAN NOTE") and the Soft Cost Loan
is evidenced by one or more  promissory  notes,  of even date  herewith,  in the
aggregate  original   principal  amount  of  $12,668,596.00   (individually  and
collectively,  the "SOFT COST NOTE").  The Building Loan Note and this Agreement
are  secured by a Building  Loan  Leasehold  Mortgage,  Security  Agreement  and
Assignment of Rents (the "BUILDING LOAN MORTGAGE"),  of even date herewith, made
by  Borrower  in favor of the  Lenders,  and  recorded in the Office of the City
Register,  New York County, (the "OFFICIAL RECORDS"),  covering the Property and
by other collateral as described herein and in the Commitment  Letter.  The Soft
Cost Note and the Soft Cost Loan  Agreement are secured by a Soft Cost Leasehold
Mortgage, Security Agreement and Assignment of Rents (the "SOFT COST MORTGAGE"),
of even date herewith, made by Borrower in favor of the Lenders, recorded in the
Official Records,  covering the Property and by other collateral as described in
the Soft Cost Loan Agreement and in the Commitment Letter.

      WHEREAS,   Completion   (hereinafter   defined)  of  construction  of  the
Improvements  and the payment and  performance by Borrower of all obligations of
Borrower under this Agreement and otherwise in connection with the Building Loan
and the Soft Cost Loan and the payment of all sums due with  respect to both the
Building  Loan  and the  Soft  Cost  Loan  are to be  guaranteed  by the  entity
identified  under  the  definition  of  Guarantor  below,  who  is  executing  a
Completion Guaranty, a Payment Guaranty and an Operating Deficit Guaranty, to be
dated of even date  herewith  (collectively,  the  "GUARANTY"),  in favor of the
Lenders.

      WHEREAS,  In  connection  with the  Building  Loan and the Soft Cost Loan,
Borrower and Guarantor  are  executing in favor of the Lenders an  Environmental
Indemnity  Agreement,  to be dated of even  date  herewith  (the  "ENVIRONMENTAL
INDEMNITY").

      WHEREAS,  Borrower and Developer  (hereinafter defined) have also executed
and  delivered to the Lenders in respect of the Building  Loan and the Soft Cost
Loan, the Assignment of Contracts, Permits, Licenses and Approvals, of even date
herewith,  relating  to the Plans,  the  General  Contract  and the  Architect=s
Agreement  (all as defined  below),  and certain other  contracts and rights and
interests of Borrower and Developer,  as Borrower's  agent,  with respect to the
construction  and  operation of the Project  (the  "ASSIGNMENT  OF  CONTRACTS"),
including,  without  limitation,  all contracts,  rights and interests described
therein.

      WHEREAS,  The  Commitment  Letter,  this  Agreement,  the Soft  Cost  Loan
Agreement,  the  Building  Loan Note,  the Soft Cost  Note,  the  Building  Loan
Mortgage,  the Soft Cost  Mortgage,  the Security  Agreement,  the UCC Financing
Statements,  the  Assignment  of  Contracts,  the  Guaranty,  the  Environmental
Indemnity  and all other  documents  evidencing or securing the Building Loan or
the Soft Cost Loan are referred to herein as the "LOAN DOCUMENTS."

      WHEREAS,  The Lenders have advised Borrower that, subject to the terms and
conditions of this Agreement,  and based upon the  representations,  warranties,
covenants and undertakings of Borrower herein contained, the Lenders are willing
to make such  Advances  of the Loan to  Borrower  on the  terms  and  conditions
hereinafter set forth.


                                       2
<PAGE>

      NOW,  THEREFORE,  in  consideration of the premises and for other good and
valuable   consideration,   the  receipt  and   adequacy  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                          PARTICULAR TERMS; DEFINITIONS
                          -----------------------------

      Section 1.1 Definitions. For all purposes of this Agreement, the following
terms,  except as otherwise  expressly  provided or unless the context  requires
otherwise, shall have the respective meanings hereinafter specified:

"ADVANCE"                 -   Shall have the meaning set forth in Section 2A.1.

"AFFILIATE"               -   With respect to any person  (including any person,
                              corporation,     limited    liability     company,
                              partnership or other business  organization),  any
                              person which directly or indirectly  controls,  or
                              is controlled  by, or is under common control with
                              such person.  For the purposes of this definition,
                              however,  the parties  acknowledge  that Developer
                              and  Guarantor  are not  currently  Affiliates  of
                              Borrower.

"AGENCY FEE"              -   A fee equal to $10,000 per annum payable to Agent,
                              for its own  account,  with the first such payment
                              payable by Borrower to Agent on the Closing  Date,
                              with all  subsequent  payments  being  due on each
                              anniversary  thereof  through the Maturity Date as
                              the same may be  extended  by the First  Extension
                              Period  and the  Second  Extension  Period  (which
                              Agency Fee shall be prorated for partial years and
                              refunded as applicable).

"AGENT"                   -   Key  Corporate  Capital  Inc., a national  banking
                              association and its successor  appointed  pursuant
                              to Section 7.11.

"AGENT'S INSPECTING
CONSULTANT"               -   Corbett & Chiusano Associates, Inc.

"AGENT'S INSPECTING
CONSULTANT FEES"          -   All reasonable fees and  disbursements  of Agent's
                              Inspecting Consultant.

"AGENT'S COUNSEL"         -   Jones,  Day,  Reavis & Pogue,  and/or  such  other
                              counsel as Agent may select.

"AGENT'S COUNSEL FEES"    -   All reasonable fees and  disbursements  of Agent's
                              Counsel.


                                       3
<PAGE>

"AGGREGATE CHANGE ORDER
 AMOUNT"                  -   $1,000,000.

"APPLICABLE LIBOR RATE"   -   Shall have the meaning set forth in the Note.

"APPRAISAL"               -   A written appraisal  report,  prepared in response
                              to  an  engagement  letter  issued  by  Agent,  at
                              Borrower's  sole cost and expense,  in  accordance
                              with  the  Uniform   Standards   of   Professional
                              Appraisal Practice applicable to Federally Related
                              Transactions  as set out in Appendix A to the real
                              estate appraisal regulations adopted by the Office
                              of the Comptroller of the Currency pursuant to the
                              Financial   Institutions   Reform,   Recovery  and
                              Enforcement Act of 1989 ("FIRREA")  (Sub-part C of
                              12   C.F.R.   34)  by  an   appraiser   reasonably
                              satisfactory  to the Lenders who shall  deliver to
                              the Lenders its written authorization for reliance
                              by the Lenders on the Appraisal.

"APPROVED LEASES"         -   Collectively,   all  leases  or  other  rental  or
                              occupancy  agreements  of  the  Improvements  that
                              comport with the  requirements  of Section  4.2(i)
                              hereof  and the  Ground  Lease,  which  have  been
                              approved  by Agent and the Ground  Lessor  (unless
                              such  approval  is not  required  pursuant to such
                              Section   4.2(i)   or   the   Ground   Lease,   as
                              applicable), and are fully executed.

"ARCHITECT'S AGREEMENT"   -   The architect's agreement,  dated December 8, 1998
                              entered into by Developer  on  Borrower's  behalf,
                              and Borrower's Architect.

"ASSIGNMENT AND ACCEPTANCE
 AGREEMENT"               -   An Assignment  and  Acceptance  Agreement  entered
                              into by KCCI or another Lender and an Assignee (as
                              defined in Section  7.14),  pursuant  to which the
                              Assignee  shall acquire all or a portion of KCCI's
                              or such other Lender's Commitment and shall become
                              a Lender party to this Agreement.

"ASSIGNMENT OF CONTRACTS" -   The Assignment of Contracts, Permits, Licenses and
                              Approvals  dated the date  hereof made by Borrower
                              and Developer to Agent for the ratable  benefit of
                              Lenders.

"BANC ONE FINANCING"      -   Shall mean the equity financing obtained by Member
                              and/or  Alliance  Holdings,  Inc.  from  Banc  One
                              Capital   Partners  IV,  Ltd.,   or  an  affiliate
                              thereof, as more particularly described in Section
                              2B.15 hereof.


                                       4
<PAGE>

"BANKRUPTCY CODE"         -   The United States Bankruptcy Code, 11 U.S.C. " 101
                              et. seq.,  as amended  from time to time,  and all
                              regulations  promulgated  thereunder  and rules of
                              practice and procedure applicable thereto.

"BORROWER"                -   Shall have the meaning  set forth in the  preamble
                              hereto.

"BORROWER'S ARCHITECT"    -   Schuman Lichtenstein Clamon Efron, Architects

"BUDGET"                  -   Shall mean the Final Budget.

"BUILDING LOAN"           -   Shall have the meaning set forth in Section
                              2A.1(a).

"BUILDING LOAN AGREEMENT" -   Shall have the meaning  set forth in the  Recitals
                              hereto.

"BUILDING LOAN MORTGAGE"  -   Shall have the meaning  set forth in the  Recitals
                              hereto.

"BUILDING LOAN NOTE"      -   Shall have the meaning  set forth in the  Recitals
                              hereto.

"CHANGE ORDER"            -   Any amendment or  modification  to the Plans,  the
                              General Contract or any Major Contract.

"CHANGE ORDER AMOUNT"     -   $100,000.

"CLOSING DATE"            -   August 25, 1999.

"COLLATERAL"              -   The  Premises,  the Project and all  property  and
                              interests  in  property  (now  owned or  hereafter
                              acquired)  upon which a Lien is granted  under any
                              of the Loan Documents.

"COMMITMENT"              -   Shall have the meaning set forth in Section 2B.16.

"COMMITMENT FEE"          -   The  aggregate  sum of  $368,437.50,  $184,219  of
                              which was previously paid by Borrower to KCCI, and
                              the remaining  $184,218.50  of which is payable to
                              Agent,  for its  own  account  or for the  ratable
                              benefit of the Lenders, on the Closing Date.

"COMPLETION" or
"COMPLETION OF THE
IMPROVEMENTS"             -   Shall  be  deemed  to  have   occurred   upon  the
                              occurrence  of  all  of  the  following:  (i)  the
                              Improvements comprising the Project shall be fully
                              paid  and 100%  complete  in  accordance  with the
                              Plans,  all  Requirements  and the requirements of
                              the Ground  Lease,  all as determined by Agent and
                              Agent's  Inspecting  Consultant in accordance with
                              the  procedure  set forth in Section  2B.2  below;
                              (ii)


                                       5
<PAGE>

                              all on-site and off-site improvements,  including,
                              without  limitation,   all  utility  services  and
                              fixtures and equipment  required for access to and
                              operation  of  the  Improvements   shall  be  100%
                              complete;   (iii)  a  temporary   certificate   of
                              occupancy  for the full use and  occupancy  of the
                              entire   Premises   has  been   issued  (it  being
                              expressly  understood  that Borrower shall proceed
                              as  expeditiously  as  possible  to secure a final
                              Certificate of Occupancy,  in any event within two
                              (2) years of issuance of the temporary certificate
                              of  occupancy)  or its  equivalent  issued  by the
                              applicable    governmental   authority   for   the
                              Improvements comprising the Project, and all other
                              reasonable  evidence  that  the  City of New  York
                              and/or  the  Battery  Park  City   Authority  have
                              acknowledged  the  completion of all work required
                              by it to  meet  all  legal  requirements  and  the
                              requirements    under   the   Ground   Lease,   as
                              applicable,  including,  without  limitation,  all
                              zoning and building requirements; (iv) all Permits
                              and Licenses,  if any,  required for the operation
                              of the Project as an  independent  living/assisted
                              living   complex   under  all   applicable   legal
                              requirements  have  been  issued;  (v)  all of the
                              requirements  set  forth  in  Section  6.4 of this
                              Agreement for the final disbursement of Hard Costs
                              shall have been satisfied; (vi) the opening of the
                              Project shall have been  scheduled to occur within
                              thirty (30) days.

"COMPLETION DATE"         -   The date that occurs eighteen (18) calendar months
                              after the Closing  Date,  subject to extension for
                              Force  Majeure  (it  being  expressly  understood,
                              however,  that  the  Maturity  Date  shall  not be
                              extended by reason of Force Majeure).

"COMPLETION GUARANTY"     -   The Completion Guaranty dated the date hereof made
                              by  Guarantor  in favor of Agent,  for the ratable
                              benefit of the Lenders.

"CONSTRUCTION
ADMINISTRATION FEE"       -   A fee equal to $25,000,  payable to Agent, for its
                              own account on the Closing Date.

"DEBT SERVICE
COVERAGE RATIO"           -   NOI,  less  the sum of (i)  five  percent  (5%) of
                              Project  Revenues,  and  (ii)  an  annual  capital
                              expenditure   reserve  equal  to  $250  per  unit,
                              divided by all  interest,  principal  amortization
                              and other payments due with respect to the


                                       6
<PAGE>

                              Loans  and any other  debt  (other  than  interest
                              payments pursuant to Mezzanine Financing permitted
                              hereunder)  of  Borrower   during  the  applicable
                              period.

"DEFAULT RATE"            -   Shall have the meaning  set forth in the Note.  In
                              no event  shall the  Interest  Rate or the Default
                              Rate exceed the maximum  interest  rate  permitted
                              under applicable law.

"DEVELOPER"               -   Shall mean  Brookdale  Living  Communities  of New
                              York - BPC Inc., a Delaware corporation.

"DEVELOPMENT AGREEMENT"   -   The Amended  and  Restated  Development  Agreement
                              made as of August 24, 1999 by Borrower,  as owner,
                              and Developer.

"DEVELOPMENT FEE"         -   The Development Fee set forth in the Budget.

"DOMESTIC BUSINESS  DAY"  -   Any day other than a  Saturday  or Sunday or a day
                              when  commercial  banks are authorized or required
                              by law to close in Cleveland, Ohio.

"DRAW REQUEST"            -   A written  statement of Borrower on a Standard AIA
                              Form  G702  and  G703   setting   forth  the  Loan
                              disbursement   sought  by   Borrower   under  this
                              Agreement,  which shall  constitute an affirmation
                              by   Borrower   that   the   representations   and
                              warranties  of Article III remain true and correct
                              as of the date  thereof and will be so on the date
                              of  disbursement,  which draw request shall be (i)
                              signed by  Borrower,  or by Developer on behalf of
                              Borrower,   approved  in  writing  by   Borrower's
                              Architect,   all  subject  to   confirmation   and
                              approval   by   Agent   and   Agent's   Inspecting
                              Consultant,  and (ii)  accompanied by lien waivers
                              or releases  as  required by Sections  6.3 and 6.4
                              below.

"ENGINEER"                -   Schuman Lichtenstein Clamon Efron, Architects


"ENGINEER'S AGREEMENT"    -   The engineer's agreement,  dated December 8, 1998,
                              entered into by Developer  on  Borrower's  behalf,
                              and the Engineer.

"ENVIRONMENTAL INDEMNITY
 AGREEMENT"               -   The  Environmental  Indemnity  Agreement dated the
                              date  hereof  made by Borrower  and  Guarantor  in
                              favor of Agent for the ratable benefit of Lenders.


                                       7
<PAGE>

"EURODOLLAR BUSINESS DAY" -   Any  Domestic  Business  Day on  which  commercial
                              banks   are   open  for   international   business
                              (including dealings in dollar deposits) in London,
                              England.

"EVENT OF DEFAULT"        -   Shall  have the  meaning  set  forth in  Article V
                              hereof.

"FFE"                     -   Furniture,  fixtures and equipment  referred to in
                              the Budget.

"FACILITY SUMMARY REPORT" -   Shall  have  the  meaning  set  forth  in  Section
                              4.1(dd) hereof.

"FINAL BUDGET"            -   The budget delivered to, approved and initialed by
                              Agent on or before  Closing  Date,  as same may be
                              amended  from  time to  time  with  Agent's  prior
                              written   consent  in   accordance   with  Section
                              7.2(b)(iv)  or as line  items  within  same may be
                              reallocated in accordance with Section 2B.14.

"FINANCIAL STATEMENTS"    -   The financial statements of Borrower and Guarantor
                              heretofore  delivered to Agent in connection  with
                              the Loan, as supplemented from time to time.

"FORCE MAJEURE"           -   Delays in construction of the Improvements  caused
                              by or attributable to acts of God, unusual weather
                              conditions,  strikes,  lockouts or labor  disputes
                              (including  those  involving  Borrower if Borrower
                              has used all  reasonable  means  to  conclude  the
                              strike,   lockout  or  labor   dispute   short  of
                              conceding Borrower's position in the labor matter)
                              inability   to  obtain  an   adequate   supply  of
                              materials,  fuel,  water,  electricity,  labor  or
                              other  supplies,  casualty,  governmental  action,
                              accidents, breakage, repairs, or other conditions,
                              matters  or  events   which  are  not  within  the
                              reasonable    control   of   Borrower    and   not
                              attributable  to the bad faith of  Borrower or its
                              agents,  excluding  the lack of funds,  including,
                              without  limitation,  the lack of  funds  due to a
                              failure  to  perform  any  obligations  hereunder,
                              provided (i) the Budget, at all times,  remains in
                              balance,  or if same is not in  balance,  Borrower
                              and/or   Guarantors  have  complied  with  Section
                              2B.7(A)  hereof,   (ii)  Borrower  notifies  Agent
                              within  five  (5)  days of the  occurrence  of the
                              Force   Majeure   event  and  the  length  of  the
                              anticipated  delay,  but in no  event  shall  said
                              relief exceed  ninety (90) days in the  aggregate,
                              and (iii) Borrower has been granted similar relief
                              under the Ground  Lease and all  Requirements,  as
                              necessary.

"FORWARD TREASURY LOCK
AGREEMENT"                -   The  agreement,  dated  as  of  the  date  hereof,
                              between Borrower, as counterparty, and KCCI (which
                              shall name


                                       8
<PAGE>

                              Guarantor as credit support provider), or dated as
                              of  a  future  date,   between   Borrower   and/or
                              Guarantor,  as  counterparty,  and a  third  party
                              financial  institution  reasonably  acceptable  to
                              Agent,  as the case may be,  pursuant to which the
                              Interest  Rate   Protection   Facility   shall  be
                              purchased in accordance  with the  requirements of
                              Section   4.1(kk)   hereof,   it  being  expressly
                              understood that notwithstanding anything contained
                              herein  or in  any of the  other  Loan  Documents,
                              payments of additional  interest and other amounts
                              due  under the  Forward  Treasury  Lock  Agreement
                              shall be  secured by the Soft Cost  Mortgage,  the
                              Guaranties  and the other Loan  Documents  if, and
                              only to the extent  that,  KCCI and one or more of
                              the other  Lenders are the parties  providing  the
                              Interest Rate Protection Facility.

"GENERAL CONTRACT"        -   The general  contract,  dated  December  30, 1998,
                              entered  into  by  Borrower,  or by  Developer  on
                              Borrower's  behalf,  and  the  General  Contractor
                              providing for a maximum fixed price.

"GENERAL CONTRACTOR"      -   HRH Construction Corporation

"GOVERNMENTAL AUTHORITY"  -   The United States,  the City of New York, State of
                              New York and any  political  subdivision  thereof,
                              and any  agency,  department,  commission,  board,
                              bureau  or  instrumentality  of any of them  which
                              exercises  jurisdiction over Borrower,  any of the
                              Guarantors or the Premises.

"GROUND LEASE"            -   That certain Ground Lease,  dated as of August 24,
                              1999,  between  Battery  Park City  Authority,  as
                              Ground Lessor, and Borrower,  as Tenant,  pursuant
                              to which  Borrower holds the leasehold on the Land
                              and Improvements.

"GROUND LESSOR"           -   Battery Park City Authority.

"GUARANTY" OR "GUARANTIES"-   Shall mean the Payment  Guaranty,  the  Completion
                              Guaranty, the Operating Deficit Guaranty or any of
                              them.

"GUARANTOR"               -   Brookdale  Living  Communities,  Inc.,  a Delaware
                              corporation,   or  any  additional   guarantor  or
                              substitute   Guarantor   permitted  under  Section
                              4.2(m).

"HARD COSTS"              -   All   costs   that   constitute   "costs   of  the
                              improvement"  under  the  New  York  Lien  Law and
                              included in the Budget.


                                       9
<PAGE>

"IMPROVEMENTS"            -   An  assisted   living/independent  living  complex
                              containing    approximately    218    units    and
                              approximately  219,615 square feet of "floor area"
                              (as such term is defined in the Zoning  Resolution
                              of  the  City  of  New  York),  including  without
                              limitation all on-site and off-site  improvements,
                              including,   without   limitation,   all   utility
                              services and fixtures and  equipment  required for
                              access  to  and  operation  of the  complex  to be
                              constructed  on the  Land,  all of  which  is more
                              particularly described in the Plans.

"INITIAL CLOSING"         -   The date of the initial funding of the Loan.

"INITIAL ESTIMATED COST"  -   Shall mean $62,624,077, i.e. the maximum amount of
                              the  Loan  ($49,125,000)  plus the  amount  of the
                              Required Equity ($13,499,077).

"INTEREST RATE"           -   Shall mean the Prime Rate or Applicable LIBOR Rate
                              as provided in the Note.

"INTEREST RATE PROTECTION
FACILITY"                 -   Shall  mean the  interest  rate  protection  which
                              shall  be   purchased  in   accordance   with  the
                              requirements of Section 4.1(kk) hereof pursuant to
                              the Forward  Treasury Lock Agreement  (hereinafter
                              defined),  it being expressly  understood that all
                              amounts  that  may be due to KCCI  (or  any  other
                              Lender  who  shall  become a party to the  Forward
                              Treasury  Lock  Agreement)  shall be  secured on a
                              pari passu basis by the  Building  Loan  Mortgage,
                              the Soft Cost  Mortgage,  the  Guaranties  and the
                              other    Loan    Documents,    and    accordingly,
                              notwithstanding  the second priority nature of the
                              Soft Cost Mortgage, all recoveries pursuant to the
                              Building Loan Mortgage, the Soft Cost Mortgage and
                              the other Loan Documents shall be shared on a pari
                              passu  basis  among the Lenders who are parties to
                              this  Loan  Agreement  and  the  Lenders  who  are
                              parties to the Forward  Treasury Lock Agreement in
                              accordance  with their  relative  interests in the
                              Loan on the one hand and in the  Forward  Treasury
                              Lock  Agreement on the other;  it being  expressly
                              understood,    however,   that,    notwithstanding
                              anything  contained  herein or in any of the other
                              Loan Documents,  the additional interest and other
                              amounts that may be due to the party providing the
                              Interest Rate Protection Facility shall be secured
                              by the Soft Cost Mortgage,  the Guaranties and the
                              other  Loan  Documents  if, and only to the extent
                              that,  KCCI and one or more of the Lenders are the
                              parties  providing  the Interest  Rate  Protection
                              Facility.


                                       10
<PAGE>

"INTERMEDIATE THRESHOLD"  -   Shall  have  the  meaning  set  forth  in  Section
                              4.1(cc) hereof.

"LAND"                    -   Shall have the meaning  set forth in the  Recitals
                              hereto.

"LEASEHOLD ENTITY"        -   Shall  have  the  meaning  set  forth  in  Section
                              7.2(b)(ix) hereof.

"LENDER" or "LENDERS"     -   KCCI and the other financial  institutions  listed
                              in Annex I, and each other  financial  institution
                              which  has  been   assigned  an  interest   herein
                              pursuant to Section 7.14.

"LIEN"                    -   Any mortgage,  pledge,  lien,  security  interest,
                              judgment  lien,   mechanic's   lien,   installment
                              purchase  agreement  or other third  party  right,
                              charge or  encumbrance  of any kind  affecting the
                              Land.

"LIBOR INTEREST PERIOD"   -   Shall have the meaning set forth in the Note.

"LIBOR RATE"              -   Shall have the meaning set forth in the Note.

"LIQUID ASSETS"           -   Shall  mean  assets  in the  form  of  cash,  cash
                              equivalents,  obligations of (or fully  guaranteed
                              as to principal and interest by) the United States
                              or any agency or instrumentality thereof (provided
                              the full  faith and  credit of the  United  States
                              supports   such    obligation    or    guarantee),
                              certificates  of  deposit  issued by a  commercial
                              bank   having   net   assets   of  not  less  than
                              $500,000,000,  securities  listed  and traded on a
                              recognized  stock  exchange  or  traded  over  the
                              counter and listed in the National  Association of
                              Securities  Dealers Automatic  Quotations,  liquid
                              debt instruments that have a readily ascertainable
                              value and are  regularly  traded  in a  recognized
                              financial  market,  or any  unused  portion of any
                              credit line maintained with a bank which must have
                              an Standard & Poor's rating of "A" or better, none
                              of which are subject to specific  pledge,  lien or
                              other encumbrance.

"LOAN"                    -   Shall  have  the  meaning  set  forth  in  Section
                              2A.1(a).

"LOAN DOCUMENTS"          -   Shall have the meaning  set forth in the  Recitals
                              hereto.

"MAJOR CONTRACTS"         -   Any contract entered into by Borrower  relating to
                              the   Improvements   in  an  amount  equal  to  or
                              exceeding $200,000.

"MAJOR CONTRACTOR"        -   Any contractor party to a Major Contract.

                                       11
<PAGE>

"MAJOR SUBCONTRACT"       -   Any contract between the General  Contractor and a
                              subcontractor  relating to the  Improvements in an
                              amount equal to or exceeding $200,000.

"MAJOR SUBCONTRACTOR"     -   Any subcontractor party to a Major Subcontract.


"MANAGEMENT AGREEMENT"    -   The  Management  Agreement made as of August 24th,
                              1999, by Borrower,  as owner,  and  Developer,  as
                              manager.

"MANAGEMENT FEE"          -   Shall mean the  management  fee payable to Manager
                              under the Management Agreement.

"MANAGER"                 -   Brookdale  Living  Communities  of New  York - BPC
                              Inc., a Delaware corporation.

"MATURITY DATE"           -   February 28, 2001,  subject to extension  pursuant
                              to the terms of Section 2A.11 of this Agreement.

"MEMBER"                  -   AH  Battery  Park  Member,  LLC,  an Ohio  limited
                              liability company,  the sole member and manager of
                              Borrower.

"MEMBERSHIP AGREEMENT"    -   The Amended and  Restated  Operating  Agreement of
                              Borrower, dated as of June 19, 1999.

"MEZZANINE FINANCING"     -   Shall  have  the  meaning  set  forth  in  Section
                              2B.15(b) hereof.

"MORTGAGE"                -   The  Building  Loan  Mortgage  and the  Soft  Cost
                              Mortgage,  each dated of even date herewith,  made
                              by Borrower, as mortgagor, to Agent, as mortgagee,
                              for the  ratable  benefit  of the  Lenders,  which
                              Building Loan  Mortgage  secures the Building Loan
                              Note and encumbers,  among other things,  and is a
                              first lien on,  Borrower's  leasehold  interest in
                              the Premises and which Soft Cost Mortgage  secures
                              the Soft  Cost  Note and  encumbers,  among  other
                              things,  and  is  a  second  lien  on,  Borrower's
                              leasehold interest in the Premises.

"NOI"                     -   Project Revenues,  less all ordinary and customary
                              operating  expenses  actually incurred and paid by
                              Borrower, other than the Management Fee (certified
                              by  Borrower  or by the  Developer  or  Manager on
                              behalf of Borrower and approved by the Agent),  in
                              connection with the ownership and operation of the
                              Project.

"NOTE" or "NOTES"         -   Shall have the meaning set forth in Section 2A.2.


                                       12
<PAGE>

"OBLIGATION"              -   All  obligations  of  Borrower  to  Agent  and the
                              Lenders  under  this  Agreement,  the Notes or the
                              other Loan Documents or any related  instrument or
                              document, howsoever created, arising or evidenced,
                              whether   direct   or   indirect,    absolute   or
                              contingent,  or now or hereafter existing,  or due
                              or to become due.

"OPERATING DEFICIT
 GUARANTY"                -   The  Operating  Deficit  Guaranty  dated  the date
                              hereof made by  Guarantor  in favor of Agent,  for
                              the ratable benefit of the Lenders.

"PAYMENT GUARANTY"        -   The Payment Guaranty dated the date hereof made by
                              Guarantor  in  favor  of  Agent,  for the  ratable
                              benefit of the Lenders.

"PERMITTED ENCUMBRANCES"  -   The  items  listed  in  Exhibit  B hereto  and any
                              easements  or  licenses  granted  with the written
                              consent of Agent,  which shall not be unreasonably
                              withheld if such  easements  and/or  licenses  are
                              reasonably  necessary  for and  beneficial  to the
                              operation   of   the   Project,   or   any   other
                              encumbrances   expressly   permitted   under  this
                              Agreement.

"PLANS"                   -   The   preliminary   and  the   final   plans   and
                              specifications, including all shop drawings (which
                              shop drawings will be kept at the Project site for
                              inspection   by   Agent  or   Agent's   Inspecting
                              Consultant), for the construction and equipping of
                              the Improvements prepared (in accordance with, and
                              which  conform to, the  requirements  set forth in
                              Article 11 of the Ground Lease, including, without
                              limitation,  (a)  the  Requirements,   the  Master
                              Development  Plan,  the Design  Guidelines and the
                              Construction  Documents  (as all of such terms are
                              defined   in  the   Ground   Lease)  and  (b)  the
                              provisions  of Section  11.02 of the Ground  Lease
                              governing the review and approval by the lessor of
                              the  plans  and   specifications)   by  Borrower's
                              Architect,   and   approved   by  Agent,   Agent's
                              Inspecting Consultant and the Ground Lessor to the
                              full extent  required  under the Ground  Lease and
                              (in  the  case  of  final  plans,  to  the  extent
                              necessary   to  satisfy   any   Requirement)   the
                              applicable Governmental Authorities, as amended or
                              modified by all Change Orders  approved  hereunder
                              by Agent.

"POLLUTANT"               -   Any solid, liquid, gaseous or thermal contaminant,
                              including smoke, vapor, radon, soot, fumes, acids,
                              alkalis,  chemicals,  waste, petroleum products or
                              by   products,


                                       13
<PAGE>

                              asbestos (including,  without limitation,  friable
                              asbestos,  airborne  asbestos or any  substance or
                              material containing asbestos),  PCBs,  phosphates,
                              lead or other heavy metals,  chlorine,  radon gas,
                              any   "HAZARDOUS   SUBSTANCE"  or  "POLLUTANT"  or
                              "CONTAMINANT"  as  defined  in  the  Comprehensive
                              Environmental Response, Compensation and Liability
                              Act, as amended,  any "HAZARDOUS WASTE" as defined
                              in the Resource Conservation and Recovery Act, any
                              "POLLUTANT"  as  defined  in the  Clean  Water Act
                              and/or any "HAZARDOUS AIR POLLUTANT" as defined in
                              the Clean  Air Act,  and the  regulations  adopted
                              pursuant thereto,  or any other toxic or hazardous
                              wastes or  materials  as  defined,  identified  or
                              classified   under   any   Requirement,   and  any
                              regulations adopted pursuant thereto.

"PREMISES"                -   Borrower's  leasehold  interest  in the Land,  the
                              Improvements,  the  building  materials,  personal
                              property and all other items owned  and/or  leased
                              by Borrower and  described in the granting  clause
                              of the Mortgage,  and any other personal  property
                              owned  and/or  leased by Borrower  and used in the
                              construction  or  operation  of the  Improvements,
                              including all fixtures,  furnishings and equipment
                              necessary  to  operate  the  Improvements  for its
                              intended purpose.

"PREPAYMENT"              -   Shall mean any mandatory or optional prepayment of
                              the Loan or any part  thereof  pursuant to Section
                              2A.6 hereof.

"PRIME RATE"              -   Shall have the meaning set forth in the Note.

"PROJECT"                 -   The Premises,  including without  limitation,  the
                              Land, the  Improvements,  all on-site and off-site
                              improvements,  including without  limitation,  all
                              utility   services  and  fixtures  and   equipment
                              required   for  access  to  or  operation  of  the
                              Improvements.

"PROJECT DOCUMENTS"       -   The Ground Lease, the Development  Agreement,  the
                              Management Agreement, the Assignment of Contracts,
                              the General Contract,  the Architect's  Agreement,
                              the Engineer's Agreement, the Plans, all necessary
                              Project permits,  the Approved  Leases,  the Major
                              Contracts and the Major Subcontracts.

"PROJECT REVENUES"        -   All fixed rent or other income (including  expense
                              reimbursements)  actually  received by Borrower in
                              connection with its ownership and occupancy of the
                              Premises,  as reasonably determined by Agent based
                              upon


                                       14
<PAGE>

                              the most current  Facility  Summary Report then in
                              Agent's possession.

"PRO RATA"                -   Shall  have  the  meaning  set  forth  in  Section
                              2B.16(i) hereof.

"PROTECTIVE ADVANCES"     -   Any  disbursements and advances pursuant to any of
                              the  Loan  Documents  (which   disbursements   and
                              advances  shall be  deemed to be  "ADVANCES"  made
                              hereunder)   which   Agent  deems   necessary   or
                              desirable to preserve or protect the Collateral or
                              any portion  thereof or to enhance the  likelihood
                              or  maximize   the  amount  of  repayment  of  the
                              Advances and other Obligations.

"REQUIRED EQUITY"         -   The   aggregate   sum   of   $13,499,077,   to  be
                              contributed  by Borrower for costs incurred in the
                              development and construction of the  Improvements,
                              which contribution may be made in the form of cash
                              and/or   the    Mezzanine    Financing   as   more
                              particularly described in Section 2B.15 hereof.

"REQUIREMENT"             -   Any  law,  statute,   ordinance,  order,  rule  or
                              regulation of a Governmental  Authority applicable
                              to  Borrower,  any  Guarantors  or  the  Premises,
                              including,  but not limited to, laws,  ordinances,
                              orders,   rules  or  regulations  with  regard  to
                              zoning,   land  use,   building  or  environmental
                              matters.


"REQUISITE LENDERS"       -   Lenders   (including   Agent)   whose   Pro   Rata
                              participation  (not including the participation of
                              any of the Lenders  which Agent has  determined to
                              be in default), in the aggregate,  are equal to or
                              greater than sixty-six and two-thirds  percent (66
                              2/3%).

"RETAINAGE"               -   Shall have the meaning  set forth in Section  2B.2
                              hereof.

"SIGNIFICANT PARTY"       -   Borrower or Guarantor.

"SOFT COST LOAN"          -   Shall  have  the  meaning  set  forth  in  Section
                              2A.1(a) hereof.

"SOFT COST LOAN AGREEMENT"-   Shall have the meaning  set forth in the  Recitals
                              hereto.

"SOFT COST MORTGAGE"      -   Shall have the meaning  set forth in the  Recitals
                              hereto.

"SOFT COST NOTE"          -   Shall have the meaning  set forth in the  Recitals
                              hereto.


                                       15
<PAGE>

"SOFT COSTS"              -   All  non-construction  or soft  costs  that do not
                              constitute "costs of the improvement under the New
                              York Lien Law" and are  delineated  as such in the
                              Final Budget.

"STABILIZATION"           -   Shall  have  the  meaning  set  forth  in  Section
                              4.1(cc) hereof.

"SUBSTANTIAL COMPLETION"  -   Shall be deemed to have  occurred upon the last to
                              occur  of the  following  dates:  (i) the  date of
                              issuance of a temporary  certificate  of occupancy
                              covering  all of the  Premises,  and (ii) the date
                              upon which the first resident takes  possession of
                              their unit.

"SUPERMAJORITY LENDERS"   -   Lenders   (including   Agent)   whose   Pro   Rata
                              participation  (not including the participation of
                              any of the Lenders  which Agent has  determined to
                              be in default), in the aggregate,  are equal to or
                              greater than seventy-five percent (75%).

"TITLE INSURER"           -   The issuer of the title insurance  policy required
                              by Section  6.2(m)  hereof,  which issuer shall be
                              Chicago Title Insurance Company.

"UCC FINANCING
STATEMENTS"               -   The  UCC-1   Financing   Statements   executed  by
                              Borrower, as debtor, in favor of Agent, as secured
                              party, to be filed in connection with the personal
                              property   described   in  the  Mortgage  and  the
                              Assignment of Contracts.

"UNANIMOUS LENDERS"       -   All of  the  Lenders  (including  Agent,  but  not
                              including the  participation of any of the Lenders
                              which  Agent  has  determined  to be in  default),
                              collectively.


      Section 1.2 Singular and Plural. Words used herein in the singular,  where
the context so permits, shall be deemed to include the plural and vice versa.


                                  ARTICLE II(A)

                                  LOAN FACILITY
                                  -------------

       Section  2A.1  Loans.  (a)  Subject to the terms and  conditions  of this
Agreement, including without limitation, (i) the funding limitations embodied in
Section 2B.7 hereof and (ii) the loan balancing  requirements of Section 2B.7(A)
hereof,  each Lender,  severally,  and not  jointly,  agrees to make a series of
advances  to  fund  Hard  Costs  in  an  aggregate  principal  amount  of  up to
$36,456,404  (each an "ADVANCE" and  collectively,  the  "ADVANCES";  all of the
Advances of all of the Lenders under this Agreement collectively,  the "BUILDING
LOAN" and  together  with  Advances in an  aggregate  principal  amount of up to
$12,668,596  under the Soft Cost Loan


                                       16
<PAGE>

Agreement,  (the "SOFT COST Loan";  the  Building  Loan and Soft Cost Loan being
referred to  collectively  as the "LOAN" OR  "LOANS"),  to or for the benefit of
Borrower,  in an  aggregate  principal  amount  for any Lender not to exceed the
amount set forth under the heading "LOAN  COMMITMENT"  opposite the name of such
Lender on Annex I.

      (b) The Building Loan shall be fully secured by the Building Loan Mortgage
and the other Collateral  described herein and in the other Loan Documents.  The
Building Loan Mortgage shall secure the  indebtedness  described in the Building
Loan Note or Notes and herein,  and any future  loans,  advances,  payments  and
disbursements  by  Lenders  pursuant  to this  Agreement  or the  Building  Loan
Mortgage  shall be added to the principal  indebtedness  under the Building Loan
Notes.

      (c) This Agreement shall remain in full force and effect after the Loan is
fully funded and throughout the term of the Loan and any extensions  thereof for
the purpose of  governing  the rights and  obligations  of  Borrower,  Agent and
Lenders but not for the benefit of any third persons.

      Section 2A.2 Notes.  The Advances made by each Lender  pursuant to Section
2A.1(a) shall be evidenced by one or more promissory  notes of Borrower dated of
even date herewith (such  Building Loan Notes and Soft Cost Notes,  the "NOTE"or
"NOTES"), payable to the order of such Lender and representing the obligation of
Borrower to pay the unpaid principal amount of the Advances under the Loans made
by such  Lender,  with  interest  thereon at the  Interest  Rate and,  after the
occurrence and during the  continuance  of any Event of Default,  at the Default
Rate.  Each  Lender is hereby  authorized  to record the date and amount of each
Advance of the proceeds of the Loans made by such Lender and the date and amount
of each payment or  prepayment  of principal of the Loans made to such Lender on
the schedule  annexed to and  constituting a part of such Lender's Note, and any
such  recordation  shall  constitute prima facie evidence of the accuracy of the
information  so recorded in the absence of manifest  error;  provided,  however,
that the  failure by any Lender to make any such  recordation  on its Note shall
not affect any of the obligations of Borrower under such Note or this Agreement.

      Section 2A.3      Interest Rate.

            (a)  Advances  of the Loans shall bear  interest  at the  Applicable
LIBOR Rate or the Prime Rate pursuant to the  provisions of the Note.  After the
occurrence  and  during  the  continuance  of any  Event of  Default  hereunder,
Advances of the proceeds of the Loan shall bear interest at the Default Rate.

            (b) Notwithstanding  the foregoing,  only so much of the outstanding
principal  amount of the Loan as would not  become  due and  payable  during the
applicable  LIBOR  Interest  Period shall be designated as a LIBOR Rate Loan and
the remaining  principal balance shall be designated as a Prime Rate Loan. Prime
Rate Loans will bear interest at the Prime Rate.  "PRIME RATE" means the rate of
interest  per  annum  announced  by the  Cleveland  office of  KeyBank  National
Association  ("KEYBANK") as its Prime Rate, whether or not such rate is publicly
announced.  The Prime Rate is not necessarily the lowest rate charged by KeyBank
for commercial or other types of loans, it being  understood that the Prime Rate
is only one of the bases for  computing  interest on loans made by the Agent and
that, by basing  interest on the


                                       17
<PAGE>

Prime Rate, the Agent and the Lenders have not committed to charge, and Borrower
has not in any way bargained  for,  interest based on a lower or the lowest rate
at which the Agent or the other  Lenders  may now or in the future make loans to
other borrowers.  Any interest rate based on the Prime Rate shall be adjusted on
and as of the effective date of any change in the Prime Rate. Each determination
of the Prime Rate by the Agent shall be  conclusive.  As of August 23, 1999, the
Prime Rate is currently 8.0%.

      Section  2A.4  Payment  of  Interest.   Prior  to  maturity,   whether  by
acceleration  or  otherwise,  interest on the  Advances  shall be payable at the
Interest Rate or Interest Rates provided in the Note, with each interest payment
being due on the  twenty-fourth  (24th)  day of the first  full  calendar  month
following the date on which the first Advance is made hereunder,  and subsequent
interest payments being due thereafter  monthly on the twenty-fourth  (24th) day
of each month  regardless of the applicable  Interest Rate.  After maturity,  by
acceleration or otherwise, interest on the Advances shall be payable on the date
described in the preceding sentence or earlier, or more frequently, on demand of
Agent.

      Section  2A.5 Payment of  Principal.  The entire  principal  amount of the
Loan, or so much thereof as may be  outstanding  on the Maturity Date  (together
with all  outstanding  interest and other sums due hereunder or under the Notes,
the Mortgage and the other Loan Documents), shall be paid as provided herein and
in the Notes on the Maturity Date, or on such earlier date as may result from an
acceleration  of the Maturity Date in accordance  with Section 2A.13 hereof.  If
the Maturity  Date is extended in  accordance  with Section  2A.11(c),  Borrower
shall make installment  payments of the principal of the Advances monthly on the
twenty  fourth  (24th)  day of each  month,  commencing  with  the  first  month
following  such  extension,  in amounts  determined in  accordance  with Section
2A.11, and the entire  remaining  principal amount of the Advances shall be paid
on the Maturity Date as so extended,  or on such earlier date as may result from
an  acceleration of the Maturity Date in accordance with Section 2A.13 or 5.3(a)
hereof.

      Section 2A.6 Prepayment.  Subject to the provisions of Sections 2A.8, 2A.9
and 2A.10  hereof,  upon not less than three (3) Domestic  Business  Days' prior
written notice to Agent  specifying  the intended date of  prepayment,  Borrower
shall have the right to prepay the outstanding principal amount of the Advances,
in whole or in part,  without  premium or penalty but with all accrued  interest
and breakage  fees on the amount being  prepaid to the date of such  prepayment.
Each partial  prepayment must equal at least $100,000 or some $100,000 increment
thereof.  Amounts of principal  prepaid will not be readvanced by Lenders as new
Advances.

      Section 2A.7 Procedure for Payment.  Each payment on the Notes,  including
each  prepayment  of principal  and each  payment of interest,  shall be made by
Borrower  to  Agent  at  its  office  at  127  Public  Square,  Cleveland,  Ohio
44114-1306,  in lawful  money of the United  States of America,  in  immediately
available  funds, by 1:00 P.M.,  Cleveland,  Ohio time, on the due date for such
payment  without setoff or  counterclaim.  Subject to Section 7.13 below,  Agent
shall distribute such payments ratably to the Lenders on the day of receipt,  if
received by 1:00 P.M. as aforesaid,  and on the following Domestic Business Day,
if received after 1:00 P.M., in like funds as received.  The failure of Borrower
to make any such payment by the  aforesaid  time shall not  constitute a default
hereunder,  provided  that such  payment is made on such due date,  but any such
payment  received by Agent after 1:00 P.M.,  Cleveland,  Ohio time,  on such due
date  shall be deemed to have been  made on the next  Domestic  Business  Day or
Eurodollar  Business  Day,


                                       18
<PAGE>

as the case may be, for the purpose of calculating interest on the Advances.  If
any payment under the Notes or any other Loan Document  shall be due and payable
on a day which is not a Domestic Business Day or Eurodollar Business Day, as the
case  may be,  the due  date  thereof  shall be  extended  to the next  Domestic
Business Day or Eurodollar Business Day, as the case may be (except as otherwise
provided in the  definition of LIBOR  Interest  Period),  and interest  shall be
payable at the applicable rate specified herein during such extension.

      Section  2A.8  Indemnification.  Notwithstanding  anything to the contrary
contained herein or in any other Loan Document,  Borrower agrees that if (a) any
repayment  or  prepayment  of any Advance is made for any reason  (other than as
contemplated  in the last sentence of the definition of LIBOR Interest Period in
the  Note)  on a day  prior  to the  last  Eurodollar  Business  Day of the then
effective  LIBOR Interest  Period,  or (b) by any other action of Borrower or by
reason of an acceleration of the Note, an Applicable LIBOR Rate is terminated on
a day prior to the last  Eurodollar  Business  Day of the then  effective  LIBOR
Interest  Period with  respect to such  Applicable  LIBOR Rate,  Borrower  shall
indemnify each Lender against,  and pay on demand  directly to each Lender,  any
loss, liability,  expense,  penalty or other charge suffered or incurred by such
Lender as a result of such  repayment or termination  of such  Applicable  LIBOR
Rate, including,  without limitation, (i) any loss, liability,  expense, penalty
or other charge  suffered or incurred by such Lender  during the period from the
date of  receipt  of such  repayment  or  acceleration  to the  last  Eurodollar
Business  Day of the LIBOR  Interest  Period in question if the rate of interest
obtainable by such Lender upon the  redeployment  of an amount of funds equal to
such  repayment  is less than the  interest  rate  computed by  reference to the
Applicable LIBOR Rate in effect during the LIBOR Interest Period in question, or
(ii) any loss,  liability  or expense  suffered  or  incurred  by such Lender in
liquidating prior to maturity eurodollar deposits or other deposits, as the case
may be, in amounts  which  correspond to such  payment.  A  certificate  of such
Lender giving a reasonably  detailed  calculation of the amount of any such loss
or expense  shall be deemed  conclusive  in the absence of manifest  error.  The
amounts payable by Borrower under this Section 2A.8 shall expressly  exclude any
margin that any such Lender may have anticipated over any Applicable LIBOR Rate.

      Section 2A.9  Reimbursement.  Borrower agrees to reimburse each Lender for
its costs in complying  during the term of the Notes with all  applicable  laws,
executive  orders and regulations of the  governments of the United States,  the
United  Kingdom and any other  applicable  government,  and of any regulatory or
administrative  agency  thereof  (including,  without  limitation,  the  Bank of
England,  the Board of  Governors  of the  Federal  Reserve  System or any other
governmental body claiming  jurisdiction),  including any increase in said costs
due to a change therein or in the interpretation  thereof,  which impose, modify
or deem applicable any reserve,  asset maintenance or special deposit or capital
adequacy  requirements  on the  obligation  of  Lender  to make  Advances  or on
deposits obtained in the London interbank  eurodollar market or other markets in
respect of Advances  subject to LIBOR,  or which  subject such Lender to any tax
with  respect to its Note or change the basis of  taxation  of  payments to such
Lender of  principal,  interest or fees  payable  under its Note (except for any
tax, or changes in the rate of any tax,  based upon the net income or profits of
such Lender) or which impose any other  similar  conditions  with respect to the
Advances or the  obligation of such Lender to make Advances  under the Loan. The
increased  cost  to a  Lender  in  complying  with  laws,  executive  orders  or
regulations  which  impose,  modify  or  deem  applicable  any  reserve,   asset
maintenance  or  special  deposit  or  capital  adequacy   requirements  on  the
obligation of a Lender to make Advances  under


                                       19
<PAGE>

the Loan or on deposits  obtained in the London interbank  eurodollar  market or
other  markets  shall be  computed  by  determining  the  amount  by which  such
requirements  effectively  increase such Lender's cost of making and maintaining
the deposits  attributable to the Advances subject to LIBOR and by computing the
additional interest which would have been owing to such Lender if such effective
increase had been added to the Applicable LIBOR Rate for purposes of determining
the Applicable  LIBOR Rate during the affected period. A certificate of a Lender
giving a reasonably  detailed  calculation  of the amount of such costs shall be
deemed  conclusive in the absence of manifest  error.  Agent shall give Borrower
written notice of any such increased cost of any Lender's making and maintaining
the deposits  attributable to Advances  subject to LIBOR upon Agent's receipt of
notice of the same.  Notwithstanding  anything  to the  contrary  stated in this
Section 2A.9, no such increased  costs shall be  recoverable  from Borrower with
respect to any period more than 120 days prior to the date Agent  shall  provide
Borrower with written notice of such increased costs incurred by any Lender, and
such increased costs shall only be imposed by a Lender who actually is incurring
such  increased  costs  and only so long as such  Lender is  exercising  similar
rights  against  other  borrowers to whom such Lender is lending  money at rates
based on the LIBOR Rate. Furthermore, Borrower shall not be required to pay such
increased  costs due  solely  to a change in  location  of the  Lender's  office
extending the Advances that are subject to LIBOR.  Borrower may, during a period
of the fifteen (15) Domestic  Business Days following receipt by Borrower of any
such notice to reimburse any such increased  costs which are material in amount,
either (i) demand  that the Lender  requesting  reimbursement  of the  increased
costs,  within  such  period,  assign  its  Advances  bearing  interest  at  the
Applicable  LIBOR  Rate  to  one or  more  assignees  which  Borrower  or  Agent
identifies,  in accordance  with any  applicable  provisions of this  Agreement,
including,  without  limitation  Section  7.14(b),  upon payment in  immediately
available  funds of a purchase  price  therefor  equal to the  unpaid  principal
amount thereof,  together with interest accrued with respect thereto to the date
of such  assignment and all fees and other charges  accrued or payable under the
terms of this  Agreement for the benefit of such Lender with respect  thereto to
the date of such assignment, and if such payment is made within such period such
Lender shall so assign its Advances  bearing  interest at the  Applicable  LIBOR
Rate, or (ii) within such period, repay the portion of the Loan owing the Lender
who requests the increased  costs,  together with interest  accrued with respect
thereto to the date of such repayment and all fees and other charges  accrued or
payable under the terms of this Agreement  with respect  thereto for the benefit
of such Lender to the date of such  repayment,  any such repayment being for the
sole credit of such Lender and not for any other Lender.  All expenses  incurred
by Agent in  connection  with the  foregoing  shall be for the sole  account  of
Borrower  and shall  constitute  an  Obligation  hereunder.  Each Lender  hereby
represents  that,  as of the date hereof,  such Lender is not subject to Federal
Reserve  Board reserve  requirements.  Any assignee of a portion of any Lender's
Commitment  hereunder shall make the foregoing  representation as of the closing
of such assignment.

      Section 2A.10 Changes.  Notwithstanding anything to the contrary contained
herein,  in the Notes, in the Mortgage or in any other Loan Document,  if, prior
to or during any LIBOR Interest Period with respect to which LIBOR is in effect,
any change in any law,  treaty,  regulation  or  official  directive,  or in the
interpretation thereof, by any governmental body charged with the administration
thereof,  shall make it unlawful  for any Lender to fund or maintain its funding
in eurodollars or other dollars of the Advances  subject to the Applicable LIBOR
Rate or otherwise to give effect to such Lender's  obligations  as  contemplated
hereby,  (a)  Agent  may by  notice  to  Borrower  declare  that  such  Lender's
obligations  in respect of the


                                       20
<PAGE>

Applicable  LIBOR Rate are terminated  forthwith,  (b) the Applicable LIBOR Rate
shall  forthwith  cease to be in effect,  and interest shall from and after such
date be calculated at the Prime Rate unless Borrower shall thereafter  elect, in
accordance  with the terms  hereof,  an  individual  Applicable  LIBOR  Rate not
subject to such  illegality,  and (c) Borrower  agrees to indemnify  such Lender
against any loss, cost, or expense actually incurred as provided in Section 2A.8
hereof. A certificate of such Lender giving a reasonably detailed calculation of
the amount of any such loss,  expense,  penalty or other  charge shall be deemed
conclusive  in the absence of manifest  error.  As noted in Section  2A.6 above,
Borrower may, in accordance  with said Section,  prepay the Loan at any time but
any such prepayment  shall not diminish  Borrower's  obligations  under Sections
2A.8, 2A.9 and 2A.10 hereof,  through the date such Lender receives full payment
of its  Note  and all sums due with  respect  to the  Notes,  including  without
limitation, any sums due under Sections 2A.8, 2A.9 and 2A.10 hereof.

      Section 2A.11     Extension Periods.

            (a)  Provided the Loan is not then in default,  Completion  has been
achieved,  the  Improvements  are  then  fully  open  and  operating,   and  all
requirements  for the final  disbursement of Hard Costs set forth in Section 6.4
of this Agreement have been satisfied, Borrower may, subject to the requirements
of this Section 2A.11,  extend the maturity of the Notes for the period from the
day next succeeding the Maturity Date through the date that occurs eighteen (18)
months  after the  Maturity  Date (the  "FIRST  EXTENSION  PERIOD"),  and for an
additional  period  from the day  next  succeeding  the  last  day of the  First
Extension  Period through the date that occurs twelve (12) months after the last
day of the First  Extension  Period (the "SECOND  EXTENSION  PERIOD";  the First
Extension  Period and the Second  Extension  Period  are  sometimes  hereinafter
collectively referred to as the "EXTENSION Periods").

            (b)  Borrower's  right to extend the  maturity  of the Notes for the
First  Extension  Period  shall  be  conditioned  upon the  satisfaction  of the
following  requirements,  as  determined  by  Agent:  (i)  Borrower  shall  have
delivered  written  notice of its desire to extend the maturity of the Notes and
said  written  notice must be  delivered to Agent not later than sixty (60) days
prior to the then effective  Maturity Date, (ii) at the time of delivery of such
notice,  Completion shall have occurred and (iii) no Event of Default  hereunder
or under any of the other Loan  Documents  shall have occurred and be continuing
and there shall be no outstanding payment default under the Loans.

            (c)  Borrower's  right to extend the  maturity  of the Notes for the
Second  Extension  Period  shall be  conditioned  upon the  satisfaction  of the
following  requirements,  as determined by Agent:  (i) the maturity of the Notes
shall have been extended for the First  Extension  Period,  (ii) Borrower  shall
have delivered  written notice of its desire to extend the maturity of the Notes
and said  written  notice must be  delivered  to Agent not later than sixty (60)
days prior to the expiration of the First Extension  Period,  which notice shall
be  accompanied  by payment of an extension fee equal to 25 basis points (.0025)
of the outstanding  principal  amount of the Notes (plus any unfunded  principal
made available to Borrower during the Second Extension  Period),  (iii) no Event
of  Default  hereunder  or under  any of the other  Loan  Documents  shall  have
occurred and be continuing  and there shall be no  outstanding  payment  default
under the  Loans and (iv) at the time of  delivery  of such  notice,  Completion
shall have  occurred,  and the Project  shall have  achieved,  and be capable of
maintaining, based upon Agent's reasonable


                                       21
<PAGE>

determination, a minimum Debt Service Coverage Ratio calculated on a prospective
basis for the first  quarter  of the Second  Extension  Period  (i.e.  including
actual figures from quarters 8, 9, 10 and 11 and including  projected  principal
payments  during the Second  Extension  Period) of not less than 1.2 to 1.0, and
(v) in the event that the Requisite Lenders request a new or updated  Appraisal,
Borrower  furnishes to Agent an Appraisal,  at Borrower's sole cost and expense,
reasonably satisfactory in all material respects to the Lenders and evidencing a
loan to value ratio not greater  than 75%.  Upon the  extension  of the Maturity
Date pursuant to this Section 2A.11(c), the outstanding principal balance of the
Loan shall amortize in equal monthly installments of principal payable beginning
on  the  first  day  of the  Second  Extension  Period.  The  monthly  principal
amortization  payments  shall be  determined at the  commencement  of the Second
Extension Period based upon a 25-year amortization schedule;  provided, that the
monthly  principal  amortization  payments  shall be adjusted from time to time,
based on the foregoing 25-year amortization  schedule,  to include the amount of
Advances, if any, made to Borrower during the Second Extension Period.

            (d) In no event  shall the  Maturity  Date of the Notes be  extended
beyond the Extension Periods.

      Section 2A.12 Lenders'  Rights.  Borrower  acknowledges and agrees that an
individual  Lender may wish to purchase one or more deposits in order to fund or
maintain its funding of the Advance subject to LIBOR during the applicable LIBOR
Interest  Period.  Any Lender shall be entitled to fund and maintain its funding
of all or any part of such Advance in any manner it sees fit,  provided that all
determinations  hereunder  (including,  without  limitation,  all determinations
under Sections 2A.8,  2A.9 and 2A.10 hereof) shall be made as if such Lender had
actually  funded and  maintained  that Advance to be subject to LIBOR during the
applicable LIBOR Interest Period through the purchase of eurodollar  deposits or
other  deposits,  as the case may be, in an amount equal to such Advance subject
to LIBOR and having a maturity  corresponding  to such  LIBOR  Interest  Period.
Borrower  agrees that for purposes of Sections  2A.8,  2A.9 and 2A.10 hereof any
reference to a Lender  therein  shall also include any Lender that has signed an
Assignment and Acceptance  Agreement in accordance  with Section 7.14(b) of this
Agreement to the extent of its Pro Rata share in such Advance  bearing  interest
at the Applicable LIBOR Rate, and in this respect Borrower agrees that Agent, on
behalf of any such assignee,  may collect  directly from Borrower,  and Borrower
agrees  to pay to Agent  (but  Borrower  shall not be  required  to pay the same
directly  to any such  assignee),  any  sums  owing  to such  participant  under
Sections 2A.8, 2A.9 and 2A.10 hereof.

      Section 2A.13 Acceleration of Maturity. The Notes, including all principal
thereof and interest  thereon,  however termed,  shall become due and payable at
the option of Agent upon the occurrence of any of the following  (subject to any
applicable cure periods specified in this Agreement):

            (a) Any default  shall occur and continue  beyond any notice or cure
period  under this  Agreement,  the  Building  Loan  Mortgage  or any other Loan
Document,  or if a Significant  Party shall be in default  beyond any applicable
notice or cure period under or attempt to terminate any Loan Document;


                                       22
<PAGE>

            (b) A Significant  Party shall fail to comply beyond any  applicable
notice or cure period with any of the  covenants  made by it in this  Agreement,
any  Note,  the  Mortgage  or in any  other  Loan  Document,  or at any time any
representation or warranty made by a Significant Party to Agent or any Lender in
this Agreement or in any other Loan Document or in any  certificate or statement
delivered in  connection  therewith  shall be false or  misleading  to an extent
deemed by Agent, in its reasonable judgment, to be material; or

            (c) Any other Event of Default under this Agreement, the Mortgage or
any other Loan Document shall occur.

      Section 2A.14 Costs of Collection. If any Note shall be collected by legal
proceedings or through any court or shall be referred to an attorney  because of
any default,  Borrower  agrees to pay all reasonable  attorney's  fees and court
costs incurred by Agent as well as the Lenders.

      Section  2A.15 Late  Charges.  In the event that any payment of  interest,
principal,  or  principal  and  interest  shall not be paid when due (whether by
acceleration  or  otherwise),  a "LATE  CHARGE"  calculated  at the rate of five
percent  (5%) on such  overdue  installment  shall be  charged  by Agent for the
purpose of defraying the expenses incident to handling such delinquent payments,
which "LATE CHARGE" shall be payable on the same day of the month as payments of
interest,  provided,  however,  in no event shall  Borrower be required to pay a
late fee greater than the maximum amount  permitted under  applicable laws. Such
charge  shall be in addition  to, and not in lieu of, any other  remedy Agent or
any Lender may have and is in addition to any reasonable fees and charges of any
agents or  attorneys  which  Agent is  entitled  to employ  upon any  default by
Borrower  hereunder or under any other Loan Document,  whether authorized herein
or by law.


                                  ARTICLE II(B)

                       LOAN DISBURSEMENTS/REQUIRED EQUITY
                       ----------------------------------

      Subject  to  the  provisions  of  this  Agreement,   and  upon  Borrower's
satisfaction  of the  applicable  requirements  of  this  Agreement,  including,
without  limitation,  the  conditions to  disbursements  set forth in Article VI
hereof, and also subject to the funding limitations of Section 2B.7, each Lender
severally,  and not jointly, agrees to make Advances hereunder from time to time
in  accordance  with  Article  II(A),  but not more than once a month  except as
provided in Section  2A.3(b)  regarding  Loan  interest  and Section  2B.1,  and
Borrower will accept each Lender's Advance representing a proportionate share of
the amount of the Loan as follows:

      Section 2B.1 Procedure for Loan Borrowing and Interest Rate Election. Draw
Requests for Hard Costs and Soft Costs shall be submitted prior to Completion at
least once,  but at all times no more than once,  per month on or about the same
date of each month.  Borrower shall submit a so-called "PENCIL COPY REQUISITION"
to Agent's  Inspecting  Consultant  prior to the  submission  of a Draw Request.
Within  five (5)  Domestic  Business  Days of  Agent's  Inspecting  Consultant's
receipt of the pencil copy  requisition,  Agent's  Inspecting  Consultant  shall
review the pencil copy requisition,  inspect the Project and provide comments to
Borrower.  Borrower


                                       23
<PAGE>

shall submit a total Draw Request, within ten (10) calendar days thereafter,  in
duplicate to Agent and Agent's  Inspecting  Consultant  which  includes the Draw
Request  for Hard  Costs in  accordance  with  Agent's  Inspecting  Consultant's
comments related thereto and the Draw Request for Soft Costs, and Borrower shall
simultaneously  send a summary of the Draw Request to each of the other  Lenders
for  informational  purposes.  Within ten (10) Domestic Business Days of Agent's
receipt from Borrower of the total Draw Request,  Agent shall review and approve
or  disapprove  the Draw Request  and, if such Draw  Request is approved,  shall
cause the same to be funded within such ten (10)  Domestic  Business Day period,
subject,  however, to satisfaction of the conditions set forth or referred to in
this Article II(B).  All Draw Requests must be  accompanied  by such  supporting
documentation  as Agent  may  require,  including,  without  limitation,  a cost
breakdown,  which must be certified as to accuracy by Borrower and be consistent
in form and  substance  with the  cost  breakdown  set  forth in the  Budget  in
aggregate  total  and  itemization  and  limitations  set  forth in the  General
Contract,  if any,  and lien waivers from all  contractors,  subcontractors  and
suppliers  supplying goods or services related to the Improvements in the sum of
all prior disbursements for all of Borrower's preceding Draw Requests,  but only
including  supporting  invoices upon the specific  request of Agent.  The Budget
shall serve as the  disbursement  control for each line item, and neither Agent,
nor any Lender shall be required to disburse  Loan proceeds or make Advances for
any line item in excess of the amounts  specified in the Final  Budget,  (as the
same may be  amended  due to Budget  reallocations  pursuant  to  Section  2B.14
hereof),  as payable  from Loan  proceeds.  No later  than three (3)  Eurodollar
Business Days prior to the date of the  requested  Advance and  disbursement  of
Loan proceeds,  Borrower shall notify Agent whether such Advance shall initially
bear  interest at the Prime Rate or the  Applicable  LIBOR Rate or a combination
thereof  subject to the limitations set forth in Section 2A.3 and Section 2A.10.
Upon receipt of such Draw Request from Borrower,  Agent shall  promptly,  but no
later  than  two  (2)  Eurodollar   Business  Days  prior  to  the   anticipated
disbursement  date,  notify  each  Lender of the  pending  Draw  Request and the
anticipated  disbursement date. Provided that all of the conditions set forth in
Article VI have been satisfied and Agent  approves the Draw Request,  then by no
later than 11:00 a.m.,  Cleveland time, on the  disbursement  dates specified in
Agent's  notice to each  Lender,  (A) each  Lender  other than Agent  shall make
available  to Agent an  amount  in  immediately  available  funds  equal to such
Lender's  Pro Rata share of the  Advances to be made and  disbursed by Agent (as
determined by Agent), and Agent, as a Lender,  shall also make available its Pro
Rata share of such Advances, and (B) Agent shall then make available to Borrower
the amount of such Advances,  which shall  correspond to the amount approved for
disbursement by Agent by wire transferring to the account of Borrower maintained
by Borrower or by  Developer  on behalf of Borrower as set forth in Section 2B.9
the aggregate amount of said Advances.  No such Advances or disbursements  shall
be made until the Title Insurer has verbally  provided  Agent with advice (i.e.,
no change in title not theretofore approved by Agent) required by Section 6.3(e)
hereof  and has  committed  to issue  the  title  continuation  and  endorsement
referred to therein.

      Section 2B.2      Amount of Disbursements for Hard Costs.

            (a) The amount of any  disbursement  for Hard Costs  (excluding FFE)
shall not at any time exceed an amount equal to (i) the percentage of completion
evidenced by inspections of the Improvements by Agent's  Inspecting  Consultant,
times (ii) the  estimated  total Hard Costs set forth in the Budget and approved
by Agent,  minus  (iii) an amount  equal to ten percent  (10%)


                                       24
<PAGE>

(or such greater  amount as may be  stipulated  in the General  Contract) of the
value of the work completed for which payment is sought (the  "RETAINAGE").  The
foregoing  retainage  percentage may be reduced to 0% (or such greater amount as
may be  stipulated  in the  General  Contract)  when  the  Improvements  are 50%
completed and the other requirements of Section 2B.8 have been satisfied, but no
Retainage  previously  withheld shall be released to Borrower when the foregoing
reduction in percentage occurs. The aggregate of all of the Retainage shall only
be released in accordance with Section 2B.8 below.

            (b)  Prior  to  each  disbursement  hereunder,   Agent's  Inspecting
Consultant  shall  inspect  the  Improvements  to verify  that the Draw  Request
accurately  reflects the  percentage  of  construction  completed  to date.  The
percentage  of completion of  construction  at any time and the estimated  total
cost of Hard Costs shall be  determined  by Agent based upon advice from Agent's
Inspecting Consultant,  and Agent's reasonable  determination shall be final and
binding on Borrower. Agent's Inspecting Consultant may disapprove the amount, or
any portion thereof, requested for any work if it shall deem such work not to be
in accordance  with the Plans or inferior in quality in any material  respect to
the quality that is required in the Plans.

      Section  2B.3 Stored  Materials.  In the case of items  stored  safely and
securely  off-site in a bonded  warehouse or on the premises of a fabricator  or
some other secure facility reasonably acceptable to Agent and Agent's Inspecting
Consultant and not yet incorporated into the Improvements  ("STORED MATERIALS"),
each Lender  agrees  that it will fund as part of an Advance  its  proportionate
share of the cost of Stored  Materials  at the times  Hard  Costs are funded and
prior to their incorporation into the Improvements provided that:

            (a)  Borrower  or  Developer  has an  obligation  under the  General
Contract or any purchase order to advance or pay for such Stored Materials;

            (b) Agent has received  executed  conditional bills of sale (subject
only to  receipt  of  payment)  or other  proof  reasonably  satisfactory  to it
evidencing Borrower's unencumbered title in and to such Stored Materials;

            (c) Agent,  acting on behalf of  Lenders,  has been  granted a first
priority security interest,  subject only to any interest that the Ground Lessor
may have under the applicable provisions of the Ground Lease, and perfected same
through the filing of UCC-1  financing  statements  as required,  in such Stored
Materials prior to or simultaneous with it making any such Advance;

            (d) such Stored Materials are fully insured in an amount and with an
insurance company satisfactory to Agent, in its sole discretion,  under a policy
containing a standard New York mortgagee  endorsement or the equivalent  thereof
as well as travel insurance with respect to off-site Stored Materials, and Agent
is provided a certificate of insurance evidencing such insurance;

            (e) each item  comprising  such Stored  Materials  are  properly and
securely  stored and clearly  marked with,  among other  things,  Borrower's  or
Developer's name and the job number so as to segregate and distinguish same from
the property of others,  and Agent's


                                       25
<PAGE>

Inspecting  Consultant has inspected such Stored  Materials and has approved the
identity, quality and quantity of same;

            (f) Agent has  received a bill of lading or other  proof  reasonably
satisfactory to it evidencing the warehouseman's  receipt and acceptance of such
Stored  Materials  and a copy of the executed  contract  with the  warehouseman,
which shall expressly  provide that any security interest that such warehouseman
might have in the Stored Materials is subordinate to the security  interest held
by the Agent on behalf of the Lenders;

            (g) the value of Stored Materials shall not exceed  $5,000,000.00 in
the aggregate,  unless Agent, in its sole discretion  agrees to a greater amount
for prefabricated Stored Materials;

            (h) Borrower provides lien waivers from all suppliers supplying such
Stored Materials in the sum received by each such supplier for all of Borrower's
preceding Draw Requests; and

            (i)  Borrower  has  provided  written  notice to Agent  and  Agent's
Inspecting  Consultant of an impending Draw Request covering any costs of Stored
Materials two weeks prior to the submission of such Draw Request.

            (j)  such  Stored   Materials  are  to  be  incorporated   into  the
Improvements  within  sixty (60) days of delivery  to the  Project  Site or such
longer time as is not  detrimental  to the timely  completion  of the Project as
required hereunder, and is approved by Agent in its sole discretion.

      Section 2B.4      Intentionally Omitted

      Section 2B.5      Intentionally Omitted

      Section 2B.6      Intentionally Omitted

      Section 2B.7 Funding Limitations. At no time shall any Lender be obligated
to make  Advances to Borrower for more than Lender's Pro Rata share of what such
Lender is then required to fund, pursuant to Draw Requests submitted by Borrower
and  approved  by  Agent,  to the  party  seeking  payment  or,  in the  case of
reimbursement,  to the party seeking reimbursement, or to disburse (prior to the
satisfaction  of the  requirements  for the  reduction of Retainage set forth in
Section  2B.8  hereof) for Hard Costs  (prior to the last Advance for Hard Costs
hereunder)  Loan  proceeds  in  amount(s)  which  exceed,   separately  for  any
individual  line item or in the aggregate for all line items,  90% of Hard Costs
(subject,  however,  to the provisions of Section 2B.8 hereof) multiplied by the
percentage of completion of construction then attained for the Improvements,  as
determined  by  Agent's  Inspecting  Consultant.  Agent  shall not  unreasonably
withhold  its  consent  to a request  by  Borrower  for access to funds from the
Contingency  portion  of the  Budget,  so long as  there is not then an Event of
Default in existence and the Loan, is, and after such use of  Contingency  funds
shall remain, in balance.


                                       26
<PAGE>


      Section  2B.7(A) Loan Balancing.  Anything  contained in this Agreement to
the contrary  notwithstanding,  it is expressly  understood  and agreed that the
Loan  shall at all  times be "IN  BALANCE."  The Loan  shall be deemed to be "IN
BALANCE"  only at such time and from time to time, as Agent may determine in its
reasonable  discretion,  that the then  undisbursed  portion of the Loan and the
then unpaid portion of the Required Equity (it being  expressly  understood that
no Advances of the Loans shall be made until the Required  Equity is fully paid)
equals or exceeds the amount  necessary  for the timely and full  payment of all
costs  and  expenses  relative  to  construction  and  leasing  of the  Project,
including  without  limitation,  all Hard  Costs and Soft Costs for (i) all work
done  and  not  theretofore  paid  for or to be  done  in  connection  with  the
completion of the construction of the Improvements in accordance with the Plans,
applicable Requirements and the Ground Lease, including, without limitation, the
installation of all utility services, fixtures and equipment required for access
to and operation of the  Improvements  both on-site and  off-site,  and (ii) all
other  costs  incurred  and not  theretofore  paid  for,  or to be  incurred  in
connection with the Premises,  including, without limitation all Hard Costs, all
Soft Costs,  all interest on the Loan, and the amount of any interest reserve or
interest contingency (as reasonably  determined by Agent).  Borrower agrees that
if Agent  reasonably  determines  that the  Loan is not "IN  BALANCE",  Borrower
shall,  within  thirty  (30) days after  written  demand by Agent,  deposit  the
deficiency with Agent (the "DEFICIENCY DEPOSIT"), which Deficiency Deposit shall
first be exhausted before any further  disbursement of the Loans is made, or, if
the Loan is not in balance due, in whole or in part, to the insufficiency of the
interest  reserve  line item of the Budget,  at  Borrower's  option,  in lieu of
making a Deficiency Deposit with respect to such interest deficiency, direct the
Agent,  by  written  notice,  to  permanently  reduce  the  remaining  available
Development  Fee line item of the Budget in  sufficient  amount to increase  the
interest  reserve line item of the Budget and thereby  cause the Loan to then be
"in balance"  which notice shall be  accompanied  by the written  consent of the
Developer to such permanent reduction of the payment of the Development Fee from
Loan  proceeds.  Notwithstanding  anything  contained  in the  foregoing  to the
contrary,  Borrower shall comply with all requirements of the New York Lien Law.
The  Lenders  shall not be  obligated  to make  Advances  and Agent shall not be
obligated to make any Loan  disbursement  of proceeds of Advances if and so long
as the Loan is not in  balance.  Among the  various  events that could cause the
Loan to be "OUT OF BALANCE" are  determinations  by Agent that (i) the Budget is
insufficient or inadequate,  or (ii) the  Improvements  (based upon the progress
and pace of  construction  through the date of such  determination)  will not be
Completed  and occupied in accordance  with the Occupancy  Schedule set forth on
EXHIBIT F. In making any determination as to the projected interest component of
any completion/lease up cost calculation, Agent shall use the then-current rates
on the  Advances.  In making  any  determination  as to  whether  the Loan is in
balance,  Agent shall  consider,  among  other  things,  the Budget,  the amount
available  in  the  Contingency  line  item  of  the  Budget,  the  progress  of
construction and overall the status of the Project.

      Section 2B.8      Retainage.

            (a) The  Retainage  held-back  but not  disbursed  by the Lenders as
Advances covering  retention for Hard Costs in accordance with the provisions of
Section 2B.2 shall,  subject to the terms and conditions hereof, be disbursed to
Borrower, or, at Agent's option after the occurrence and continuance of an Event
of Default  hereunder or under any other Loan  Document  directly to the General
Contractor or any Major Subcontractor in accordance with the


                                       27
<PAGE>

General  Contract,  upon  satisfaction  of the conditions for the receipt of the
final disbursement set forth in Section 6.4 hereof.

            (b)  Notwithstanding  the  foregoing  restraints  on the  release of
Retainage,  each Lender agrees, upon the written request of Borrower,  to reduce
the retainage of the General  Contractor with respect to all disbursements  made
hereunder  subsequent to the date of such written request from ten percent (10%)
to zero percent (0%) provided  that, at the time such  reduction in Retainage is
requested:  (i) there is no default or any event which with the giving of notice
(if notice is required  hereunder) or passage of time would  constitute an Event
of  Default  by  Borrower  or any  Guarantor  hereunder  or under any other Loan
Document,  (ii) Developer on behalf of Borrower has a  corresponding  obligation
under the General Contract or applicable Major Contract to reduce, or there is a
corresponding  provision in the General  Contract or such Major  Contract  which
requires or permits, with the approval of Borrower and Agent, a reduction of the
percentage  of Retainage  at the time said  reduction  is  requested,  (iii) the
Improvements  are at least fifty  percent (50%)  completed and Agent  receives a
certification  from  Agent's  Inspecting  Consultant  as to  same  along  with a
certification  that the completed  construction is in accordance with the Plans;
and (iv) the work for which the  disbursement is requested has been completed by
the contractor or  subcontractor  in question and Agent receives a certification
from Agent's Inspecting  Consultant as to same. No Retainage previously withheld
shall be released to Borrower when the foregoing reduction in percentage occurs.
The aggregate of all of the  Retainage  remaining  shall only be released  after
Completion  has  occurred and all of the  requirements  of Section 6.4 have been
satisfied.

      Section 2B.9 Place of Disbursement.  All Loan disbursements  shall be made
at Agent's  office in  Cleveland,  Ohio or any other  office of Agent  hereafter
selected and notified to Borrower  from time to time by Agent.  Unless Agent and
Borrower  otherwise  agree,  all  disbursements  will be  made by wire  transfer
directly into Developer's  segregated  construction loan account  maintained for
the Project with LaSalle Bank National Association located in Chicago, Illinois.
During  the  term of the  Development  Agreement  or the  Management  Agreement,
Borrower hereby  specifically and irrevocably directs Agent to make all Advances
to the account of Developer as described in the preceding sentence,  and receipt
of Advances by Developer, shall for all purposes satisfy any funding obligations
of Lenders hereunder.

      Section 2B.10     Intentionally Omitted.

      Section 2B.11 Expenses and  Disbursements  Secured by Loan  Documents.  (a
Agent  may,  at  Agent's  option,  at any time and from  time to time  after the
occurrence of an Event of Default  under any Loan Document  while the same shall
be continuing,  disburse,  from the amounts made available to it by the Lenders,
all or any part of any  particular  Draw Request or the Retainage  either (i) to
Borrower for  disbursement  in  accordance  with the Draw  Request,  (ii) to the
General Contractor, Major Subcontractor in accordance with the General Contract,
Major Contractor or other party,  either directly or by check jointly payable to
Borrower  and  such  party,  for all  costs  payable  to such  party,  (iii)  at
Borrower's  expense,  to the Title  Insurer,  which shall pay said monies to the
parties  owed  payment;  or  (iv)  to any  Guarantor  in  connection  with  such
Guarantor's   performance  of  the  Guaranty  Obligations  (as  defined  in  the
Completion Guaranty).



                                       28
<PAGE>

            (b) At any time and from time to time and whether  before or after a
default  hereunder,  whether or not Borrower shall have submitted a Draw Request
therefor,  Agent shall  disburse  to itself and for the  ratable  benefit of the
Lenders from Loan  proceeds  sums  necessary to pay,  when due, all interest due
Lenders and all expenses reimbursable to Agent and Lenders hereunder, including,
without limitation, Agent's Counsel Fees and Agent's Inspecting Consultant Fees.
Unless  an  Event  of  Default  by  Borrower  hereunder  exists,  the  foregoing
reimbursable  expenses  will not be funded by Agent without  giving  Borrower an
opportunity to review and approve same,  which approval may not be  unreasonably
withheld or delayed, it being understood that reasonable expenses which Borrower
fails to approve may  nonetheless  be funded by or reimbursed  to Lender,  which
will make final good faith  determination as to whether expenses are reasonable.
No such  disbursement  shall be deemed to cure or remedy any default by Borrower
hereunder.

            (c) The  execution  of this  Agreement  by Borrower  constitutes  an
irrevocable  direction  to make the  disbursements  in the  manner  set forth in
Sections 2B.11(a) and 2B.11(b), and no further authorization from Borrower shall
be necessary to warrant such  disbursements,  and all such  disbursements  shall
satisfy pro tanto the  obligations of Lenders  hereunder and shall be secured by
the lien of the  Mortgage  as fully as if made to  Borrower,  regardless  of the
disposition  thereof by the General Contractor,  or any Major Contractor,  Major
Subcontractor, Title Insurer or other person.

      Section  2B.12  Other  Limitations  and  Requirements.  The  making of any
disbursement  by Agent shall not be deemed an acceptance or approval by Agent or
any Lender (for the benefit of Borrower or any third person) of the work done or
Improvements  constructed.  Notwithstanding  anything  contained  herein  to the
contrary,  neither  Agent  nor any  Lender  shall  have any  obligation  to lend
hereunder  unless Agent is, at all times satisfied that the  Improvements can be
constructed  lien-free in accordance  with the Plans,  and be open and ready for
occupancy by the Completion Date for the sums set forth in the Budget.

      Section 2B.13 Contract Verification.  From time to time, Agent may forward
to all contractors,  subcontractors,  material suppliers,  architects, engineers
and other  parties  listed  on any Draw  Request,  a  contract  verification  to
ascertain  the  correctness  of the amount of the contract for each  contractor,
subcontractor,  material  supplier,  architect,  engineer and any other party as
contained on the statement.  In the event of any discrepancy between the amounts
shown  by the  executed  copies  of the  contracts,  the Draw  Request,  and the
verification of contract forms,  Agent shall have the right to require that such
discrepancies be eliminated to its full satisfaction.

      Section  2B.14  Budget  Reallocations.  Agent  agrees not to  unreasonably
withhold its consent to Budget reallocations  requested by Borrower provided (i)
that at the time of any such request, there is no Event of Default then existing
hereunder  or under any other Loan  Document,  (ii) the Loan is "in  balance" as
defined in Section  2B.7,  (iii) in the case of  reallocation  of savings,  such
savings  are  actual  cost  savings  for work  completed  and fully  paid for in
connection with the  construction  of the  Improvements or are cost savings that
will be realized upon  completion of work in progress,  all as documented to the
reasonable  satisfaction  of Agent,  and all applicable  requirements of the New
York Lien Law are complied with, at the sole expense of Borrower,  as determined
by Agent in its sole  discretion  upon the advice of counsel,  and (iv) under no
circumstances  may items  designated in the Budget as Hard Costs be allocated to
items


                                       29
<PAGE>

designated  in the Budget as Soft  Costs,  or vice versa  until Agent shall have
granted  its  prior  written  consent  thereto,   which  consent  shall  not  be
unreasonably withheld, and all applicable  requirements of the New York Lien Law
are complied  with,  at the sole expense of Borrower,  as determined by Agent in
its sole discretion upon the advice of counsel.

      Section 2B.15     Required Equity.

            (a) Lender shall not be  obligated  to make any  Advances  hereunder
until Borrower shall have contributed the full amount of the Required Equity and
the full amount of the Required  Equity shall have been fully  disbursed to fund
Project  costs set forth in the Budget and approved by the Agent,  with evidence
of such payments  delivered to the Agent  promptly  after the making thereof and
prior to  disbursement  of any proceeds of the Loan. The Required  Equity may be
contributed  by Borrower in the form of cash  (including  without  limitation by
means of the Banc One  Financing  obtained by Member and/or  Alliance  Holdings,
Inc., provided same complies with Section 2B.15(b) hereof) or may be contributed
by means of the Mezzanine  Financing,  all on the terms set forth herein, or any
combination  of cash and the  Mezzanine  Financing,  prior to or  following  the
Closing Date or prior to or following  the date in which the Required  Equity is
fully funded.  As of the date hereof,  Borrower has delivered to Lender, in form
acceptable in all respects to Agent,  evidence that Borrower has  contributed or
shall contribute the full amount of the Required Equity (i) by paying,  prior to
the  Closing  Date  designated  project  costs  approved in writing by Agent and
identified in the Budget and/or (ii) by procuring an  irrevocable  commitment or
commitments  to fund Project costs  incurred after the Closing Date and approved
by the Agent.

            (b) For the purposes of this Agreement,  "MEZZANINE FINANCING" shall
mean  financing  obtained  by  Borrower  or  Member  from  a  lender  reasonably
acceptable to the Requisite Lenders.  Both the Mezzanine  Financing and the Banc
One Financing  must comply with the  following  terms and  conditions:  (i) such
financing  shall at no time be secured by any  interest  in the  Premises or any
part of the Project,  but the Banc One  Financing  may be secured by a pledge of
the equity  interest of  Alliance  Holdings,  Inc.  in Member and the  Mezzanine
Financing  may be secured  by a pledge of the equity  interest  in  Borrower  by
Member;  (ii)  the Banc  One  Financing  and the  Mezzanine  Financing  shall be
subordinated to the Loans pursuant to a subordination  and standstill  agreement
in form and substance  satisfactory  to the Requisite  Lenders;  (iii) principal
payments in connection  with such financing shall be deferred until the Loan has
been fully repaid,  (iv) interest  payments in  connection  with such  financing
shall be  deferred  until such time as the Debt  Service  Coverage  Ratio on the
Project has exceeded 1.4:1.0 for at least two (2) consecutive calendar quarters;
(v) the lender providing the Banc One Financing or the Mezzanine Financing shall
not have any right to prevent Agent from foreclosing on the Project or otherwise
enforcing its rights under this Agreement or the other loan  documents  executed
by  Borrower  in  connection  with the Loan and,  in the  event of a default  by
Borrower or Member of any of the terms and  conditions of the Banc One Financing
or the Mezzanine Financing, such lender shall not have any right to foreclose on
the Project,  but subject to the terms and conditions of the  subordination  and
standstill  agreement executed by such lender in favor of Lender, shall have the
right to foreclose on the equity  interest of Borrower  held by Member or on the
equity interest of Member held by the members of Member;  and (vi) the terms and
conditions  of such  financing  and the  agreements  embodying the same shall be
otherwise reasonably acceptable to the Requisite Lenders in all respects.


                                       30
<PAGE>

      Section 2B.16 Pro Rata;  Commitments.  (i) As used herein,  the terms "PRO
RATA,"  "RATABLE,"  "PROPORTIONATE"  and words of similar  import when used with
reference to the Lenders mean (unless the context clearly  otherwise  indicates)
pro rata  according  to the unpaid  principal  amounts  owing to the  respective
Lenders  under the  Notes,  or, if no  principal  is then  owing to any  Lender,
according to the Commitment, as the case may be, of the respective Lenders.

            (ii) As used in this Agreement,  the  "COMMITMENT" of each Lender at
any time means (A) the decimal  figure set forth in Annex I opposite the name of
the Lender multiplied by THIRTY SIX MILLION FOUR HUNDRED FIFTY SIX THOUSAND FOUR
HUNDRED  FOUR AND  00/100  DOLLARS  ($36,456,404.00)  minus (B) the  outstanding
principal balance of the Building Loan that was advanced by such Lender.

      Section  2B.17  Sharing of Setoffs.  Each Lender  agrees that if it shall,
through the exercise of a right of Lender's lien, setoff or counterclaim against
Borrower,  or pursuant to a secured  claim under  Section 506 of Title 11 of the
United  States Code or other  security or interest  arising from, or in lieu of,
such secured  claim,  received by such Lender under any  applicable  bankruptcy,
insolvency  or other  similar law or  otherwise,  obtain  payment  (voluntary or
involuntary)  in respect of any  Advance  or  Advances  as a result of which the
unpaid principal portion of its Advances shall be proportionately  less than the
unpaid principal portion of the Advances of any other Lender,  such Lender shall
be deemed simultaneously to have purchased from such other Lender at face value,
and  shall  promptly  pay to  such  other  Lender  the  purchase  price  for,  a
participation  in the  Advance or  Advances  of such other  Lender,  so that the
aggregate  unpaid  principal  amount of the  Advances and  participation  in the
Advances  held by each Lender shall be in the same  proportion  to the aggregate
unpaid  principal  amount of all the Advances then  outstanding as the principal
amount of such  Lender's  Advances  under  its Note  prior to such  exercise  of
Lender's lien, setoff or counterclaim or other event was to the principal amount
advanced under all of the Notes  outstanding  prior to such exercise of Lender's
lien, setoff or counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments  shall be made pursuant to this Section and
the payment giving rise thereto shall thereafter be recovered,  such purchase or
purchases or  adjustments  shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment  restored without interest.  Borrower
expressly  consents  to the  foregoing  arrangements  and agrees that any Lender
holding a  participation  in an  Advance  deemed to have been so  purchased  may
exercise  any and all  rights of  Lender's  lien,  setoff or  counterclaim  with
respect to any and all moneys owing by Borrower to such Lender by reason thereof
as fully as if such  Lender  had made an Advance  directly  to  Borrower  in the
amount of such participation.


                                       31
<PAGE>

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF BORROWER
                  ------------------------------------------

      Section 3.1 Representations and Warranties of Borrower.  Borrower
represents and warrants that:

            (a)  Borrower.  Borrower  is a duly formed  Ohio  limited  liability
company,  is in good  standing  under  the laws of the  State of Ohio,  is fully
authorized  to do  business  in the  State of New York,  and has full  power and
authority to consummate the transactions contemplated hereby;

            (b) Borrower's  Sole Member.  The sole member of Borrower is Member.
Member is a duly formed Ohio  limited  liability  company,  is in good  standing
under  the laws of the  State  of Ohio,  and has full  power  and  authority  to
consummate the transactions  contemplated  hereby as the sole member and manager
of  Borrower.  At all times while the Loan is  outstanding,  except as otherwise
permitted by Section  4.2(m) below,  Member shall be the sole member and manager
of Borrower and shall own not less than one hundred  percent (100%) of Borrower.
The sole  member  and  manager of Member is  Alliance  Holdings,  Inc.  Alliance
Holdings,  Inc.  is a duly  formed  Pennsylvania  corporation,  and  is in  good
standing  under  the  laws of  Pennsylvania.  At all  times  while  the  Loan is
outstanding,  except as otherwise  permitted by Section  4.2(m) below,  Alliance
Holdings, Inc. shall be the sole member and manager of Member;

            (c)  Guarantor  and  Developer/Manager.  Guarantor  is a duly formed
Delaware  corporation,  is in good  standing  under the laws of Delaware and has
full power and  authority to consummate  the  transactions  contemplated  by the
Guaranties. Developer is a duly formed Delaware corporation, is in good standing
under the laws of the Delaware,  is fully authorized to do business in the State
of New York and has full power and  authority  to  consummate  the  transactions
contemplated under the Development  Agreement,  the Management Agreement and the
Assignment of Contracts;

            (d)  Enforceability.  All Loan  Documents  executed by Borrower have
been duly authorized,  executed and delivered,  constitute the valid and binding
obligations of Borrower, and are enforceable against Borrower in accordance with
their respective terms;

            (e) Organizational Documents. The Membership Agreement has been duly
executed by the parties thereto, is in full force and effect, and there exist no
defaults  thereunder  or any event  that with  passage of time and the giving of
notice if notice is hereunder required would constitute a default thereunder;

            (f)  Financial  Information.  The  Financial  Statements of Borrower
heretofore  delivered  to Agent  fairly and  accurately  present  the  financial
condition of Borrower as of the date thereof and no  materially  adverse  change
has  occurred  in the  financial  condition  reflected  therein  since  the date
thereof.  The Financial  Statements  have been prepared in accordance with sound
accounting  methods,  principles and standards  consistently  applied and do not
fail to state any  information  necessary to make such Financial  Statements not
materially misleading;


                                       32
<PAGE>

            (g)  Insolvency.  Borrower is not insolvent (as such term is defined
in the Bankruptcy Code) and will not be rendered  insolvent by execution of this
Agreement  or  any  other  Loan  Document  to  which  it is a  party  or by  the
consummation of the transactions contemplated thereby;

            (h)  Budget.  The Budget  presents  a full,  accurate  and  complete
representation  of all costs,  expenses and fees which Borrower expects to incur
or pay or anticipates becoming obligated to pay to complete  construction of the
Improvements;

            (i) Litigation.  There are no actions, suits or proceedings pending,
or to the knowledge of Borrower or Guarantor, as applicable, threatened, against
or  affecting  Borrower,  Guarantor  or the  Premises  with  respect to which an
adverse decision is reasonably  likely that would have a material adverse effect
on  Borrower,   Guarantor  or  the  Premises,   or  involving  the  validity  or
enforceability  of the  Mortgage,  or the priority of the lien  thereof,  or the
validity or  enforceability  of any Loan Document to which Borrower or Guarantor
is a party, at law or in equity,  before or by any Governmental  Authority,  and
Borrower is not operating  under or subject to, in default or in violation  with
respect to, any order,  writ,  injunction,  decree or demand of any court or any
Governmental  Authority  which would  reasonably be expected to  materially  and
adversely affect its ability to perform its obligations hereunder;

            (j) Legal and  Contractual  Restrictions.  The  consummation  of the
transactions contemplated hereby and the performance by Borrower or Guarantor of
their respective obligations under this Agreement,  the Mortgage, the Notes, the
Security Agreement, the Payment Guaranty, the Completion Guaranty, the Operating
Deficit  Guaranty,  the  Environmental  Indemnity  Agreement,  or any other Loan
Document  will not result in any breach of, or constitute a default  under,  any
mortgage,  deed of trust,  lease, bank loan or credit agreement,  organizational
document  or  other  material  agreement  or  instrument  to which  Borrower  or
Guarantor is a party or by which Borrower or Guarantor may be bound or affected;

            (k)  Governmental  Authority.  No authorization or approval or other
action  by,  and no notice to or filing  with,  any  Governmental  Authority  or
regulatory  body is required for the due execution,  delivery and performance by
Borrower or Guarantors of the Loan  Documents that is required prior to the date
hereof and has not yet been obtained;

            (l) Other  Contracts.  There is no default  on the part of  Borrower
under or with respect to this  Agreement,  the Note, the Mortgage,  any Approved
Lease or any other Loan  Document,  and no event has occurred and is  continuing
which with the giving of notice (if notice is hereunder or thereunder  required)
and the passage of time would  constitute a default  under any of the  aforesaid
documents;

            (m) Usury.  The maximum interest rate or interest rates for the Loan
are not to Borrower's knowledge, after consultation with counsel, usurious;

            (n)  Counterclaims  and  Defenses.  Borrower  has no  counterclaims,
offsets or defenses with respect to the Loan or with respect to the Notes or any
other Loan Document;


                                       33
<PAGE>

            (o) Lien of Mortgage.  To Borrower's  knowledge,  after consultation
with  counsel and the Title  Insurer,  the Building  Loan  Mortgage  will,  upon
recordation  thereof  be a good and valid  first  lien on  Borrower=s  leasehold
interest in the Premises (other than intangible personal  property),  subject to
the Permitted Encumbrances,  and upon such filing and recordation and the filing
of the UCC  Financing  Statements  in the  proper  offices,  Agent  will  have a
perfected,  good and valid  first  security  interest  in all items of  personal
property  described in the granting  clause of the Building Loan  Mortgage,  the
Security  Agreement and the  Assignment  of Contracts,  subject to the Permitted
Encumbrances;

            (p)  Encumbrances.   Except  for  the  Permitted  Encumbrances,  the
Premises  are not and will not be  encumbered  by any other  Lien not  expressly
permitted  hereunder  or  hereafter  approved  in  writing  by  Agent,  it being
understood  that  Agent  will not  unreasonably  withhold  its  approval  of any
reasonably necessary beneficial easements;

            (q) Approved  Leases.  With  respect to the Approved  Leases and any
other leases affecting the Premises,  Borrower shall, on a continuing  basis, be
deemed to have  represented  and  warranted  that the same are in full force and
effect,  have not been modified or amended in any material  respect  without the
consent of Agent, not more than ten percent (10%) of Approved Leases are subject
to actual or alleged Borrower defaults,  and all conditions to the effectiveness
thereof required to be satisfied as of the date hereof have been satisfied;

            (r) Condemnation,  Eminent Domain, Access. Borrower has not received
any notice of, and is not aware of, any actual,  proposed or threatened exercise
of  the  power  of  eminent  domain  or  other  taking  by any  governmental  or
quasi-governmental  body or agency of all or any portion of the  Premises or any
interest  therein,  and no condition  exists and no  application is pending that
would  unreasonably  inhibit use and  occupancy of the Premises for its intended
purpose or adversely modify,  restrict or inhibit full access, ingress or egress
to the Project from the adjacent roadways in any material respect;

            (s)  Casualty.  The Premises  have not suffered any casualty or loss
since the date of the  appraisal  required  to be  delivered  to Agent under the
provisions of this Agreement;

            (t) Pollutants.  Except as specifically  identified and disclosed in
the environmental  reports delivered to Lender, the Premises has never been used
by Borrower to generate, manufacture,  refine, produce, store, handle, transfer,
process or transport any  Pollutants in violation of any  Environmental  Law and
Borrower has not used in the past, nor does Borrower intend to use, or permit to
be used, in the future,  during  construction  or otherwise the Premises for the
purpose of generating,  manufacturing,  refining,  producing, storing, handling,
transferring,  processing or  transporting  of any Pollutant in violation of any
Environmental  Law.  Except as  specifically  identified  and  disclosed  in the
environmental  reports  delivered  to Lender,  Borrower  has no knowledge of any
Pollutant having been allowed to spill,  leak,  escape,  be discharged,  dumped,
emptied or otherwise  disposed of or dealt with on the Premises or  incorporated
into the  Improvements  or allowed to be  discharged  or drained  into or on any
property  adjacent  to the  Premises  or into any waters on or  adjacent  to the
Premises or onto lands from which such Pollutants might seep, flow or drain into
such waters in  violation  of any  Environmental  Law.  The  Premises (i) is not
included  or proposed to be  included  on the  National  Priorities  List issued
pursuant to Comprehensive Conservation Environmental


                                       34
<PAGE>

Response,  Compensation  and  Liability  Act  ("CERCLA")  by the  United  States
Environmental  Protection  Agency ("EPA") or on the inventory of other potential
"PROBLEM" sites issued by the EPA, (ii) has not otherwise been identified by EPA
as a potential  CERCLA site or included or proposed for inclusion on any list or
inventory  issued pursuant to any state  environmental  statute or issued by any
other Governmental Authority, and (iii) is not located in a "WETLANDS". Borrower
has not received any notice of, nor does  Borrower  have any  knowledge  of, any
occurrence or circumstance  which with notice or passage of time would give rise
to a claim or Lien under or  pursuant  to any  environmental  rule,  regulation,
Requirement  or  statute  of  any  Governmental   Authority  pertaining  to  any
Pollutant.

            (u)  Subdivision.  The Land  consists of one separate tax lot and is
not part of a larger tract owned or leased by  Borrower,  and there are and will
be no  encroachments on or from the Land except as shown on the survey delivered
by  Borrower  pursuant  to  this  Agreement  or  as  expressly  permitted  under
applicable  Requirements  and approved by Agent and any adjacent  property owner
whose rights are affected by such encroachment;

            (v) Access. The Project has access to legally dedicated and accepted
roads;

            (w) Borrower is, or by January 1, 2000 shall be, Year 2000 Compliant
(as hereinafter  defined).  "Year 2000 Compliant"  shall mean that all software,
embedded microchips,  and other processing capabilities utilized by and material
to the  business  operations  or  financial  condition  of Borrower  (including,
without  limitation,  business  operations  conducted by Developer on Borrower=s
behalf under the Development Agreement and the Management Agreement) are able to
interpret and manipulate  data on and involving all calendar dates correctly and
without causing any abnormal ending scenario,  including in relation to dates in
and  after  the  year  2000.  Upon  Lender=s  written  request,  Borrower  shall
reasonably  demonstrate  (or shall cause  Developer to  reasonably  demonstrate)
compliance with the preceding covenant.

            (x) Plans. The Plans,  have been approved by Borrower and Guarantor,
and before the initial  Advance,  said Plans  shall be  approved  by Agent,  the
Ground Lessor and, to the extent  required by any Requirement or any restrictive
covenant, the appropriate Governmental Authority and the beneficiary of any such
covenant;

            (y) Construction Performed. All construction heretofore or hereafter
performed  complies and shall comply with all Requirements and the Ground Lease;
Borrower has fully paid for all work  performed  through the date hereof (except
for any retainage  expressly  provided for in the relevant Project Document) and
has  received  lien  waivers  for  all  such  work;  the  Improvements  will  be
constructed  wholly  within  the  perimeter  of the  Land and  substantially  in
accordance with the Plans;  there are no structural  defects in the Improvements
(it  being  intended  that  the  absence  of  structural   defects  shall  be  a
pre-condition  to  the  funding  of  any  Draw  Request);  no  violation  of any
Requirement or the Ground Lease exists with respect  thereto and the anticipated
use thereof  complies with all Requirements and the Ground Lease and restrictive
covenants  affecting  the Land  and all  requirements  for  such  use have  been
satisfied to the extent possible as of the date hereof;

            (z) Utilities.  All utility services  necessary for the construction
of the  Improvements  and the operation  thereof for their intended  purpose are
available at the


                                       35
<PAGE>

boundaries of the Land, including,  without limitation,  water supply, storm and
sanitary sewer facilities,  gas,  electrical,  and telephone  facilities and the
installation  of said  utility  services  to the  Improvements  can and  will be
completed by the  Completion  Date.  Borrower has  received  permission,  to the
extent required, from the appropriate Governmental Authority and/or the provider
of each utility  service to connect the  Improvements  into each utility service
provided the Improvements are constructed in accordance with the Plans;

            (aa) Compliance. All zoning, planning, land use (including,  without
limitation,  the  Zoning  Resolution  of the  City of New  York),  construction,
renovation,  and environmental  approvals,  authorizations,  licenses or permits
necessary as of the date hereof to permit the Improvements to be constructed and
operated  shall be listed on a schedule to be  delivered by Borrower to Agent on
the Closing Date  (together with copies of items listed in said  schedule),  and
have been or will be acquired by Borrower as and when  required,  are or will be
in full force and effect and  Borrower  has  received no notice of a  violation,
revocation or  termination of same and any rights to appeal the granting of such
approvals  have expired with no appeals  being taken.  Said permits are the only
permits   necessary  to  construct  the  Improvements  in  accordance  with  all
Requirements.  The  Improvements,  as described in the Plans and when completed,
will comply with all zoning, environmental, air quality, subdivision,  planning,
building, land use (including,  without limitation, the Zoning Resolution of the
City of New  York),  and  other  similar  types  of  laws,  rules,  regulations,
ordinances,  requirements,  planning  approvals and permit conditions imposed by
any Governmental  Authority.  Any zoning or subdivision  approval is based on no
real property,  or rights  appurtenant  thereto,  other than the Land and rights
encumbered  by  the  lien  of  the  Mortgage.  To  Borrower's  knowledge,  after
consultation with counsel, the Improvements as, and to be, improved and used are
not in violation of any  covenants,  conditions or  restrictions  of any kind or
nature,  whether or not of record,  affecting all or any part of the Land or any
interest therein. No amendment or change in any such permit, license or variance
and no  amendment  or change in zoning or any other  land use  control  has been
sought or obtained or will be sought or obtained;

            (bb) Contracts.  Borrower or Developer on Borrower's  behalf has not
made and is not aware of any  contract  or  arrangement  of any kind  binding on
Borrower or  Developer on  Borrower=s  behalf in an amount in excess of $50,000,
except those  disclosed in writing on a schedule to be delivered to Agent on the
Closing  Date (or which may be entered  into  subsequent  to the date hereof and
disclosed in writing to Agent);

            (cc)   Information.   To  Borrower's   knowledge,   no  information,
certification or report submitted to Agent by or on behalf of Borrower  pursuant
to this  Agreement  or  otherwise  in  connection  with the  Loan or  Borrower's
requests or applications  therefor contains any material misstatement of fact or
fails to state a material fact necessary to make the  information not misleading
in any material respect;

            (dd) Draw Request.  Each Draw Request,  and the receipt of the funds
requested  thereby,  shall have the effect stated in the  definition of the term
"DRAW REQUEST" and be accompanied by the items in said definition and such other
items as are required by this Agreement;


                                       36
<PAGE>

            (ee) Use of  Proceeds.  Borrower  will  employ the Loan  proceeds in
accordance with the Budget and will not require and will not avail itself of any
additional  extension of credit for any purpose  without  Agent's  prior written
consent;

            (ff) Broker. Borrower has not retained the services of any broker in
connection with the Loan (other than Shattuck Hammond Partners); and

            (gg) Investment Company Act; Other  Regulations.  Borrower is not an
"INVESTMENT  COMPANY",  or a company  "CONTROLLED"  by an "INVESTMENT  company,"
within the meaning of the Investment  Company Act of 1940, as amended.  Borrower
is not subject to  regulation  under any Federal or State  statute or regulation
which limits its ability to incur the Obligations or any other indebtedness.

            LENDER   ACKNOWLEDGES   THAT  BORROWER  HAS  RELIED  SOLELY  ON  THE
DEVELOPER'S  CERTIFICATE  IN THE FORM ATTACHED  HERETO AND MADE A PART HEREOF AS
EXHIBIT E IN MAKING THE REPRESENTATIONS RELATING TO THE PREMISES AND THE PROJECT
(AS  DISTINGUISHED  FROM THOSE  REPRESENTATIONS  RELATING  TO  BORROWER  AND ITS
ORGANIZATION)  CONTAINED IN THIS SECTION 3.1 AND ELSEWHERE IN THIS AGREEMENT AND
OTHER  LOAN  DOCUMENTS.  IN THE EVENT  THAT  DEVELOPER'S  OBLIGATIONS  UNDER THE
DEVELOPER'S CERTIFICATE SHALL TERMINATE PURSUANT TO THE TERMS THEREOF,  BORROWER
SHALL BE DEEMED TO HAVE MADE ALL OF THE  REPRESENTATIONS  IN THIS ARTICLE 3.1 ON
ITS OWN ACCORD AND WITHOUT  RELIANCE ON THE  DEVELOPER'S  CERTIFICATE.  BORROWER
EXPRESSLY   ACKNOWLEDGES   AND  AGREES  THAT   NOTWITHSTANDING   THE   FOREGOING
ACKNOWLEDGMENT BY LENDER, ANY MISREPRESENTATION CONTAINED HEREIN OR IN THE OTHER
LOAN DOCUMENTS,  WHETHER OR NOT MADE IN RELIANCE ON THE DEVELOPER'S CERTIFICATE,
SHALL  BE  DEEMED  A  DEFAULT  HEREUNDER  BY  BORROWER,  SUBJECT  TO  ALL OF THE
APPLICABLE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.


                                   ARTICLE IV

                              COVENANTS OF BORROWER
                              ---------------------

      Section 4.1  Affirmative  Covenants of Borrower.  Borrower  covenants with
Agent, for itself and for the ratable benefit of the Lenders,  that,  throughout
the term of the Loan and any extensions thereof, Borrower will:


            (a) Structure of Borrower.  Comply with all Requirements in order to
      maintain Borrower in good standing as a validly existing limited liability
      company under the laws of the State of Ohio,  authorized to do business in
      the State of New York;

            (b) Performance of Obligations.  Promptly comply with all conditions
      of this  Agreement  and the other Loan  Documents  with which  Borrower is
      required  to  comply  and  any   Requirement,   the  Ground  Lease  and/or
      restrictive covenant affecting the Land;

            (c) Notices. Promptly (upon transmittal or receipt) deliver to Agent
      copies of all material notices and correspondence with respect to: (i) any
      Project Document, (ii)


                                       37
<PAGE>

      any Loan Document, (iii) the financial condition of Borrower, (iv) Agent's
      and Lenders' security, and (v) any violation or potential violation of any
      Requirement or any approval,  authorization, or permit issued in regard to
      the Premises or Improvements,  and Borrower will promptly respond fully to
      any inquiry of Agent made with  respect  thereto,  and will permit  Agent,
      upon Agent's written  request,  to participate in any inquiry,  hearing or
      meeting with regard to any of the  foregoing  and will furnish  Agent,  on
      demand, proof of compliance,  or proof of the action Borrower is taking in
      order  to  comply,  reasonably  satisfactory  in all  respects  to  Agent;
      provided  that  Lender  acknowledges  that  pursuant  to  the  Development
      Agreement  and  the  Management  Agreement,   Borrower  has  delegated  to
      Developer  certain of Borrower's duties under this Agreement and the other
      Loan Documents.  Accordingly, during the term of the Development Agreement
      and/or Management  Agreement,  (i) Lender shall rely on any notice, demand
      or request for  Advances  from  Developer as if such  notices,  demands or
      requests for Advances  were made by Borrower,  (ii) any notice,  demand or
      request for Advances or  modifications  not signed by  Developer  shall be
      ineffective and (iii) Agent shall not act upon any request by Borrower for
      a material modification to any of the Loan Documents unless the same is in
      writing signed by both Borrower and Developer;

            (d) Additional Documents. Execute and deliver to Agent, from time to
      time, and as reasonably  requested by Agent, such other documents as shall
      be  reasonably  necessary  to provide the rights and remedies to Agent and
      Lenders granted or provided by the Loan Documents;

            (e)  Maintenance  of Premises.  Maintain the Premises in good repair
      and safe condition at all times and if at any time any Pollutant  shall be
      discovered  buried under,  manufactured or processed or stored on the Land
      in  violation  of  Requirements,  Borrower  will  promptly  remove same in
      accordance with any and all Requirements;

            (f) Insurance.  Maintain, at all times, insurance on the Premises in
      accordance with the requirements of the Mortgage;

            (g)  Draw  Request.  Prior to  Completion  and  satisfaction  of all
      requirements of Section 6.4 hereof,  submit to Agent at least once, but no
      more than once each  calendar  month a Draw Request  (except  Borrower may
      make an additional  Draw Request to pay Interest or as otherwise  provided
      herein);

            (h) Payment of Fees.  On the Closing  Date and  thereafter  promptly
      when due, pay the Commitment Fee, the Construction Administration Fee, the
      Agency Fee, Agent's Counsel Fees, Agent's Inspecting  Consultant fees, all
      costs and expenses  required to satisfy the  conditions of this  Agreement
      and all costs and fees of whatever  nature incurred by Agent acting on its
      own  behalf  or as agent  for  itself  and any  participating  Lenders  in
      connection  with  the  negotiation,   consummation,   execution,  closing,
      syndication,   administration   and/or   collection   of  the  Loan,   but
      specifically  excluding  any  expenses  incurred  in  connection  with the
      negotiation, consummation, execution and closing of the Loan by any Lender
      (other  than KCCI  (individually  or as Agent)) in excess of $5,000  each.
      Without  limiting the generality of the foregoing,  Borrower will pay: (i)
      mortgage  recording taxes and recording fees, title insurance premiums and
      costs, escrow


                                       38
<PAGE>

      fees, flood zone determination fees, survey fees, appraisal costs, Agent's
      environmental audit and site inspection fees; and (ii) all reasonable fees
      and  expenses   incurred  by  Agent,   and  its   respective   agents  and
      representatives  in  connection  with any Event of Default  under any Loan
      Document  or the  enforcement  thereof.  To the  extent  Agent,  after the
      Initial Closing,  deems it necessary in its reasonable  judgment to employ
      counsel  and/or  consultants  for any purpose  relative  to the Loan,  the
      reasonable fees and expenses of such counsel and/or  consultants  shall be
      borne by Borrower.  Any such fees and expenses incurred by Agent are to be
      paid  promptly by Borrower in no event later than ten (10)  Business  Days
      from Agent's delivery of an invoice to Borrower. Borrower hereby agrees to
      indemnify  and hold Agent  harmless  with respect to all of the  foregoing
      costs, fees and expenses;

            (i) Use of  Proceeds.  Borrower  shall  receive the  Advances of the
      Building Loan made  hereunder and shall hold same in trust solely for, and
      shall  expend,  Building  Loan  proceeds  solely for the purpose of paying
      costs  of the  improvement  as  defined  in the New  York  Lien  Law,  and
      identified in the Budget and Borrower  shall utilize  Advances of the Soft
      Cost Loan solely for the purpose of paying costs  identified in the Budget
      as Soft Costs. Borrower represents and agrees that it will not require and
      agrees that it will not avail itself of any additional extension of credit
      for the requisition and development of the Premises or the construction of
      the Improvements (except for financing expressly permitted hereunder).  An
      affidavit pursuant to Section 22 of the Lien Law of the State of New York,
      is attached hereto as EXHIBIT C and made a part hereof;

            (j)  Construction.  Cause the construction of the Improvements to be
      prosecuted  with  diligence and continuity so as to complete and equip the
      same in accordance with the Plans,  the Ground Lease, all Requirements and
      the  Budget on or before  the  Completion  Date free and clear of Liens or
      claims for Liens other than Permitted Encumbrances. Borrower will promptly
      deliver a copy of all  proposed and  executed  Change  Orders to Agent and
      Agent's Inspecting Consultant;

            (k) Standard of  Construction.  Construct and achieve  Completion of
      the  Improvements  substantially  in  accordance  with  the  Plans  to the
      reasonable  satisfaction  of Agent and Agent's  Inspecting  Consultant and
      will not permit,  and will promptly  remove,  any encroachment on the Land
      unless the same is  insured  over by the Title  Insurer to the  reasonable
      satisfaction  of Agent,  and Borrower will not allow the  Improvements  to
      encroach on any adjoining property or street, and if any such encroachment
      exists  Borrower will promptly remove same unless the same is insured over
      by the Title Insurer to the reasonable satisfaction of Agent;

            (l)  Inspections.  Subject to the  Approved  Leases,  permit  Agent,
      Agent's Inspecting  Consultant and/or Agent's agents and the other Lenders
      at all  reasonable  times to enter upon the  Premises,  and to inspect the
      Improvements and all materials to be used in the construction  thereof and
      to examine  all Plans which are or may be kept at the  construction  site,
      and will  cooperate,  and  cause  the  General  Contractor  and the  Major
      Contractors   (and  will  use  good  faith  efforts  to  cause  the  Major
      Subcontractors) to cooperate, with Agent's Inspecting Consultant to enable
      it to perform its functions;


                                       39
<PAGE>

            (m)  Correction  of  Defects.  Upon  demand of Agent  based upon the
      advice of Agent's Inspecting Consultant,  correct any structural defect in
      the  Improvements  or any  departure  from the Plans deemed by Agent to be
      material, and the disbursement of any Loan proceeds shall not constitute a
      waiver of Agent's  right to require  compliance  with this  covenant  with
      respect to any such defects or departures from the Plans;  notwithstanding
      the foregoing,  neither Agent nor Agent's Inspecting Consultant shall have
      any  affirmative  duty to  Borrower or any third party to inspect for said
      defects or to call them to the  attention  of  Borrower or anyone else and
      the failure to do so shall in no event give rise to any claim or liability
      to or on the part of any party;

            (n) Bonds.  Obtain and deliver to Agent  material and labor  payment
      bonds and performance bonds, which bonds must be reasonably  acceptable to
      Agent, for the General  Contractor,  naming Agent, for the ratable benefit
      of the Lenders, as a dual obligee thereunder;

            (o) Letter Agreements.  Require  Borrower's  Engineer and Architect,
      the General  Contractor  and each Major  Contractor to timely  execute and
      deliver to Agent a letter in the form previously approved by the Agent;

            (p)  Foundation  Survey.   Deliver  to  Agent  a  foundation  survey
      complying  with the  requirements  provided  by Agent to  Borrower  on the
      Closing Date upon completion of the foundation;

            (q) As-Built Survey.  Deliver to Agent an as-built  ALTA/ACSM survey
      complying with the  requirements  set forth in the Commitment  Letter upon
      Completion of the Improvements;

            (r) Indemnification.  Protect,  defend, indemnify and hold Agent and
      Lenders, and Agent's and each Lender's officers, directors,  shareholders,
      employees and agents harmless from all claims,  expenses,  costs,  losses,
      injury, liabilities (including liability for penalties), judgments, fines,
      damages,  settlements,   causes  of  actions,  suits,  demands,  including
      attorneys  fees and costs,  arising from or related to: (i) any  brokerage
      commissions  or finder's fees claimed by any broker or other party arising
      by reason of the execution  hereof or the consummation of the transactions
      contemplated  hereby (except by any such broker or other party retained by
      Lender), (ii) any actions or omissions relative to the Premises including,
      without limitation,  contract,  personal injury (other than for Agent's or
      Lenders' gross negligence or wilful misconduct) or property damage claims,
      (iii) the Improvements or the construction  thereof, (iv) the existence of
      any  encroachment  (except as shown on the survey  delivered  by  Borrower
      pursuant to this  Agreement  and  approved by Agent or as may be permitted
      under Section  4.1(k)) upon the Land or from any part of the  Improvements
      encroaching  on any adjoining  property,  street or easement,  and (v) any
      action or lien pursuant to any  environmental  Requirement  or clean up or
      compensation  act,  including  the failure to comply with the terms of any
      order  issued by any  federal,  state or  municipal  department  or agency
      having regulatory authority over environmental  matters with regard to the
      Premises  or any other  property  owned by  Borrower  or the  presence  or
      existence of any  Pollutant in violation of  Requirements.  If any action,
      suit or proceeding  arising from any of the  foregoing is


                                       40
<PAGE>

      brought against Agent or any Lender,  Borrower will resist and defend such
      action,  suit or  proceeding or cause the same to be resisted and defended
      by counsel  designated  by Borrower  (which  counsel  shall be  reasonably
      satisfactory to Agent),  unless,  due to a conflict of interest,  Agent or
      any Lender  require such  action,  suit or  proceeding  to be resisted and
      defended  by  counsel  of its own  selection  and is  represented  by such
      counsel (in which case Borrower shall be liable for the payment of Agent's
      and such Lender's reasonable  attorney's fees), provided that prior to the
      occurrence  and  continuance  of  default,  Agent or any Lender  shall not
      settle or release any claim without the written consent of Borrower, which
      approval  shall not be  unreasonably  withheld or  delayed.  If and to the
      extent that the foregoing  provisions of this Section may be unenforceable
      for any reason, Borrower hereby agrees to make the maximum contribution to
      payment and satisfaction of each of the indemnified  liabilities  which is
      permissible  under applicable law. If Borrower shall fail to do any act or
      thing which it has  covenanted  to do hereunder or any  representation  or
      warranty on the part of Borrower  contained herein or in any Loan Document
      shall be breached and such breach  shall  continue  beyond any  applicable
      notice  and  grace  periods,  Agent or any  Lender  may (but  shall not be
      obligated  to) do the  same or  cause  it to be done or  remedy  any  such
      breach, and may expend its funds for such purpose; provided, however, that
      no such  action  by Agent or any  Lender  shall  relieve  Borrower  of any
      liability  in  connection  with  such  failure  or  breach or be deemed to
      constitute  a waiver of any  default  under  this  Agreement  or such Loan
      Document.  Any and all amounts so expended by Agent or any Lender shall be
      repayable to them by Borrower,  promptly  after Agent's  demand  therefor,
      with interest at the Default Rate from the date of  expenditure  by Lender
      to the date of repayment.  The  obligations of Borrower under this Section
      4.1(r) shall survive the  termination  of this Agreement and the discharge
      of Borrower's other obligations hereunder.  Notwithstanding the foregoing,
      to the extent the Guarantor shall have performed its obligations under the
      Guaranties and/or the Environmental  Indemnity pertaining to the preceding
      obligations,  neither  Borrower  nor any  Guarantor  shall be  liable  for
      duplicative fees and costs incurred by Agent or Lenders in connection with
      such obligations;

            (s)  Security  Interests.  Grant Agent,  for the ratable  benefit of
      Lenders,  a first lien and  security  interest,  subject only to Permitted
      Encumbrances and liens permitted  hereunder and that the Ground Lessor may
      have under the  applicable  provisions of the Ground Lease,  in and to all
      furnishings,  fixtures and equipment  and other  personal  property  owned
      and/or  leased by Borrower and used in the  operation of the  Improvements
      immediately  upon acquisition of same or any part of same and will deliver
      to  Agent,  promptly  following  demand,  copies  of all  documents  which
      evidence  Borrower's  title to or a leasehold  interest in any  materials,
      fixtures or articles incorporated in the Improvements.  Borrower shall not
      enter into  conditional  sales contracts or lease agreements for equipment
      to be used in the  construction or operation of the  Improvements,  except
      for office  equipment,  furniture and other machinery or equipment used in
      the day-to-day operation and maintenance of the Improvements, the value of
      which in the aggregate shall not exceed $500,000;

            (t)   Permits.   Obtain   and  keep  all   permits,   licenses   and
      authorizations  required  for  the  construction,  use  and  operation  of
      Premises,  including  without  limitation  the  temporary  certificate  of
      occupancy  covering the Improvements,  in full force and effect,


                                       41
<PAGE>

      promptly  comply with all conditions  thereof,  and upon Agent's  request,
      promptly deliver to Agent evidence of compliance and promptly notify Agent
      of any violation, revocation or termination of same;

            (u) Easements.  Procure such easements, cross easements or operating
      agreements  as Agent  may  reasonably  deem  necessary  for the use of the
      Premises and will submit same to Agent for approval prior to the execution
      thereof  by  Borrower,  accompanied  by a drawing  or survey  showing  the
      location thereof;

            (v)  Compliance   with   Requirements.   Promptly  comply  with  all
      Requirements  which affect the Premises or for which a notice of violation
      or  non-compliance  has been issued and promptly deliver to Agent evidence
      of such  compliance  and  copies  of any  such  notices  of  violation  or
      non-compliance;

            (w) Payment of Claims;  Notice to Agent of Claims.  Promptly pay all
      costs and expenses incurred in connection with the Premises,  and Borrower
      shall cause the Premises to be kept free and clear of any Liens other than
      Permitted Encumbrances.  Within thirty (30) days after filing of any Lien,
      Borrower  shall  cause such Lien to be  discharged,  released of record or
      bonded  over for a sum and in a manner by a  reputable  surety each in all
      respects acceptable to Agent; notify Agent in writing within ten (10) days
      thereof  should  any  mortgage,   lien,   notice  of  lien,  stop  notice,
      encumbrance or charge or any other security instrument  whatsoever against
      the  Property  (other  than  the  Permitted  Encumbrances),  Improvements,
      Personal  Property,  or other collateral  covered by the Loan Documents or
      any part thereof come to Borrower=s attention.  Borrower shall do all acts
      and execute all  additional  documents  required by Agent to maintain  the
      priority  of the lien of the  Building  Loan  Mortgage  and the Soft  Cost
      Mortgage and to comply with the Lien Law of the State of New York.

            (x)  Financial  Statements.  Furnish  to Agent:  (i)  Commencing  on
      Completion  and  with  respect  to  monthly  statements  ending  upon  the
      achievement of the  Intermediate  Threshold with respect to Borrower,  not
      later than forty-five (45) days after the end of each calendar month, and,
      not later than one hundred twenty (120) days after the close of Borrower's
      fiscal  year,  a balance  sheet,  a  statement  of profit and loss,  and a
      statement of changes  setting  forth in  comparative  form figures for the
      preceding  month  or  year,  as the case  may be.  The  annual  statements
      delivered  by  Borrower  shall be  certified  by an officer of Borrower or
      Developer.  After the  Intermediate  Threshold has occurred,  Borrower may
      submit  quarterly  statements in lieu of the monthly  statements  required
      hereunder.  All such financial statements shall be certified by an officer
      of Borrower or Manager;  (ii) With  respect to  Guarantor,  not later than
      forty-five  (45) days after the end of each  calendar  quarter,  and,  not
      later than one hundred  twenty  (120) days after the close of  Guarantor's
      fiscal  year,  a balance  sheet,  a  statement  of profit and loss,  and a
      statement of changes  setting  forth in  comparative  form figures for the
      preceding year or quarter,  as the case may be. The annual statements (but
      not the quarterly  statements) delivered by Guarantor shall be audited and
      certified  by Ernst & Young LLP or another firm of  independent  certified
      public  accountants,  reasonably  acceptable to Agent.  All such financial
      statements  shall be certified by officer of  Guarantor;  (iii) Such other
      financial


                                       42
<PAGE>

      statements  required  pursuant  to the terms of the  Mortgage or as may be
      reasonably requested by Agent;

            (y)  Approved  Leases.  Use  reasonable  efforts to fully  lease the
      Improvements. All leases must comply with the leasing guidelines set forth
      in Section 4.2(i) hereof. Borrower shall obtain the prior written approval
      of Agent for each lease if required by Section 4.2(i).

            (aa) Additional  Documents.  Execute and deliver to Agent, from time
      to time, such other documents as shall be reasonably  necessary to provide
      the rights and remedies granted or provided by the Loan Documents;

            (bb) Rent Rolls.  From and after the date of Completion,  deliver to
      Agent,  (i) not less than monthly  prior to  Stabilization  and  quarterly
      thereafter,  on or before the fifth  (5th) day of such  month or  calendar
      quarter,  as the case may be, a rent roll and a "Leasing  Report" relative
      to any vacant units which shall summarize resident  applications  received
      and  leasing  progress,  certified  by  Borrower  or  Manager on behalf of
      Borrower to be true and complete and  containing  Borrower's  or Manager's
      certification  that,  except as specifically  noted, (1) all of the Leases
      then in effect  comport with the  requirements  of Section  4.2(i) hereof,
      including the requirement that such Leases do not vary in any material way
      from the form of lease  previously  approved by Agent and the  requirement
      that the fixed  rent  under each such Lease is not less than the rates set
      forth on EXHIBIT F; (2) there have been no  prepayments  under such Leases
      greater than thirty (30) days (except for security  deposits shown on such
      rent roll); and (3) the aggregate of (x) the revenues from such Leases and
      (y) the pro  forma  rentals  for  the  then  vacant  units  determined  in
      accordance  with the pro forma  rentals set forth on Exhibit F are no less
      than ninety-five percent (95%) of the total pro forma rentals set forth on
      Exhibit F, and otherwise  containing  such  information  and being in such
      form as Agent may reasonably  require,  and (ii) not less than one hundred
      twenty (120) days  following the end of Borrower=s  fiscal year, an annual
      pro forma operating  statement for the Improvements,  prior to Completion,
      Borrower shall deliver to Agent a monthly Leasing Report;

            (cc)  Operating  Budget/Cash  Flow.  Deliver  to the Agent  facility
      summary  reports for the  Project in form and  substance  satisfactory  to
      Agent,  which shall be broken down on a line item basis  (including a line
      item for NOI) and shall include an occupancy summary and a profit and loss
      summary (each, a "FACILITY SUMMARY REPORT"). Such Facility Summary Reports
      will be provided monthly from Substantial  Completion until  Stabilization
      has  been  achieved,   with  quarterly   reports  being   permitted  after
      Stabilization has been achieved, within forty-five (45) days after the end
      of   each   calendar   month   or   quarter,   as   applicable.   As  used
      herein,"STABILIZATION"  shall mean, and shall have been achieved, when the
      Debt Service  Coverage  Ratio for the Project  following the  Intermediate
      Threshold  has  exceeded  1.2 to 1.0 for at least  three  (3)  consecutive
      calendar months. As used HEREIN,"INTERMEDIATE THRESHOLD" (which must occur
      no later than the twelfth (12th) month following Substantial Completion to
      be effective)  shall mean, and shall have been achieved when: (i) at least
      six (6) months have elapsed since  Substantial  Completion;  (ii) not less
      than 87.5% of the units then scheduled to be occupied, as set forth in the
      Occupancy  Schedule  attached  hereto and made a part hereof as EXHIBIT F,
      are


                                       43
<PAGE>

      then occupied and all payments are being made in accordance with the terms
      of Approved Leases, and (iii) the NOI of the Project on a cumulative basis
      for the period from Substantial Completion through the last day covered by
      the most recent monthly  Facility Summary Report submitted by Borrower and
      approved by Agent,  as set forth in such Facility  Summary  Report,  is no
      less  than  87.5% of the  projected  NOI set forth in the  Budget  (or any
      revised  projected  NOI approved by the  Requisite  Lenders in writing for
      such respective period);

            (dd) Debt  Service  Coverage  Ratio.  Achieve and maintain a minimum
      Debt Service Coverage Ratio for the Project,  as determined by Agent based
      upon information  provided by Borrower within  forty-five (45) days of the
      end of each calendar  quarter,  of (i) 1.0 to 1.0 at the end of quarters 5
      and 6 following Substantial Completion;  and (ii) 1.2 to 1.0 at the end of
      quarter 7 following  Substantial  Completion,  and each quarter subsequent
      thereto,  as determined  quarterly on a rolling basis including up to four
      quarters  commencing  with  quarter  7. For  example,  in  quarter  8, the
      calculation  will include  figures from  quarters 7 and 8 only; in quarter
      10, the calculation will include figures from quarters 7, 8, 9 and 10.

            (ee) Occupancy of the Project. Achieve and maintain occupancy of the
      Project  after   Substantial   Completion,   as   established  to  Agent's
      satisfaction,  at not less than the following scheduled levels measured at
      the end of such period:

                  Quarter 2 following Substantial Completion:           43.75%
                  Quarter 3 following Substantial Completion:           55.13%
                  Quarter 4 following Substantial Completion:           65.63%
                  Quarter 5 following Substantial Completion:           76.13%
                  Quarter 6 following Substantial Completion:           83.13%
                  Quarters 7-10 following Substantial Completion:       83.13%

            (ff) Guarantor's Net Worth. Provide to Agent a certificate,  in form
      reasonably  acceptable to Agent, on a quarterly basis,  within  forty-five
      days (45) of the end of each calendar quarter, evidencing that Guarantor's
      minimum net worth is equal to $70,000,000.

            (gg) Guarantor's Liquidity.  Provide to Agent a certificate, in form
      reasonably  acceptable to Agent, on a quarterly basis,  within  forty-five
      (45) days of the end of each calendar  quarter,  evidencing that Guarantor
      has Liquid Assets equal to at least $5,000,000.

            (hh) Compliance  With Ground Lease.  Comply in all respects with the
      Ground Lease, including,  without limitation, the provisions of Article 11
      thereof  governing  construction  of the Project,  and the  provisions  of
      Article 40 thereof governing non-discrimination and comply with all of the
      instruments  and  agreements  with which  Borrower  is  required to comply
      pursuant to the Ground Lease,  including,  without limitation,  the Master
      Lease, the Master Development Plan and the Design Guidelines.


                                       44
<PAGE>

            (ii)   Post-Closing   Conditions.   Borrower   shall   satisfy   the
      Post-Closing  Conditions  set forth in Section  2B.7, if any, on or before
      the Post-Closing Delivery Date and in no event later than the Post-Closing
      Default Date.

            (jj) Agent's Sign on the Premises.  Authorize Agent (i) to erect, at
      its  option,  and  solely  at  Agent's  expense,  a sign  on the  Premises
      indicating  that Agent and the Lenders are the source of the financing for
      the  Improvements  and (ii) to use Borrower's name and the location of the
      Improvements  in  any  published  advertisement.   Any  sign  must  be  in
      compliance  with  applicable  ordinances and the Ground Lease and shall be
      removed upon Completion;

            (kk) Borrower and/or Guarantor on Borrower's  behalf shall establish
      and  maintain the Interest  Rate  Protection  Facility and comply with the
      Forward  Treasury Lock Agreement.  Borrower and/or Guarantor on Borrower's
      behalf shall establish the Interest Rate Protection  Facility by effecting
      transactions  pursuant to the Forward  Treasury Lock Agreement as follows:
      in an amount not less 25% of the aggregate  original  principal  amount of
      the Loan on or before the Closing  Date; in an amount not less than 50% of
      the  aggregate  original  principal  amount of the Loan on or  before  the
      thirtieth  (30th) day  following  the Closing  Date; in an amount not less
      than 75% of the  aggregate  original  principal  amount  of the Loan on or
      before the  sixtieth  (60th) day  following  the Closing  Date;  and in an
      amount not less than 100% of the aggregate  original  principal  amount of
      the Loan on or before the ninetieth (90th) day following the Closing.

      Section 4.2 Negative Covenants of Borrower. Borrower will not, without the
prior  written  consent  of  Agent  throughout  the  term  of the  Loan  and any
extensions thereof:

            (a)  Interest  in  Premises.  Except for  Approved  Leases and other
      Permitted Encumbrances, create, effect, consent to, contract for, agree to
      make, suffer or permit any conveyance,  sale, assignment,  transfer, lien,
      pledge,  mortgage,  security  interest,  encumbrance  or alienation of the
      Land,  the  Improvements  or any  interest in a portion of the Land or the
      Improvements,   whether  effected   directly,   indirectly,   voluntarily,
      involuntarily,  or by operation of law or otherwise. No other financing or
      mortgaging of the Land or the  Improvements  shall be permitted  while the
      Loan or any  portion  thereof is  outstanding,  it being  understood  that
      neither the BancOne financing nor the Mezzanine  Financing  (provided they
      always comport with the  requirements  of Section  2B.15(b)  hereof) shall
      violate this provision;

            (b) Ownership.  Change the ownership (directly or indirectly) or the
      structure  of Borrower or its members,  and no member shall sell,  assign,
      pledge,  hypothecate  or encumber or transfer its  membership  interest in
      Borrower  provided,  however,  that the foregoing  provision  shall not be
      deemed  violated  by (i) a  foreclosure  and  acquisition  of  the  equity
      interest  in  Borrower  or Member by the  lender (or an  affiliate  of the
      lender)  providing  the  Mezzanine  Financing  or the Banc One  Financing,
      provided  that  the  Banc  One  Financing  or  Mezzanine   Financing,   as
      applicable, and such foreclosure and acquisition, complies in all respects
      with  Section  2B.15(b) and the  subordination  and  standstill  agreement
      delivered by such lender pursuant to Section 2B.15(b); (ii) an


                                       45
<PAGE>

      acquisition of the equity  interest in Borrower  directly by Developer (or
      any other wholly owned  subsidiary of the  Guarantor) on the express terms
      and conditions set forth in Section 4.2(m) hereof;  or (iii) any change of
      ownership  of  Alliance   Holdings,   Inc.,   provided   Brookdale  Living
      Communities  of New York - BPC,  Inc.  is then  the  Developer  under  the
      Development  Agreement and the Manager under the Management  Agreement and
      the foregoing agreements are then in full force and effect. Borrower shall
      not permit or allow the Membership Agreement to be amended,  terminated or
      modified;

            (c)  Amendment  to  Documents.  Except as permitted  hereunder,  (i)
      modify or amend or terminate (other than by full performance  thereof) any
      Loan Document,  or (ii) modify or amend or terminate any Project  Document
      (except as permitted in Section  4.2(d) below and except for  non-material
      changes to Approved  Leases  that do not have the effect of  reducing  the
      aggregate revenues from the Leases to less than ninety-five  percent (95%)
      of the  "gross  potential  rents" for the  applicable  period set forth on
      Exhibit F hereto,  without the prior  consent of Agent which  consent will
      not be unreasonably withheld (as to Project Documents only);

            (d) Change  Orders.  Without  the written  consent of Agent,  Ground
      Lessor (if  required),  any lessee  under an Approved  Lease (if  required
      under such Approved Lease),  any  Governmental  Authority whose permission
      may be  required,  or any  other  person or entity  whose  consent  may be
      required by any easement,  agreement or other  document,  suffer or permit
      any material  modification  of or material  deviation from the Plans,  nor
      shall  Borrower  allow any  change  orders to be  executed  or permit  the
      performance  of any work  pursuant to any Change  Order which  exceeds the
      Change Order Amount (whether an add or a deduct or a reallocation)  or the
      Aggregate   Change  Order  Amount  (whether  an  add  or  a  deduct  or  a
      reallocation),  or which  (regardless of the amount) adversely affects the
      quality of the Improvements, or which adversely affects the quality of any
      of the  materials or equipment  to be used in the  Improvements,  or which
      increases  or reduces the floor space as set forth in the Plans,  or which
      modifies  any  of  the   parameters   set  forth  in  the   definition  of
      Improvements,  or  which  might  result  in any  increase  in the  Budget.
      Borrower  will not make any changes  which could give rise to a defense by
      the bonding company to its  obligations  under the payment and performance
      bonds  required  hereunder,  or which  are  deemed by  Agent's  Inspecting
      Consultant   to  adversely   affect  the   structural   integrity  of  the
      Improvements;

            (e) Other  Agreements.  Execute any  contract or become party to any
      arrangement  for the  performance  of work on the  Premises  in  excess of
      $200,000  without first  providing  written  notice to Agent and, if Agent
      shall so request,  without  providing a copy of such proposed  contract to
      Agent;

            (f) Agreements Affecting the Premises.  Without the prior consent of
      Agent,  which consent shall not be unreasonably  withheld or delayed (such
      consent having been granted with respect to the Development Agreement, the
      Management  Agreement,   the  Ground  Lease,  the  General  Contract,  the
      Architect's Agreement, Approved Leases and the Engineer's Agreement) enter
      into any development,  leasing, management or other similar agreement that
      constitutes  a Major  Contract,  or fail to provide a letter,  in form and
      substance  satisfactory  to Agent,  executed  by the  other  party to said
      agreement


                                       46
<PAGE>

      (including  those  agreements to which Agent has consented) to the effect,
      that upon a default under any Loan Document and Agent's acquisition and/or
      obtaining  control  of the  Premises  on  behalf  of the  Lenders  through
      foreclosure,  sale or other means,  such  agreement  shall  terminate upon
      Agent's  request at no cost to Agent and  Lenders  (provided  that no such
      letter  will  be  required  if the  agreement  in  question  contains  the
      foregoing provision);

            (g) Pollutants. Either during construction or thereafter, permit the
      Premises to be used to generate,  manufacture,  prepare,  produce,  store,
      handle,  transfer,  process,  spill or empty or  otherwise  dispose of any
      Pollutant in violation of any Requirement,  and if same is found to exist,
      Borrower  shall  take all steps to  promptly  remove  such  Pollutants  in
      accordance with all Requirements;

            (h)  Subdivision.  File  any  application  or seek  any  subdivision
      approval for the Land or file or record any  subdivision  or parcel map or
      accept any subdivision  approval,  nor shall Borrower consent to, join in,
      knowingly  permit or approve  any change in the zoning of the Land  unless
      required by law or with Agent's prior written consent;

            (i) Leasing and Leasing Guidelines. Borrower will not enter into any
      lease  of  all  or  any  portion  of the  Premises  unless  the  following
      conditions  are met: such lease or similar  agreement is an Approved Lease
      or (1) such lease does not vary in any material way from the form of lease
      provided  to and  approved  by Agent (and the Ground  Lessor,  to the full
      extent  required  under the  Ground  Lease,  a copy of which  consent,  if
      required,  shall be delivered to Agent) prior to the execution of any such
      lease by Borrower,  (2) the fixed rent under such lease,  when  aggregated
      with the fixed rent  payable  under all leases  then in effect and the pro
      forma  rentals  for the then  vacant  units set forth on Exhibit F, is not
      less than  ninety-five  percent  (95%) of the total pro forma  rentals set
      forth on  Exhibit F, and (3) the term  thereof  shall be not less than six
      (6) months;

            (j)  Termination of Lease.  Terminate or accept the surrender of any
      lease,   (other  than  the  agreements  pursuant  to  which  the  assisted
      living/independent  living units are occupied),  without the prior written
      consent of Agent unless,  with respect to  termination  of any lease,  the
      lessee is in  default  thereunder  after the  expiration  of any notice or
      grace periods;

            (k) General Contract. Terminate or accept the surrender of, or amend
      or modify,  the  General  Contract,  (except for Change  Orders  expressly
      permitted  hereunder)  without the prior written  consent of Agent,  which
      consent shall not be unreasonably withheld or delayed;

            (l) Other Contracts.  Terminate or accept the surrender of, or amend
      or  modify in any  material  respect,  the  Development  Agreement  or the
      Management  Agreement,  without the prior written consent of Agent,  which
      consent shall not be unreasonably withheld or delayed; and

            (m) Mergers, Admission of New Members. Except as expressly permitted
      by Section 4.2(b) or this Section  4.2(m),  none of Borrower,  Member,  or
      Guarantor  will


                                       47
<PAGE>

      merge or consolidate with, or sell, assign,  lease or otherwise dispose of
      all or substantially all of its assets to, any other person, or permit any
      other  person to be admitted as a new or  substitute  member or manager in
      Borrower,  except that  Guarantor  may directly or through a  wholly-owned
      Affiliate  acquire  (and assume all  obligations  of)  Borrower or Member;
      provided,  however that,  notwithstanding the foregoing, and only if there
      are then no  outstanding  Events  of  Default,  and (i) Agent  shall  have
      received  written notice thirty (30) days prior to any proposed  merger or
      consolidation  of Guarantor,  (ii) such Guarantor  shall have delivered to
      Agent  copies of all  documents  to effect such  merger or  consolidation,
      (iii) Agent shall have determined in its sole and absolute discretion that
      following such proposed merger or consolidation  the surviving entity will
      meet the minimum net worth and liquidity  requirements of Sections 4.1(ff)
      and 4.1(gg) hereof), (iv) such Guarantor shall have caused to be delivered
      to Agent such opinions of counsel as Agent may reasonably  request,  which
      opinions  shall  be  satisfactory  to it in all  respects,  and  (v)  such
      Guarantor  shall  have  paid  any and  all  expenses,  including,  without
      limitation,  reasonable legal expenses,  in connection with Agent's review
      of any of the  foregoing,  then no further  approval  of said  transaction
      shall be required,  provided,  the surviving entity assumes in writing all
      obligations of Guarantor under the Guaranties to Lender.


                                    ARTICLE V

                                EVENTS OF DEFAULT
                                -----------------

      Section 5.1 Events of Default.  The following  shall  constitute  defaults
hereunder and upon the giving of notice and the passage of time, if any provided
in Section 5.2, shall, unless a right to cure exists under this Agreement or the
applicable  Loan  Document  and such  default  is cured as  provided  herein  or
therein, constitute "EVENTS OF DEFAULT" hereunder:

            (a) if any default  shall occur and  continue  beyond any notice (if
notice is  required)  and cure period (if a cure period is  provided)  under the
Mortgage or any other Loan Document including,  without limitation the Soft Cost
Loan Agreement,  or if a Significant Party shall be in default beyond applicable
notice and cure periods  under or attempt to terminate  any Loan  Document,  and
such default continues beyond any such notice and cure period;

            (b) if  Borrower  shall  fail to pay  when  due any  installment  of
interest  or  principal  or the  Agency  Fee or any other  sums  payable,  or if
Borrower shall fail to reimburse any Lender,  when required,  any sums due under
this  Agreement,  the Notes,  the  Mortgage  or any other Loan  Document,  or if
Borrower shall fail to comply with any monetary  covenant made by it in any Loan
Document;

            (c) if a  Significant  Party  shall  fail to comply  with any of the
nonmonetary  covenants  made  by  it  in  this  Agreement  (including,   without
limitation,  any violation of the negative covenants set forth in Section 4.2(b)
or 4.2(m) or the covenant to execute new Notes as provided in Section  7.14(b)),
the Notes,  the  Mortgage or in any other Loan  Document,  or if at any time any
representation or warranty made by a Significant Party to Agent or any Lender in
this Agreement or in any other Loan Document or in any certificate  delivered in
connection


                                       48
<PAGE>

herewith  shall be false or  misleading  to an extent  deemed  by Agent,  in its
reasonable judgment, to be material;

            (d) if a judgment is entered against the Borrower,  or if there is a
levy  upon any  ownership  interest  in the  Borrower,  which in the  reasonable
judgment  of Agent would  materially  and  adversely  affect the ability of such
party to perform any of its respective  obligations under any Loan Document, or,
subject to the  provisions of Section  1.06(c) of the  Mortgage,  a lien for the
performance of work, the supply of materials or otherwise,  be filed against the
Premises and such judgment or lien remains  unsatisfied or unbonded for a period
of thirty (30) days after notice of filing  thereof,  provided  that within said
thirty  (30) day  period the  Premises  are not the  subject of any writ,  levy,
execution or sequestration;  provided,  however,  the Borrower may timely appeal
same provided said appeal is in good faith, is diligently  pursued,  said appeal
is permitted by law, said appeal has the effect of staying any type of action on
such  judgment or lien,  the Borrower  posts any security  required by law which
security  shall be reasonably  satisfactory  to Agent,  and said appeal does not
subject Agent or the Premises to any civil or criminal penalties;

            (e) if a  Significant  Party  shall (i) suspend or  discontinue  its
business,  or (ii) make an  assignment  for the benefit of  creditors,  or (iii)
admit in writing its inability to pay its debts as they become due, or (iv) file
a voluntary  petition in bankruptcy,  or (v) become insolvent (as defined in the
Bankruptcy  Code),  or (vi) file any  petition or answer  seeking for itself any
reorganization,  arrangement,  composition, readjustment of debt, liquidation or
dissolution  or  similar  relief  under any  present or future  statute,  law or
regulation of any  jurisdiction,  or (vii) petition or apply to any tribunal for
any receiver, custodian or any trustee for any substantial part of its property,
or (viii) be the  subject  of any such  proceeding  commenced  against  it which
remains  undismissed  for a period of sixty (60)  days,  or (ix) file any answer
admitting or not contesting the material  allegations of any such petition filed
against it, or of any order,  judgment or decree  approving such petition in any
such  proceeding,  or (x) seek,  approve,  consent to, or  acquiesce in any such
proceeding,  or  in  the  appointment  of  any  trustee,  receiver,   custodian,
liquidator,  or fiscal agent for it, or any substantial part of its property, or
an order is entered appointing any such trustee, receiver, custodian, liquidator
or fiscal agent and such order remains in effect for sixty (60) days;

            (f) if an order for relief is entered under the  Bankruptcy  Code or
any other  decree or order is entered by a court of competent  jurisdiction  (i)
adjudicating  a Significant  Party  bankrupt or insolvent,  or (ii) approving as
properly filed a petition  seeking  reorganization,  arrangement,  adjustment or
composition  of or in respect of a  Significant  Party,  or (iii)  appointing  a
receiver,  liquidator,  assignee,  trustee,  custodian,  sequestrator  (or other
similar  official)  of a  Significant  Party or of any  substantial  part of the
property of any thereof (other than a decedent's  estate),  or (iv) ordering the
winding up or  liquidation  of the affairs of a  Significant  Party and any such
decree or order  continues  unstayed  and in effect  for a period of sixty  (60)
days;

            (g) if the  Premises,  or any  interest  therein,  be sold or in any
manner encumbered or conveyed without the prior written consent of Agent, except
as  expressly  permitted  hereunder  (or if any  interest  in  Borrower be sold,
assigned,  pledged or  encumbered  except as  permitted  by  Section  4.2(b) and
Section 4.2(m), including in connection with the Mezzanine Financing or the Banc
One Financing);


                                       49
<PAGE>

            (h) if the  Premises  or any  part  thereof  shall be  condemned  or
damaged  by fire or other  casualty  unless  the  requirements  set forth in the
Mortgage for restoration of the Premises are promptly commenced and satisfied;

            (i) if  Borrower  shall enter into any lease of the  Premises  which
does not qualify as an Approved  Lease under this Agreement or if Borrower shall
be in default under ten percent (10%) or more of the Approved Leases;

            (j) if,  except  as  otherwise  permitted  hereunder  in each  case,
Borrower  shall  materially  amend,  modify or vary any  Approved  Lease,  or if
Borrower  shall consent to or acquiesce in the surrender of any Approved  Lease,
or if more than ten percent (10%) of Approved Leases shall be terminated  unless
a lessee is in default  thereunder  after the  expiration of any notice or grace
periods;

            (k) if any material  provision of this  Agreement or any of the Loan
Documents  shall at any time for any reason cease to be valid and binding on any
Significant  Party, or shall be declared to be null and void, or the validity or
enforceability  thereof  shall  be  contested  by any  Significant  Party,  or a
proceeding shall be commenced by any Governmental  Authority having jurisdiction
over  any   Significant   Party   seeking  to  establish   the   invalidity   or
unenforceability  thereof,  or a Significant Party shall deny that it has any or
further  liability  or  obligation  under  this  Agreement  or any  of the  Loan
Documents;  provided,  however,  that if a proceeding  shall be commenced by any
Governmental  Authority seeking to establish the invalidity or  unenforceability
of this  Agreement or any other Loan  Document,  a Significant  Party may timely
contest the validity of such proceeding  provided said contest is in good faith,
is  diligently  pursued,  said contest is permitted by law, said contest has the
effect  of  staying  any  type  of  action  pursuant  to  such  proceeding,  the
Significant  Party posts any security  required by law which  security  shall be
reasonably  satisfactory  to Agent,  and said contest does not subject Agent, or
any Lender, or the Premises to any civil or criminal penalties;

            (l) (i) if at any time any  representation  or warranty  made by any
Significant  Party  in  the  Payment  Guaranty,  the  Completion  Guaranty,  the
Operating Deficit Guaranty,  the Environmental  Indemnity Agreement or any other
Loan Document or any certificate executed by any Significant Party in connection
with the Loan or any other  Loan  Document  shall be false or  misleading  to an
extent  deemed  material  as  reasonably  determined  by  Agent,  or (ii) if any
Guarantor  shall  fail to comply  with any  covenant  made by it in the  Payment
Guaranty,  the  Completion  Guaranty,  the Operating  Deficit  Guaranty,  or the
Environmental  Indemnity  Agreement  and such  failure is not cured by Guarantor
within  the  time  period  provided  in the  Payment  Guaranty,  the  Completion
Guaranty,  the  Operating  Deficit  Guaranty,  or  the  Environmental  Indemnity
Agreement,  as the case may be, or if a default  (except  as set forth in (l)(i)
above) by  Guarantor  shall  occur under the Payment  Guaranty,  the  Completion
Guaranty,  the  Operating  Deficit  Guaranty,  or  the  Environmental  Indemnity
Agreement and shall continue beyond any applicable grace period, or if Guarantor
shall  revoke or attempt to revoke,  disavow,  contest,  commence  any action or
raise any  defense  against its  obligations  under the  Payment  Guaranty,  the
Completion  Guaranty,  the  Operating  Deficit  Guaranty,  or the  Environmental
Indemnity Agreement;


                                       50
<PAGE>

            (m) if  Borrower  executes  any  conditional  bill of sale,  chattel
mortgage  or other  security  instrument  covering  any  materials,  fixtures or
personal property used in the construction or operation of the Improvements,  or
intended to be incorporated  therein except as expressly  permitted hereunder or
by Agent or required under the Ground Lease;

            (n) if the  construction of the  Improvements is not carried on with
reasonable  dispatch or at any time be discontinued  for a period of ten (10) or
more consecutive  Domestic Business Days for reasons other than Force Majeure or
if the  Project  does not  open as  scheduled  within  thirty  (30)  days of the
Completion Date;

            (o) if the  Improvements,  in the reasonable  judgment of Agent, (i)
are not or cannot be  completed  lien-free  on or before  the  Completion  Date,
subject  to  Force  Majeure,  or (ii)  are not  completed  lien-free  (it  being
understood that Permitted  Encumbrances are not prohibited liens hereunder),  or
if  Completion  has not occurred on or before the  Completion  Date,  subject to
Force Majeure;

            (p) if Agent or its representatives or Agent's Inspecting Consultant
are not permitted, subject to Approved Leases, at all reasonable times, to enter
upon the Premises and to inspect the Improvements  and the construction  thereof
and all materials,  fixtures and articles used or to be used in the construction
thereof and to examine all Plans,  or if  Borrower  shall fail within  seven (7)
days to furnish to Agent or its  authorized  representative,  when  requested in
writing, copies of such Plans;

            (q) if the  temporary  certificate  of  occupancy  or the  permanent
Certificate of Occupancy,  as applicable,  covering the Project shall be revoked
or expire;

            (r) if Borrower is unable to satisfy any  condition  of its right to
the receipt of an Advance  requested  hereunder for a period in excess of thirty
(30) days;

            (s) if Agent's Inspecting Consultant certifies that the construction
of the  Improvements  is not  substantially  in  accordance  with  the  Plans or
substantially in accordance with applicable Requirements;

            (t) except as expressly provided in Section 4.2(b) and 4.2(m), if at
any  time  while  the  Loan is  outstanding,  Member  (or any  successor  entity
permitted  hereunder or otherwise  approved by Agent) shall own and control less
than one hundred percent (100%) of Borrower or shall cease to be the sole member
and  manager of Borrower  (subject  to  Developer's  special  management  rights
pursuant to the Membership Agreement); or

            (u) if Borrower  shall fail to secure a Certificate of Occupancy for
the full use and  occupancy of the entire  Premises  within two (2) years of the
date of issuance of the temporary certificate of occupancy;

            (v) if Borrower  shall be in default  under the Ground  Lease beyond
the applicable notice and cure periods afforded to Borrower thereunder;


                                       51
<PAGE>

            (w) if Borrower shall fail to satisfy the Post-Closing Conditions on
or before the Post-Closing Default Date; or

            (x) if Borrower shall fail to cause Guarantor to establish, maintain
and comply with the Cap Agreement and the Interest Rate Protection Facility.

      Section 5.2 Grace  Periods.  The  defaults  described in Section 5.1 shall
constitute  Events of Default hereunder upon the giving of the following notices
and the passage of the following time periods:

            (a) with respect to any default under Section 5.1(b) above, five (5)
Domestic  Business Days after the  occurrence  of such default;  notwithstanding
anything  contained  herein to the contrary,  neither Agent nor any Lender shall
have any obligation to give written notice of such default;

            (b) with respect to any non-monetary  default under Sections 5.1(c),
(h), (l)(i) or (q) above, thirty (30) days after the date written notice of such
default  is sent to  Borrower  by Agent,  provided  that if such  default is not
curable  within  such thirty (30) day  period,  then  Borrower  shall have up to
ninety (90) additional days to cure same,  provided Borrower promptly  commences
and at all  times is  diligently  attempting  to cure  such  default,  Agent has
determined in its  reasonable  discretion  that the continued  existence of such
default will not adversely affect the collateral for the Loan and that there are
no other defaults hereunder;

            (c) with respect to any of the defaults described in Section 5.1(n),
(o), (p), (r) or (s) above,  ten (10) days after the date notice of such default
is sent to  Borrower  by Agent and the same is not cured  with such ten (10) day
period; and

            (d)  with  respect  to any of the  defaults  described  in  Sections
5.1(a), (d), (e), (f), (g), (i), (j), (k), (l)(ii), (m), (t) or (u) above, there
shall be no  requirement  that Agent or any Lender  send  notice of default  and
there shall be no  opportunity  to cure,  except as may be applicable in Section
5.1(l).

            (e) notwithstanding  anything contained herein or in any of the Loan
Documents,  upon the  occurrence of an Event of Default,  in the event Agent (i)
declares the entire  principal  amount under the Notes then  outstanding due and
payable  in  accordance  with  any of the  Loan  Documents  or  (ii)  institutes
foreclosure  proceedings in accordance with the terms of the Mortgage,  Borrower
shall not have the right or opportunity to cure any Event of Default  thereafter
without first receiving Lender's consent.

      Section 5.3 Rights of Agent and Lenders. Subject to Section 6.3(b) hereof,
(a) upon the  occurrence  and during the  continuation  of a default,  Agent and
Lenders may, without notice to Borrower,  cease funding amounts not yet advanced
hereunder or under the Loan. Upon the occurrence and continuation of an Event of
Default,  Agent may, in its sole discretion,  at the same or different times, in
addition to any right or remedy  available to it under the Mortgage or any other
Loan  Document or permitted by law or equity,  declare the  Obligations  and all
sums then owing by Borrower hereunder to be forthwith due and payable, whereupon
all  such  sums  shall  become  and  be  immediately  due  and  payable  without
presentment, demand, notice and


                                       52
<PAGE>

protest,  notice  of  dishonor,  notice  of  intent  to  accelerate,  notice  of
acceleration or notice of any other kind, except as may be specifically required
under this  Agreement or the Note or the  Mortgage,  and Agent,  for the ratable
benefit of the  Lenders,  shall have the right to enter into  possession  of the
Premises  and  perform  any and all work and labor  necessary  to  complete  the
Improvements  and employ  watchmen to protect the Premises and the  Improvements
and all sums  expended  by  Agent in  connection  with the  construction  of the
Improvements  shall be deemed to have been paid to  Borrower  and secured by the
lien of the Mortgage (as shall any other sums  advanced by Agent for  whatsoever
purpose relative to the Loan or the  Improvements).  For this purpose,  Borrower
hereby constitutes and appoints Agent its true and lawful  attorney-in-fact with
full power of  substitution  to complete the  Improvements,  and hereby empowers
said attorney or attorneys after the occurrence and during the continuance of an
Event of Default to do the following: to use any funds of Borrower including any
balance  which may be held in escrow and any funds  which may remain  unadvanced
hereunder for the purpose of completing the Improvements; to make such additions
and changes and  corrections  in the Plans which shall be  necessary to complete
the   Improvements;   to  rent  the  Premises;   to  employ  such   contractors,
subcontractors,  agents, architects and inspectors as shall be required for said
purposes;  to pay,  settle or compromise all existing bills and claims which are
or may be Liens against the  Premises,  or may be necessary or desirable for the
completion  of the work or the clearance of title;  to execute all  applications
and  certificates  in  the  name  of  Borrower  which  may  be  required  by any
construction  contract;  and  to do  any  and  every  act  with  respect  to the
construction of the Improvements  which Borrower may do in its own behalf. It is
understood  and agreed that this power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Said attorney-in-fact shall also
have power to prosecute and defend all actions or proceedings in connection with
the  construction of the  Improvements  and to take such action and require such
performance  as it deems  necessary.  Borrower  hereby assigns and quitclaims to
Agent, for the ratable benefit of the Lenders,  all sums not advanced  hereunder
and all sums in escrow or any sums  deposited  with Agent which sums may be used
for any purpose associated with the Loan as Agent may desire.

            (b)  Agent  shall  have  the  right,   after  the   occurrence   and
continuation of an Event of Default, at its option, and in addition to any right
or remedy  available to it under this Agreement,  the Mortgage or any other Loan
Document,  to  effectuate  the  transfer in the name of Borrower of all permits,
rights  and  privileges  relative  to the  construction,  operation,  zoning and
planning of the  Improvements  (the "PERMITS") to Agent, for the ratable benefit
of Lenders,  to the extent  permitted by law. For this purpose,  Borrower hereby
constitutes  and appoints Agent its true and lawful  attorney-in-fact  with full
power of substitution to complete the transfer and hereby empowers said attorney
or attorneys  after the  occurrence and during the  continuation  of an Event of
Default to execute any and all documents,  certificates,  applications and forms
for the  transfer  of the  Permits and to pay all  expenses  necessary  for such
transfer.  It is  understood  and agreed  that this power of  attorney  shall be
deemed to be a power  coupled  with an interest  which  cannot be revoked.  Said
attorney-in-fact  shall also have the power to prosecute  and defend all actions
or proceedings in connection with the aforesaid transfer and to take such action
and require such performance as is deemed necessary.

            (c)  Agent  shall  have  the  right,   after  the   occurrence   and
continuation  of an Event of Default,  to apply any  payments or  recoveries  it
receives on account of the Obligation to principal, interest, expenses and other
sums  due  with  respect  to the  Loan in  such  order  as  Agent,


                                       53
<PAGE>

in its sole  discretion,  may elect,  regardless of the manner in which any such
payments or recoveries are allocated or reflected in any foreclosure,  judgment,
or deficiency or allocation proceeding relative to foreclosure of the Mortgage.

      Section 5.4 Limited Recourse Obligations.  Notwithstanding anything to the
contrary  contained  herein or in any of the other  Loan  Documents,  Borrower's
officers,  directors,  employees,  members,  partners,  managers,  shareholders,
incorporators or agents,  but  specifically  excluding  Borrower,  Guarantor and
Developer  (herein  called  the  "BORROWER'S  GROUP"),  shall  have no  personal
liability for the payment of the Notes or for the  performance  or observance of
the covenants, representations and warranties of Borrower contained herein or in
any of the other Loan  Documents,  and Agent and the other  Lenders agree not to
seek any damages or personal money judgment against any member of the Borrower's
Group for any default under the Notes or under any  instrument  now or hereafter
securing the Notes,  but in such event will look solely to Borrower,  Guarantor,
Developer and the security for the indebtedness evidenced by the Notes; provided
that nothing shall  preclude  Agent or any Lender from  exercising  its remedies
against  Borrower,  including,  without  limitation,  obtaining  and enforcing a
judgment  against Borrower in connection with the foreclosure of the Mortgage or
any  security  interest  created  by the  Loan  Documents  or  making a claim in
bankruptcy  for amounts owed as evidenced  by the Loan  Documents,  and provided
further  that nothing  contained  above shall be deemed (a) to limit or restrict
any other type of action or proceeding  against  Borrower nor affect the lien of
the Mortgages,  (b) to be a release or impairment of the obligations of Borrower
under the Notes,  this  Mortgage or any other Loan  Documents,  (c) to limit the
Agent or any Lender from  enforcing its rights under the Notes,  the  Mortgages,
the  Building  Loan  Agreement,  the Soft Cost Loan  Agreement or any other Loan
Document,  (d) to constitute a waiver,  release or discharge of any indebtedness
or  obligation  under  the  Notes or  secured  by the  Mortgages,  the  Security
Agreement or the Assignment of Contracts or (e) to affect the personal liability
of the Guarantor  under the  Completion  Guaranty,  the Payment  Guaranty or the
Operating Deficit Guaranty.


                                   ARTICLE VI

                             CONDITIONS TO LENDERS'
                             ----------------------
                     OBLIGATIONS TO MAKE LOAN DISBURSEMENTS
                     --------------------------------------

      Section 6.1 Conditions Precedent to First Disbursement.  Neither Agent nor
any Lender shall be obligated to make any Advances or disburse any Loan proceeds
hereunder, including the first disbursement of Loan proceeds, until (a) Borrower
shall  have  contributed  the full  amount of the  Required  Equity and the full
amount of the Required  Equity  shall have been fully  disbursed to fund Project
costs set forth in the Budget and  approved by Agent,  all as more  particularly
set forth in  Section  2B.15  hereof,  (b)  Borrower  and  Guarantor  shall have
established  the  Interest  Rate  Protection  Facility  pursuant  to the Forward
Treasury  Lock  Agreement and (c) all the other  conditions  of this  Agreement,
including without  limitation,  this Article VI have been satisfied at or before
the Initial Closing.

      Section 6.2  Documents To Be  Delivered.  On the Closing Date and prior to
Agent making the first disbursement of Loan proceeds hereunder, Agent shall have
received this Agreement and it shall also have received the following items, and
unless  identified  in Section


                                       54
<PAGE>

2B.7  as a  Post-Closing  Condition,  each  of the  following  items  heretofore
received by Agent shall be deemed to have been accepted and approved by Agent:

            (a)   the executed Soft Cost Loan Agreement;

            (b)   the executed Building Loan Notes and Soft Cost Notes;

            (c)   the executed Building Loan Mortgage and Soft Cost Mortgage;

            (d)   the executed Security Agreement;

            (e)   the UCC Financing Statements;

            (f)   the executed Assignment of Contracts;

            (g)   the executed Payment Guaranty;

            (h)   the executed Completion Guaranty;

            (i)   the executed Operating Deficit Guaranty;

            (j)   the executed Environmental Indemnity Agreement;

            (k) a certified copy of the fully executed Ground Lease;

            (l) Estoppel and Recognition Agreement executed by the Ground Lessor
and all other parties having an interest in the Land;

            (m) certified copies of the fully executed Development Agreement and
the fully executed Management  Agreement,  each containing a provision that such
agreement is subordinate to the Mortgage,  and that such  agreement,  at Agent's
election, may be terminated or continued upon any foreclosure of the Mortgage or
acquisition of title to the Premises by Agent or Leasehold Entity (as defined in
Section 7.2);

            (n) an  Appraisal  of the  Land  and the  Improvements  and a Market
Feasibility Study prepared by Tellatin, Louis & Andreas, Inc., which shall be in
all respects satisfactory to Agent;

            (o) the Commitment Fee,  Construction  Administration Fee, the first
installment of the Agency Fee, Agent's Inspecting  Consultant Fees, the expenses
of the other  Lenders  (subject  to the $5,000 cap on the  expenses of each such
Lender set forth in Section 4.1(h)), and Agent's Counsel Fees which are then due
and payable;

            (p) such advice from Agent's  Inspecting  Consultant  as Agent shall
reasonably  require with respect to the  construction  of the  Improvements  and
matters incidental thereto;



                                       55
<PAGE>

            (q) a  current  title  commitment  from the  Title  Insurer  (in all
respects satisfactory to Agent's Counsel) which shall set forth a description of
the Land, shall have attached thereto copies of all instruments  which appear as
exceptions in the  commitment,  and a paid ALTA Loan (Form 1992) title insurance
policy (the "POLICY") issued by the Title Insurer, covering the Premises, and in
form and  substance  reasonably  acceptable  to Agent and Agent's  Counsel.  The
Policy shall insure KCCI as Agent for itself and the other Lenders  described in
this Agreement,  as same may be amended from time to time, and their  successors
and assigns,  that the Building Loan Mortgage,  for the full principal amount of
the Building Loan, is a valid first lien,  and that the Soft Cost Mortgage,  for
the full  principal  amount of the Soft Cost Loan,  is a valid second  lien,  on
Borrower's leasehold interest in the Land, the Improvements, the Project and all
other  real  property  subject  to the  granting  clause  of the  Building  Loan
Mortgage,  free and clear of all defects and encumbrances  except such as may be
set forth on  EXHIBIT B attached  hereto  and made a part  hereof or as Agent or
Agent's  Counsel shall approve in writing (the  "PERMITTED  ENCUMBRANCES").  The
Policy shall contain:  (i) full coverage  against  mechanic's and  materialmen's
liens,  including,  without  limitation,  with respect to any work  performed or
materials  supplied in connection with the  construction of the  Improvements or
acquisition  of the Land prior to the Initial  Closing and the  recording of the
Mortgage, (ii) other than the Permitted Encumbrances, no encroachments or survey
or other exceptions not theretofore approved by Agent and Agent's Counsel, (iii)
a pending  disbursements  endorsement  obligating  the Title  Insurer to provide
title  continuations  and endorsements  contemplated by Section 6.3(e) and other
provisions of this  Agreement,  and (iv) variable  rate  (additional  interest),
comprehensive,  and same as survey  endorsements and such other endorsements and
affirmative  insurance  as Agent may  require,  including,  without  limitation,
appropriate   insurance  with  regard  to  restrictions,   covenants  and  other
agreements  affecting the Premises or to the effect that the enforcement of same
will not result in a forfeiture  or  reversion  of title or otherwise  adversely
affect  the  Mortgage,  as well  as  affirmative  insurance  that  the  proposed
Improvements  comply with any such  restrictions,  covenants or  agreements  and
further  against  the forced  removal of said  Improvements  or a  comprehensive
endorsement, and with all so-called "Standard Exceptions" deleted;

            (r) an original current ALTA/ACSM survey of the Premises,  complying
with the requirements set forth in the Commitment Letter;

            (s) an  original  current  site  plan of the  Premises  showing  the
Improvements to be constructed and the relation of the Improvements by distances
to the perimeter of the Land and the set-back lines;

            (t) evidence that all approvals  required to be obtained at or prior
to such time  under the  Ground  Lease  have been  obtained  and all  deliveries
required under the Ground Lease have been made (including,  without  limitation,
pursuant to Article 11 and Article 40 thereof);

            (u) evidence of compliance with all applicable  zoning  requirements
and  land  use  planning  requirements,   including,   without  limitation,   an
Architect's  Certificate  of  Compliance  with  local  governmental  zoning  and
building ordinances,  including, without limitation the Requirements, the Master
Development  Plan,  the Design  Guidelines  and the  Construction  Documents  as
defined  in the  Ground  Lease  and the  opinion  of  Borrower's  counsel  as to
compliance with the use provisions of the Zoning Code of the City of New York;



                                       56
<PAGE>


            (v) a list and copies (when obtained by Borrower) of, all approvals,
authorizations or permits required by any Governmental Authority, including land
use, zoning and planning,  construction,  environmental  and operational for the
Premises for the purposes contemplated by the Plans;

            (w) a certificate,  in form and substance  acceptable to Agent, from
Borrower that all approvals, authorizations, certificates, licenses, and permits
referred to in the preceding  paragraph are or will be in full force and effect,
have not been and will not be amended or modified  and Borrower has not received
any notice that there are any violations of said permits or that any Permits are
in default or have been revoked, suspended or terminated;

            (x) all of the Engineer's or  Architects'  Contracts and the General
Contractor's contract, containing all of the provisions required pursuant to the
Ground Lease, including, without limitation, the provisions set forth in Section
11.05(b)  of the Ground  Lease and  Section  40.2 (a)  through (e) of the Ground
Lease),  each  certified  by Borrower to be a true and  complete  copy  thereof,
together  with a letter  signed by each of the  Engineer,  the Architect and the
General  Contractor in a form  substantially  acceptable  to Agent,  which shall
provide (i) that such party shall complete the Project for Agent and the Lenders
at Agent's option and at Agent's request if a Loan default occurs, and otherwise
in accordance  with this  Agreement and (ii) that the agreement  with such party
may be  terminated  upon  foreclosure  of the  Mortgage  or  acquisition  of the
Property by Agent or a Leasehold Entity;

            (y)  a   list   of   all   known   and   contemplated   contractors,
subcontractors,  and materialmen to be used for development of the Project, when
and as available;

            (z) a complete  set of Plans,  certified  by  Developer on behalf of
Borrower,  and evidence  satisfactory to Agent of approval by the Ground Lessor,
Borrower's Architect and the General Contractor and all other necessary parties;

            (aa)  dual-obligee  labor and material payment bonds and performance
bonds with  respect to the General  Contract  (in amounts not less than the full
amount of the contract price thereunder unless waived by Agent in writing in its
sole discretion) and naming Borrower and Agent as co-obligees,  said bonds to be
issued  by  companies  reasonably  acceptable  to Agent  and in form and  amount
reasonably satisfactory to Agent;

            (bb) letters from local utility  companies or municipal  authorities
stating  that gas,  electric,  sewer and water will be available to the Premises
upon  Completion  of the  Improvements  in  sufficient  quantities  to serve the
Improvements for their intended purpose;

            (cc) soil analysis (including  drainage) results,  together with the
proposed  methodology  to develop the Project for its intended use based on soil
condition,  certified by a qualified engineer,  which has been approved by Agent
prior to the date hereof;

            (dd)  evidence  (including  a Phase I, and if  warranted a Phase II,
environmental  assessment)  indicating  that  the  Premises  are  free  from all
Pollutants  with  respect to which  remediation  is required or the  presence in
concentration  of which is in violation of  environmental  laws, and are free of
all other  contamination  which,  even if not so  regulated,  is


                                       57
<PAGE>

known to pose a hazard to the health of any person on or about the Premises, and
that the Premises is not in a "Wetlands" or "Flood Plain" area,  and contains no
underground  storage tanks or oil or gas wells (it being expressly  acknowledged
by Borrower that the Agent reserves the right, at Borrower's  expense, to retain
an independent consultant to review any such evidence submitted by Borrower);

            (ee)  as to  Borrower,  (i)  a  copy  of  the  Membership  Agreement
certified  by the sole member and manager of Borrower to be a true and  complete
copy thereof; (ii) the limited liability certificate of Borrower; (iii) evidence
that  the  formation  of  Borrower  and  the  filing  of its  limited  liability
certificate  comply with all  Requirements;  (iv) resolutions of the sole member
and  manager  of the  sole  member  and  manager  of  Borrower  in all  respects
acceptable to Agent;

            (ff) as to  Guarantor,  (i) a copy of its  bylaws,  certified  by an
officer  of  Guarantor  to  be a  true  and  complete  copy  thereof;  (ii)  the
certificate  of  incorporation  of  Guarantor;  (iii)  evidence  of  Guarantor's
authority to execute the Loan  Documents  to which  Guarantor is a party and the
Guaranties  authorizing  the action  required of such  Guarantor in all respects
acceptable  to Agent and (iv)  evidence  that the formation of Guarantor and the
filing of its certificate of incorporation comply with all Requirements;

            (gg)  the Borrower's and Guarantor's Federal Tax I.D. Number;

            (hh) as to  Developer,  (i) a copy of its  bylaws,  certified  by an
officer  of  Developer  to  be a  true  and  complete  copy  thereof;  (ii)  the
certificate  of  incorporation  of  Developer;  (iii)  evidence  of  Developer's
qualification  to transact  business in New York;  (iv) evidence of  Developer's
authority to execute the Development  Agreement and the Management Agreement and
the  Assignment of Contracts  for the benefit of Lenders;  (v) evidence that the
formation of Developer and the filing of its certificate of incorporation comply
with all Requirements;

            (ii) an opinion of Borrower's  and each  Guarantor's  counsel to the
effect that (i) upon due  authorization and execution by the parties thereto and
upon such  recording or filing  thereof as may be specified in the opinion,  the
Building Loan Notes, the Soft Cost Notes,  the Building Loan Mortgage,  the Soft
Cost Mortgage, this Agreement,  the Soft Cost Loan Agreement,  the Assignment of
Contracts,  the Security Agreement,  the Environmental Indemnity Agreement,  the
Payment Guaranty,  the Completion  Guaranty,  the Operating Deficit Guaranty and
the  other  Loan  Documents  will  be  legal,  valid  and  binding  instruments,
enforceable  against  Borrower  or  Guarantor,  as the case  may be,  as a party
thereto in accordance with their respective  terms,  except as may be limited by
applicable bankruptcy, insolvency,  reorganization or similar laws affecting the
rights of creditors generally; (ii) the amounts to be received by Agent, for the
ratable benefit of the Lenders,  as interest  constitute lawful interest and are
neither usurious nor illegal; (iii) there is no threatened or pending litigation
that might affect the Loans,  the Premises,  the Project or for which an adverse
decision is reasonably  likely which would  materially and adversely  affect the
ability of the  Guarantor or Borrower to perform  their  respective  obligations
under the Loan Documents; (iv) the Loan and the transactions contemplated by the
Loan Documents do not violate any provision of any law,  restriction or document
affecting Borrower, any Guarantor,  the Project or the Premises; (v) Borrower is
a validly formed and existing  limited  liability  company under the laws of the
State of Ohio,  it is duly  qualified  to transact  business in


                                       58
<PAGE>

the State of New York, it has the legal capacity to own, develop and operate the
Premises,  the Project and the Improvements and to perform its obligations under
the Loan  Documents,  and that the Loan and the execution of the Loan  Documents
has been  duly  authorized  by the sole  member  of  Borrower  and that the Loan
Documents  have been duly executed and  delivered;  (vi)  Guarantor is a validly
formed and existing corporation under the laws of the State of Delaware,  it has
the legal capacity to perform its obligations  under the Loan Documents to which
it is a  party,  and the  execution  of the  Payment  Guaranty,  the  Completion
Guaranty, the Operating Deficit Guaranty, the Environmental  Indemnity Agreement
and the  other  Loan  Documents  to which  Guarantor  is a party  have been duly
authorized by the board of directors of Guarantor and that the Loan Documents to
which  Guarantor is a party have been duly  executed and delivered by Guarantor;
(vii) such other matters  concerning  the Loan,  the Loan  Documents,  Borrower,
Guarantors,  the Premises,  the Improvements and the Project as Agent or Agent's
Counsel may reasonably  require  (including an opinion with respect to zoning of
the Premises  (only as to compliance  of the  contemplated  use with  applicable
Requirements) and the Project), provided, however, the opinion of the Borrower's
and the  Guarantor's  in-house legal counsel will be acceptable  with respect to
the  following  items:  (i)  there  is no  pending,  or to its  best  knowledge,
threatened, litigation that might affect the Loans, the Premises, the Project or
for which an adverse  decision is reasonably  likely which would  materially and
adversely  affect the ability of the  Guarantor  or  Borrower  to perform  their
respective  obligations under the Loan Documents;  (ii) the Loan Documents shall
have been duly executed by Borrower and the Guarantor, as applicable,  and (iii)
the  Loans  has  been  duly  authorized  by  Borrower  and the  Guaranties  duly
authorized by the Guarantor.;

            (jj) the  policies of  insurance  required by Agent  pursuant to the
requirements of the Mortgage,  (or  certificates,  to the extent permitted under
the Mortgage), accompanied by evidence of the payment of the premiums therefor;

            (kk)  advice  from the Title  Insurer to the effect that a search of
the public records discloses no conditional sales contracts,  chattel mortgages,
leases of personalty,  financing  statements or title retention agreements filed
and/or  recorded  against  Borrower,  except  the  Mortgage  and  the  financing
statements in favor of Agent,  for the ratable benefit of the Lenders,  filed in
connection  with the  Mortgage,  the Security  Agreement  and the  Assignment of
Contracts;

            (ll) an  analysis  and  verification  of the  Budget  and line  item
breakdown and timing to complete the Project  prepared at  Borrower's  sole cost
and expense by  independent  third party  consultants  selected by Agent with no
conditions or facts objectionable to Agent;

            (mm) the Final  Budget,  which shall  include a cost  breakdown  and
separate  itemization  of all Hard Costs and Soft Costs for the  Project by line
item, and such backup information or materials as Agent may require;

            (nn) the Project  development  schedule  provided  by  Borrower  and
development  supervisor  setting forth the approximate start and finish dates of
all major  stages of the Project  (and  providing  that the  development  of the
Project  has  commenced  prior to the date hereof ), in such format as Agent and
Borrower may reasonably agree;


                                       59
<PAGE>

            (oo)  INTENTIONALLY OMITTED

            (pp)  current  certified  financial  statements  of  Guarantor  (and
Borrower, if the same have been prepared at the time of the Closing);

            (qq)  a list of deposits or other advances made by potential
occupants of the Project; and

            (rr) all  other  items  required  by the  Commitment  Letter  or the
Closing Checklist previously delivered by Agent's Counsel to Borrower.

      Section 6.3  Conditions to Funding of Advances.  Before the funding of any
Advance, each of the following conditions must be satisfied:

            (a) Conditions  Precedent.  All conditions of Section 6.2 shall have
been and remain satisfied;

            (b)  Defaults.  There  shall  be  no  default  by  Borrower  or  any
Guarantor,  or any event which with the giving of notice (if required hereunder)
and passage of time would constitute a default, under any Loan Document, and all
such documents shall be in full force and effect; notwithstanding the foregoing,
and except for Section 5.1(r) defaults,  Agent will not  unreasonably  refuse to
fund an Advance if the Borrower has otherwise satisfied all requirements for the
Advance, the default in question is non-monetary,  and would be completely cured
by or in connection with the funding of the Advance.

            (c)  Representation   and  Warranties.   The   representations   and
warranties  made in Article III hereof shall be true and correct in all material
respects  on and as of the date of the  disbursement  with the same effect as if
made on such date;

            (d)  Additional  Documents.  Agent shall have received and approved:
(i) a Draw Request,  (ii) such advice from Agent's Inspecting  Consultant (which
advice shall inure to Lenders' benefit only) as Agent shall reasonably  require,
and (iii) such additional documents as Agent may reasonably require,  including,
but not limited to, all Major Contracts;

            (e) Title  Endorsements.  Agent shall have  received,  in connection
with each Draw Request, a notice of title continuation and an endorsement to the
title  insurance  policy  theretofore  delivered,  indicating  that,  since  the
preceding  disbursement,  there  has been no  change  in the  state of title not
theretofore  approved  by Agent,  which  endorsement  shall  have the  effect of
increasing  the  coverage of the policy by an amount  equal to the  disbursement
then made, together with an update to the comprehensive endorsement;

            (f) Loan Documents.  Agent shall have  reasonably  approved all Loan
Documents and other items required to be submitted to it;

            (g) Lien Waivers. Executed lien waivers or releases of lien (i) from
all  contractors,  subcontractors,  suppliers  and  others  which  have  or  are
supplying  labor,  materials,  goods or  services  related to the Project or the
Improvements  in the  sum of  all  prior


                                       60
<PAGE>

disbursements  for all of  Borrower's  preceding  Draw  Requests,  and (ii) with
respect  to any items of the type  described  in the  preceding  clause (i) in a
pending Draw Request for which  Borrower is seeking  reimbursement  based on its
prior  payment of that item,  together  with such  evidence as Agent may require
that no notices of lien or stop  notices  have been filed and that  nothing  has
occurred which could, in Agent's sole opinion, jeopardize the superiority of the
lien of the Mortgage  over any possible  lien.  Notwithstanding  the  foregoing,
monthly lien waivers  shall not be required  (except  upon  completion  of their
contracts) from any party whose total contract price is less than $25,000;

            (h) Loan in Balance. The Building Loan and the Soft Cost Loan shall,
in Agent's sole opinion, be "in balance" as defined in Section 2B.7(A) and Agent
shall be reasonably  satisfied that  Completion of Construction on or before the
Completion Date can reasonably be achieved;

            (i) No  Termination of Contracts,  Licenses,  Permits or Approvals .
None of the  documents  covered  by the  Assignment  of  Contracts  or the bonds
relating to the General Contract shall have been terminated, modified or revoked
without  Agent's  prior written  consent other than the Change Orders  expressly
permitted hereunder pursuant to Section 4.2(d), and;

            (i) Post-Closing Deliveries.  On or before the Post-Closing Delivery
Date, the Post-Closing Conditions shall have been satisfied.

      Section  6.4  Last  Disbursement  of Hard  Costs.  In the case of the last
disbursement  of Hard  Costs  and  release  of the  Retainage,  all of the above
conditions shall be met or waived and Agent shall have received and approved:

            (a)  Certificate  of Occupancy.  A temporary  certificate of use and
occupancy,  certificate of completion or its equivalent covering all portions of
the Improvements or other evidence of the approval by any Governmental Authority
of the Improvements to the extent any such approval is a condition of the lawful
use and occupancy of the Improvements, including the approval by the local board
of fire underwriters or its equivalent,  and evidence that Borrower has obtained
all permits  required by any Requirement to operate the  Improvements  for their
intended  purposes,  provided that Borrower  shall proceed as  expeditiously  as
possible to secure the final  certificate  of occupancy (in any event within two
(2)  years of  issuance  of the  temporary  certificate  of  occupancy),  or its
equivalent issued by the applicable  governmental authority for the Improvements
comprising the Project,  and all other reasonable  evidence that the City of New
York and/or the Battery Park City Authority has  acknowledged  the completion of
all work  required  by it to meet all legal  requirements  and the  requirements
under the Ground Lease, as applicable, including, without limitation, all zoning
and building requirements;

            (b) Title Insurer's Advice.  Advice from Title Insurer to the effect
that  the  Improvements  have  been  constructed  lien-free  and  an  additional
endorsement  to the  Title  Policy  increasing  coverage  to  include  the final
Building Loan Advance and insuring  such other  matters as Agent may  reasonably
require including,  without limitation, that the Improvements do not encroach on
any easement, right-of-way or land of others and do not violate any Requirements
including,   without   limitation,   those   related  to  set-backs  and  height
restrictions;


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<PAGE>

            (c) As-Built Survey. A final "AS BUILT" ALTA/ACSM survey showing the
Improvements  located  wholly  within the  perimeter of the Land,  and otherwise
complying with the requirements as provided in the Commitment Letter;

            (d) Completion  Certificates.  Completion of Construction shall have
occurred and  certificates of completion from Borrower=s  Architect and Engineer
(and Agent's  Inspecting  Consultant)  stating that the  Improvements  have been
completed  substantially  in  accordance  with  the  Plans  and  all  applicable
requirements  of the Ground Lease and of  Governmental  Authorities  and that an
authorized  representative  of the party  executing  the  certificate  made such
periodic inspections of the Improvements during the course of construction as it
deemed  necessary  as the basis of such  certification,  and any other  evidence
reasonably  required  by Agent  that the  Improvements  have been  substantially
completed in accordance with the Plans and in compliance  with all  requirements
of the Ground  Lease and of  Governmental  Authorities,  and that all items of a
"punch list" nature  which Agent has  identified  have been waived in writing or
corrected to Agent's reasonable satisfaction.

            (e)  Architect=s  Certificate/Compliance  With Laws. An  architect's
certificate (in the form of the sample attached hereto and made a part hereof as
EXHIBIT D) and such other  evidence as Agent may require to  establish  that the
Improvements are free of structural defects and can be legally occupied and that
the use and  occupancy  of the  Improvements  as an assisted  living/independent
living  complex  comply in all material  respects  with all  applicable  zoning,
subdivision  and  building  codes and  other  Requirements,  including,  but not
limited to,  compliance with the National  Environmental  Policy Act,  Americans
with  Disabilities Act and any other  applicable  Federal,  state,  municipal or
local Requirements. Such evidence of zoning compliance shall be in the form of a
letter  (which  must be in all  regards  acceptable  to Agent)  from  Borrower's
Architect and/or its zoning counsel.

            (f) Final Lien Waivers.  Such final lien waivers,  certificates  and
estoppels as Agent or the Title Company may reasonably  require from  Borrower=s
Architect and  Engineer,  the General  Contractor,  and all  subcontractors  and
material  suppliers  which have performed work on the  Improvements  or provided
labor,  materials or supplies in connection  therewith certifying receipt of the
final  payment  of all sums owing to each of such  parties  from  Borrower  with
respect  to the  Improvements  and  stating  that each  such  party has no claim
against  Borrower,  the  Improvements  or any Loan  funds  arising  out of or in
connection with such work, labor, materials or supplies.

            (g) Borrower's Affidavit.  An affidavit duly executed by Borrower or
by  Developer  on behalf of  Borrower  stating  that each person  providing  any
material  or  performing  any  work  in  connection  with  the  construction  or
Completion of the Improvements,  the General  Contractor and all  subcontractors
and material  suppliers  have been paid in full or will be paid in full from the
proceeds of such final Advance,  that all  withholding  taxes have been paid and
that lien waivers have been received from all  contractors,  subcontractors  and
suppliers who have performed work or supplied  materials in connection  with the
construction of the  Improvements for Borrower,  the General  Contractor and all
subcontractors.

            (h) Final As-Built Plans and Specifications. A final set of as-built
site,   architectural,   structural,   mechanical,   plumbing,   electrical  and
landscaping  Plans for the


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<PAGE>

completed  Improvements,  marked to show all  changes  made during the course of
construction, and satisfactory to Agent.

            (i)  Warranties  and  Guaranties.   Copies  of  all  warranties  and
guaranties issued in connection with the Improvements.

            (j)  Insurance.  Borrower  shall have  delivered  to Agent  evidence
reasonably satisfactory to Agent that all property damage, business interruption
or  rental  loss,  liability  and other  insurance  coverage  for the  completed
Improvements, as required under the Loan Documents, are in full force and effect
with all premiums paid.

            (k) Reserve  Requirement.  The  undisbursed  portion of the Building
Loan and/or the Soft Cost Loan shall  include a reserve for  interest  and other
costs relative to the Property,  the Building Loan and the Soft Cost Loan in all
respects  acceptable to Agent, and both the Building Loan and the Soft Cost Loan
shall be in balance, as determined by Agent.



                                   ARTICLE VII

                                    THE AGENT
                                    ---------

      Section 7.1  Appointment;  Powers and  Immunities.  Subject to Section 7.2
below,  each Lender hereby  irrevocably  appoints and authorizes Agent to act as
its agent  hereunder and under the other Loan  Documents with such powers as are
specifically  delegated to Agent by the terms hereof and thereof,  together with
such other powers as are reasonably incidental thereto. Unless expressly limited
by the terms of Section 7.2 below, all provisions of this Agreement or the other
Loan Documents which require the consent or approval of Agent shall be consented
to, or not  consented to, and approved by, or not approved by, Agent in its sole
discretion.  Agent:  (a)  shall  have no duties  or  responsibilities  except as
expressly set forth in this  Agreement and the other Loan  Documents,  and shall
not by reason of this  Agreement or any other Loan Document be a trustee for any
Lender;  (b)  shall  not  be  responsible  to  the  Lenders  for  any  recitals,
statements,  representations  or warranties  contained in this  Agreement or any
other Loan Document,  or in any  certificate  or other  document  referred to or
provided for in, or received by any Lender  under,  this  Agreement or any other
Loan Document, or for the validity, effectiveness,  genuineness,  enforceability
or  sufficiency  of this  Agreement  or any  other  Loan  Document  or any other
document  referred  to or  provided  for herein or therein or for any failure by
Borrower to perform any of its  obligations  hereunder or thereunder;  (c) shall
not be required to initiate or conduct any litigation or collection  proceedings
hereunder or under any other Loan Document except to the extent requested by the
Unanimous  Lenders or Requisite  Lenders,  as provided in Section 7.2 below, and
then only on terms and conditions  satisfactory  to Agent;  (d) may consult with
the other  Lenders,  but shall have sole  authority to approve all Draw Requests
hereunder  and make any  determinations  required  by  Section  2B.15,  (e) upon
Agent's determination that an Event of Default as set forth in Section 5.1 above
has occurred, may (i) declare that such Event of Default exists, (ii) accelerate
the Obligations as provided in Section 5.3 above,  and (iii) manage  litigation,
including  foreclosure  proceedings,  and (f) shall not be  responsible  for any
action  taken or  omitted  to be taken by it  hereunder  or under any other Loan
Document or any other document


                                       63
<PAGE>

or  instrument  referred to or provided  for herein or therein or in  connection
herewith  or  therewith,   except  for  its  own  gross  negligence  or  willful
misconduct.   In   administering   the  Loan,   Agent   shall  have  no  greater
responsibility  to the Lenders  than it would have if Agent were the sole Lender
hereunder and will be deemed to have exercised reasonable care in performing its
duties hereunder if it exercises the level of care  substantially  equal to that
which Agent accords its own loans. Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or  attorneys-in-fact  selected by it with reasonable care.  Except as expressly
provided  herein,  the provisions of this Article VII are solely for the benefit
of Agent and the  Lenders,  and  Borrower  shall not have any  rights as a third
party  beneficiary of any of the provisions  hereof. In performing its functions
and duties under this Agreement and under the other Loan Documents,  Agent shall
act solely as agent of the  Lenders  and does not assume and shall not be deemed
to have assumed any obligation  towards or  relationship of agency or trust with
or for Borrower.  The duties of Agent shall be ministerial and administrative in
nature,  and Agent shall not have by reason of this  Agreement or any other Loan
Document a fiduciary relationship in respect of any Lender.

      Section 7.2 Limitations on Agent. Notwithstanding anything to the contrary
contained in Section 7.1 above:

            (a) Unanimous Lender Consent.  The consent of the Unanimous  Lenders
shall be required for the following actions, waivers and amendments:

                  (i) an increase in the principal amount of the Loan;

                  (ii) a  reduction  of the rate or amount of interest on any of
            the  Advances  or any  fees  (other  than the  Agency  Fee) or other
            amounts payable to the Lenders except as provided hereunder;

                  (iii) the  postponement  of the  Maturity  Date  (except  with
            respect to any extension  permitted by the terms of Section 2A.11 of
            this  Agreement)  or a  waiver  of  any  of  the  conditions  to the
            extension of the Maturity Date under Section 2A.11;

                  (iv) the  assignment of any right or interest in or under this
            Agreement or any of the other Loan Documents by Borrower;

                  (v) the release of any of the Collateral or the release of any
            Guarantor or any other obligor under a Loan Document from any of its
            obligations  thereunder  (except upon the complete and  indefeasible
            payment of the Loan and except upon Agent's  determination  that the
            criteria for reduction of the Guaranty  Obligations  as set forth in
            the Payment Guaranty have been met);

                  (vi) the amendment of the  definition of "REQUISITE  LENDERS,"
            "SUPERMAJORITY LENDERS" or "UNANIMOUS LENDERS";

                  (vii) the  amendment of any of the  provisions of this Article
            VII;


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<PAGE>

                  (viii)  the  waiver  or  amendment  of any of the  affirmative
            covenants  of Borrower set forth in Section 4.1 (a)  concerning  the
            structure of Borrower, Section 4.1 (e) concerning maintenance of the
            Premises, Section 4.1 (h) concerning payment of fees, Section 4.1(i)
            concerning use of proceeds of the Loan,  Section  4.1(j)  concerning
            completion by the Completion Date, Section 4.1 (n) concerning bonds,
            Section  4.1  (r)  concerning   indemnification,   Section  4.1  (s)
            concerning security interests, Section 4.1(x) concerning delivery of
            Guarantor's   financial   statements,   Section  4.1(bb)  concerning
            delivery of rent rolls and Leasing  Reports as to both the  delivery
            of such items and compliance with the requirements thereof,  Section
            4.1(cc)  concerning  delivery of Facility Summary Reports as to both
            the  delivery  of such items and  compliance  with the  requirements
            thereof,  Section 4.1(dd)  concerning Debt Service  Coverage Ratios,
            Section 4.1(ee) concerning minimum occupancy levels, Section 4.1(ff)
            concerning  Guarantor's  net worth and  Section  4.1(gg)  concerning
            Guarantor's liquidity;

                  (ix) the waiver or amendment of any of the negative  covenants
            of Borrower set forth in Section 4.2 (a) concerning  interest in the
            Premises,  Section 4.2 (b) and Section 4.2(m) concerning  ownership,
            and Section 4.2 (g) concerning Pollutants;

                  (x) the waiver of any Event of Default  described  in Sections
            5.1 (a) concerning  default beyond the cure period,  Section 5.1 (b)
            concerning any monetary default, Section 5.1 (d) concerning judgment
            against a Significant Party,  Section 5.1 (e) concerning  bankruptcy
            proceedings,  Section 5.1 (f) concerning a bankruptcy order, Section
            5.1  (g)  concerning  transfer  of the  Premises,  Section  5.1  (h)
            concerning  casualty  or  condemnation  of  the  Premises,   Section
            5.1(l)(ii)  concerning  Guarantor's  obligation under the Guaranties
            and  the  Environmental   Indemnity  Agreement  and  Section  5.1(t)
            concerning Member's ownership and control of Borrower;

                  (xi) the  amendment  of Section  2B.15  concerning  Borrower's
            obligation  to  contribute  the Required  Equity,  the  amendment of
            Section  2B.15   concerning  the  requirement   that  the  Mezzanine
            Financing  shall be subordinate  to the Loans,  the extension of the
            grace periods set forth in Section 5.2, the amendment of Section 5.3
            concerning  rights  of Agent and  Lenders,  Section  5.4  concerning
            limited recourse obligations, Section 7.14 concerning successors and
            assigns or Section 8.5 concerning amendments to this Agreement;

                  (xii)  disposition  of  the  Premises  with  financing  by the
            Leasehold Entity;

                  (xiii) the waiver of the  covenants of Guarantor  set forth in
            the  Guaranties  as to  Guarantor's  minimum  net worth and  minimum
            liquidity; and

                  (xiv) any amendment to the Ground Lease.


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<PAGE>

            (b) Requisite Lender Consent.  The consent of the Requisite  Lenders
shall be required for the following actions, waivers and amendments:

                  (i) the waiver of any Event of Default  described  in Sections
            5.1 other than those requiring the consent of the Unanimous  Lenders
            pursuant to Section 7.2(a)(x) above;

                  (ii) the waiver of Borrower's  obligation to pay the late fees
            set forth in Section 2A.3;

                  (iii)  actions  taken  by Agent  under  Section  2B.2(b)  that
            contradict the advice of Agent's Inspecting Consultant or the waiver
            or amendment of any of the provisions set forth in Sections  2B.2(a)
            concerning  the  release  of  Retainage,   Section  2B.5  concerning
            disbursement of the Development Fee, Section 2B.7 concerning funding
            limitations, Section 2B.7(A) concerning loan balancing requirements,
            and Section 2B.8  concerning  reduction or release of Retainage  for
            Hard Costs  except for the release of  Retainage  by Agent on a line
            item basis as permitted by Section 2B.8;

                  (iv) an  amendment  to the Budget  (other than a  reallocation
            pursuant  to Section  2B.14) or the  granting of consent to a Change
            Order  required  pursuant  to  Section  4.2(d)  to the  extent  such
            amendment or Change Order is material,  "material"  meaning that (a)
            individually or in the aggregate with all previous amendments,  such
            amendment or Change Order  results in an increase or decrease in the
            Budget in excess of $500,000 or (b) such  amendment  or Change Order
            would reduce the value of the Project;

                  (v) the making of  Protective  Advances  (with  notice of same
            made to the Lenders  promptly  thereafter) in an aggregate amount in
            excess  of  $250,000;  provided,  however,  that  approval  from the
            Requisite Lenders shall not be required for Agent to fund Protective
            Advances  (with  notice  of  same  made  to  the  Lenders   promptly
            thereafter),  in any  amount  without  limitation  in the case of an
            emergency (in Agent's reasonable  judgment) or for sums expended for
            real estate taxes,  other governmental  charges,  insurance premiums
            and utility charges;

                  (vi)  the  waiver  or  amendment  of any  of  the  affirmative
            covenants  of  Borrower  set  forth in  Section  4.1 (f)  concerning
            insurance,   Section  4.1  (j)   concerning   construction   of  the
            Improvements  (other  than  the  requirement  of  completion  by the
            Completion Date,  which, as provided in Section  7.2(a)(viii)  shall
            require  the  consent of the  Unanimous  Lenders),  Section  4.1 (k)
            concerning standard of construction,  Section 4.1 (m) concerning the
            correction of defects,  Section 4.1 (p)  concerning  the  foundation
            survey,  Section 4.1 (q) concerning the as-built survey, and Section
            4.1 (w) concerning the payment of claims;

                  (vii) the waiver or amendment of any of the negative covenants
            of Borrower set forth in Section 4.2 (h)  concerning  subdivision of
            the Land, and Section 4.2 (j) concerning termination of leases;


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<PAGE>

                  (viii) the waiver or  amendment of any of the  provisions  set
            forth in Section 6.3 concerning  conditions to funding,  and Section
            6.4 concerning the last disbursement of Hard Costs;

                  (ix)  acquisition  of the Premises by foreclosure by an entity
            wholly owned and  controlled  (directly or  indirectly)  by Agent to
            hold title to the Premises following  foreclosure or acceptance of a
            deed  in  lieu  of  foreclosure  (the  "LEASEHOLD   Entity")  or  by
            acceptance of a deed in lieu of foreclosure by the Leasehold Entity;

                  (x) structure of the entity to serve as the Leasehold Entity;

                  (xi) plan for  management  of the  Premises  by the  Leasehold
            Entity,  including,  for example,  an  operating  budget and capital
            improvements  budget,  leasing  guidelines,  management  and leasing
            agent  criteria,  and  plan for  marketing  and  disposition  of the
            Premises;

                  (xii)  disposition  of the Premises  without  financing by the
            Leasehold Entity; and

                  (xiii)  determinations  as to the  declaration  of an Event of
            Default and the exercise of Lender=s remedies hereunder or under the
            other Loan Documents after an Event of Default.

            (c) Supermajority  Lender Consent.  The consent of the Supermajority
Lenders shall be required for the following actions, waivers or amendments:

                  (i)  any  admission  of any  new or  substitute  member  in or
            manager of Borrower  that  requires  Agent or Lender  consent  under
            Section 4.2(b) or Section 4.2(m) hereof; or

                  (ii) any merger or consolidation  involving any Guarantor that
            requires  Agent or Lender  consent under  Section  4.2(b) or Section
            4.2(m) hereof.

            (d) Lender  Consent.  At any time that Agent  desires the consent of
the Lenders  pursuant to this Section 7.2, Agent shall provide written notice of
the proposed  action,  waiver or amendment to each Lender  together with Agent's
recommendation.  Each Lender shall provide  written notice to Agent within seven
(7) Domestic  Business Days of such Lender's  receipt of Agent's notice granting
or denying such Lender's consent to such proposed  action,  waiver or amendment.
Failure of any Lender to respond to Agent within such time frame shall be deemed
to be a grant  of such  Lender's  consent  in  favor of the  action,  waiver  or
amendment recommended by Agent in such notice.

      Section 7.3  Reliance  by Agent.  Agent shall be entitled to rely upon any
certification,   notice  or  other  communication   (including  any  thereof  by
telephone, telecopy, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the


                                       67
<PAGE>

proper  person or persons,  and upon  advice and  statements  of legal  counsel,
independent  accountants or other experts  selected by Agent.  As to any matters
not expressly  provided for by this Agreement or any other Loan Document,  Agent
shall in all cases be fully  protected in acting,  or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Requisite
Lenders,  and such  instructions of the Requisite Lenders in any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.

      Section 7.4 Defaults.  Agent shall not be deemed to have  knowledge of the
occurrence  of a default or an Event of Default  (other than the  nonpayment  of
principal of or interest on the Loans)  unless Agent has received  notice from a
Lender or Borrower  specifying such default or Event of Default and stating that
such notice is a "NOTICE OF DEFAULT".  In the event that Agent  receives  such a
notice of the  occurrence of a default or an Event of Default,  Agent shall give
prompt notice thereof to the Lenders. Agent shall give each Lender prompt notice
of each  nonpayment  of principal of or interest on the Loans  whether or not it
has received any notice of the occurrence of such  nonpayment.  Agent shall take
such action  hereunder with respect to such default or Event of Default as shall
be directed by the Unanimous Lenders or Requisite Lenders as provided in Section
7.2 above,  provided  that,  unless and until  Agent  shall have  received  such
directions,  Agent may (but  shall not be  obligated  to) take such  action,  or
refrain  from  taking  such  action,  with  respect to such  default or Event of
Default as it shall deem advisable in the best interests of the Lenders.

      Section 7.5 Rights of Agent as a Lender.  With respect to Advances made by
it, KCCI in its  capacity as a Lender  hereunder  shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not  acting as Agent,  and the term  "LENDER"  or  "LENDERS"  shall,  unless the
context otherwise indicates,  include KCCI in its individual capacity. Agent may
(without  having to account  therefor to any Lender) accept  deposits from, lend
money to and generally  engage in any kind of banking,  trust or other  business
with Borrower (and any of its Affiliates) as if it were not acting as Agent, and
Agent may accept fees and other  consideration  from  Borrower  for  services in
connection  with this Agreement or any other Loan Document or otherwise  without
having to account for the same to the Lenders.

      Section 7.6  Indemnification.  Each Lender  severally  agrees to indemnify
Agent,  to the extent Agent shall not have been  reimbursed  by Borrower (and if
Lenders  indemnify Agent but Borrower later reimburses  Agent,  then Agent is to
return the earlier paid amount to the Lenders),  ratably in accordance  with its
Commitment,  for  any  and  all  liabilities,   obligations,   losses,  damages,
penalties,  actions,  judgments,  suits,  costs,  expenses  (including,  without
limitation,  counsel fees and  disbursements)  or  disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against Agent
in any way  relating  to or  arising  out of this  Agreement  or any other  Loan
Document or any other documents contemplated by or referred to herein or therein
or the transactions  contemplated hereby or thereby (excluding,  unless an Event
of Default has occurred and is continuing,  the normal  administrative costs and
expenses  incident to the  performance  of its agency  duties  hereunder) or the
enforcement  of any of the terms hereof or thereof or any such other  documents;
provided,  however,  that no Lender shall be liable for any of the  foregoing to
the extent they arise from the gross negligence or willful  misconduct of Agent.
If any  indemnity  furnished to Agent for any purpose  shall,  in the opinion of
Agent,  be


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<PAGE>

insufficient  or become  impaired,  Agent may call for additional  indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished.

      Section  7.7  Consequential  Damages.  AGENT SHALL NOT BE  RESPONSIBLE  OR
LIABLE TO ANY LENDER,  BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY  PUNITIVE,
EXEMPLARY  OR  CONSEQUENTIAL  DAMAGES  WHICH MAY BE  ALLEGED AS A RESULT OF THIS
AGREEMENT,  THE OTHER LOAN  DOCUMENTS  OR ANY OF THE  TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY UNLESS AGENT DELIBERATELY FAILS TO REMIT TO ANY LENDER ITS PRO
RATA SHARE OF LOAN PAYMENTS MADE BY BORROWER OR FAILS TO ADVANCE MONIES ADVANCED
BY A LENDER  TO FUND A DRAW  REQUEST  WHICH  COMPLIED  WITH ALL OF THE TERMS AND
CONDITIONS OF THIS AGREEMENT.

      Section 7.8 Payee of Note  Treated as Owner.  Agent may deem and treat the
payee of any Note as the owner thereof for all purposes  hereof unless and until
a written  notice of the  assignment  or transfer  thereof shall have been filed
with Agent and the provisions of Section 7.14 have been satisfied. Any requests,
authority  or consent of any  person who at the time of making  such  request or
giving such  authority or consent is the holder of any Note shall be  conclusive
and binding on any subsequent holder,  transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor or replacement thereof.

      Section 7.9 Lenders'  Knowledge;  Nonreliance  on Agent and Other Lenders.
Each Lender agrees that it has,  independently  and without reliance on Agent or
any other Lender,  and based on such documents and  information as it has deemed
appropriate, made its own credit analysis of Borrower and decision to enter into
this Agreement and that it will,  independently  and without reliance upon Agent
or any other Lender,  and based on such  documents and  information  as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not  taking  action  under  this  Agreement  or any of the other  Loan
Documents.  Agent  shall  not be  required  to keep  itself  informed  as to the
performance or observance by Borrower of this Agreement or any of the other Loan
Documents or any other document referred to or provided for herein or therein or
to inspect the  properties or books of Borrower or any other person.  Except for
notices,  reports and other documents and information  expressly  required to be
furnished to the Lenders by Agent  hereunder or under the other Loan  Documents,
Agent shall not have any duty or  responsibility  to provide any Lender with any
credit or other  information  concerning  the  affairs,  financial  condition or
business of Borrower or any other person (or any of their  Affiliates) which may
come into the  possession of Agent;  provided  that,  (i) promptly after receipt
from  Borrower  and/or  Guarantor,  Agent shall send the  Lenders  copies of all
financial information furnished by Borrower and/or Guarantor (including, without
limitation,  those set forth in Section 4.1(x) (financial  statements),  Section
4.1(bb)  (rent rolls),  Section  4.1(cc)  (Facility  Summary  Reports),  Section
4.1(ff)  (certificates  of Guarantor's net worth) and 4.1(gg)  (certificates  of
Guarantor's Liquid Assets) as well as all material notices furnished by Borrower
and/or  Guarantor and (ii) upon the written  request of a Lender,  provided such
request is reasonable in scope under the circumstances, Agent shall request that
Borrower and/or Guarantor  provide any information or  documentation  that Agent
shall have the right to request  from  Borrower  and/or  Guarantor  hereunder or
under any of the other Loan  Documents and upon the receipt of such  information
or  documentation  shall promptly  deliver the same to such Lender and any other
Lenders.


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<PAGE>

      Section 7.10 Failure to Act. Except for action expressly required of Agent
hereunder or under the other Loan  Documents,  Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive  further  assurances  to  its  satisfaction  by  the  Lenders  of  their
indemnification  obligations under Section 7.6 against any and all liability and
expense which may be incurred by Agent by reason of taking,  continuing to take,
or failing to take any such action.

      Section 7.11 Resignation or Removal of Agent.  Agent (a) may resign at any
time by giving notice  thereof to the Lenders,  Guarantor and Borrower,  and (b)
may not be removed as Agent unless  Lenders (other than Agent and other than any
Lender  then in  default)  holding no less than 75% of the  Commitments  vote in
favor of such removal,  or, in the case of a removal due to a material breach of
or material default in Agent's obligations under this Article VII that shall not
have been cured within thirty (30) days after written  notice to Agent,  may not
be removed as Agent unless Lenders holding no less than 75% of the  Commitments,
excluding  the  Commitment of Agent,  vote in favor of such  removal,  provided,
however,  that in no event  may the  Agent  be  removed  unless  two (2) or more
Lenders vote in favor of such removal. Upon any such resignation or removal, the
Lenders  (by  majority  vote and  including  KCCI,  based upon their  respective
outstanding  Commitments)  shall  have the right to appoint a  successor  Agent,
subject to the rights of Guarantor set forth in 7.14(b) hereof.  If no successor
Agent  shall  have been so  appointed  by the  Lenders  within 30 days after the
retiring  Agent's notice of resignation,  then the retiring Agent may, on behalf
of the Lenders,  appoint a successor  Agent. Any successor Agent shall be a bank
which is  reasonably  acceptable  to  Borrower  (and  Guarantor,  as provided in
Section 7.14(b) hereof) and which has a combined capital and surplus of at least
$500,000,000.  Upon the acceptance of any  appointment  as Agent  hereunder by a
successor  Agent,  such successor  Agent shall  thereupon  succeed to and become
vested with all the rights,  powers,  privileges  and duties of the  retiring or
removed  Agent,  and the retiring or removed Agent shall be discharged  from its
duties and obligations hereunder for matters occurring after the successor Agent
takes over.  After any  retiring  Agent's  resignation  or removal  hereunder as
Agent,  the  provisions  of this  Article  VII shall  continue in effect for its
benefit in respect  of any  actions  taken or omitted to be taken by it while it
was acting as Agent hereunder.

      Section 7.12  Reliance by Borrower.  (a)  Notwithstanding  anything to the
contrary in this Agreement or in any Assignment  and Acceptance  Agreement,  the
Lenders and Agent hereby agree that throughout the term of the Loan:

            (b) Borrower,  Developer and Guarantor  shall have the right without
the need of any inquiry or  investigation to rely on the appointment of Agent as
agent for all of the Lenders for the purposes  and with the powers  specifically
set forth herein and the continuance of that appointment  throughout the term of
the Loan unless  Borrower,  Developer and Guarantor has received notice pursuant
to Section 7.11 of the  resignation  of Agent and  designation  of a replacement
Agent.

            (c) The right of Borrower, Developer and Guarantor hereunder to rely
upon  and  look to  Agent  shall  continue  during  the  term of the Loan and no
dispute,  complaint or claim between any Lender and Agent shall impair or negate
such right of Borrower to rely upon and look  exclusively  to Agent as set forth
in  this  Article  VII;  provided,  however,  that  if and  at  such  time  as a
replacement  Agent or  co-Agent  has been duly  appointed  in the place of Agent


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<PAGE>

originally  named  herein (or in the place of any earlier  replacement  Agent or
co-Agent(s) appointed in accordance with the terms hereof),  Borrower shall rely
on such  replacement  Agent or co-Agent(s) and shall no longer rely on any prior
Agent.

      Section  7.13  Apportionment  of Payments.  All payments of principal  and
interest in respect of  outstanding  Advances,  all payments of fees (other than
the Construction  Administration  Fee and the Agency Fee) and all other payments
in  respect  of any other  Obligations,  shall be  allocated  among  such of the
Lenders as are entitled  thereto,  in  proportion to their  respective  Pro Rata
shares or  otherwise  as provided  herein.  Agent  shall  apply all  payments in
respect of any  Obligations  and all  proceeds of  Collateral  in the  following
order:  First,  to pay  principal of and interest on any portion of the Advances
which Agent may have  advanced on behalf of any Lender other than KCCI for which
Agent has not then been  reimbursed by such Lender or Borrower;  Second,  to pay
principal of and interest on any Protective Advance for which Agent has not then
been paid by Borrower or reimbursed by the Lenders; Third, to pay Obligations in
respect of any fees,  expense  reimbursements  or indemnities then due to Agent;
Fourth,  to pay any  outstanding  Obligations  in respect  of any fees,  expense
reimbursements  or indemnities  then due to the Lenders;  Fifth, to pay interest
due in respect of  Advances;  Sixth,  to the ratable  payment or  prepayment  of
principal  outstanding  on Loans in the order of priority  determined  by Agent;
Seventh,  to the  ratable  payment  of all other  Obligations;  and  Eighth,  as
Borrower designates.

      Section 7.14 Successors and Assigns. (a) Subject to Section 7.14(b) below,
each Lender may at any time sell to one or more persons  (each a  "PARTICIPANT")
participating  interests  in  its  Pro  Rata  share  of  the  Loan,  any  of its
Commitments or any other of its interests  hereunder  relating  thereto,  all on
such terms as such Lender may deem acceptable.  In the event of any such sale of
a participating  interest to a Participant,  the assigning Lender's  obligations
under this Agreement shall remain unchanged,  such assigning Lender shall remain
solely  responsible  to the other  parties  hereto for the  performance  of such
obligations,  such  assigning  Lender shall remain the holder of its Note issued
hereunder for all purposes  under this  Agreement,  and Agent and Borrower shall
continue to deal solely and directly  with such  assigning  Lender in connection
with the rights and obligations  derived through the assigning Lender under this
Agreement.

      (b) Each Lender may at any time  assign to one or more banks or  financial
institutions (each an "ASSIGNEE") all or any of its rights and obligations under
this Agreement,  its Note and the other Loan Documents,  and such Assignee shall
assume all such rights and obligations, pursuant to an Assignment and Acceptance
Agreement executed by such Assignee,  all on such terms as such Lender and Agent
may deem  acceptable,  provided that (i) such Lender  retains an interest of not
less than $10,000,000 in the Loan,  (provided,  however,  that the amount of the
interest  that  European  American Bank shall be required to retain shall be not
less than $5,000,000 and provided further that the foregoing  minimums shall not
apply  after an Event of  Default  hereunder  or  under  any of the  other  Loan
Documents);  (ii) such Lender  assigns an  interest of not less than  $5,000,000
(provided, however, that the foregoing minimum shall not apply after an Event of
Default  hereunder or under any of the other Loan Documents);  (iii) such Lender
pays to Agent an administrative  fee of $2,500.00 for each such assignment,  and
(iv) Agent and  Guarantor  approve the  Assignee,  which  approval  shall not be
unreasonably  withheld  (provided,  however  that  Guarantor  shall not have the
foregoing  approval  rights with respect to such assignee  following an Event of
Default  hereunder or under any of the other Loan


                                       71
<PAGE>

Documents).  Guarantor  shall also have the right to approve any  replacement of
KCCI as the Agent hereunder and under the other Loan  Documents,  which approval
shall not be  unreasonably  withheld,  except that (i) Guarantor  shall not have
such approval rights following an Event of Default hereunder or under any of the
other Loan Documents and (ii) upon the resignation of KCCI,  Fleet National Bank
shall be first  considered as the replacement  Agent and Guarantor shall have no
approval  rights  with  respect to the  appointment  of Fleet  National  Bank as
replacement  Agent.  Upon  the  execution,   delivery  and  acceptance  of  such
Assignment and Acceptance Agreement in accordance with this Agreement,  from and
after the effective date of the assignment  effected  thereby,  (x) the Assignee
thereunder  shall be a party  hereto and,  to the extent of that  portion of the
Loan covered by such  Assignment and Acceptance  Agreement,  have the rights and
obligations of a Lender  hereunder  with a Commitment as set forth therein,  and
(y) the assigning  Lender shall,  to the extent  provided in such Assignment and
Acceptance Agreement, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance Agreement
covering  all or the  remaining  portion  of an  assigning  Lender's  rights and
obligations under this Agreement, such Lender shall cease to be a party hereto).
Such Assignment and Acceptance Agreement shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Assignee  as a  Lender  party to this  Agreement  and the  resulting  adjustment
arising from the purchase by such Assignee of all or a portion of the rights and
obligations of the assigning Lender under this Agreement, its Note and the other
Loan Documents.  On or prior to the effective date of the assignment effected by
such Assignment and Acceptance Agreement,  Borrower shall execute and deliver to
Agent in exchange for the  assigning  Lender's Note or Notes a new Note or Notes
to the order of the Assignee in an amount equal to the Commitment  assumed by it
pursuant to such Assignment and Acceptance  Agreement and a new Note or Notes to
the order of such assigning Lender in an amount equal to the Commitment retained
by it  hereunder.  Such new Note or Notes shall be dated as of the Closing  Date
and shall  otherwise be in the form of the Note or Notes replaced  thereby.  The
Note or Notes  surrendered by the assigning Lender shall be marked  "CANCELLED".
Borrower  shall  assist  KCCI  in the  process  of  syndicating  the  Loans  and
Commitments to the extent reasonably requested by KCCI.

      (c)  Borrower  authorizes  any  Lender  to  disclose  to any  Participant,
Assignee  or  other  transferee  (each  a  "TRANSFEREE")   and  any  prospective
Transferee  any and  all  financial  information  in  such  Lender's  possession
concerning Borrower which has been delivered to such Lender by Borrower pursuant
to this  Agreement  or which has been  delivered  to such  Lender by Borrower in
connection  with such  Lender's  credit  evaluation  prior to entering into this
Agreement.

      (d) Anything in this Section  7.14 to the  contrary  notwithstanding,  any
Lender  may  assign  and  pledge  all or any  portion  of  the  Advances  and/or
obligations  owing  to it to any  Federal  Reserve  Bank  or the  United  States
Treasury  as  collateral  security  pursuant  to  Regulation  A of the  Board of
Governors of the Federal  Reserve  System and any Operating  Circular  issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
Advances and/or  obligations  made by Borrower to the assigning  and/or pledging
Lender in accordance with the terms of this Agreement  shall satisfy  Borrower's
obligations hereunder in respect of such assigned Advances and/or obligations to
the extent of such  payment.  No such  assignment  shall  release the  assigning
and/or pledging Lender from its obligations hereunder.


                                       72
<PAGE>

      (e) KCCI agrees to furnish to Borrower upon  Borrower's  written request a
copy of any Assignment and  Acceptance  Agreement  between KCCI and any Assignee
executed pursuant to paragraph (b) above.

      (f) This  Agreement  shall be  binding  on the  parties  hereto  and their
respective successors and assigns.


                                  ARTICLE VIII

                               GENERAL PROVISIONS
                               ------------------

      Section  8.1  No  Waiver;   Modifications   in  Writing.   No  Advance  or
disbursement of Loan proceeds  hereunder shall constitute a waiver of any of the
conditions  of Agent's or any Lender's  obligation  to make further  Advances or
disbursements.  Agent may by written  notice to  Borrower,  at any time and from
time to time,  waive in whole or in part and  absolutely or  conditionally,  any
default or Event of Default  hereunder subject to the provisions of Section 7.2.
Any such waiver shall be subject to such  conditions or  limitations as shall be
specified  in any such  notice.  In the case of any such  waiver,  the rights of
Borrower shall be otherwise  unaffected,  and any default or Event of Default so
waived shall be deemed to be cured and not  continuing  to the extent and on the
conditions  or  limitations  set forth in such waiver,  but no such waiver shall
extend to any  subsequent  or other  default or Event of Default,  or impair any
right, remedy or power consequent thereupon.

      Section 8.2 Agent's Approval. All proceedings taken in connection with the
Loan and all Draw  Requests,  documents,  agreements  or  contracts  required or
contemplated  by this  Agreement or any other Loan Document  shall be reasonably
satisfactory  to Agent,  and all parties  thereto shall have received copies (or
certified copies where appropriate in such counsel's  judgment) of all documents
which they may reasonably request in connection therewith.

      Section 8.3 Standing.  All conditions to the  obligations of Agent and the
Lenders to make  Advances and  disbursements  hereunder  are imposed  solely and
exclusively  for the benefit of Agent,  the Lenders  and their  assigns,  and no
other person shall have standing to require  satisfaction  of such conditions in
accordance  with their terms or be entitled to assume that Agent or Lenders will
refuse to make  Advances or  disbursements  in the absence of strict  compliance
with any or all thereof, and no other person shall, under any circumstances,  be
deemed  to be the  beneficiary  of such  conditions,  any or all of which may be
freely waived in whole or in part by Agent at any time if in its sole discretion
it deems it  advisable  to do so  (subject  to the  provisions  of  Section  7.2
hereof),  it being  further  understood  that  Agent and  Lenders  shall have no
obligation  to see to it  that  the  Improvements  are  properly  and/or  timely
completed or to supervise the  construction of the Improvements or to supervise,
direct or review the  distribution or  disbursements  of Loan proceeds.  Neither
Agent nor any Lender,  by making the Loan or by any other action taken  pursuant
to the Loan  Documents,  shall be deemed to be a partner or joint  venturer with
Borrower.

      Section  8.4  Notices.  All  notices,  demands,   instructions  and  other
communications  required or  permitted  to be given to or made upon either party
hereto or any other person shall be


                                       73
<PAGE>

in writing and shall be personally  delivered or sent by registered or certified
mail,  postage prepaid,  return receipt  requested,  or by prepaid courier,  and
shall be  deemed  to be  given  for  purpose  of this  Agreement  in  regard  to
registered or certified  mail,  three (3) days after  mailing,  and in regard to
personal delivery or prepaid courier, on the day that such writing is delivered.
Unless otherwise  specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section, notices,  demands,  instructions and other
communications  in writing shall be given to or made upon the following  persons
at their respective addresses indicated below:

      If to Borrower:

            AH Battery Park Owner, LLC
            c/o Alliance Holdings, Inc.
            723 Electronic Drive, Suite 300
            Horsham, PA  19044
            Attention:  David B. Fenkell
            Telecopy:   (215) 706-0877

      with a copy to Developer:

            Brookdale Living Communities of New York - BPC, Inc.
            c/o Brookdale Living Communities, Inc.
            77 West Wacker Drive, Suite 4400
            Chicago, Illinois 60601
            Attention:  Darryl W. Copeland, Jr.
            Telecopy:   (312) 977-3699

      and with a courtesy copy to:

            Brookdale Living Communities, Inc.
            77 West Wacker Drive, Suite 4400
            Chicago, Illinois 60601
            Attention:  Robert J. Rudnik
            Telecopy:   (312) 977-3769

            Squire, Sanders & Dempsey, LLP
            1300 Huntington Center
            41 South High Street
            Columbus, Ohio  43215
            Attention:  David Cooper, Esq.
            Telecopy:   (614) 365-2499



                                       74
<PAGE>

      If to Agent:

            Key Corporate Capital Inc.
            127 Public Square
            Cleveland, Ohio 44114-1306
            Attention:  Ms. Nancy A. Herman
                        Vice President
            Telecopy:   (216) 689-4997

      with a courtesy copy to:

            Jones, Day, Reavis & Pogue
            901 Lakeside Avenue
            Cleveland, Ohio  44114
            Attention:  Bernadette M. Mast, Esq.
            Telecopy:   (216) 579-0212

If to a Lender,  to such Lender at its address or telecopier number set forth on
the signature page hereof or in the Assignment and Acceptance Agreement pursuant
to which it became a party  hereto.  Notices may  alternatively  be sent to such
other  address as any of the parties may from time to time  designate by written
notice given as herein required.  Rejection or refusal to accept or inability to
deliver because of changed addresses or because no notice of changed address was
given shall be deemed a receipt of such notice. The effectiveness of such notice
will not be  affected by the giving or lack  thereof of courtesy  copies of such
notice.

      If any day on which any notice, demand, instruction or other communication
is given or sent by any  party  hereto  is not a  Domestic  Business  Day,  such
notice, demand,  instruction or other communication shall be deemed to have been
given or sent on the Domestic  Business Day next  succeeding  such  non-Domestic
Business Day.

      Section 8.5  Amendments.  Neither this Agreement nor any provision  hereof
may be  changed,  waived,  discharged  or  terminated  orally,  but  only  by an
instrument  in  writing  signed by the party  against  whom  enforcement  of the
change,  waiver,  discharge  or  termination  is sought,  and in the case of the
Lenders, which is approved as provided in Section 7.2 hereof.

      Section 8.6  Assignment.  Borrower shall not assign or transfer any of its
rights hereunder without the prior written consent of Agent.

      Section 8.7 Governing Law. This Agreement shall be governed by the laws of
the State of New York without regard to principles of conflict of laws.

      Section 8.8  Severability  of Provisions.  Any provision of this Agreement
which is prohibited or unenforceable  shall be ineffective to the extent of such
prohibition or unenforceability without affecting the validity or enforceability
of the rest of such provision.

      Section 8.9  Headings.  Article,  Section and other  headings used in this
Agreement  are for  convenience  of  reference  only and  shall not  affect  the
construction of this Agreement.


                                       75
<PAGE>

      Section 8.10 Waiver of Trial by Jury.  AGENT,  LENDERS AND BORROWER  SHALL
AND DO HEREBY  WAIVE TRIAL BY JURY IN ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM
BROUGHT BY ANY OF THE  PARTIES  HERETO  AGAINST  ANY OTHER  PARTY ON ANY MATTERS
WHATSOEVER  ARISING  OUT OF OR IN ANY WAY IN  CONNECTION  WITH  THE  LOAN,  THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.

      Section 8.11      Submission to Jurisdiction; Service of Process

            (a)  The   Borrower   irrevocably   submits  to  the   non-exclusive
jurisdiction  of the  courts of the State of New York,  the courts of the United
States for the Southern  District of the State of New York, and appellate courts
from any thereof, over any suit, action or proceeding arising out of or relating
to this Note.  The Borrower  hereby  irrevocably  waives,  to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit,  action or  proceeding  brought in any such court
and any claim that any such suit,  action or proceeding  brought in such a court
has been brought in an inconvenient forum.  Without limiting Borrower's right to
appeal any such final  judgment  in  accordance  with  applicable  Requirements,
Borrower  agrees that a final  judgment in any such suit,  action or  proceeding
brought in such a court shall be conclusive and binding upon Borrower.

            (b) The Borrower hereby  irrevocably  appoints CT Corporation System
as its  authorized  agent to accept  and  acknowledge,  on  behalf of  Borrower,
service  of any and all  process  which may be  served  in any  suit,  action or
proceeding  of the nature  referred  to above in any such  court.  The  Borrower
represents  and  warrants  that such agent has agreed in writing to accept  such
appointment  and that  Borrower  has  delivered to the Agent a true copy of such
designation  and  acceptance.   Said   designation  and  appointment   shall  be
irrevocable.  If such agent shall cease so to act, Borrower covenants and agrees
that it shall irrevocably designate and appoint without delay another such agent
satisfactory  to the Agent and shall  promptly  deliver to the Agent evidence in
writing of such other agent's acceptance of such appointment.

            (c) Process may be served in any suit,  action or  proceeding of the
nature  referred to above (i) by the mailing of copies  thereof by registered or
certified air mail, postage prepaid return receipt requested, to Borrower at its
address set forth above or to such other  address of which  Borrower  shall have
given written notice to the Agent, or (ii) without affecting the efficacy of any
service made pursuant to clause (i) above,  if Borrower  shall not have filed an
appearance within  twenty-one days after the date of such mailing,  by serving a
copy thereof upon CT Corporation  System,  at its office at 1633  Broadway,  New
York, New York 10014, as Borrower's  agent for service of process.  The Borrower
agrees that such service shall be deemed in every respect  effective  service of
process upon Borrower in any such suit,  action or proceedings and shall, to the
fullest extent  permitted by law, be taken and held to be valid personal service
upon and personal delivery to Borrower. Nothing in this Section shall affect the
right of the Agent to serve process in any manner  permitted by law or limit the
right of the Agent to bring  proceedings  against  Borrower in the courts of any
other jurisdiction or jurisdictions.

      Section 8.12 Lender's Remedies  Cumulative.  Each and every right,  remedy
and power  hereby  granted  to Agent or any Lender or allowed it by law or other
agreement shall be cumulative and not exclusive and may be exercised by Agent or
such Lender from time to time.


                                       76
<PAGE>

      Section 8.13  Counterparts.  This Agreement may be executed by the parties
hereto  separately  in any  number of  counterparts,  each of which  shall be an
original  and all of  which  collectively  shall  constitute  one  and the  same
agreement.

      Section 8.14 Trust Fund. Borrower agrees that it will receive the Advances
secured by the Mortgage  and will hold the right to receive  such  Advances as a
trust fund to be applied first for the purpose of paying the cost of improvement
(as defined in New York Lien Law),  if any, and will apply the same first to the
payment  of such  costs  before  using any part of the total of the same for any
other purpose and will comply with Section 13 of the New York Lien Law. Borrower
will  indemnify  and  hold  Lender  harmless  against  any  loss  or  liability,
reasonable  cost or  expense,  including,  without  limitation,  any  judgments,
reasonable  attorneys' fees, costs of appeal,  bonds and printing costs, arising
out of or relating  to any  proceeding  instituted  by any  claimant  alleging a
violation by Borrower or Lender of any applicable  lien law  including,  without
limitation, any section of Article 3A of the New York Lien Law. The provision of
this Section shall survive the payment and performance of Borrower's obligations
under this Agreement and the other Loan Documents.

                            [SIGNATURE PAGE FOLLOWS]




<PAGE>


            IN WITNESS WHEREOF,  the parties hereto have executed this Agreement
as of the date first set forth above.

Borrower:                     AH BATTERY PARK OWNER, LLC,
                              an Ohio limited liability company

                              BY:   AH Battery Park Member, LLC, an Ohio
                                    limited liability company, its sole
                                    member and manager

                                    By:   Alliance Holdings, Inc., a
                                          Pennsylvania corporation, its sole
                                          member and manager

                                          By:  /s/ David B. Fenkell
                                             ------------------------------


                                                Name:  David B. Fenkell
                                                      ----------------------

                                                Title: President
                                                      -----------------------


The Agent:                    KEY CORPORATE CAPITAL INC.


                              By:  /s/ Nancy A. Herman
                                 -----------------------------
                                    Nancy A. Herman
                                    Vice President


The Lenders:                  KEY CORPORATE CAPITAL INC.

                              By:  /s/ Nancy A. Herman
                                 -----------------------------
                                    Nancy A. Herman
                                    Vice President


                              FLEET NATIONAL BANK

                              By:  /s/ Patricia Marinilli
                                 -----------------------------
                                    Patricia Marinilli
                                    Vice President


                             EUROPEAN AMERICAN BANK

                              By:  /s/ Sophia Haliotis
                                 -----------------------------
                                    Sophia Haliotis
                                    Group Vice President


<PAGE>



                                     ANNEX I





                       Lender                    Pro Rata Share
                       ------                    --------------

             Key Corporate Capital Inc.           45.03816794%
             Fleet National Bank                  34.60559796%
             European American Bank               20.35623410%



<PAGE>




                                    EXHIBIT A
                                    ---------

                                LEGAL DESCRIPTION



All that certain plot, piece or parcel of land, situate,  lying and being in the
Borough of Manhattan,  County of New York,  City and State of New York,  bounded
and described as follows:

BEGINNING at the  intersection  of the southerly line of Chambers Street and the
westerly line of North End Avenue;

THENCE  southerly  along the  westerly  line of North End Avenue,  a distance of
196.00 feet to a point on the northerly line of Warren Street;

THENCE westerly along said northerly line of Warren Street, a distance of 100.00
feet to the division  line between  Parcel 20C on the west and Parcel 20B on the
east;

THENCE  northerly  along said  division  line at right  angles to the  preceding
course, a distance of 196.00 feet to the southerly line of Chambers Street;

THENCE  easterly  along said southerly  line of Chambers  Street,  a distance of
100.00 feet to the point of BEGINNING.


<PAGE>



                                    EXHIBIT B
                                    ---------

                             Permitted Encumbrances


1.    Terms,  covenants,  conditions  and provisions of Declaration of Covenants
      and  Restrictions  made by  Battery  Park  City  Authority  dated  3/15/84
      recorded on 3/21/84 in Reel 776 Page 360.

2.    Terms,  covenants,  conditions  and  provisions of  unrecorded  Settlement
      Agreement  made  between  the City of New York  and New York  State  Urban
      Development  Corporation,  dated as of 6/6/80 as recited in  amendment  to
      Option to Purchase  recorded  in Reel 1133 Page 582.  Said  Agreement  was
      amended by unrecorded amendments dated 6/9/80, 8/15/86, 6/28/89, 12/30,89,
      5/18/90, 10/15/93, 4/10/95 and 10/1/96.

3.    Terms,  covenants and  conditions  in connection  with Option to Purchase,
      dated  6/6/80  granted  to the City of New York as set forth in  Agreement
      between  New York State Urban  Development  Corporation,  BPC  Development
      Corporation,  Battery Park City Authority and the City of New York,  dated
      as of 6/6/80  recorded  on  6/11/80  in Reel 527 Page 153,  as  amended by
      Amendment to Option to Purchase  between  Battery Park City  Authority and
      the City of New York,  dated 8/15/86  recorded  10/22/86 in Reel 1133 Page
      582 and further amended by Second  Amendment to Option to Purchase between
      Battery Park City Authority and the City of New York,  dated as of 5/18/90
      recorded 5/30/90 in Reel 1697 Page 294.

4.    Terms,  covenants and conditions of the Declaration of Restrictions  dated
      6/15/83  made by Battery Park City  Authority  recorded on 6/20/83 in Reel
      696 Page 551.

5.    Unrecorded Memo of  Understanding  dated 11/8/79 among the Governor of the
      State of New York, the Mayor of the City of New York and the President and
      Chief Executive Officer of the Urban  Development  Corporation and Battery
      Park City  Authority  as  amended  by  unrecorded  amendments  recited  in
      Amendment to Option to Purchase recorded in Reel
      1133 Page 582.

6.    Unrecorded  Westway  Agreement  dated  12/8/81  between  Battery Park City
      Authority, Battery Park City Development Corporation and the People of the
      State of New York as  amended by  Unrecorded  Amendment  dated  9/9/82 and
      further amended by the Second  Unrecorded  Amendment of Westway  Agreement
      dated 6/83 recited in that certain Easement and Conveyance between Battery
      Park City Authority and the People of the State of New York dated 10/29/85
      recorded 11/20/85 in Reel 987 Page 949.

7.    Distinctive  Street  Improvement  Maintenance  Declaration  dated  1/13/86
      recorded 9/17/90 in Reel 1729 Page 352.

8.    Memorandum of Ground Lease by the Battery Park City  Authority,  as ground
      lessor,  and AH Battery  Park Owner,  LLC, as ground  lessee,  dated as of
      August 24, 1999,  to be recorded in the Office of the City  Register,  New
      York County



<PAGE>

9.    Subordination, Nondisturbance and Attornment Agreement by the Battery City
      Authority,  as master  lessor,  and AH Battery Park Owner,  LLC, as ground
      lessee,  dated as of August 24, 1999,  to be recorded in the Office of the
      City Register, New York County

10.   Building Loan  Leasehold  Mortgage,  Security  Agreement and Assignment of
      Leases and Rents, by AH Battery Park Owner, LLC, as mortgagor, in favor of
      Key Corporate Capital Inc., as Agent for the Lenders and Mortgagee,  dated
      as of August 24, 1999,  to be recorded in the Office of the City  Register
      New York County

11.   Soft Cost Leasehold Mortgage,  Security Agreement and Assignment of Leases
      and Rents,  by AH Battery Park Owner,  LLC, as mortgagor,  in favor of Key
      Corporate  Capital Inc., as agent for the Lenders and mortgagee,  dated as
      of August 24, 1999,  to be recorded in the Office of the City Register New
      York County

12.   UCC-1 Financing  Statements from AH Battery Park Owner, LLC, as debtor, in
      favor of Key  Corporate  Capital Inc. as Agent for the Lenders and secured
      party, dated as of August 24, 1999, to be filed in various jurisdictions

13.   Recognition  Agreement  by the  Battery  Park  City  Authority,  as ground
      lessor, and KCCI and the other Lenders, dated as of August 24, 1999, to be
      recorded in the Office of the City Register, New York County

14.   Memorandum of Property Option Agreement by AH Battery Park Owner,  LLC, as
      grantee,  and Brookdale  Living  Communities  of New York - BPC,  Inc., as
      grantor,  dated as of August 24, 1999, to be recorded in the Office of the
      City  Register,  New York County,  with  respect to that certain  Property
      Option Agreement, which, by its terms, is subordinate to the Mortgages and
      the other Loan Documents executed in favor of KCCI and the other Lenders

                                       2

<PAGE>

                                    EXHIBIT C
                                    ---------

                       Affidavit Pursuant to Section 22 of
                       -----------------------------------
                      the Lien Law of the State of New York
                      -------------------------------------

                                 (See Attached)



<PAGE>


                                    EXHIBIT D

                         Form of Architect's Certificate
                         -------------------------------

                            [LETTERHEAD OF ARCHITECT]

                                                Dated:_____________

Key Corporate Capital Inc., as Agent
127 Public Square
Cleveland, Ohio 44114-1306
Attention:  Ms. Nancy A. Herman
            Vice President

      Re:   Loans in the aggregate  maximum  amount of $49,125,000 to AH Battery
            Park  Owner,   LLC  (the   "BORROWER")   for  the   construction  of
            improvements  (the  "PROJECT")  located  at 445  North  End  Avenue,
            Battery Park City, New York, New York

Ladies and Gentlemen:

      The  undersigned  is the Architect for the above Project  pursuant to that
certain architect's agreement,  dated  __________________,  199_, with Brookdale
Living  Communities of New York-BPC,  Inc.  ("DEVELOPER"),  the developer of the
Project on behalf of the Borrower,  a true copy of which agreement we deliver to
you herewith (which  agreement,  together with any and all renewals,  extensions
and  modifications  thereof and all exhibits and addenda  thereto is hereinafter
referred to collectively as the "ARCHITECT'S AGREEMENT").

      In consideration  of lenders  ("LENDERS") for whom you are acting as Agent
(the "AGENT")  making  mortgage  loans  ("LOANS") to the Borrower to finance the
construction  of the  Project,  we agree with  respect to said Project that upon
receipt of written  notice from the Agent that the Borrower has defaulted  under
any of the  loan  documents,  we shall  continue  to act as  Architects  for the
Project,  PROVIDED that the Agent and/or the Lenders agrees to pay all sums owed
us as the  Architects  for work  previously  performed  to the  extent  that the
Borrower  has not received  construction  Loans  designated  for payment of such
work, and we as Architects shall be reimbursed in accordance with the provisions
of the  Architect's  Agreement for services  thereafter  rendered on the Agent's
behalf,  PROVIDED  that  unless  and  until  Lender  requests  that we  continue
performance under the Architect's Agreement as provided in the preceding clause,
Lender  shall not be liable for any of the  obligations  of Borrower to us under
the Architect's Agreement.

      We further  acknowledge  and consent to the  collateral  assignment by the
Borrower to the Agent of (i) all its rights under the Architect's  Agreement and
(ii) all plans, specifications,  drawings, renderings, and models related to the
Project,  to secure the Loans made by the Lenders to the  Borrower in respect to
the Project and any other obligations which may also be secured thereby.


                                       4
<PAGE>

      We advise  you that we are not aware of any  breach or  default  under the
Architect's Agreement.

      We  agree  that  whether  or not  the  Borrower  elects  to  continue  the
employment of us as Architects after the date hereof,  the Agent shall hereafter
succeed  to,  and  have  all of the  rights  of the  Borrower  in,  said  plans,
specifications,  drawings,  renderings, and models (collectively,  the "PLANS"),
and, without limiting the generality of the foregoing, may use such materials to
complete the Project.

      We hereby agree that we will not, without Lender=s prior written approval,
agree to any alteration,  modification, amendment to or release or discharge (in
whole or in part) of the  Architect's  Agreement or the Plans, or waive or claim
any waiver in respect of any provisions thereof, or perform any work pursuant to
any "material" change order. A change order shall be deemed "material" if (a) it
affects the value or use of the Project,  or (b) it  increases or decreases  the
costs of  construction of the Project by more than $100,000 or (c) when added to
other change orders not requiring the approval of Lender under clause (b) above,
it increases or decreases the costs of  construction of the Project by more than
$1,000,000.

      The  rights of the Agent  hereunder  shall  extend to its  successors  and
assigns  (including any purchaser upon foreclosure of the mortgage  securing the
Borrower's Loans, any receiver in possession of the Project, and any corporation
formed by or on behalf of any such  person),  and this letter also inures to the
benefit of any guarantor of the Loans that  undertakes,  at the Agent's request,
to complete the Project and perform the Borrower's  obligations to the Agent and
the Lenders in respect thereof.

      It shall not be necessary  for you to  acknowledge  your  agreement to the
foregoing,  as this letter is intended to constitute,  upon delivery of a signed
copy hereof,  a binding  obligation of the undersigned  without the necessity of
any such acknowledgment by you.

      The obligations of the undersigned hereunder may not be terminated without
the prior written  consent of the Agent.  This letter shall bind the  successors
and assigns of the undersigned.

                                          Very truly yours,


                                          [NAME OF ARCHITECT]


                                          By:   ______________________________
                                                Name:
                                                Title:


                                       5
<PAGE>



                                   EXHIBIT E
                                   ---------

                             Developer's Certificate
                             -----------------------

Brookdale  Living  Communities  of New  York-BPC,  Inc., a Delaware  corporation
("Developer"),  hereby represents and warrants to AH Battery Park Owner, LLC, an
Ohio limited  liability  company  ("Borrower"),  and Key Corporate Capital Inc.,
Fleet  National Bank and European  American Bank  (collectively,  "Lender") that
each of the  representations  and warranties  contained in that certain Building
Loan  Agreement  and that certain Soft Cost Loan  Agreement  (collectively,  the
"Loan Agreement") dated as of the date hereof by and between Borrower and Lender
and each of the Loan Documents (as defined in the Loan  Agreement)  which relate
to the Premises (as defined in the Loan Agreement)  (specifically  excluding any
representations  or  warranties  relating  to  Borrower  or  its  member  and/or
affiliates)   is  true,   correct  and  complete  in  all   material   respects.
Notwithstanding  the  foregoing,  if any of the  aforementioned  representations
and/or warranties  contained in the Loan Agreement and/or the Loan Documents are
limited  to  the   knowledge  or  best   knowledge   of   Borrower,   then  such
representations  and/or  warranties  shall be limited to the  knowledge  or best
knowledge,  respectively, of Developer.  Developer's obligations hereunder shall
terminate  (unless  Developer or its  affiliates  have  exercised  its rights to
acquire the  Property or an interest in Borrower or its member) upon the earlier
to occur of the (a) date upon which the Management  Agreement (as defined in the
Loan Agreement and the Development  Agreement (as defined in the Loan Agreement)
are  terminated  and (b) the date upon which the  indebtedness  evidenced by the
Note (as  defined in the Loan  Agreement)  is  repaid;  provided,  however,  any
liability  arising  prior to such  date  shall  not  terminate.  Notwithstanding
anything  to the  contrary  contained  herein,  in no event  shall any  officer,
director,  employee,  member,  manager,  shareholder,  incorporator  or agent of
Developer or Developer's  affiliates be personally liable for any of Developer's
obligations hereunder.

Dated: August   ,1999

                         DEVELOPER:

                         BROOKDALE LIVING COMMUNITIES OF NEW YORK-BPC,INC.,
                         a Delaware corporation

                         By:
                             -----------------------------------------
                         Name:
                             -----------------------------------------
                         Its:
                             -----------------------------------------



<PAGE>



                                    EXHIBIT F
                                    ---------

                       Occupancy Schedule/Pro Forma Rental
                       -----------------------------------


Minimum Occupancy Levels
------------------------

Quarter 2 following Substantial Completion:           43.75%
Quarter 3 following Substantial Completion:           55.13%
Quarter 4 following Substantial Completion:           65.63%
Quarter 5 following Substantial Completion:           76.13%
Quarter 6 following Substantial Completion:           83.13%
Quarters 7-10 following Substantial Completion: 83.13%



Pro Forma Rentals
-----------------

                                   MONTHLY FEE    ANNUAL FEE       TOTAL
UNIT MIX       IL.    # OF UNITS    (PER UNIT)    (PER UNIT)    ANNUAL FEE
--------       ---    ----------   -----------    ----------    ----------

Studio         IL         24         $3,750         $45,000    $ 1,080,000
One Bedroom    IL        126         $4,550         $54,600    $ 6,879,600
Two Bedroom    IL         48         $5,150         $61,800    $ 2,966,400
Studio         AL         19         $4,250         $51,000    $   969,000
One Bedroom    AL          1         $5,050         $60,600    $    60,600

                         218         $4,570         $54,842    $11,955,600