L E A S E



                      HEALTH CARE PROPERTY INVESTORS, INC.,

                                    as Lessor


                                       AND


              INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,


                                    as Lessee



                         Dated as of September 30, 1996








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                                      LEASE


                  THIS LEASE ("Lease") is dated as of the 30th day of September,
1996,  and  is  between  HEALTH  CARE  PROPERTY  INVESTORS,   INC.,  a  Maryland
corporation  ("Lessor") and INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
a Delaware corporation ("Lessee").


                                   ARTICLE I.

     1.   Leased Property; Term

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

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

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

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

               (d) all equipment,  machinery,  fixtures, and other items of real
          and/or personal property,  including all components  thereof,  now and
          hereafter  located in, on or used in connection  with and  permanently
          affixed to or incorporated into the Leased Improvements, including all
          furnaces, boilers, heaters,  electrical equipment,  heating, plumbing,
          lighting,  ventilating,  refrigerating,  incineration,  air and  water
          pollution control,  waste disposal,  air-cooling and  air-conditioning
          systems,  apparatus,  sprinkler  systems,  fire and  theft  protection
          equipment,  and built-in oxygen and vacuum  systems,  all of which, to
          the greatest extent  permitted by law, are hereby deemed to constitute
          real   estate,   together   with  all   replacements,   modifications,
          alterations and additions thereto (collectively, the "Fixtures"); and

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


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<PAGE>





                  SUBJECT, HOWEVER, to the easements,  encumbrances,  covenants,
conditions and  restrictions  and other matters which affect the Leased Property
as of the  date  hereof  or the  Commencement  Date  or  created  thereafter  as
permitted  hereunder to have and to hold for (1) a fixed term (the "Fixed Term")
commencing on the Commencement  Date, as defined below, and ending at 11:59 p.m.
Los Angeles  time on the later of (A) the  expiration  of the  fifteenth  (15th)
Lease Year and (B) the  expiration  of the "Fixed  Term" of the Newest  Facility
Group Lease (as defined below), but in no event later than the expiration of the
20th Lease Year and (2) the  Extended  Terms  provided for in Article XIX unless
this  Lease  is  earlier  terminated  as  hereinafter  provided.  Following  the
Commencement  Date,  the parties  shall  execute an  amendment  to this Lease in
substantially  the form attached hereto as Exhibit C to confirm certain matters,
including the  Commencement  Date of this Lease and the Minimum Rent  determined
pursuant to Section 3.1 below. Upon any change in the Minimum Rent in accordance
with the provisions of Section 3.1 below or otherwise pursuant to this Lease, at
Lessor's request, the parties shall similarly execute an amendment to this Lease
confirming  such  matters.  In  addition,  upon the  "Commencement  Date" of any
Facility Group Lease (as defined below) following the Commencement  Date of this
Lease (if any),  including the Newest  Facility Group Lease,  Lessor may prepare
and, if prepared,  Lessor and Lessee  shall  execute and deliver an amendment to
this Lease  confirming  that (x) such Facility Group Lease is a "Facility  Group
Lease" for  purposes of this Lease,  and (y) the  extension of the Fixed Term of
this Lease to be coterminous  with the "Fixed Term" of the Newest Facility Group
Lease, as applicable.  Notwithstanding  the foregoing,  the failure of Lessor to
prepare  and/or  the  failure  of  Lessee to so  execute  and  deliver  any such
amendment shall not, absent manifest error, affect Lessor's determination of the
matters to be confirmed thereby.

                                   ARTICLE II.

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

                  ACH:  As defined in Section 3.1.

                  Additional Charges:  As defined in Article III.

                  Additional Rent:  As defined in Article III.



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

                  Appraiser:  As defined in Article XXXIV.

                  Award:  All  compensation,  sums or anything of value awarded,
paid or received on a total or partial Condemnation.

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

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

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

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

                  Capital Additions:  One or more new buildings,  or one or more
additional  structures annexed to any portion of any of the Leased Improvements,
or the material expansion of existing improvements, which are constructed on any
parcel or portion of the Land, during the Term, including  construction of a new
wing or new story,  or the  renovation  of existing  improvements  on the Leased
Property  in order to  provide a  functionally  new  facility  needed to provide
services not previously offered.



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<PAGE>




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

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

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

                  Closing Date:  As defined in the Contract of Acquisition.

                  Code:  The Internal Revenue Code of 1986, as amended.

                  Commencement Date:  The Closing Date.

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

                  Competing  Facility.  Any  facility or  institution  providing
services  or  goods  similar  to  those  provided  at the  time in  question  in
connection with the Facility and the


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<PAGE>




Primary  Intended Use or similar to those provided in connection  with any other
Permitted Use hereunder as to which Lessee then desires to change the Facility's
Primary Intended Use.

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

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

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

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

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

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

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

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



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<PAGE>




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

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

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

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

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

                  Environmental Costs:  As defined in Article XXXVI.

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

                  Event of Default:  As defined in Article XVI.



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                  Extended Term(s):  As defined in Article XIX.

                  Facility:  The current 54-bed,  17,000 square foot Alzheimer's
assisted-living  care facility  being operated or proposed to be operated on the
Leased Property.

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

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

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

                  Facility Mortgage:  As defined in Article XIII.

                  Facility Mortgagee:  As defined in Article XIII.

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

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


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<PAGE>




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

                  Fair  Market  Value:  The  fair  market  value  of the  Leased
Property, and all Capital Additions, determined in accordance with the appraisal
procedures  set forth in Article  XXXIV or Section  35.1,  as  applicable.  Fair
Market  Value shall be the higher  value  obtained  by assuming  that the Leased
Property is unencumbered by this Lease or encumbered by this Lease.  Further, in
determining  Fair Market Value the  positive or negative  effect on the value of
the Leased Property  attributable to the interest rate,  amortization  schedule,
maturity  date,  prepayment  penalty  and  other  terms  and  conditions  of any
encumbrance  which  will not be removed at or prior to the date as of which such
Fair Market Value  determination is being made shall be taken into account.  The
Leased  Property  shall be valued  at its  highest  and best use which  shall be
presumed to be as a  fully-permitted  Facility  operated in accordance  with the
provisions  of this Lease.  Fair market value of the Leased  Property  shall not
include "going concern" or "business  enterprise" value  attributable to factors
other than the  highest and best use of the Leased  Property.  In  addition,  in
determining   Fair  Market  Value,  the  negative  value  of  (a)  any  deferred
maintenance or other items of repair or replacement of the Leased Property,  (b)
any  then  current  or  prior  licensure  or  certification   violations  and/or
admissions  holds and (c) any other  breach or  failure  of Lessee to perform or
observe its obligations  hereunder shall not be taken into account;  rather, the
Leased Property,  and every part thereof, shall be deemed to be in the condition
required by this Lease  (i.e.,  good order and  repair) and Lessee  shall at all
times be deemed to have  operated  the Facility in  compliance  with and to have
performed all  obligations of the Lessee under this Lease.  Notwithstanding  the
foregoing, in the event of a bona fide, arms-length Transfer with any


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<PAGE>




Person  (other than an Affiliate  of Lessee and other than  pursuant to a Master
Sublease),  the Fair Market Value of the Leased Property for purposes of Section
24.2(c) below shall be the gross  consideration  (as defined  above)  payable to
Lessee or any Affiliate of Lessee in connection  with such Transfer for Lessee's
leasehold  interest in the Leased Property  created under this Lease,  unless in
connection  with  the  transaction(s)  as  to  which  such  Transfer  is a  part
(including any step, tiered or indirect transactions), additional or other gross
consideration is payable to Lessee or any Affiliate of Lessee in addition to the
gross  consideration  allocated by the parties thereto to the leasehold interest
created  hereby,  in  which  event  the  appraisers  appointed  pursuant  to the
appraisal  procedures  set forth in Article  XXXIV shall  determine  whether the
portion of such gross consideration payable to Lessee or any Affiliate of Lessee
in such  transaction(s) and allocated for the leasehold estate created hereby as
initially  determined by the parties  thereto is reasonably  related to the Fair
Market  Value  of the  Leased  Property,  as also  determined  pursuant  to this
definition and the appraisal  procedures set forth in such Article XXXIV.  If so
reasonably related, the Fair Market Value of the Leased Property for purposes of
such Section 24.2(c) shall be deemed the portion of the gross  consideration  so
allocated  by the  parties.  Otherwise,  the Fair  Market  Value  of the  Leased
Property for purposes of such Section  24.2(c) shall be  determined  pursuant to
this  definition  and the appraisal  procedures set forth in such Article XXXIV,
but in no event  greater than the gross  consideration  payable to Lessee or any
Affiliate   of  Lessee  in   connection   with  such   Transfer  and  the  other
transaction(s) as to which such Transfer is a part.

                  Fixed Term:  As defined in Article I.

                  Fixtures:  As defined in Article I.

                  GAAP:  Generally accepted accounting principles.

                  Gross Revenues: All revenues received or receivable from or by
reason of the operation of the Facility or any other use of the Leased Property,
Lessee's  Personal  Property and all Capital  Additions  including  all revenues
received or receivable for the use of or otherwise attributable to units, rooms,
beds and other facilities provided,  meals served, services performed (including
ancillary services),  space or facilities subleased or goods sold on or from the
Leased  Property  and all  Capital  Additions;  provided,  however,  that  Gross
Revenues shall not include:

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

                  (ii)     bad debt in accordance with GAAP;



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<PAGE>




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

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

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

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

                  Guarantor:  ILC.

                  Guaranty:  The  Guaranty  of even date  herewith  executed  by
Guarantor.

                  Handling:  As defined in Article XXXVII.

                  Hazardous Substances:  Collectively,  any petroleum, petroleum
product or byproduct  or any  substance,  material or waste  regulated or listed
pursuant to any Environmental Law.

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

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

                  Impositions: Collectively, all taxes, including capital stock,
franchise and other state taxes of Lessor (or, if Lessor is not HCPI, of HCPI as
a result of its investment in Lessor), ad valorem,  sales, use, single business,
gross  receipts,  transaction  privilege,  rent or  similar  taxes;  assessments
including  assessments  for  public  improvements  or  benefits,  whether or not
commenced  or  completed  prior  to the date  hereof  and  whether  or not to be
completed within the Term; ground rents;  water,  sewer and other utility levies
and charges;  excise tax levies;  fees including  license,  permit,  inspection,
authorization and similar fees; and all other governmental charges, in each case
whether general or special, ordinary or


                                       10


<PAGE>




extraordinary,  or foreseen or unforeseen,  of every character in respect of the
Leased  Property  and/or  the  Rent  and  all  interest  and  penalties  thereon
attributable  to any  failure in  payment by Lessee  which at any time prior to,
during or in respect  of the Term  hereof  may be  assessed  or imposed on or in
respect  of or be a lien upon (i)  Lessor or  Lessor's  interest  in the  Leased
Property,  (ii) the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein, or (iii) any occupancy, operation,
use or  possession  of, or sales from or activity  conducted on or in connection
with the Leased  Property  or the  leasing or use of the Leased  Property or any
part thereof;  provided,  however, that nothing contained in this Lease shall be
construed  to  require  Lessee to pay (a) any tax based on net  income  (whether
denominated  as a franchise or capital  stock or other tax) imposed on Lessor or
any other Person,  (b) any  transfer,  or net revenue tax of Lessor or any other
Person except Lessee and its successors, (c) any tax imposed with respect to the
sale,  exchange  or other  disposition  by Lessor of any Leased  Property or the
proceeds thereof,  or (d) except as expressly  provided elsewhere in this Lease,
any principal or interest on any  indebtedness  on the Leased Property for which
Lessor is the obligor,  except to the extent that any such tax, assessment,  tax
levy or charge of the type  described in clause (a), (b) or (c) above is levied,
assessed  or imposed in lieu  thereof  or as a  substitute  for any tax which is
otherwise included in this definition.

                  Incremental  Gross Revenues:  The positive amount,  if any, by
which the Gross  Revenues  for the  current  Lease  Year or  partial  Lease Year
exceeds the Base Gross Revenues.

                  Insurance  Requirements:  The  terms of any  insurance  policy
required by this Lease and all requirements of the issuer of any such policy and
of any insurance board,  association,  organization or company necessary for the
maintenance of any such policy.

                  Intangible  Property:  All  accounts,  proceeds  of  accounts,
rents, profits,  income or revenues derived from the use of rooms or other space
within the Leased  Property or the  providing  of services in or from the Leased
Property;  documents,  chattel  paper,  instruments,  contract  rights,  deposit
accounts, general intangibles, causes of action, now owned or hereafter acquired
by Lessee (including any right to any refund of any Impositions) arising from or
in  connection  with  Lessee's  operation  or use of the  Leased  Property;  all
licenses  and permits  now owned or  hereinafter  acquired by Lessee,  which are
necessary or desirable  for Lessee's use of the Leased  Property for its Primary
Intended  Use  or  any  other  Permitted  Use,  including,  if  applicable,  any
certificate of need or similar  certificate;  the right to use any trade name or
other name  associated with the Facility;  and any and all third-party  provider
agreements (including Medicare and Medicaid).

                  Land:  As defined in Article I.

                  Lease:  As defined in the preamble.

                  Lease Rate:  Nine and Eight-Tenths Percent (9.8%).



                                       11


<PAGE>




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

                  Leased  Improvements;  Leased  Property:  Each as  defined  in
Article I.

                  Leasehold FMV:  As defined in Article XXIV.

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

                  Lessee:  As defined in the preamble.

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

                  Lessor:  As defined in the preamble.

                  Lessor's Personal Property:  As defined in Article I.

                  Letter of Credit Date:  As defined in Section 21.2.

                  Master Sublease:  As defined in Article XXIV.

                  Minimum Rent:  As defined in Article III.

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


                                       12


<PAGE>





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

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

                  Occupant:  Any Person under an Occupancy Arrangement.

                  Offer:  As defined in Article XXXV.

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

                  One-Five Mile Area:  As defined in Section 7.4.1.

                  One Mile Area:  As defined in Section 7.4.1.

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

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

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

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

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

                  Primary Intended Use: The specific Permitted Use for which the
Facility is being  operated at any time during the Term in accordance  with this
definition.  Initially,  the  Primary  Intended  Use  shall  be  an  Alzheimer's
assisted-living care facility.  Lessee shall give to Lessor not less than thirty
(30) days prior written notice of any change in the Primary  Intended Use to any
other Permitted Use hereunder. Lessee shall not be entitled to change


                                       13


<PAGE>




the Primary  Intended Use to any other Permitted Use (i) without first providing
such  notice to Lessor or (ii) at any time after the  occurrence  of an Event of
Default  hereunder which remains uncured (if applicable).  In addition,  without
Lessor's  prior  written  consent,  which  consent  may be given or  withheld in
Lessor's  sole and absolute  discretion,  Lessee shall not be entitled to change
the Primary  Intended Use to any other  Permitted Use if Lessee or any Affiliate
of Lessee then owns, operates or manages or has a material interest (including a
controlling  interest) in a Competing  Facility  within the One Mile Area or, if
such  change in use is to occur  after the eighth  (8th) Lease Year of the Fixed
Term or after the Third (3rd) Lease Year of either Extended Term, as applicable,
within the One-Five Mile Area.

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

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

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

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


                                       14


<PAGE>


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

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

                  SEC:     Securities and Exchange Commission.

                  State:  The State or Commonwealth in which the Leased Property
is located.

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

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

                  Transfer:  As defined in Article XXIV.

                  Transfer Consideration:  As defined in Article XXIV.

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

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



                                       15


<PAGE>




                                  ARTICLE III.

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

                  3.1.1 Minimum Rent. For the period from the Commencement  Date
through the  expiration of the Fixed Term,  Lessee shall pay to Lessor  "Minimum
Rent" monthly,  in advance on or before the first day of each calendar month, an
amount equal to $23,111.67 (i.e.,  one-twelfth  (1/12) of the product of (i) the
Lease Rate times (ii) the Minimum Repurchase Price as of the Commencement Date).
The first monthly  payment of Minimum Rent shall be payable on the  Commencement
Date  (prorated as to any partial  calendar month at the beginning of the Term).
Minimum Rent for the Extended  Terms,  if any, shall be determined in accordance
with the provisions of Article XIX.

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

                  (a) less than the lesser of (i) One Hundred Two Percent (102%)
of the sum of the Minimum Rent and Additional Rent paid or payable by Lessee for
the immediately  prior Lease Year of the applicable Term and (ii) the sum of (A)
the Minimum Rent and Additional Rent paid or payable for the  immediately  prior
Lease Year, plus (B) One Hundred  Percent (100%) of Incremental  Gross Revenues;
nor

                  (b) more than One Hundred  Five  Percent  (105%) of the sum of
Minimum Rent and Additional  Rent paid or payable by Lessee for the  immediately
prior Lease Year of the applicable Term.

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


                                       16


<PAGE>





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

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

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

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

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


                                       17


<PAGE>




information,  including  Lessee's  good faith best estimate of the amount of any
unresolved contractual allowances.

                  3.3 Confirmation of Gross Revenues.  Lessee shall utilize,  or
cause to be utilized, an accounting system for the Leased Property in accordance
with its usual and customary  practices  and in accordance  with GAAP which will
accurately  record all Gross  Revenues and Lessee shall retain for at least five
(5) years after the expiration of each Lease Year  reasonably  adequate  records
conforming to such  accounting  system showing all Gross Revenues for such Lease
Year. Lessor, at its own expense except as provided hereinbelow,  shall have the
right  from time to time (but in no event  more than one time per Lease  Year or
partial  Lease Year) by its  accountants  or  representatives,  to review and/or
audit the  information  set forth in the  Officer's  Certificate  referred to in
Section  3.2(a)  and in  connection  with such  review  and/or  audit to examine
Lessee's records with respect thereto  (including  supporting data and sales tax
returns)  subject to any  prohibitions  or limitations on disclosure of any such
data under applicable law or regulations  including any duly enacted  "Patients'
Bill of Rights" or similar  legislation,  or as may be necessary to preserve the
confidentiality of the Facility-patient  relationship and the  physician-patient
privilege. If any such review and/or audit discloses a deficiency in the payment
of Additional  Rent on account thereof (if  applicable),  Lessee shall forthwith
pay to Lessor the amount of the deficiency together with interest thereon at the
Overdue Rate compounded monthly from the date when said payment should have been
made to the date of payment  thereof.  If any such review and/or audit discloses
that the Gross  Revenues  actually  received by Lessee for any Lease Year exceed
those  reported by Lessee by more than Two Percent  (2%),  Lessee  shall pay the
costs of such review and/or audit (whether or not Additional  Rent is based upon
Gross Revenues). Any proprietary information obtained by Lessor pursuant to such
review  and/or  audit  shall  be  treated  as  confidential,  except  that  such
information may, subject to appropriate  confidentiality  safeguards, be used in
any  litigation or arbitration  proceedings  between the parties or disclosed to
prospective lenders or purchasers.

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

                  3.5 Late Payment of Rent. LESSEE HEREBY ACKNOWLEDGES THAT LATE
PAYMENT  BY  LESSEE  TO LESSOR  OF RENT  WILL  CAUSE  LESSOR TO INCUR  COSTS NOT
CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH IS PRESENTLY ANTICIPATED TO BE
EXTREMELY DIFFICULT TO


                                       18


<PAGE>

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

                           Lessor's Initials:

                           Lessee's Initials:

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

                                   ARTICLE IV.

                  4.1      Impositions.

                  4.1.1.  Subject to Article XII relating to permitted contests,
Lessee shall pay, or cause to be paid, all Impositions before any fine, penalty,
interest or cost may be added for  non-payment.  Lessee shall make such payments
directly to the taxing  authorities  where  feasible,  and  promptly  furnish to
Lessor copies of official receipts or other  satisfactory  proof evidencing such
payments.  Except as provided in the last  sentence of this Section 4.1.1 and in
Section 4.1.7 below,  Lessee's obligation to pay Impositions shall be absolutely
fixed upon the date such  Impositions  become a lien upon the Leased Property or
any part thereof. If any Imposition may, at the option of the taxpayer, lawfully
be paid in


                                       19


<PAGE>




installments, whether or not interest shall accrue on the unpaid balance of such
Imposition,  Lessee may pay the same,  and any  accrued  interest  on the unpaid
balance of such Imposition,  in installments as the same respectively become due
and before any fine,  penalty,  premium,  further  interest or cost may be added
thereto.  In such event, Lessee shall only be responsible for those installments
on account of such Impositions which are assessed during the Term.

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

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

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

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

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



                                       20


<PAGE>




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

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

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

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

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



                                       21


<PAGE>




                                   ARTICLE V.

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

                                   ARTICLE VI.

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

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


                                       22


<PAGE>




Requirements  and all Insurance  Requirements  and otherwise in accordance  with
customary practice in the industry for the Primary Intended Use.

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

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

                                  ARTICLE VII.

                  7.1  Condition  of the Leased  Property.  Lessee  acknowledges
receipt and delivery of  possession  of the Leased  Property and that Lessee has
examined and otherwise  has  knowledge of the  condition of the Leased  Property
prior to the  execution  and delivery of this Lease and has found the same to be
in good order and repair, free from Hazardous  Substances not in compliance with
Legal  Requirements,  and satisfactory for its purposes  hereunder.  Regardless,
however,  of any examination or inspection made by Lessee and whether or not any
patent or latent defect or condition was revealed or discovered thereby,  Lessee
is leasing the Leased Property "AS IS" in its present  condition.  Lessee waives
any claim or action  against  Lessor in respect of the  condition  of the Leased
Property including any defects or adverse conditions not discovered or otherwise
known  by  Lessee  as  of  the  date   hereof.   LESSOR  MAKES  NO  WARRANTY  OR
REPRESENTATION,  EXPRESS OR  IMPLIED,  IN RESPECT OF THE LEASED  PROPERTY OR ANY
PART  THEREOF,  EITHER AS TO ITS FITNESS FOR USE,  DESIGN OR  CONDITION  FOR ANY
PARTICULAR  USE OR PURPOSE OR  OTHERWISE,  OR AS TO THE NATURE OR QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT
BEING AGREED THAT ALL SUCH RISKS,


                                       23


<PAGE>




LATENT OR PATENT,  ARISING FROM EVENTS,  CONDITIONS OR  CIRCUMSTANCES  OCCURRING
PRIOR TO OR  DURING  THE TERM ARE TO BE BORNE  SOLELY BY  LESSEE  INCLUDING  ALL
RESPONSIBILITY  AND LIABILITY FOR ANY  ENVIRONMENTAL  REMEDIATION AND COMPLIANCE
WITH ALL ENVIRONMENTAL LAWS.

                  7.2      Use of the Leased Property

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

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

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

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



                                       24


<PAGE>




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

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

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

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

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



                                       25


<PAGE>




                  7.4.1  During  the  Term  and for a  period  of two (2)  years
thereafter,  neither Lessee nor any of its  Affiliates,  directly or indirectly,
shall operate,  own, manage or have any interest in or otherwise  participate in
or receive  revenues  from any Competing  Facility  (whether now or hereafter in
operation), within a one (1) mile radius from the outside boundary of the Leased
Property (the "One Mile Area"). By its signature  hereto,  Lessee represents and
warrants to Lessor that neither Lessee nor any of its  Affiliates  currently has
any such interest in any such Competing  Facility  within such One Mile Area. In
addition, the following shall apply:

                  (a) Lessee or any of its Affiliates may at anytime directly or
indirectly,   operate,  own,  manage  or  have  any  interest  in  or  otherwise
participate  in or receive  revenues  from any Competing  Facility  outside of a
radius of five (5) miles from the outside boundary of the Leased Property.

                  (b) Prior to the  expiration of the eighth (8th) Lease Year of
the Fixed  Term,  and prior to the  expiration  of the third (3rd) Lease Year of
each Extended Term, if any,  Lessee or any of its Affiliates may acquire and may
directly or indirectly, operate, own, manage or have an interest in or otherwise
participate in or receive revenues from any Competing  Facility  (whether now or
hereafter in operation)  within a radius from one (1) to five (5) miles from the
outside boundary of the Leased Property (the "One-Five Mile Area").

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

                  (d) Without limiting Lessor's rights as provided in subsection
(c) above, during the Term (including the Extended Terms, if any) Lessor


                                       26
<PAGE>

shall have a first refusal to finance (and/or  refinance) any Competing Facility
now or  hereafter  owned or proposed to be owned,  directly  or  indirectly,  by
Lessee or any  Affiliate of Lessee  within the One-Five  Mile Area upon the same
terms and  conditions  of any financing  (or  refinancing)  from any third party
which  Lessee or any  Affiliate  of Lessee  intends to accept  (or has  accepted
subject to Lessor's  right of first  refusal  herein),  including  any financing
(and/or  refinancing)  of  such  Competing  Facility  together  with  any  other
facilities owned or proposed to be owned,  directly or indirectly,  by Lessee or
any Affiliate of Lessee (whether or not such other facilities are located within
the One-Five Mile Area).  If, during the Term  (including the Extended Terms, if
any),  Lessee or any Affiliate of Lessee  reaches such  agreement or a tentative
agreement  with  respect to the terms and  conditions  of any such  third  party
financing (or refinancing)  for any such Competing  Facility within the One-Five
Mile Area (whether by itself or with one or more other facilities), Lessee shall
promptly  notify Lessor of the material terms  thereof,  including the principal
balance,  purchase price,  interest,  lease rate,  amortization rate or term, as
applicable.  Lessor shall have  fifteen  (15) days after  receipt of such notice
from Lessee within which to exercise  Lessor's  right of first refusal and agree
to provide such  financing  (or  refinancing)  upon the same  material  terms as
described in the notice to Lessor, which agreement shall include, if applicable,
Lessor's  agreement to provide such financing or refinancing with respect to any
such other  facilities which are included in the same financing (or refinancing)
package with such  Competing  Facility  within the One-Five Mile Area. If Lessor
shall not exercise  Lessor's right of first refusal within said fifteen (15) day
period and within the manner herein provided,  Lessee shall be free for a period
of one (1) year after the  expiration  of said fifteen (15) day period to obtain
financing (or  refinancing)  with respect to such Competing  Facility within the
One-Five  Mile Area (and any such other  facilities  described in such notice to
Lessor) from any third party upon terms no less  favorable than those so offered
to Lessor. If such financing (or refinancing) is not consummated, Lessor's right
of first  refusal as provided in this  subsection  (d) with  respect to any such
Competing  Facility  shall  be  re-instituted,  as to  any  subsequent  proposed
financing (or refinancing) of the same by Lessee or any Affiliate of Lessee.  As
used in this subsection (d), "financing (or refinancing)" shall mean and include
a loan  (including a loan secured by the real estate and other  collateral  of a
Competing   Facility)   and   any   sale-leaseback   or   similar   transaction.
Notwithstanding  anything to the contrary in this  subsection  (d), Lessor shall
not have a right of first  refusal  with  respect  to (i) any  seller/transferor
take-back  financing  provided to Lessee or an Affiliate of Lessee in connection
with the  acquisition of a Competing  Facility within the One-Five Mile Area, so
long as such  take-back  financing was required by such  seller/transferor  as a
condition to such acquisition, (ii) the assumption by Lessee or any Affiliate of
Lessee of any  financing  encumbering a Competing  Facility  within the One-Five
Mile Area  which  financing  existed  prior to the date of  acquisition  of such
Competing  Facility by Lessee or any  Affiliate of Lessee or (iii) any financing
(or refinancing) of any non-competing facilities or Competing Facilities located
outside of the  One-Five  Mile Area which are owned or  proposed  to be owned by
Lessee or an Affiliate of Lessee, unless such


                                       27
<PAGE>

facilities  (or some of them)  are  included  in a  proposed  financing  (and/or
refinancing)  package with a Competing Facility within the One-Five Mile Area as
to which Lessor has a right of first refusal hereunder.

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

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

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

                                  ARTICLE VIII.

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


                                       28
<PAGE>

Property, Lessee's Personal Property and all Capital Additions shall not be used
for any unlawful purpose.

                                   ARTICLE IX.

                  9.1      Maintenance and Repair

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

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

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


                                       29
<PAGE>

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

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



                                       30

<PAGE>

                                   ARTICLE X.

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

                                   ARTICLE XI.

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

                                  ARTICLE XII.

                  12. Permitted  Contests.  Lessee, upon prior written notice to
Lessor,  on its own or in Lessor's name, at Lessee's  expense,  may contest,  by
appropriate  legal  proceedings  conducted in good faith and with due diligence,
the amount,  validity or  application,  in whole or in part, of any licensure or
certification decision,  Imposition,  Legal Requirement,  Insurance Requirement,
lien, attachment,  levy, encumbrance,  charge or claim; provided,  however, that
 
     (i)  in  the  case  of  an  unpaid  Imposition,   lien,  attachment,  levy,
encumbrance,  charge  or  claim,  the  commencement  and  continuation  of  such
proceedings shall suspend the collection thereof from Lessor and from the Leased
Property or any Capital Addition thereto;

     (ii) neither the Leased Property or any Capital Addition thereto,  the Rent
therefrom  nor any part or interest in either  thereof would be in any danger of
being sold, forfeited, attached or lost pending the outcome of such proceedings;

     (iii) in the case of a Legal  Requirement,  neither Lessor nor Lessee would
be in any danger of civil or criminal  liability for failure to comply therewith
pending the outcome of such proceedings;  (iv) if any such contest shall involve
a sum of money or potential loss in excess of Fifty Thousand Dollars  ($50,000),
Lessee  shall  deliver  to Lessor and its  counsel  an opinion of legal  counsel
reasonably


                                       31


<PAGE>

acceptable  to Lessor to the  effect set forth in  clauses  (i),  (ii) and (iii)
above,  to the  extent  applicable;  (v) in the  case  of a  Legal  Requirement,
Imposition,  lien,  encumbrance  or charge,  Lessee  shall give such  reasonable
security as may be reasonably  required by Lessor to insure ultimate  payment of
the same and to prevent  any sale or  forfeiture  of the Leased  Property or any
Capital  Addition  thereto  or  the  Rent  by  reason  of  such  non-payment  or
noncompliance;  (vi)  in the  case of an  Insurance  Requirement,  the  coverage
required  by Article  XIII  shall be  maintained;  and (vii) if such  contest be
finally resolved against Lessor or Lessee,  Lessee shall promptly pay the amount
required to be paid,  together with all interest and penalties  accrued thereon,
or comply  with the  applicable  Legal  Requirement  or  Insurance  Requirement.
Lessor,  at  Lessee's  expense,   shall  execute  and  deliver  to  Lessee  such
authorizations  and other  documents as may  reasonably  be required in any such
contest, and, if reasonably requested by Lessee or if Lessor so desires,  Lessor
shall join as a party  therein.  The provisions of this Article XII shall not be
construed  to permit  Lessee to contest the payment of Rent or any other  amount
payable by Lessee to Lessor hereunder.  Lessee shall indemnify,  defend, protect
and save Lessor harmless from and against any liability,  cost or expense of any
kind that may be imposed upon Lessor in connection with any such contest and any
loss resulting therefrom.

                                  ARTICLE XIII.

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

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



                                       32

<PAGE>




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

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

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

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

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

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

                  13.3  Additional  Insurance.  In  addition  to  the  insurance
described  above,  Lessee shall  maintain  such  additional  insurance as may be
reasonably  required  from  time to time by any  Facility  Mortgagee  and  shall
further at all times maintain adequate workers'


                                       33


<PAGE>

compensation  coverage and any other coverage required by Legal Requirements for
all Persons  employed by Lessee on the Leased Property and any Capital  Addition
thereto in accordance with Legal Requirements.

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

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

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

                  13.7  Blanket   Policies  and   Policies   Covering   Multiple
Locations.  Notwithstanding  anything to the contrary contained in this Article,
Lessee's  obligations to carry the casualty insurance provided for herein may be
brought within the coverage of a blanket policy or policies of insurance carried
and maintained by Lessee or its Affiliate;  provided, however, that the coverage
afforded Lessor will not be reduced or diminished or


                                       34
<PAGE>

otherwise  be  different  from that which would  exist  under a separate  policy
meeting  all  other  requirements  of this  Lease by  reason  of the use of such
blanket policy of insurance,  and provided further that the requirements of this
Article  XIII are  otherwise  satisfied.  For any  liability  policies  covering
facilities in addition to the Leased Property,  Lessor may require excess limits
as Lessor reasonably determines.

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

                                  ARTICLE XIV.

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


                                       35


<PAGE>

                  14.2     Insured Casualty.

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

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

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

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



                                       36


<PAGE>

                  14.3     Uninsured Casualty.

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

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

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

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

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



                                       37

<PAGE>

                                   ARTICLE XV.

                  15. Condemnation

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

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

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

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

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

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



                                       38

<PAGE>




                                  ARTICLE XVI.

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

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

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

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

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

                  (e) Lessee or any Guarantor shall:

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

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

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

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

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


                                       39


<PAGE>


                  (f) Lessee or any Guarantor  shall be  adjudicated as bankrupt
or a court of competent  jurisdiction shall enter an order or decree appointing,
without  the  consent  of  Lessee,  a  receiver  of  Lessee  or of the  whole or
substantially  all of its  property,  or approving a petition  filed  against it
seeking  reorganization  or arrangement  of Lessee under the Federal  bankruptcy
laws or any other  applicable  law or statute of the United States of America or
any state thereof,  and such  judgment,  order or decree shall not be vacated or
set aside or stayed within ninety (90) days from the date of the entry thereof;

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

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

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

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

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



                                       40

<PAGE>

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

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

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

                  (o)  Lessee  fails to cure or abate any Class A or  equivalent
violation  occurring  during  the  Term  that  is  claimed  by any  governmental
authority,  or  any  officer  acting  on  behalf  thereof,  of any  law,  order,
ordinance,  rule or regulation pertaining to the operation of the Facility,  and
within the time permitted by such  authority for such cure or abatement,  unless
(i) said  violation  has no  material  effect on  Lessor,  the  Facility  or the
operation thereof for its Primary Intended Use and Lessee thereafter  diligently
and in good faith  proceeds to cure such  violation or (ii) Lessee is reasonably
and in good faith contesting such violation;

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

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

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



                                       41

<PAGE>




                  16.2  Certain  Remedies.  If an Event of  Default  shall  have
occurred,  Lessor  may  terminate  this  Lease by giving  Lessee  notice of such
termination  and the Term shall  terminate  and all rights of Lessee  under this
Lease shall cease.  Lessor shall have all rights at law and in equity  available
to Lessor as a result of any Event of Default.  Lessee  shall pay as  Additional
Charges all costs and  expenses  incurred  by or on behalf of Lessor,  including
reasonable  attorneys'  fees and  expenses,  as a result of any Event of Default
hereunder. If an Event of Default shall have occurred and be continuing, whether
or not this Lease has been terminated pursuant to Section 16.1, Lessee shall, to
the  extent  permitted  by law,  if  required  by Lessor  so to do,  immediately
surrender to Lessor  possession of the Leased Property and any Capital Additions
thereto  and quit the same and Lessor may enter  upon and  repossess  the Leased
Property  and  any  Capital  Addition  thereto  by  reasonable  force,   summary
proceedings, ejectment or otherwise, and may remove Lessee and all other Persons
and any of Lessee's  Personal  Property from the Leased Property and any Capital
Addition thereto.

                  16.3  Damages.  (i) The  termination  of this Lease;  (ii) the
repossession of the Leased Property and any Capital Addition thereto;  (iii) the
failure of Lessor,  notwithstanding  reasonable good faith efforts, to relet the
Leased  Property;  (iv)  the  reletting  of  all or any  portion  of the  Leased
Property;  or (v) the failure or  inability  of Lessor to collect or receive any
rentals due upon any such reletting, shall not relieve Lessee of its liabilities
and  obligations  hereunder,  all of which shall  survive any such  termination,
repossession  or  reletting.  If  any  such  termination  occurs,  Lessee  shall
forthwith  pay to Lessor  all Rent due and  payable  with  respect to the Leased
Property to and including the date of such termination. Thereafter:

Lessee shall forthwith pay to Lessor,  at Lessor's option, as and for liquidated
and agreed current damages for an Event of Default by Lessee, either:

               (A) The sum of:

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

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

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

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


                                       42


<PAGE>





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

         or (B)  alternatively,  if  Lessor  does  not elect to  terminate  this
         Lease, then:

         without  termination  of  Lessee's  right to  possession  of the Leased
         Property,  each  installment  of said Rent and other  sums  payable  by
         Lessee to Lessor  under the Lease as the same  becomes due and payable,
         together with interest at the Overdue Rate from the date when due until
         paid, and Lessor may enforce, by action or otherwise, any other term or
         covenant of this Lease.

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

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

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



                                       43

<PAGE>




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

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

                  16.9     [Reserved]

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

                  16.10.1 Lessee, as debtor, hereby grants to Lessor, as secured
party, a security interest and an express  contractual lien upon all of Lessee's
right, title and interest in and to Lessee's Personal Property and in and to the
Intangible  Property  and any and all  products,  rents,  proceeds  and  profits
thereof in which  Lessee now owns or  hereafter  acquires  an interest or right,
including  any leased  Lessee's  Personal  Property.  This Lease  constitutes  a
security agreement covering all such Lessee's Personal Property and the


                                       44

<PAGE>

Intangible  Property.  The security  interest  granted to Lessor with respect to
Lessee's  Personal  Property  in this  Section  16.10 is  intended by Lessor and
Lessee to be subordinate to any security interest granted in connection with the
financing or leasing of all or any portion of the Lessee's  Personal Property so
long as the lessor or financier of such  Lessee's  Personal  Property  agrees to
give  Lessor  written  notice of any  default by Lessee  under the terms of such
lease or financing arrangement,  to give Lessor a reasonable time following such
notice to cure any such default and consents to Lessor's  written  assumption of
such lease or financing  arrangement  upon Lessor's curing of any such defaults.
This security  agreement and the security  interest created herein shall survive
the expiration or earlier termination of this Lease.

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

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

                                  ARTICLE XVII.

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



                                       45

<PAGE>

                                 ARTICLE XVIII.

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

                                  ARTICLE XIX.

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

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


                                       46

<PAGE>

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

                                   ARTICLE XX.

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



                                       47

<PAGE>

                                  ARTICLE XXI.

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

                  21.2 Times for Obtaining Letters of Credit. The initial letter
of credit shall be obtained and delivered to Lessor prior to or  contemporaneous
with the Commencement  Date. The letters of credit covering  subsequent  periods
shall be obtained  and  delivered to Lessor not less than thirty (30) days prior
to the  expiration  of the then  existing  letter of credit  ("Letter  of Credit
Date").  The term for each such  letter of credit  shall begin no later than the
expiration date of the previous letter of credit.



                                       48

<PAGE>

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

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

                                  ARTICLE XXII.

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

                                 ARTICLE XXIII.

                  23.  General   Indemnification.   In  addition  to  the  other
indemnities contained herein, and notwithstanding the existence of any insurance
carried by or for the  benefit of Lessor or Lessee,  and  without  regard to the
policy  limits of any such  insurance,  Lessee shall  protect,  indemnify,  save
harmless  and defend  Lessor  from and  against  all  liabilities,  obligations,
claims,  damages,  penalties,  causes of action,  costs and expenses,  including
reasonable attorneys', consultants' and experts' fees and expenses, imposed upon
or incurred by or asserted against Lessor by reason of: (i) any accident, injury
to or death of Persons or


                                       49
<PAGE>

loss of or damage to  property  occurring  on or about the  Leased  Property  or
adjoining sidewalks;  (ii) any use, misuse, non-use,  condition,  maintenance or
repair by Lessee of the Leased Property; (iii) any failure on the part of Lessee
to  perform  or  comply  with  any  of  the  terms  of  this  Lease;   (iv)  the
non-performance  of any of the terms and  provisions of any and all existing and
future  subleases  of the Leased  Property  entered  into  during the Term to be
performed by any party thereunder; (v) any claim for malpractice,  negligence or
misconduct  committed by any Person on or working from the Leased Property;  and
(vi) the violation of any Legal Requirement.

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

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



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<PAGE>

                                  ARTICLE XXIV.

                  24. Transfers.

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

                  24.2 Consent. Prior to any Transfer, Lessee shall first notify
Lessor of its desire to do so and shall  submit in  writing  to Lessor:  (i) the
name of the proposed Occupant,  assignee, manager or other transferee;  (ii) the
terms and  provisions  of the Transfer,  including any  agreements in connection
therewith; and (iii) such financial information as Lessor reasonably may request
concerning the proposed Occupant, assignee,


                                       51

<PAGE>




manager or other transferee.  Without limiting Lessor's absolute and unequivocal
right to impose  any other  conditions  to  granting  its  consent to a Transfer
hereunder, Lessor may:

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

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

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

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

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



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<PAGE>

                  24.4 [Reserved]

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

                  24.6 No Release of Lessee's  Obligations.  No  Transfer  shall
relieve Lessee of its obligation to pay the Rent and to perform all of the other
obligations to be performed by Lessee  hereunder.  The liability of Lessee named
herein and any  immediate and remote  successor in interest of Lessee (i.e.,  by
means of any Transfer), and the due performance of the obligations of this Lease
on  Lessee's  part  to be  performed  or  observed,  shall  not  in  any  way be
discharged,  released or impaired by any (i) agreement which modifies any of the
rights or obligations of the parties under this Lease (provided,  however,  that
the same shall not be binding  upon  Lessee  unless  agreed or  consented  to in
writing by Lessee)  (ii)  stipulation  which  extends the time  within  which an
obligation under this Lease is to be performed,  (iii) waiver of the performance
of an obligation  required  under this Lease,  or (iv) failure to enforce any of
the obligations set forth in this Lease. If any Occupant,  assignee,  manager or
other transferee  defaults in any performance due hereunder,  Lessor may proceed
directly  against  the  Lessee  named  herein  and/or any  immediate  and remote
successor in interest of Lessee  without  exhausting  its remedies  against such
Occupant, assignee, manager or other transferee.

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

                  24.8  Transfers  In  Bankruptcy.  In the  event of a  Transfer
pursuant to the provisions of the Bankruptcy Code, all consideration  payable or
otherwise to be  delivered in  connection  with such  Transfer  shall be paid or
delivered to Lessor,  shall be and remain the  exclusive  property of Lessor and
shall not  constitute  property of Lessee or of the estate of Lessee  within the
meaning of the Bankruptcy Code. Any consideration constituting Lessor's property
pursuant to the immediately preceding sentence and not paid or delivered


                                       53

<PAGE>

to Lessor shall be held in trust for the benefit of Lessor and be promptly  paid
or  delivered  to  Lessor.   For  purposes  of  this  Section  24.8,   the  term
"consideration" shall have the same meaning given to such term in the definition
of Fair  Market  Rental as  provided  in Article I above.  In the event any such
consideration  is other than cash,  the fair market value of such  consideration
shall be paid or delivered to Lessor in cash.

                  24.9 Special Transactions.

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

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

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

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

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

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

                  24.9.2  Public  Offering;   Public  Trading.   Notwithstanding
anything to the contrary in Section 24.1, Lessor's consent shall not be required
in connection


                                       54


<PAGE>

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

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

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

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

                  (iii) The  purchaser or transferee  resulting  from a Transfer
pursuant to clause (a) above or the other  party(s) to the Transfer  pursuant to
clause (b) above, as the case may be, shall have sufficient operating experience
and  history  with  respect to a business  of the  nature,  type and size of the
business of ILC as the same


                                       55

<PAGE>

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

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

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


                  ARTICLE XXV.

                  25. Officer's Certificates and Financial Statements

                  25.1 Officer's Certificate.  At any time and from time to time
upon Lessee's  receipt of not less than twenty (20) days' prior written  request
by Lessor,  Lessee shall furnish to Lessor an Officer's  Certificate  certifying
(i) that this Lease is  unmodified  and in full force and  effect,  or that this
Lease  is  in  full  force  and  effect  as  modified  and  setting   forth  the
modifications;  (ii) the dates to which the Rent has been paid; (iii) whether or
not, to the best knowledge of Lessee, Lessor is in default in the performance of
any  covenant,  agreement  or  condition  contained  in this Lease  and,  if so,
specifying  each such  default  of which  Lessee  may have  knowledge;  and (iv)
responses to such other questions or statements of fact as Lessor, any ground or
underlying  lessor,  any  purchaser  or  any  current  or  prospective  Facility
Mortgagee shall reasonably  request.  Lessee's failure to deliver such statement
within such time shall  constitute  an  acknowledgement  by Lessee that (x) this
Lease is unmodified and in full force and effect except as may be represented to
the contrary by Lessor;  (y) Lessor is not in default in the  performance of any
covenant, agreement or


                                       56

<PAGE>

condition  contained in this Lease;  and (z) the other matters set forth in such
request, if any, are true and correct.  Any such certificate  furnished pursuant
to this  Article  may be relied  upon by Lessor and any  current or  prospective
Facility  Mortgagee,  ground or  underlying  lessor or  purchaser  of the Leased
Property.  Lessee  shall not be required to deliver such  certificate  more than
four (4) times per Lease Year.

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

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

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

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

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



                                       57


<PAGE>

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

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

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

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

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


                                       58
<PAGE>





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

                                  ARTICLE XXVI.

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

                                 ARTICLE XXVII.

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

                                 ARTICLE XXVIII.

                  28. Remedies Cumulative.  Each legal, equitable or contractual
right, power and remedy of Lessor now or hereafter provided either in this Lease
or by statute or otherwise  shall be cumulative  and  concurrent and shall be in
addition to every other right, power and remedy and the exercise or beginning of
the exercise by Lessor of any one or


                                       59

<PAGE>

more of such rights,  powers and remedies shall not preclude the simultaneous or
subsequent  exercise  by Lessor of any or all of such other  rights,  powers and
remedies.

                                  ARTICLE XXIX.

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

                                  ARTICLE XXX.

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

                                  ARTICLE XXXI.

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

                                 ARTICLE XXXII.

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



                                       60

<PAGE>

                                 ARTICLE XXXIII.

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

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

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

         If to Lessee:     Integrated Living Communities at Cabot Pointe, Inc.
                           2431 Old 41 Road
                           Bonita Springs, Florida 34135
                           Phone: (941) 947-7200
                           Fax:  (941) 495-0711
                           Attn:    President and CEO

         with copies to:   Integrated Living Communities at Cabot Pointe, Inc.
                           2431 Old 41 Road
                           Bonita Springs, Florida 34135
                           Phone: (941) 947-7200
                           Fax:  (941) 495-0711
                           Attn:    General Counsel

                  and      Parker Chapin Flattau & Klimpl, LLP
                           1211 Avenue of the Americas
                           New York, New York 10036-8735
                           Phone:  (212) 704-6000
                           Fax:  (212) 704-6288
                           Attn:  Andrea Paretts Ascher, Esq.



                                       61


<PAGE>

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

                                 ARTICLE XXXIV.

                  34.  Appraiser.  If it becomes necessary to determine the Fair
Market Value, Fair Market Rental or Leasehold FMV for any purpose of this Lease,
the party  required or permitted to give notice of such  required  determination
shall include in the notice the name of a Person selected to act as appraiser on
its behalf.  Within ten (10) days after  receipt of any such notice,  Lessor (or
Lessee,  as the case may be) shall by notice to Lessee (or  Lessor,  as the case
may be) appoint a second Person as appraiser on its behalf.  The appraisers thus
appointed,  each of whom  must be a member  of the  American  Institute  of Real
Estate  Appraisers  (or  any  successor  organization  thereto),  shall,  within
forty-five  (45)  days  after  the  date  of the  notice  appointing  the  first
appraiser,  proceed to determine  the Fair Market  Value,  Fair Market Rental or
Leasehold FMV as of the relevant date (giving  effect to the impact,  if any, of
inflation  from the date of  their  decision  to the  relevant  date)  provided,
however  that if only one  appraiser  shall  have been so  appointed,  or if two
appraisers  shall have been so appointed but only one such appraiser  shall have
made such  determination  within fifty (50) days after the making of Lessee's or
Lessor's  request,  then the  determination of such appraiser shall be final and
binding upon the parties.  If the  Facility  had reached  stabilized  operations
prior to the  Commencement  Date, to the extent  consistent with sound appraisal
practice as then  existing at the time of any such  appraisal,  an appraisal for
Fair Market  Value shall be made on a basis  consistent  with the basis on which
the Leased  Property was appraised for purposes of  determining  its fair market
value at the time the Leased Property was acquired by Lessor.  If two appraisers
shall have been  appointed and shall have made their  determinations  within the
respective  requisite periods set forth above and if the difference  between the
amounts so  determined  shall not exceed ten percent (10%) of the lesser of such
amounts then the Fair Market Value, Fair Market Rental or Leasehold FMV shall be
an amount equal to fifty percent (50%) of the sum of the amounts so  determined.
If the  difference  between the amounts so  determined  shall exceed ten percent
(10%) of the lesser of such amounts,  then such two appraisers shall have twenty
(20) days to appoint a third  appraiser,  but if such  appraisers fail to do so,
then either  party may  request  the  American  Arbitration  Association  or any
successor  organization  thereto to appoint an appraiser within twenty (20) days
of such request, and both parties shall be bound by any


                                       62

<PAGE>




appointment  so made within such  twenty (20) day period.  If no such  appraiser
shall have been  appointed  within such  twenty (20) days or within  ninety (90)
days of the original  request for a  determination  of Fair Market  Value,  Fair
Market Rental or Leasehold  FMV,  whichever is earlier,  either Lessor or Lessee
may apply to any court having jurisdiction to have such appointment made by such
court.  Any  appraiser  appointed  by the original  appraisers,  by the American
Arbitration  Association  or by such court shall be  instructed to determine the
Fair Market  Value,  Fair Market Rental or Leasehold FMV within thirty (30) days
after  appointment of such appraiser.  The  determination of the appraiser which
differs most in terms of dollar amount from the  determinations of the other two
appraisers  shall  be  excluded,  and  fifty  percent  (50%)  of the  sum of the
remaining two  determinations  shall be final and binding upon Lessor and Lessee
as the Fair Market Value,  Fair Market Rental or Leasehold  FMV. This  provision
for  determination by appraisal shall be specifically  enforceable to the extent
such remedy is available under applicable law, and any  determination  hereunder
shall be final and binding  upon the  parties  except as  otherwise  provided by
applicable  law.  Lessor and Lessee  shall each pay the fees and expenses of the
appraiser  appointed  by it and each shall pay one-half of the fees and expenses
of the third  appraiser and one-half of all other cost and expenses  incurred in
connection with each appraisal.

                                  ARTICLE XXXV.

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


                                       63

<PAGE>

closing in the terms of the Offer at the price and otherwise in accordance  with
(A) the  terms  and  conditions  of such  Offer  applicable  to Lessee as herein
provided and (B) the  provisions of Article XVIII and Section 35.2 to the extent
not inconsistent therewith. If Lessee shall not exercise Lessee's right of first
refusal in the manner and within the time period herein  provided,  Lessor shall
be free for a period of one (1) year after the  expiration  of said fifteen (15)
day period to sell the Leased  Property  to any third  party at a price and upon
terms no less  favorable  to Lessor than those so offered to Lessee  pursuant to
the  Offer.  If such  sale is  consummated,  Lessee's  right  of  first  refusal
hereunder  shall  automatically  terminate  and the same  shall not apply to any
subsequent sale of the Leased Property or any interest therein to any subsequent
purchaser or  transferee.  If such sale is not  consummated,  Lessee's  right of
first  refusal as  provided  in this  Section  shall be  reinstituted  as to any
subsequent sale of the Leased Property during the Term of this Lease.

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

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

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

                  (z) If Lessee shall timely and properly  exercise its right of
first refusal to purchase the Leased  Property as provided in this Section 35.1,
the purchase  price  payable by Lessee shall be the price set forth in the Offer
(or the amount allocated to the Leased Property as provided in clause (y) above,
as the case may be),  unless  concurrent  with Lessee's  exercise of such Offer,
Lessee  shall  deliver  written  notice to Lessor  that  Lessee  objects  to the
purchase price for the Leased  Property as set forth in the Offer (or the amount
so  allocated  to the Leased  Property  as  provided  in clause  (y)),  then the
purchase price payable by Lessee for the Leased  Property shall be the lesser of
(aa) the purchase  price for the Leased  Property set forth in the Offer (or the
amount so allocated  to the Leased  Property as provided in clause (y)) and (bb)
the Fair Market Value of the Leased  Property  determined in accordance with the
appraisal  procedures set forth in this clause (z). Within  forty-five (45) days
after  Lessee's  timely  exercise of its right of first refusal and objection to
the  purchase  price for the Leased  Property,  Lessor  shall cause a nationally
recognized  appraisal  firm  selected  by  Lessor,  in which  one or more of the
members, officers or principals of such


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<PAGE>




firm are members of the  American  Institute of Real Estate  Appraisers  (or any
successor  organization  thereto),  to  determine  the Fair Market  Value of the
Leased Property as of the relevant date (giving effect to the impact, if any, of
inflation from the date of such  appraiser's  decision to the relevant date) and
to deliver to Lessor and Lessee a written report of the same. The  determination
of such  appraiser  shall be final and binding upon the parties.  This provision
for  determination by appraisal shall be specifically  enforceable to the extent
such remedy is available under applicable law, and any  determination  hereunder
shall be final and binding  upon the  parties  except as  otherwise  provided by
applicable  law.  Lessor and  Lessee  shall  each pay  one-half  of the fees and
expenses of such appraiser and one-half of all other costs and expenses incurred
in connection  with such  appraisal,  unless the Fair Market Value of the Leased
Property as determined by such  appraisal is greater than the purchase price for
the Leased  Property  as set forth in the Offer (or so  allocated  to the Leased
Property as provided in clause  (y)),  in which case Lessee shall pay all of the
fees and expenses of such appraiser and any other costs and expenses incurred in
connection with such appraisal.

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

                                 ARTICLE XXXVI.

                  36.1  Lessor May Grant  Liens.  Without the consent of Lessee,
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any ground lease,  mortgage,  trust deed,  lien,  encumbrance  or title
retention  agreement  (collectively,  an "encumbrance") upon the Leased Property
and any Capital Addition  thereto,  or any portion thereof or interest  therein.
This Lease is and at all times  shall be  subject  and  subordinate  to any such
encumbrance  which may now or  hereafter  affect the Leased  Property and to all
renewals,  modifications,  consolidations,  replacements and extensions thereof.
This clause shall be self-operative  and no further  instrument of subordination
shall  be  required;   provided,   however,   that  in   confirmation   of  such
subordination,  Lessee shall execute  promptly any  certificate or document that
Lessor or any ground or underlying lessor,  mortgagee or beneficiary may request
for such  purposes;  provided  further,  however,  that any such  subjection and
subordination of this Lease or Lessee's leasehold interest hereunder to any such
encumbrance  imposed after the  Commencement  Date shall be conditioned upon the
execution  by the  holder  of such  encumbrance  and  delivery  to  Lessee  of a
non-disturbance and attornment agreement which provides,  in substance,  that so
long as no Event of Default has occurred,  the holder of such encumbrance  shall
not disturb  either  Lessee's  leasehold  interest or  possession  of the Leased
Property in accordance  with the terms thereof or other rights under this Lease.
If, in connection with obtaining financing or refinancing for the Leased


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<PAGE>

Property,  a Facility Mortgagee or prospective  Facility Mortgagee shall request
reasonable  modifications  to this Lease as a  condition  to such  financing  or
refinancing,  Lessee shall not withhold or delay its consent thereto, so long as
such  modifications do not increase Lessee's monetary  obligations  hereunder or
adversely affect Lessee's rights or non-monetary obligations under this Lease.

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

                                 ARTICLE XXXVII.

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

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



                                       66
<PAGE>

                  37.3  Remediation.  If Lessee  becomes aware of a violation of
any Legal Requirement relating to any Hazardous Substance in, on, under or about
the Leased Property or any adjacent property, or if Lessee, Lessor or the Leased
Property  becomes subject to any order of any federal,  state or local agency to
repair,  close,  detoxify,  decontaminate  or  otherwise  remediate  the  Leased
Property,  Lessee shall immediately notify Lessor of such event and, at its sole
cost  and  expense,  cure  such  violation  or  effect  such  repair,   closure,
detoxification,  decontamination  or  other  remediation.  If  Lessee  fails  to
implement and diligently pursue any such cure, repair, closure,  detoxification,
decontamination or other  remediation,  Lessor shall have the right, but not the
obligation,  to carry out such action and to recover from Lessee all of Lessor's
costs and expenses incurred in connection therewith.

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

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

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

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



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<PAGE>

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

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

                  37.5  Environmental  Inspection.  Lessor shall have the right,
from  time to time,  and upon not less  than  five (5) days  written  notice  to
Lessee,  except in the case of an  emergency  in which event no notice  shall be
required,  to conduct an  inspection  of the Leased  Property to  determine  the
existence or presence of Hazardous  Substances on or about the Leased  Property.
Upon prior  written  notice to Lessee,  Lessor shall have the right to enter and
inspect the Leased Property, conduct any testing, sampling and analyses it deems
reasonably  necessary and shall have the right to inspect materials brought into
the Leased  Property.  Lessor may,  in its  discretion,  retain such  experts to
conduct the inspection,  perform the tests referred to herein,  and to prepare a
written  report  in  connection  therewith.  If any  such  inspections  or tests
indicate  the  presence or existence  of  Hazardous  Substances  not  previously
disclosed to Lessor,  then all reasonable costs and expenses  incurred by Lessor
under this Section  shall be paid on demand as  Additional  Charges by Lessee to
Lessor. Failure to conduct an environmental  inspection or to detect unfavorable
conditions if such  inspection is conducted shall in no fashion be intended as a
release of any liability for environmental conditions subsequently determined to
be associated  with or to have occurred during  Lessee's  tenancy.  Lessee shall
remain  liable for any  environmental  condition  related to or having  occurred
during  its  tenancy  regardless  of when such  conditions  are  discovered  and
regardless of whether or not Lessor conducts an environmental  inspection at the
termination  of the  Lease.  The  obligations  set forth in this  Article  shall
survive the expiration or earlier termination of the Lease.

                                ARTICLE XXXVIII.

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



                                       68
<PAGE>

                                 ARTICLE XXXIX.

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

                                   ARTICLE XL.

                             [INTENTIONALLY OMITTED]

                                  ARTICLE XLI.

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

                                  ARTICLE XLII.

                  42.  Attorneys'  Fees. If Lessor or Lessee brings an action or
other  proceeding  against the other to enforce any of the terms,  covenants  or
conditions  hereof or any  instrument  executed  pursuant to this  Lease,  or by
reason of any breach or default hereunder or thereunder, the party prevailing in
any such action or proceeding and any appeal  thereupon shall be paid all of its
costs and reasonable attorneys' fees incurred therein.


                                       69
<PAGE>

In  addition  to  the  foregoing  and  other   provisions  of  this  Lease  that
specifically  require  Lessee to reimburse,  pay or indemnify  against  Lessor's
attorneys'  fees,  Lessee  shall pay,  as  Additional  Charges,  all of Lessor's
reasonable  attorneys'  fees incurred in connection with the enforcement of this
Lease,  including  attorneys' fees incurred in connection with Lessee's exercise
of its  right to renew  this  Lease for any  Extended  Term,  the  review of any
letters of credit,  the review,  negotiation or documentation of any subletting,
assignment,  or management  arrangement  or any consent  requested in connection
therewith, and the collection of past due Rent.

                                 ARTICLE XLIII.

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

                                  ARTICLE XLIV.

                  44.      Miscellaneous

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

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

                  44.3 Non-Recourse.  Lessee  specifically agrees to look solely
to the Leased  Property  for recovery of any  judgment  from  Lessor;  provided,
however, that if Lessor's equity in the Leased Property is less than $1 Million,
then other assets of Lessor  shall be available to satisfy any judgment  against
Lessor as provided herein,  but only to the extent of the difference between the
then amount of Lessor's equity in the Leased Property


                                       70


<PAGE>

and such $1 Million.  It is specifically  agreed that no constituent  partner in
Lessor or  officer,  director or  employee  of Lessor  shall ever be  personally
liable for any such  judgment or for the payment of any monetary  obligation  to
Lessee.  The provision  contained in the foregoing  sentence is not intended to,
and shall  not,  limit any right  that  Lessee  might  otherwise  have to obtain
injunctive relief against Lessor, or any other action not involving the personal
liability of Lessor. Furthermore, except as otherwise expressly provided herein,
in no  event  shall  Lessor  ever  be  liable  to  Lessee  for any  indirect  or
consequential damages suffered by Lessee from whatever cause.

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

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

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

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


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<PAGE>

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

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

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

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



                                       72

<PAGE>

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

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

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

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

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


                                       73
<PAGE>


SECTION WITH ANY COURT AS CONCLUSIVE  EVIDENCE OF THE CONSENT OF EACH SUCH PARTY
TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

                  LESSOR'S INITIALS:                 _______

                  LESSEE'S INITIALS:                 _______

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

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

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

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

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



                                       74


<PAGE>

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

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

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

                            HEALTH CARE PROPERTY INVESTORS, INC., 
                              a Maryland corporation


                            By:___________________________________

                            Its:__________________________________


                            INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
                              a Delaware corporation


                            By:___________________________________

                            Its:__________________________________




                                       75


<PAGE>




                                    EXHIBIT A


                          Legal Description of the Land

         The Land  referred  to is  situate  in the  unincorporated  area of the
County of Manatee, State of Florida and is described as follows:

                  Begin 60 feet South of the  northeast  corner of  Section  15,
Township  35 South,  Range 17 East,  and run thence West along the South line of
Road Right of Way a distance of 2310 feet; thence run South parallel to the East
line of 26th  Street  a  distance  of 417 feet for  Point of  Beginning;  thence
continue in the same  direction a distance  of 238.91  feet;  thence West 308.12
feet more or less to the East line of 26th  Street;  thence North along the East
line of 26th Street  distance of 239.41 feet;  thence East Parallel to the South
line of the property  hereby  conveyed a distance of 308.12 feet more or less to
the Point of  beginning,  said  property  lying in and being in Manatee  County,
Florida;  LESS AND EXCEPT the  Westerly  17.00 feet  thereof as disclosed in the
Warranty Deed dated June 12, 1996, recorded July 3, 1996 in O.R. Book 1491, Page
6630, Manatee County, Records.



                                       A-1


<PAGE>




                                    EXHIBIT B


                       List of Lessor's Personal Property


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



                                       B-1


<PAGE>




                                   Schedule 1

                    Itemization of Lessor's Personal Property

1.  BEDROOM

   QUAN        UNIT          DESCRIPTION
   ----        ----          -----------

     54        ea            Table Lamp

     54        ea            3/3 Headboard, Wood

     54        ea            3/3 Bedframe

     54        ea            3/3x76 Health Care Mattress & Box Spring

     54        ea            3-Dr. Chest

     54        ea            Nightstand

     54        ea            Upholstered Wing Chair

2.  DINING AREAS

  QUAN    UNIT   DESCRIPTION
  ----    ----   -----------

  11      ea     Dining Table Top, 36x36, bullnose wood edge and Black
                 Wrinkle Tilt Top Table Base

   1      ea     Conference/Dining table 48x86, with two bases

   1      ea     60" Diameter Table and table base, same finish

  30      ea     Dining chair, finish Valley Oak, Brittany upholstery

  30      ea     Dining chair, finish Valley Oak, Wisteria upholstery

   1      ea     Framed Ricks Print at Waitress Station

   2      ea     Framed Lea Prints at Water Fountain

   2      ea     Framed Monet Prints in Private Dining Room


                                       1-1


<PAGE>
2.  DINING AREAS  (CONTINUED)

  QUAN    UNIT   DESCRIPTION
  ----    ----   -----------

          1          ea            Potted Silk Plant in Private Dining Room

          1          lot           Drapery & hardware in Private Dining Room

3.  PUBLIC AREAS

  QUAN     UNIT      DESCRIPTION
  ----     ----      -----------

     3     ea        Planter Divider 72x18x60H, with Silk Plants in Tray

     3     ea        Column Pedestal 12x12x38H with silk floral arrangements on
                     top of columns

     1     ea        Trough Planter at entrance, 6' long, laminated with Floral
                     Arrangements in pots

     7     ea        Tub Chair, Blue

     7     ea        Tub Chair, Lilac

     3     ea        Chippendale Sofa, Print Fabric

     3     ea        Chippendale Sofa, Blue Fabric

     4     ea        Wing Chair, Brittany Upholstery

     6     ea        Upholstered Chair, Upholster Radical Blue

     6     ea        Lamp Table, medium oak

     3     ea        Cocktail Table, medium oak

     1     ea        Sofa Table 48x20x28H, medium oak

     1     ea        Framed Angel Irises at Entrance

     2     ea        Framed Graves Prints on South Wall

     2     ea        Potted silk plants



                                       1-2


<PAGE>




4.  OFFICES

   QUAN      UNIT     DESCRIPTION
   ----      ----     -----------

      1      ea       Wood Exec Desk 72x36, double ped, medium oak

      1      ea       Console with double ped and keyboard drawer

      1      ea       Desk chair with arms

      2      ea       Framed Walter Prints on wall

      3      ea       Lounge Chair

      1      ea       Lamp Table, Medium Oak

      1      ea       Table Lamp

      1      ea       Brass desk lamp

      1      lot      Drapery and Hardware

      1      ea       Office chair at Nurse Station

      1      ea       Office Chair at Control Station

      1      ea       Desk, 30x60 with LH return, medium oak, in Staff Lounge

      1      ea       Office Chair, in Staff lounge

      1      ea       Lamp Table in Staff Lounge

      1      ea       Table Lamp

      1      ea       Desk Lamp

      2      ea       Lounge Chair in Staff lounge



                                       1-3


<PAGE>
5.  LANAI

       QUAN          UNIT          DESCRIPTION
       ----          ----          -----------

         24          ea            Lounge Chair, beige with Teal upholstery

          3          ea            48" Patio Table with cast stone tops

6.  STAFF LOUNGE

       QUAN          UNIT          DESCRIPTION
       ----          ----          -----------

         15          ea            Metal lockers in one unit

          4          ea            Staff dining chairs

          4          ea            Staff lounge chairs

          1          ea            42" laminate dining table and base

7.  OFFICES

       QUAN          UNIT          DESCRIPTION
       ----          ----          -----------

          1          ea            Office chair

          1          ea            L-shaped workstation with acoustic panels,
                                   task lighting, overhead cabinet storage, 
                                   laminate worksurfaces, and two pedestals

8.  ACTIVITIES DIRECTOR

         QUAN        UNIT          DESCRIPTION
         ----        ----          -----------

         2           ea            Visitor chairs, upholstered

         1           ea            Table lamp

         2           ea            Desk lamp

9.  GENERAL EQUIPMENT ASSETS

         3 Vacuum Cleaners

         1 Carpet Extractor



                                       1-4

<PAGE>


9.  GENERAL EQUIPMENT ASSETS (CONTINUED)

         1 Wet and Dry Vac

         Electric Drill

         Alumin Shed

         Clocks

         Lock A/C Covers

         TV and Stand

         Window Tint

         70 Soap Dispensers

         35 Paper Dispensers

         Waste Baskets

         Handbars

         Time Clock

         Laundry Cart

         2 Folding Carts

         Linen Cart

         34 Memory Boxes

         Parking Signs

         Overhead Table

         5 Framed Evacuation Maps

         2 Housekeeping Carts

         Inside Signs



                                       1-5


<PAGE>

9.  GENERAL EQUIPMENT ASSETS (CONTINUED)

         Outside Signs

         Outside Fence

         Tape Printer

         2 Electric Floor Blowers

         19" TV and Stand

10.  STAFF LOUNGE ASSETS

         20 Metal Lockers

         4 Staff Dining Chairs

         1 Small Dining Table

         2 Lounge Chairs

         1 Table Lamp

         1 Lamp Table

         Refrigerator

11.  OFFICE ASSETS

         A.    First Office

         1 Wood Exec Desk 76/36

         1 Console/Drawers

         1 Desk Chair

         2 Lounge Chairs

         Table w/Lamp

         Painting/Artwork



                                       1-6


<PAGE>

11.  OFFICE ASSETS

         Window Treatment

         Office chair

         L-shaped Work Station

         Stamp Machine

         Fax Machine

         B.  Second Office

         1 30x60 Desk

         Desk Chair

         Desk Lamp

         2 Side Chairs

         l Lamp Table

         1 Table Lamp

         1 Canon Xerox Copier

         1 Dell Computer

         1 Laser Jet Printer

         Computer Stand

         Filing Cabinet

12.  DIETARY ASSETS

         Bus Cart

         4 Doz. Corning Cup 8 oz.

         6 Doz. Corning 9" Plate



                                       1-7


<PAGE>
12.  DIETARY ASSETS

         4 Doz. 8 oz. Bowl

         4 Doz. 5 oz. Dish

         4 Doz. 6" Saucer

         1 Chef Knife Kit

         Robot Coupe Food Processor

         Microwave

         Meat Slicer

         Mixer

         Toaster

         Light Board

         Oak Serving Cart

         FVT Dining Room Dishware



                                       1-8
<PAGE>


                                    EXHIBIT C

                           Form of Amendment to Lease


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

                                    RECITALS

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

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

                                    AGREEMENT

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

                  1. The Commencement Date of the Lease is_____________;

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

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

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

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



                                       C-1
<PAGE>




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



                            HEALTH CARE PROPERTY INVESTORS, INC., 
                              a Maryland corporation


                            By:___________________________________

                            Its:__________________________________


                            INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
                              a Delaware corporation


                            By:___________________________________

                            Its:__________________________________





                                       C-2

<PAGE>




                                    EXHIBIT D

                                     FORM OF
                      IRREVOCABLE STANDBY LETTER OF CREDIT

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

Date: _______________                       Letter of Credit No.: ___________

                                            Expiration Date: ________________
GENTLEMEN:

We hereby  establish  our  irrevocable  letter  of credit in your  favor for the
account of  __________________________  available by your draft(s) on us payable
at sight not to exceed a total of
------------------------------------------------------------------------------
_____________________________(_____________________) when accompanied by this
letter of credit and the following documents.

1)       A certificate  purported to be executed by a  representative  of Health
         Care Property  Investors,  Inc. ("HCPI") stating that Integrated Living
         Communities at Cabot Pointe, Inc., (Lessee"),  as lessee, has committed
         an Event of Default under the lease dated  September __, 1996,  between
         HCPI, as lessor,  and Lessee, as lessee, or that Lessee or an affiliate
         of Lessee has  committed  an event of default  under any other lease or
         agreement or other  instrument with or in favor of HCPI or an affiliate
         of HCPI and  stating  the amount for which a draw under this  letter of
         credit  is made;  (or) a  certificate  purported  to be  executed  by a
         representative of HCPI stating that a replacement  letter of credit for
         this  instrument  has not been  supplied  prior to thirty  (30) days in
         advance of the expiration of this instrument for the account of HCPI.

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

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



                                       D-1


<PAGE>




This   letter  of  credit   shall   expire  at  2:00  p.m.   at  the  office  of
________________________________________ on the expiration date.

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

Any   draft   drawn    hereunder    must   bear   the   legend    "Drawn   under
______________________________   Letter  of  Credit  Number   __________   dated
____________________.  Except so far as otherwise  expressly stated, this letter
of credit is  subject to the  "Uniform  Customs  and  Practice  for  Documentary
Credits (1993 Revision), International Chamber of Commerce Brochure No. 500." We
hereby  agree with you and all persons  negotiating  such drafts that all drafts
drawn and negotiated in compliance  with the terms of this letter of credit will
be duly honored upon  presentment and delivery of the documents  specified above
by certified or registered mail to _________________________________ located at
________________________________________________________________________________
______________________________________________ if negotiated not later that 2:00
pm on or before the expiration date shown above.


                            Very truly yours,



                            By:___________________________________

                            Its:__________________________________





                                       D-2
<PAGE>




                                    EXHIBIT E


                              FACILITY GROUP LEASES

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


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




                                       E-1


<PAGE>



                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                      Page
<S>                                                                                 <C>
ARTICLE I..........................................................................  1
          1.      Leased Property; Term............................................  1

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

ARTICLE III........................................................................ 16
          3.1     Rent............................................................. 16
          3.2     Quarterly Calculation and Payment of Additional Rent; Annual
                  Reconciliation................................................... 16
          3.3     Confirmation of Gross Revenues................................... 18
          3.4     Additional Charges............................................... 18
          3.5     Late Payment of Rent............................................. 18
          3.6     Net Lease........................................................ 19

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

ARTICLE V.......................................................................... 22
          5.      No Termination, Abatement, etc................................... 22

ARTICLE VI......................................................................... 22
          6.1     Ownership of the Leased Property................................. 22
          6.2     Personal Property................................................ 22
          6.3     Transfer of Personal Property and Capital Additions to Lessor.... 23
          6.4     Option to Purchase Removable Personal Property................... 23

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

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

ARTICLE IX......................................................................... 29
          9.1     Maintenance and Repair........................................... 29

                                        i

<PAGE>


                                                                                   Page

          9.2     Encroachments, Restrictions, Mineral Leases, etc................. 30

ARTICLE X.......................................................................... 31
          10.     Construction of Capital Additions to the Leased Property......... 31

ARTICLE XI......................................................................... 31
          11.     Liens............................................................ 31

ARTICLE XII........................................................................ 31
          12.     Permitted Contests............................................... 31

ARTICLE XIII....................................................................... 32
          13.1    General Insurance Requirements................................... 32
          13.2    Replacement Cost................................................. 33
          13.3    Additional Insurance............................................. 33
          13.4    Waiver of Subrogation............................................ 34
          13.5    Policy Requirements.............................................. 34
          13.6    Increase in Limits............................................... 34
          13.7    Blanket Policies and Policies Covering Multiple Locations........ 34
          13.8    No Separate Insurance............................................ 35

ARTICLE XIV........................................................................ 35
          14.1    Insurance Proceeds............................................... 35
          14.2    Insured Casualty................................................. 36
          14.3    Uninsured Casualty............................................... 37
          14.4    No Abatement of Rent............................................. 37
          14.5    Waiver........................................................... 37

ARTICLE XV......................................................................... 38
          15.     Condemnation..................................................... 38
          15.1    Total Taking..................................................... 38
          15.2    Partial Taking................................................... 38
          15.3    Restoration...................................................... 38
          15.4    Award-Distribution............................................... 38
          15.5    Temporary Taking................................................. 38
          15.6    Sale Under Threat of Condemnation................................ 38

ARTICLE XVI......................................................................... 39
          16.1    Events of Default................................................. 39
          16.2    Certain Remedies.................................................. 42
          16.3    Damages........................................................... 42
          16.4    Receiver.......................................................... 43
          16.5    Lessee's Obligation to Purchase................................... 43
          16.6    Waiver............................................................ 43
          16.7    Application of Funds.............................................. 44
          16.8    Facility Operating Deficiencies................................... 44


                                       ii

<PAGE>


                                                                                     Page


 ARTICLE XVII....................................................................... 45
           17.     Lessor's Right to Cure Lessee's Default.......................... 45

 ARTICLE XVIII...................................................................... 46
           18.     Purchase of the Leased Property.................................. 46

 ARTICLE XIX........................................................................ 46
           19.1    Renewal Terms.................................................... 46
           19.2    Lessor's Rights of Renewal and Early Termination................. 47

 ARTICLE XX......................................................................... 47
           20.     Holding Over..................................................... 47

 ARTICLE XXI........................................................................ 48
           21.1    Letters of Credit................................................ 48
           21.2    Times for Obtaining Letters of Credit............................ 48
           21.3    Amounts for Letters of Credit.................................... 49
           21.4    Uses of Letters of Credit........................................ 49

 ARTICLE XXII....................................................................... 49
           22.     Risk of Loss..................................................... 49

 ARTICLE XXIII...................................................................... 49
           23.     General Indemnification.......................................... 49

 ARTICLE XXIV....................................................................... 51
           24.     Transfers........................................................ 51
           24.1    Prohibition...................................................... 51
           24.2    Consent.......................................................... 51
           24.3    Attornment and Related Matters................................... 52
           24.4    [Reserved]....................................................... 53
           24.5    Costs............................................................ 53
           24.6    No Release of Lessee's Obligations............................... 53
           24.7    REIT Protection.................................................. 53
           24.8    Transfers In Bankruptcy.......................................... 53
           24.9    Special Transactions............................................. 54
           24.9.1  Transfer to Affiliate............................................ 54
           24.9.2  Public Offering; Public Trading.................................. 54
           24.9.3  ILC.............................................................. 55

 ARTICLE XXV........................................................................ 56
           25.     Officer's Certificates and Financial Statements.................. 56
           25.1    Officer's Certificate............................................ 56
           25.2    Statements....................................................... 57
           25.3    Charges.......................................................... 59




                                       iii

<PAGE>


                                                                                    Page

 ARTICLE XXVI....................................................................... 59
           26.     Lessor's Right to Inspect and Show the Leased Property........... 59

 ARTICLE XXVII...................................................................... 59
           27.     No Waiver........................................................ 59

 ARTICLE XXVIII..................................................................... 59
           28.     Remedies Cumulative.............................................. 59

 ARTICLE XXIX....................................................................... 60
           29.     Acceptance of Surrender.......................................... 60

 ARTICLE XXX........................................................................ 60
           30.     No Merger........................................................ 60

 ARTICLE XXXI....................................................................... 60
           31.     Conveyance by Lessor............................................. 60

 ARTICLE XXXII...................................................................... 60
           32.     Quiet Enjoyment.................................................. 60

 ARTICLE XXXIII..................................................................... 61
           33.     Notices.......................................................... 61

 ARTICLE XXXIV...................................................................... 62
           34.     Appraiser........................................................ 62

 ARTICLE XXXV....................................................................... 63
           35.1    First Refusal to Purchase........................................ 63
           35.2    Other Defaults................................................... 65

 ARTICLE XXXVI...................................................................... 65
           36.1    Lessor May Grant Liens........................................... 65
           36.2    Attornment....................................................... 66

 ARTICLE XXXVII..................................................................... 66
           37.1    Hazardous Substances............................................. 66
           37.2    Notices.......................................................... 66
           37.3    Remediation...................................................... 67
           37.4    Indemnity........................................................ 67
           37.5    Environmental Inspection......................................... 68

 ARTICLE XXXVIII.................................................................... 68
           38.     Memorandum of Lease.............................................. 68



                                       iv

<PAGE>


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

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

 ARTICLE XLI........................................................................ 69
           41.     Authority........................................................ 69

 ARTICLE XLII....................................................................... 69
           42.     Attorneys' Fees.................................................. 69

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

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

Exhibit A                  Legal Description of the Land

Exhibit B                  List of Lessor's Personal Property

Exhibit C                  Form of Amendment

Exhibit D                  Form of Letter of Credit

Exhibit E                  Facility Group Leases


                                        v