LEASE AGREEMENT

                                     BETWEEN

                 THE HOMESTEAD OF MANHATTAN, L.C., AS LANDLORD,


                                       AND


           INTEGRATED LIVING COMMUNITIES OF MANHATTAN, INC., AS TENANT


                              AS OF AUGUST 20, 1996
                            EFFECTIVE AUGUST 29, 1996











<PAGE>


                                TABLE OF CONTENTS

ARTICLE / SECTION PAGE
ARTICLE I
          DEMISED PREMISES .............................................  1
  1.1     Demise of Premises ...........................................  1
  1.2     Other Assets .................................................  2
  1.3     Assumed Name .................................................  3
  1.4     Delivery of Possession .......................................  3

ARTICLE II
          TERM .........................................................  3
  2.1     Term .........................................................  3
  2.2     Renewal Term .................................................  3
  2.3     Lease Term ...................................................  3
  2.4     Lease Year ...................................................  3

ARTICLE III
          RENTAL .......................................................  4
  3.1     Annual Rent ..................................................  4
  3.2     Certain Adjustments to the Annual Rent .......................  5
  3.3     Certain Adjustments to the Annual Rent; Transfer Taxes;
          Prorated Items ...............................................  5
  3.4     Other Prorations .............................................  6

ARTICLE IV
          TITLE AND POSSESSION .........................................  6
  4.1     Title and Authority ..........................................  6
  4.2     Leased Equipment .............................................  6
  4.3     Surrender of Possession ......................................  6
  4.4     Holding Over .................................................  7

ARTICLE V
          TAXES, ASSESSMENTS AND UTILITIES .............................  7
  5.1     Real Estate Taxes 7
  5.2     Personal Property Taxes ......................................  9
  5.3     Sewer Use Fees ...............................................  9
  5.4      Utilities ...................................................  9

ARTICLE VI
          USE OF DEMISED PREMISES ......................................  9
  6.1     Use by Tenant ................................................  9
  6.2     Compliance with Laws .........................................  9

                                       (i)
<PAGE>


   6.3    Waste ........................................................  10
   6.4    License and Permits ..........................................  10
   6.5    Landlord's Repairs ...........................................  10
   6.6    Conflict with Insurance Policies .............................  10

ARTICLE VII
          EMINENT DOMAIN ...............................................  10
   7.1    Permanent or Temporary Taking ................................  10
   7.2    Compensation .................................................  10
   7.3    Effect on this Lease of Permanent Taking .....................  11
   7.4    Effect on this Lease of Temporary Taking .....................  11
   7.5    Restoration ..................................................  12

ARTICLE VIII
          ALTERATIONS, REPAIRS and TRADE FIXTURES ......................  12
   8.1    Repairs by Tenant Generally ..................................  12
   8.2    Quality and Promptness of Repairs and Replacements;
          Ownership of Replacements and Warranties .....................  16
   8.3    Liability of Landlord ........................................  16
   8.4    Removal of Personal Property .................................  17

ARTICLE IX
          SIGNS ........................................................  17

ARTICLE X
          ASSIGNMENT, SUBLETTING AND SUBORDINATION .....................  17
  10.1    Assignment or Subletting by Tenant 17
  10.2    Leasehold Mortgages ..........................................  18
  10.3    Subordination and Attornment .................................  20
  10.4    Sale by Landlord 22
  10.5    Estoppel Certificates ........................................  22

ARTICLE XI
          DEFAULT ......................................................  23
  11.1    Default by Tenant23
  11.2    Landlord's Rights and Remedies ...............................  23
  11.3    Default by Landlord ..........................................  27
  11.4    Delays .......................................................  27


                                      (ii)

<PAGE>



ARTICLE XII
   DAMAGE TO DEMISED PREMISES..........................................   28
   12.1    Major Damage ................................................  28
   12.2    Nonmajor Damage .............................................  28

ARTICLE XIII
   LANDLORD'S REPRESENTATIONS AND WARRANTIES ...........................  29
   13.1    Organization and Standing of Landlord .......................  29
   13.2    Authority ...................................................  29
   13.3    Binding Effect ..............................................  30
   13.4    Absence of Conflicting Agreements ...........................  30
   13.5    Consents ....................................................  30
   13.6    Contracts ...................................................  30
   13.7    Financial Statements ........................................  31
   13.8    Material Changes ............................................  31
   13.9    Licenses; Permits ...........................................  31
   13.10   Title, Condition of Personal Property .......................  32
   13.11   Title, Condition of the Demised Premises ....................  33
   13.12   Legal Proceedings ...........................................  35
   13.13   Employees ...................................................  35
   13.14   Collective Bargaining, Labor Contracts, Employment
           Practices, etc ..............................................  35
   13.15   ERISA .......................................................  35
   13.16   Insurance ...................................................  35
   13.17   Relationships ...............................................  36
   13.18   Assets Comprising the Demised Premises ......................  36
   13.19   Absence of Certain Events ...................................  36
   13.20   Compliance with Laws ........................................  37
   13.21   Environmental Compliance ....................................  37
   13.22   Tax Returns .................................................  38
   13.23   Encumbrances Created by this Agreement ......................  38
   13.24   Residents ...................................................  38
   13.25   Zoning ......................................................  38
   13.26   Leases ......................................................  38
   13.27   Care of Residents; Deficiencies; Licensed Bed
           and Rate Schedule ...........................................  39
   13.28   Books and Records ...........................................  39
   13.29   Intellectual Property .......................................  39
   13.30   No Misstatements or Omissions ...............................  39
   13.31   Bankruptcy ..................................................  40

                                     (iii)


<PAGE>



ARTICLE XIV
   TENANT'S REPRESENTATIONS, WARRANTIES AND COVENANTS ..................  40
   14.1   Organization and Standing of Tenant ..........................  40
   14.2   Authority ....................................................  40
   14.3   Binding Effect ...............................................  41
   14.4   Absence of Conflicting Agreements ............................  41
   14.5   Statement of Operations ......................................  41

ARTICLE XV
   INSURANCE, SUBROGATION AND INDEMNIFICATION ..........................  41
   15.1   Comprehensive General Liability and
          Professional Insurance to be Carried by Tenant ...............  41
   15.2   Certificate of Insurance .....................................  41
   15.3   Other Coverage ...............................................  42
   15.4   Indemnification of Landlord ..................................  42
   15.5   Indemnification of Tenant ....................................  42
   15.6   Fire, Extended Coverage and Additional Perils Insurance ......  43
   15.7   Waiver of Subrogation ........................................  43

ARTICLE XVI
   ARBITRATION .........................................................  44

ARTICLE XVII
   CERTAIN COVENANTS OF LANDLORD .......................................  45
   17.1   Covenant Not-To-Compete ......................................  45
   17.2   Pre-Commencement Date Financial Statements ...................  46

ARTICLE XVIII
   MISCELLANEOUS PROVISIONS ............................................  46
   18.1   Notices ......................................................  46
   18.2   Understanding and Agreements .................................  47
   18.3   Amendment ....................................................  47
   18.4   Construction .................................................  47
   18.5   Specific Performance .........................................  47
   18.6   Binding Effect on Successors .................................  47
   18.7   Lease (Short Form) ...........................................  47
   18.8   Reading and Receipt of this Lease ............................  48
   18.9   Prohibition of Mechanics Liens ...............................  48
   18.10  Brokerage or Agents Fees .....................................  48
   18.11  Captions and Indexes .........................................  48
   18.12  Pronouns .....................................................  48
   18.13  Drafting of this Lease .......................................  48
   18.14  Counterparts .................................................  48
   18.15  Quiet Enjoyment ..............................................  48

ARTICLE XIX
   CONDITIONS PRECEDENT TO LEASE COMMENCEMENT ..........................  49
   19.1   Representations and Warranties ...............................  49
   19.2   Performance of Covenants; No Default .........................  49
   19.3   Delivery of Certificate ......................................  49
   19.4   Legal Matters ................................................  49
   19.5   Approvals ....................................................  49
   19.6   Material Adverse Change ......................................  50
   19.7   Authorization Documents ......................................  50
   19.8   2 ............................................................  50
   19.9   Environmental Compliance .....................................  50
   19.10  Facility Purchase Option .....................................  51
   19.11  Non-Disturbance Agreement 51

ARTICLE XX
   CERTAIN ADDITIONAL OBLIGATIONS OF LANDLORD ..........................  51
   20.1   Discharge of Liabilities .....................................  51
   20.2   Accounts Receivable ..........................................  51
   20.3   Employment of Existing Employees .............................  51
   20.4   Audited Financial Statements .................................  51
   20.5   Licenses .....................................................  51
   20.6   Collective Bargaining, Labor Contracts, etc ..................  51
   20.7   Contracts and Personal Property Leases .......................  51
   20.8   Demised Premises .............................................  51
   20.9   Delivery of Notices ..........................................  51

ARTICLE XXI
   EXTENSION OF COMMENCEMENT DATE AND TERMINATION ......................  52
   21.1   Termination ..................................................  52
   21.2   Tenant's Remedies ............................................  52

ARTICLE XXII
   CONSTRUCTION AND DELIVERY OF POSSESSION .............................  53
   22.1   Construction, Delivery of Possession and
          Commencement Date ............................................  53


                                      (v)


<PAGE>



ARTICLE XXIII
  GLOSSARY AND ADDITIONAL DEFINED TERMS ................................  55
SIGNATURE PAGE .........................................................  59


ACKNOWLEDGMENTS ........................................................  60

GUARANTY OF LEASE ......................................................  61

ACKNOWLEDGMENTS ........................................................  62


                                      (vi)
<PAGE>




SCHEDULES
---------


195178-1

EXHIBITS/SCHEDULES
EXHIBIT A
        DESCRIPTION OF THE LAND

EXHIBIT A-1
        LOCATION OF LEASED IMPROVEMENTS

EXHIBIT B 
        LIST OF CERTAIN PERSONAL PROPERTY & FIXTURES

EXHIBIT C
        LANDLORD'S CONSTRUCTION WORK

EXHIBIT D
        OPTION AGREEMENT

EXHIBIT E
        FORM OF SUBORDINATION, NON-DISTURBANCE
          AND RECOGNITION AGREEMENT

SCHEDULE 13.4

SCHEDULE 13.5

SCHEDULE 13.6

SCHEDULE 13.8

SCHEDULE 13.9

SCHEDULE 13.10(a)

SCHEDULE 13.10(b)

SCHEDULE 13.11(a)

SCHEDULE 13.11(e)

SCHEDULE 13.11(j)

SCHEDULE 13.12

                                     (vii)
<PAGE>

SCHEDULES
---------

SCHEDULE 13.13

SCHEDULE 13.16

SCHEDULE 13.17

SCHEDULE 13.19

SCHEDULE 13.21

SCHEDULE 13.25

SCHEDULE 13.26

SCHEDULE 13.27(b)

SCHEDULE 13.27(c)

SCHEDULE 13.29

SCHEDULE 14.4

                                     (viii)

<PAGE>


                                 LEASE AGREEMENT


         THIS LEASE  AGREEMENT (this "Lease") is made and entered into as of the
20th day of  August,  1996,  effective  August  __,  1996,  by and  between  THE
HOMESTEAD OF  MANHATTAN,  L.C., a Kansas  limited  liability  company  having an
address c/o The Homestead Company,  L.C., 155 North Market,  Suite 910, Wichita,
Kansas 67202, Attention: Mr. Jack West, as landlord ("Landlord"), and INTEGRATED
LIVING COMMUNITIES OF MANHATTAN,  INC., a Delaware  corporation having an office
at 10065 Red Run Boulevard, Owings Mills, Maryland 21117, as tenant ("Tenant").


                              W I T N E S S E T H:

         WHEREAS,  Landlord  is the  owner  of the  hereinafter  described  real
property on which Landlord  intends to construct the  improvements  and personal
property  constituting  the 46-bed and 35-unit assisted living facility known as
"The Homestead of Manhattan" (said real property and all  improvements  that may
from time to time be situated thereon and all Personal  Property (as hereinafter
defined), are hereinafter called the "Facility"), situated at Manhattan, Kansas;
and

         WHEREAS,  Tenant or affiliates of Tenant are engaged in the management,
leasing and  ownership  of similar  facilities  and are  experienced  in various
phases of management, leasing and ownership thereof; and

         WHEREAS,  Landlord desires to lease the Facility to Tenant for the term
hereinafter provided, and Tenant desires to accept such lease upon the terms and
subject to the conditions contained herein.

         NOW,  THEREFORE,  in consideration  of the rents,  mutual covenants and
agreements set forth in this Lease, the parties agree as follows:


                                     ARTICLE
                                DEMISED PREMISES

         DEMISE OF PREMISES.  Landlord  hereby  demises and leases to Tenant for
the term and upon the  conditions  provided  in this  Lease,  and Tenant  hereby
leases from Landlord,  the following real and personal  property  (collectively,
the "Demised Premises"):

         (a) the real property described in Exhibit A attached hereto and made a
part hereof (the "Land"), and

         (b) all buildings, structures, fixtures and other improvements of every
kind, now or hereafter  situated upon the Land,  including,  but not limited to,
the Facility,  alleyways  and  connecting  tunnels,  sidewalks,  utility  pipes,
conduits and lines (on-site), and parking areas and

<PAGE>

roadways  appurtenant to such buildings and structures,  specifically  excluding
utility  pipes,  conduits  and lines owned by utility  providers,  if any, as to
which,  however,  all of Landlord's right,  title and interest thereto is hereby
leased and included (collectively, the "Leased Improvements"), and

         (c) all easements,  licenses,  rights, privileges and appurtenances now
or hereafter relating to the Land and/or 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 or hereafter located
in, on or used in connection  with, and  permanently  affixed to or incorporated
into the Land or the Leased Improvements, including, without limitation, if any,
all  furnaces,  boilers,  heaters,  electrical  equipment,   heating,  plumbing,
lighting,  ventilation,  refrigeration,  incineration,  air and water  pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection  equipment,  and built-in oxygen
and vacuum systems,  all of which, to the greatest extent  permitted by law, are
hereby deemed by the parties hereto to constitute  real property,  together with
all replacements, modifications, alterations and additions thereto, specifically
excluding utility pipes, conduits and lines owned by utility providers,  if any,
as to which,  however,  all of Landlord's  right,  title and interest thereto is
hereby leased and included (collectively, the "Fixtures"), and

         (e) all equipment, machinery, furniture,  furnishings, movable walls or
partitions,  computers, trade fixtures, office equipment, operating supplies, or
other tangible real or personal  property now or hereafter  located,  installed,
stored,  used or usable in  connection  with the  operation  of the Facility and
removable   without   causing   material  damage  to  the  Land  or  the  Leased
Improvements,   including,   without   limitation,   all  items  of   furniture,
furnishings,  equipment, appliances,  apparatus, and vehicles, together with all
replacements,  modifications,  alterations and additions  thereto,  specifically
excluding utility pipes, conduits and lines owned by utility providers,  if any,
as to which,  however,  all of Landlord's  right,  title and interest thereto is
hereby  leased  and  included,  and also  specifically  excluding  any  personal
property owned by patients or residents, as to which, however, all of Landlord's
right,  title and interest thereto is hereby leased and included  (collectively,
the "Personal Property").

         1.2 OTHER ASSETS.  Effective on the  Commencement  Date (as hereinafter
defined) Landlord hereby  transfers,  assigns and conveys to Tenant for the term
hereinafter set forth and upon the conditions provided in this Lease, all of the
following assets (collectively, hereinafter called the "Other Assets"):

         (a) all intangible property,  assets and rights appurtenant or relating
to the ownership and/or operation of the Facility, including but not limited to,
licenses, permits and other governmental approvals from the applicable licensing
and  certification  agencies,  to  the  extent  assignable  (collectively,   the
"Intangibles"), and

                                       2
<PAGE>

         (b) all patents,  copyrights,  trademarks,  trade  names,  brand names,
service  marks,  logos,  symbols,  trade dress,  designs or  representations  or
expressions of any thereof,  or  registrations  or applications for registration
thereof,  or  any  other  inventions,   trade  secrets,  technical  information,
know-how,  proprietary right or intellectual property appurtenant or relating to
the  ownership  and/or  operation  of the  Facility  (collectively,  the  "Trade
Rights").

         1.3 ASSUMED NAME.  Tenant shall have the  exclusive  right (but not the
obligation) to use and to register as the assumed business name for the Facility
the name "The Homestead of Manhattan"  effective as of the Commencement  Date of
this Lease and thereafter while this Lease is in effect.

         1.4  DELIVERY  OF  POSSESSION  .  Landlord   shall  deliver   exclusive
possession  of the  Demised  Premises  and the  Other  Assets  to  Tenant on the
Commencement  Date.  Notwithstanding  anything to the contrary contained in this
Lease,  Tenant shall have no obligations  or liabilities  under this Lease or as
tenant of the Demised  Premises or with  respect to the Other  Assets,  prior to
such delivery of possession and the Commencement Date.


                                     ARTICLE II
                                      TERM

         2.1 TERM . Subject to Section 21.1 hereof, the term of this Lease shall
commence on the Commencement Date (as hereinafter  defined), as such date may be
extended pursuant to the express provisions hereof. The term of this Lease shall
run from the Commencement Date and terminate at 12:00 midnight,  on the last day
of the fifteen (15) Lease Year (as  hereinafter  defined) (the "Initial  Term"),
unless extended as provided in Section 2.2 below.

         2.2 RENEWAL  TERM . If this Lease is still in effect and if no Event of
Default (as  hereinafter  defined) shall have occurred and be continuing  Tenant
shall have the right to extend this Lease for three (3)  additional  consecutive
terms of five (5) years each (each a "Renewal  Term"). A renewal option shall be
deemed  exercised  upon Tenant  giving  Landlord  one hundred  twenty (120) days
written notice prior to the expiration of the then current Lease Term. If Tenant
shall give  notice of the  exercise  of an election in the manner and within the
time  provided  herein,  the Lease Term shall be extended upon the giving of the
notice without the requirement of any action on the part of Landlord.

         2.3 LEASE TERM . As used herein,  "Lease Term" shall mean, prior to the
exercise by Tenant of any of its rights under  Section 2.2 to extend the term of
this Lease,  the Initial  Term,  and after the  exercise by Tenant of any one or
more of such extension rights, "Lease Term" shall mean the Initial Term and each
Renewal  Term as to which such  right has been  exercised.  Except as  otherwise
expressly provided in this Lease, all the agreements and conditions contained in
this  Lease  shall  apply to each  Renewal  Term as to which such right has been
exercised.

         2.4 LEASE YEAR . As used herein, "Lease Year" means any 12-month period
that commences on the Commencement  Date, or any anniversary of the Commencement
Date, provided, however, if the Commencement Date occurs on a day other than the
first day of a month,  then a


                                       3
<PAGE>

Lease Year shall  commence  on the first day of the first  month  following  the
Commencement Date except that the first Lease Year shall include the period from
the  Commencement  Date  through  the  last  day  of  the  month  in  which  the
Commencement Date occurs.


                                     ARTICLE III
                                     RENTAL

         3.1 ANNUAL RENT .  Beginning  on the  Commencement  Date of this Lease,
Tenant  agrees to pay to Landlord  rent at the annual rates set forth below,  in
each case in monthly  installments  of  one-twelfth  thereof.  The monthly  rent
payments provided for herein shall be paid by Tenant in advance,  without notice
or demand,  on the first day of each month,  and the rent for the calendar month
during which rent shall begin to accrue and for the last  calendar  month of the
Lease Term, shall be apportioned,  if necessary.  All rental payments to be made
to Landlord  under this Lease shall be made to Landlord at the address stated in
Section 18.1 hereof or to such other person,  firm,  corporation or other entity
or at such  other  address as  Landlord  may  designate  by notice in writing to
Tenant.

          3.1.1    Annual  rent  ("Annual  Rent")  shall be payable as follows:
                    during  the  first  Lease  Year  at the  annual  rate of Two
                    Hundred   Fifty-eight   Thousand  Five  Hundred   ($258,500)
                    Dollars; and during each Lease Year thereafter at the annual
                    rate equal to the product  resulting  from  multiplying  the
                    Annual  Rent for the  first  Lease  Year by a  fraction  the
                    numerator of which is the Price Index (as defined in Article
                    VIII)  published for the first  calendar  month of the Lease
                    Year with respect to which the adjustment is being made, and
                    the denominator of which is the Base Price Index (as defined
                    in Article  VIII);  provided  that the  Annual  Rent for the
                    Lease  Year in  question  shall not be lower than the Annual
                    Rent for the immediately preceding Lease Year.

          3.1.2     Annual Rent shall be paid in equal monthly  installments and
                    shall be payable in advance,  without  demand,  on the first
                    day of each  calendar  month  during  any  Lease  Year.  All
                    payments of Annual Rent and all other payments to be made by
                    Tenant to  Landlord  pursuant to this Lease shall be paid in
                    lawful money of the United States of America and,  except as
                    otherwise provided in this Lease,  without discount,  setoff
                    or abatement.

          3.1.3     The  obligations  to pay Annual  Rent and all other items of
                    rent under this Lease are separate and  independent  of each
                    and every other  covenant  and  agreement  contained in this
                    Lease,  except as  otherwise  provided  in this Lease to the
                    contrary including (but not limited to) provisions  relating
                    to Tenant's right to an abatement of, or setoff or reduction
                    against, any such items of rent.

          3.1.4     In the event that any monthly  installment of Annual Rent is
                    not paid within  fifteen (15) days after the date due, then,
                    in addition to any other  rights or  remedies  available  to
                    Landlord, interest shall accrue on such overdue payment at a
                    rate per annum equal to the lesser of (a) the  maximum  rate
                    of interest


                                       4
<PAGE>

     permitted by law or (b) two percent (2%) above the "Prime Rate" of interest
     quoted  in The Wall  Street  Journal  "Money  Rates  Column"  from the date
     originally due to the date of payment of the same.

         3.2 CERTAIN ADJUSTMENTS TO THE ANNUAL RENT . Intentionally Deleted.

         3.3 CERTAIN  ADJUSTMENTS TO THE ANNUAL RENT;  TRANSFER TAXES;  PRORATED
ITEMS . On the Commencement Date, the following adjustments and prorations shall
be computed as of the  Commencement  Date with  respect to the  following  items
(unless otherwise stated herein) and the initial monthly  installments of Annual
Rent payable for the first Lease Year shall be  adjusted,  upward or downward as
appropriate, to reflect such prorations:

         (a) TRANSFER TAXES.  All state and local real estate transfer taxes and
fees payable in connection with this Lease or any of the  transaction  documents
(including,  without  limitation,  the short form lease)  relating hereto or the
recording thereof shall be borne by Landlord.

         (b) REAL  ESTATE  TAXES,  ETC.  Real  property  taxes  and all other ad
valorem public or governmental  charges against the Demised Premises  (including
charges for sewer,  water,  drainage or other services) assessed for a period in
which the  Commencement  Date occurs shall be adjusted and apportioned as of the
Commencement  Date and paid  thereafter by Tenant in  accordance  with Article V
hereof.

         (c) PERSONAL PROPERTY TAXES.  Personal  property taxes  attributable to
the value of the Personal  Property and, if applicable,  to the extent  taxable,
the Other Assets for the period in which the  Commencement  Date occurs shall be
adjusted and  apportioned  as of the  Commencement  Date and paid  thereafter by
Tenant in accordance with Article V hereof.

         (d) LICENSES,  SERVICE  CONTRACTS  AND PERSONAL  PROPERTY  LEASES.  All
prepayments  made or payments due under any  continuing  Licenses (as defined in
Section  13.9),  Contracts (as defined in Section 13.6),  and Personal  Property
Leases (as defined in Section  13.26)  affecting  the Demised  Premises or Other
Assets,  including,  without limitation,  parking,  garbage removal, laundry and
maintenance agreements, shall be adjusted and apportioned as of the Commencement
Date. Tenant shall assume all such obligations  under such continuing  Licenses,
Contracts and Personal Property Leases which arise (and relate to the period) on
and  after the  Commencement  Date.  Notwithstanding  anything  to the  contrary
contained in this Lease, Landlord shall terminate any and all service contracts,
leases  and/or other  agreements  affecting  or related to the Demised  Premises
which are with any person or entity that is affiliated with Landlord,  including
without limitation,  any and all Contracts and/or Personal Property Leases other
than those  designated by Tenant  pursuant to Article XX hereof and Tenant shall
have no obligations or liabilities with respect thereto.

         (e)  UTILITIES.  All  prepayments  made or payments due with respect to
utilities servicing the Demised Premises,  including, without limitation, water,
sewer,  electric, gas and utility bills, shall be adjusted and apportioned as of
the Commencement  Date.  Landlord shall use its best efforts to have all utility
meters read on the Commencement Date so as to accurately determine the proration
of current utility bills.

                                       5
<PAGE>

         3.4 OTHER PRORATIONS . All other charges and fees customarily  prorated
and adjusted in similar transactions in the locale in which the Demised Premises
are situated shall be prorated as of the  Commencement  Date in accordance  with
such custom.  However,  nothing contained herein shall operate to subject Tenant
to any  liability  of  Landlord,  and Tenant  does not assume any  liability  of
Landlord, except as specifically set forth in this Lease.

         In the event that accurate  prorations and other adjustments  cannot be
made as of the  Commencement  Date because  current bills or statements  are not
obtainable  (as, for example,  utility  bills),  the parties  shall prorate such
items upon receipt of the final bill or statement.


                                     ARTICLE IV
                              TITLE AND POSSESSION

         4.1 TITLE AND  AUTHORITY . Landlord  represents  and warrants to Tenant
that  Landlord  owns the fee  simple  title to the  Land,  Leased  Improvements,
Related Rights and Fixtures and Landlord owns  marketable  title to the Personal
Property  and Other  Assets,  free and clear of all Liens (as defined in Section
13.10) other than as set forth on Schedules 13.10(a), 13.10(b) and 13.11(a), and
Landlord  has the right and  complete  authority to enter into this Lease on the
terms and conditions and for the use and purposes herein stated.  Said Schedules
13.10(a),  13.10(b),  13.11(a) and 13.11(b)  shall each be updated to the extent
necessary on and as of the day preceding the Commencement Date.

         4.2 LEASED  EQUIPMENT . As of the  Commencement  Date,  Landlord  shall
furnish the Facility with the Personal Property and Fixtures (collectively,  the
"Leased Equipment"),  including, without limitation, those items of the Personal
Property  and  Fixtures  set forth on Exhibit B hereto.  Landlord  shall have no
obligation  to  furnish  the  Facility  with  any  Leased  Equipment  after  the
Commencement Date. The Leased Equipment shall include all the personal property,
fixtures,  equipment and furnishings necessary and appropriate for the operation
of the  Facility  by Tenant in  accordance  with the  standards  for  operations
contemplated  for the facility leased pursuant to that certain Lease  Agreement,
dated as of June 18,  1996,  between The  Homestead  of Garden  City,  L.C.,  as
landlord, and Integrated Living Communities at Garden City, Inc., as tenant; all
of such Leased  Equipment  being leased to Tenant  pursuant to the terms of this
Lease.  No  additional  rent,  beyond  Annual Rent  provided  for in Article III
hereof, shall be paid by Tenant for the Leased Equipment.

         4.3 SURRENDER OF POSSESSION . At the end of the Lease Term, or upon the
earlier termination of this Lease,  Tenant, at its sole cost and expense,  shall
surrender the Demised  Premises to Landlord in the same good condition and state
of repair as they were in at the Commencement Date,  ordinary wear and tear and,
except as  otherwise  provided in this Lease,  damage by fire or other  casualty
excepted,  and shall convey and  transfer to Landlord  such portion of the Other
Assets as shall not have been used,  depleted or consumed in the ordinary course
of the operation of the Facility and, subject to Section 8.2 hereof,  shall also
convey and  transfer  to  Landlord  any  replacements  and  accessories  thereto
acquired  by Tenant  during the Lease Term,  to the extent the same  continue in
existence at the end of the Lease Term.

                                       6
<PAGE>

         4.4  HOLDING  OVER . If Tenant  remains in  possession  of the  Demised
Premises after the expiration of the Lease Term, except as otherwise provided in
the Option  Agreement (as hereinafter  defined),  such possession  shall be as a
tenant at sufferance. During such occupancy, rent shall be payable equal to 150%
times the  monthly  amount of Annual Rent  payable  during the last month of the
Lease Term, and the provisions of this Lease shall be applicable and continue in
full force and effect.  However,  Landlord's acceptance of any rent payments and
the terms of this  Section 4.4 shall not  constitute  a renewal of this Lease or
give Tenant any right to continue to occupy the Land on a  month-to-month  basis
or otherwise.  Notwithstanding  the foregoing,  if Tenant is unable to surrender
the Demised  Premises  because  Landlord  fails to provide a qualified  and duly
licensed  operator  (a "Proper  Successor")  for the  Facility at the end of the
Lease Term to take over the  operation and  management  of the Facility,  Tenant
shall have the right, but shall not be obligated to, remain in possession of the
Demised  Premises and continue to operate and manage the same if Tenant would be
legally prohibited from abandoning the Demised Premises or in Tenant's judgment,
abandoning the Demised  Premises without a Proper Successor in place to continue
the  operations  of the  Facility  would  jeopardize  its (or  its  affiliates')
reputation as a provider of  residential  congregant,  nursing  and/or  assisted
living  facility  care or could  otherwise  subject  it (or its  affiliates)  to
liability.  In the event Tenant  remains in possession  of the Demised  Premises
pursuant to the immediately preceding sentence, Tenant shall (a) pay to Landlord
as gross rent during such occupancy 90% the Annual Rent payable by Tenant in the
last Lease Year of the Lease Term and (b)  surrender  possession  of the Demised
Premises within ten (10) days after Landlord provides a Proper Successor to take
over the operation and management of the Facility.


                                    ARTICLE V
                        TAXES, ASSESSMENTS AND UTILITIES

         5.1 REAL ESTATE TAXES . Tenant, at its sole cost and expense, shall pay
when  due  all ad  valorem  general  real  estate  taxes,  betterment  or  other
assessments and transit taxes  (collectively,  "Impositions") which are assessed
against,  levied,  imposed  upon,  become a lien or become due and payable  with
respect to or upon the Demised Premises,  and no other property, and which first
become  due and  payable,  or any  installments  thereof  which  become  due and
payable,  on and after the Commencement  Date and during the Lease Term.  Tenant
shall provide  Landlord with copies of all receipts  received in connection with
the  payment  of such  taxes and  assessments  within  twenty  (20)  days  after
Landlord's  request  prior to the date  interest or  penalties on such taxes and
assessments would be imposed.  Tenant shall have the right, at its sole cost and
expense  and in good  faith,  to  contest  the  amount or  validity  of any such
Imposition payable by Tenant under the terms of this Lease,  provided,  however,
that if at any time payment of any such  Imposition  shall  become  necessary to
prevent the tax sale of the Demised  Premises or any portion  thereof because of
nonpayment,  then Tenant shall pay the same in  sufficient  time to prevent such
sale. Landlord shall join, at Tenant's sole cost and expense, in any proceedings
referred to above,  and hereby  agrees that the same may be brought in its name,
if the  provisions of any law, rule or  regulations at the time, in effect shall
require  that such  proceedings  be brought by and/or in the name of Landlord or
any owner of the Demised Premises. Tenant shall be entitled to any refund of any
Impositions,  and all penalties or interest thereon,  received by Landlord which
shall have been paid by Tenant,  or which shall have been paid by  Landlord  but
previously reimbursed in full by Tenant. Provided that no Event of Default shall
have occurred and be  continuing,  Landlord  shall not,  without  Tenant's prior
approval,  make or 


                                       7
<PAGE>


agree to any settlement, compromise or other disposition of any such proceedings
or  discontinue  or withdraw any such  proceedings or accept any refund or other
adjustment of or credit for any Imposition as a result of any such  proceedings.
Landlord hereby appoints Tenant the attorney-in-fact of Landlord for the purpose
of making all payments to be made by Tenant pursuant to any of the provisions of
this Lease to persons or entities other than Landlord.  Notwithstanding anything
to the contrary  contained in this Lease, if, by not later than thirty (30) days
prior to the final date for contesting the validity or amount of any real estate
taxes and  assessments  with  respect to the last Lease Year of the Lease  Term,
Tenant  shall not have  advised  Landlord  that Tenant  intends to conduct  such
contest,  Landlord will have the right (but not the  obligation)  to contest the
validity and/or amount of such  Impositions for the last Lease Year of the Lease
Term without the consent of Tenant, but at Landlord's sole cost and expense.

          5.1.1     If at any time during the Lease Term the methods of taxation
                    of Impositions prevailing at the commencement of the Initial
                    Term  hereof  shall be  altered  so that in lieu of, or as a
                    supplement to, or a substitute for, the whole or any part of
                    the  Impositions  then  levied,  assessed  or imposed on the
                    Demised Premises, any of the following are levied,  assessed
                    or imposed:

                    (a) a tax, assessment, levy, imposition or charge, wholly or
               partially as a capital levy or otherwise,  on the rents  received
               therefrom; or

                    (b) a tax,  assessment,  levy  (including but not limited to
               any  municipal,  state or  federal  levy),  imposition  or charge
               measured  by or  based  in  whole  or in part  upon  the  Demised
               Premises and imposed upon Landlord; or

                    (c) a license fee  measured by the rent  payable  under this
               Lease;

then,  in such event,  all such taxes,  assessments,  levies,  impositions,  and
charges,  or the part  thereof  so  measured  or  based,  shall be  deemed to be
included in the  Impositions  payable by Tenant pursuant to this Section 5.1, to
the extent that such taxes, assessments,  levies,  impositions and charges would
be payable if the Demised  Premises were the only  property of Landlord  subject
thereto,  and Tenant  shall pay and  discharge  the same as herein  provided  in
respect of the payment of general real estate taxes and assessments.

          5.1.2     Impositions  shall not include any  income,  excess  profit,
                    estate,  inheritance,   succession,   transfer,   franchise,
                    capital or other tax or assessment  upon Landlord or (unless
                    in  substitution,  as  herein  provided)  upon  the  rentals
                    payable  under this  Lease,  all of which  shall be the sole
                    obligation of Landlord. The real estate taxes on the Demised
                    Premises during any year shall mean such amounts as shall be
                    finally determined,  after deducting abatements,  discounts,
                    refunds or rebates,  if any, to the Impositions payable with
                    respect to the Demised Premises during said year.

          5.1.3     Any  Impositions  which  become  due for the  year in  which
                    possession  is given to Tenant  but which are  payable  with
                    respect to a period prior to the Commencement  Date shall be
                    prorated for the calendar  year between 


                                       8
<PAGE>


                    Landlord  and Tenant as  provided  in Section 3.3 hereof and
                    such proration shall also occur at the end of the Lease Term
                    for the calendar year of termination.


          5.1.4     If  Landlord  shall have the right to elect the period  over
                    which any Impositions are payable,  Landlord agrees to elect
                    and Tenant may make such payments over the longest period of
                    time available.

         5.2  PERSONAL  PROPERTY  TAXES . Beginning  on the  Commencement  Date,
Tenant,  at its sole cost and expense,  shall pay when due all personal property
taxes and assessments (if any) assessed against,  levied, imposed upon, or which
would  become a lien or become due and payable  with  respect to, or upon any of
Tenant's tangible or intangible personal property or the Leased Equipment or the
Other Assets,  during the Lease Term.  Tenant shall provide Landlord with copies
of all  receipts  received  in  connection  with the  payment  of such taxes and
assessments  not less than ten (10) days prior to the date interest or penalties
on such taxes and assessments would be imposed.  Any personal property taxes and
assessments which become due for the year in which possession is given to Tenant
but which are payable with respect to a period  prior to the  Commencement  Date
shall be prorated for the calendar year between  Landlord and Tenant as provided
in  Section  3.3 hereof  and such  proration  shall also occur at the end of the
Lease Term for the calendar year of termination.

         5.3 SEWER USE FEES . Beginning on the Commencement Date, Tenant, at its
sole cost and expense, shall pay when due all sewer use fees, rents, charges and
deposits assessed against, levied, imposed upon, or which would become a lien or
become due and payable with respect to, or upon the Demised Premises, during the
Lease Term.  Tenant shall provide Landlord with copies of all receipts  received
in  connection  with the payment of such fees,  rents,  charges and deposits not
less than ten (10) days prior to the date  interest or penalties on such fees or
deposits would be imposed.

         5.4 UTILITIES . Beginning on the Commencement Date, Tenant, at its sole
cost and  expense,  shall  obtain in its name and pay when due all  charges  and
deposits  for gas,  water,  electricity,  cable  television,  trash,  telephone,
communication  services,  and all other  utilities  used on or  supplied  to the
Demised Premises, during the Lease Term.


                                   ARTICLE VI
                             USE OF DEMISED PREMISES

         6.1 USE BY  TENANT .  Tenant  shall use the  Demised  Premises  for the
business  purpose of a  residential  congregant,  nursing  care and/or  assisted
living facility and all related and ancillary medical and therapeutic  services,
and for no other purpose without Landlord's consent,  which consent shall not be
unreasonably withheld or delayed.

         6.2 COMPLIANCE WITH LAWS . Except as otherwise provided in this Section
6.2, and in Sections 8.1.4,  8.1.5, and 8.1.6,  Tenant, in operating the Demised
Premises,  at its sole cost and expense,  shall comply with all applicable city,
county,  state and federal building codes,  ordinances,  rules,  regulations and
laws  applicable  to the  Demised  Premises,  notices  from  the  issuer


                                       9
<PAGE>


of the Facility's fire hazard or casualty policy,  and each covenant,  condition
or  restriction  of  record  which  is a  Permitted  Exception  (as  hereinafter
defined).

         Without  limiting the  generality of the  foregoing  provisions of this
Section 6.2, except as otherwise provided in this Lease, Tenant, at its cost and
expense,  shall comply with all Environmental Laws (as hereinafter defined) that
are  applicable to its  operation of the Demised  Premises,  including,  but not
limited to, the use, handling, treatment,  storage,  transportation and disposal
of any hazardous,  toxic or infectious waste,  material or substance  (including
Medical Waste) and petroleum products,  material or waste. Landlord, at its cost
and expense,  shall comply with all  Environmental  Laws in connection  with the
previous,   present   and/or   future   use,   handling,   treatment,   storage,
transportation and disposal of any such waste, material,  substance and products
at or on the Demised  Premises by anyone  other than Tenant,  or its  employees,
agents, contractors, invitees, residents, patients or clients.

         6.3 WASTE . Tenant shall neither  commit,  nor permit the commission of
waste upon or against the Demised Premises, ordinary wear and tear excepted.

         6.4 LICENSE AND  PERMITS . Tenant at its sole cost and  expense,  shall
acquire and  maintain  all  licenses  and permits  needed to operate the Demised
Premises for the then applicable use permitted herein.  Tenant, as a provider of
residential care services, shall comply with all applicable rules,  regulations,
laws,  statutes,  orders,  ordinances  and  requirements,  and will maintain its
certifications  for  reimbursement  and  licensure,  and its  accreditation,  if
compliance with  accreditation  standards is required to maintain the operations
of the Facility.

         6.5  LANDLORD'S  REPAIRS . Landlord  shall have no  obligation  to make
improvements,  alterations,  replacements  or repairs to the  Demised  Premises,
except as may be expressly provided herein.

         6.6 CONFLICT WITH INSURANCE  POLICIES.  Tenant shall not permit any use
of the Demised  Premises which would invalidate any policy of insurance or which
would  increase  the  premiums for any  insurance  policy  carried by or for the
benefit of Landlord unless Tenant pays any such increase in premiums.


                                   ARTICLE VII
                                 EMINENT DOMAIN

         7.1  PERMANENT  OR  TEMPORARY  TAKING . If after the  execution of this
Lease all or any part of the Demised  Premises  is  acquired  on a permanent  or
temporary basis by any federal,  state or local governmental agency, by means of
condemnation or threat of condemnation, or by reason of mutual agreement between
Landlord, Tenant, and said governmental agency, this Article VII shall control.

         7.2 COMPENSATION . All compensation  awarded for any taking (including,
but not limited to, loss of  leasehold)  shall  belong to and be the property of
Landlord; provided, however, that Tenant shall be entitled to any portion of the
award made to Tenant for its loss of business, 


                                       10
<PAGE>

depreciation to or for the cost of removal of stock, fixtures,  equipment (other
than the Leased  Equipment) or signs,  moving expenses,  relocation costs or any
other allowances to which Tenant may be legally  entitled.  This Lease shall not
preclude the right of Tenant to pursue an independent action for damages against
any  governmental  agency for said  taking,  provided,  however that in no event
shall any  resulting  award to Tenant  reduce  the  amount of the award to which
Landlord may be entitled.  In any event,  Landlord shall not be liable to Tenant
for any damages.

         7.3  EFFECT ON THIS LEASE OF  PERMANENT  TAKING . In the event that the
whole of the Demised  Premises  is taken  permanently  by any method,  then this
Lease shall terminate as of the date title to the Demised  Premises vests in the
governmental  agency.  Such date of vesting  shall operate as though it were the
date originally  intended by the parties for expiration of this Lease and Tenant
shall pay Annual Rent and Landlord  shall refund to Tenant any  overpayments  of
Annual Rent or other charges within five (5) days after the date of such vesting
and all other  obligations  hereunder  accrued  (prorated as appropriate) to the
date of such vesting.

         In the  event  a  substantial  and  material  portion  (as  hereinafter
defined) of the Demised Premises are taken  permanently,  then Tenant shall have
the option to terminate this Lease by giving Landlord at least ninety (90) days'
written notice. If Tenant does not elect to terminate this Lease or if less than
a substantial and material portion of the Demised Premises are taken,  then this
Lease  shall  terminate  only as to the part of the Demised  Premises  taken and
Annual Rent shall be reduced for the remainder of the Lease Term by a just, fair
and equitable  proportion of Annual Rent payable  according to the size,  nature
and extent of the property  that is taken.  Any  adjustments  or  reductions  in
Annual  Rent,  as  contemplated  by this  Section  shall take into  account  the
practical and economic  effect of the taking in question on the operation of the
Demised  Premises.  In the event that a  substantial  and  material  part of the
Demised  Premises is  temporarily  taken in excess of three  hundred  sixty-five
(365)  consecutive days, then such taking shall be deemed a permanent taking for
purposes of this Lease. It shall be presumed that the taking is "substantial and
material" if (a) the Kansas  Department  of Health and  Environment  permanently
closes the Demised  Premises  whether in whole or in part because of such taking
for use as a nursing care and/or assisted living facility, or (b) if in Tenant's
reasonable business judgment the portion of the Demised Premises not so taken is
inadequate  to  continue to operate the  Facility in a  commercially  profitable
manner as a nursing care and/or  assisted  living  facility,  as the case may be
according to the then actual use by Tenant.

         In the event that the Demised Premises become landlocked by such taking
for a period in excess of three (3) consecutive days and reasonable  alternative
access  cannot be  provided  within  five (5) days after such  occurrence,  then
Annual  Rent  shall  abate  until  access or  reasonable  alternative  access is
provided to the Demised  Premises;  provided  that if such access or  reasonable
alternative  access  cannot be  provided  within  thirty  (30) days  after  such
occurrence,  then Tenant shall have the right to terminate this Lease by written
notice to Landlord,  which shall terminate this Lease sixty (60) days after such
notice.

         7.4 EFFECT ON THIS LEASE OF TEMPORARY TAKING . In the event that all or
part of the Demised Premises are taken for a temporary use, Annual Rent shall be
reduced  and abated by a just,  fair and  equitable  proportion  of Annual  Rent
payable  according to the size, nature and extent of the property that is taken.
Any  adjustments or reductions in Annual Rent, as  contemplated  by this


                                       11
<PAGE>

Section shall take into account the practical and economic  effect of the taking
in question on the operation of the Demised  Premises.  Tenant shall continue to
perform all other  conditions of this Lease as though the taking or condemnation
had not occurred, except to the extent that Tenant shall be prevented from doing
so by reason of the  taking or  condemnation  and except  for the  abatement  of
Annual Rent as provided herein. Neither party to this Lease shall have any right
to  terminate  this Lease by reason of a temporary  taking of all or part of the
Demised Premises, except as stated in Section 7.3 above.

         7.5 RESTORATION. If any building or improvement on the Demised Premises
or any replacement  thereof shall be damaged or partially  destroyed by any such
taking of less than all or substantially all thereof and this Lease shall not be
terminated by reason  thereof,  Tenant shall be entitled to receive such portion
of any award to which Landlord may be entitled, as will be sufficient to pay for
the costs of restoring and rebuilding such  building(s) and  improvement(s)  and
within  ninety  (90) days  after  receipt  by Tenant of such sum,  Tenant  shall
proceed with  reasonable  diligence to conduct any necessary  demolition  and to
repair,  replace  or  rebuild,  any  remaining  part  of  said  building(s)  and
improvement(s),  or of any replacement thereof not so taken, so as to constitute
such remaining part thereof a complete,  useable building in  substantially  the
same condition and repair as the building(s) and  improvements  were in prior to
any such taking;  and Tenant  shall hold that  portion of any award  received by
Tenant  pursuant  to this  Section  in trust  to apply  the same to the cost and
expense of such demolition,  repairing, replacing and rebuilding. If the cost of
any work  necessary  to  repair,  replace or rebuild  (including  any  necessary
demolition   work)  any  damage  to  or  destruction  of  the   building(s)  and
improvement(s) or any replacement or replacements  thereof shall equal or exceed
an aggregate cost of One Hundred Thousand ($100,000) Dollars,  the same shall be
conducted under the  supervision of an architect or engineer  selected by Tenant
and approved in writing by Landlord, which approval Landlord agrees shall not be
unreasonably  withheld or delayed.  Whenever  pursuant to this Section Tenant is
entitled to receive the proceeds of an award in excess of $100,000 in amount for
the  purpose  of  applying  the  same  to the  cost of  demolishing,  repairing,
replacing or rebuilding,  such proceeds  shall be paid to the Insurance  Trustee
provided for in Article XV, to be disposed of by such  Insurance  Trustee in the
manner provided in Article XII.


                                  ARTICLE VIII
                     ALTERATIONS, REPAIRS AND TRADE FIXTURES

         8.1 REPAIRS BY TENANT GENERALLY .

          8.1.1     Except  as  otherwise  expressly  provided  in  this  Lease,
                    including  without  limitation,  in this Article VIII and in
                    Articles VII, XII and XXII,  Tenant shall be responsible for
                    the  performance,  at its  sole  cost  and  expense,  of all
                    necessary    repairs,    replacements,    alterations    and
                    improvements,  whether  or not in order to  comply  with all
                    applicable  laws,   regulations  and  municipal  ordinances,
                    (collectively,  "Repairs")  to the  Demised  Premises.  This
                    obligation  to perform  Repairs shall  include,  at its sole
                    cost  and   expense,   inspecting,   keeping,   maintaining,
                    repairing and replacing the interior,  exterior,  structural
                    and  nonstructural   improvements,   alterations  and  other
                    components  on  the  Demised  Premises  so  as to  keep  the
                    improvements and interior  decorations in


                                       12
<PAGE>

                    substantially  the  same  condition  as they  were in on the
                    Commencement Date, subject to depreciation and ordinary wear
                    and tear, and in a safe  condition,  free from dirt,  water,
                    snow,  ice,  refuse,  trash and  obstruction  and shall also
                    include,  but not be limited to, signs, glass,  landscaping,
                    any  air  conditioning,  heating,  electrical,  ventilating,
                    parking areas and driveways,  plumbing systems,  roof, walls
                    and all interior and exterior  cleaning,  painting,  repairs
                    and replacements on or at the Demised Premises. Tenant shall
                    not  voluntarily  alter any  structural  part of the  Leased
                    Improvements   or  demolish,   remove,   or  materially  and
                    permanently  alter any  permanent  improvement  in or on the
                    Land or make permanent  additions thereto the cost of which,
                    in the case of any single  alteration  or addition,  exceeds
                    $50,000 or, in the case of all such alterations or additions
                    in  any  Lease  Year,  exceeds  in the  aggregate  $250,000,
                    without the prior written consent of Landlord, which consent
                    shall not be  unreasonably  withheld or  delayed;  provided,
                    however,  that Landlord's consent shall not be required with
                    respect to any such  Repairs  which are required in order to
                    comply  with  applicable  laws,   regulations  or  municipal
                    ordinances  or in the  case  of an  emergency  or any  other
                    situation  where  bodily  harm is  threatened  or  Tenant is
                    exposed  to  liability  if such  Repairs  are not  made.  In
                    addition,   Tenant  may  perform  any  other  non-structural
                    alterations  and additions to the Demised  Premises  without
                    Landlord's  consent  so long as  Tenant  gives a copy of the
                    plans and  specifications,  if any, to  Landlord  within ten
                    (10) days prior to making such alterations and/or additions;
                    provided further that cosmetic modifications and decorations
                    that are  substantially  consistent  with the quality of the
                    original  materials  and  decorations  that were used in the
                    Facility may be made by Tenant without any  notification  to
                    Landlord.

                         8.1.1.1 The dollar  amounts set forth in this paragraph
                    8.1.1 shall be adjusted and increased  each Lease Year by an
                    amount equal to the product  resulting from multiplying each
                    of said dollar  amounts by a fraction the numerator of which
                    is the Price Index published for the first calendar month of
                    the Lease Year with respect to which the adjustment is being
                    made, and the denominator of which is the Base Price Index.

                         8.1.1.2 As used in this Lease the following terms shall
                    have the following respective meanings:

                         (i)  "Price  Index"  shall mean the  "Revised  Consumer
                    Price Index for All Urban Consumers (the CPI-U) published by
                    the  Bureau  of  Labor   Statistics  of  the  United  States
                    Department  of  Labor,  for  All  Cities  area,  All  Items,
                    (1982-84=100)"; and

                         (ii) "Base  Price  Index"  shall  mean the Price  Index
                    published for the calendar  month in which the  Commencement
                    Date occurs or if not  published  for such  month,  then the
                    closest   preceding   month  for  which  a  Price  Index  is
                    available.

                         8.1.1.3 In the event the Price Index shall hereafter be
                    converted  to  a  different   standard   reference  base  or
                    otherwise revised,  the determination of the adjusted dollar
                    amounts  

                                       13
<PAGE>


                    hereunder  shall  be made  with  the use of such  conversion
                    factor,  formula or table for  converting the Price Index as
                    may be  published  by the  Bureau  of Labor  Statistics,  or
                    Prentice  Hall,  Inc.  or any  other  nationally  recognized
                    publisher of similar statistical information. If at any time
                    during  the Lease  Term the Price  Index  shall no longer be
                    published by said Bureau,  then any comparable  index issued
                    by said  Bureau  or  similar  agency  of the  United  States
                    issuing  similar  indices  shall be used for the purposes of
                    making  the  adjustments  under  Article  III and under this
                    Article  VIII,  the  same,   however,  to  be  appropriately
                    adjusted  in  order  to give  effect  to the  intent  of the
                    foregoing  provisions  of this Lease.  In the event that the
                    U.S.  Department  of  Labor,  Bureau  of  Labor  Statistics,
                    changes the publication frequency of the Price Index so that
                    a Price  Index  is not  available  to make a  cost-of-living
                    adjustment as herein provided in Article III or this Article
                    VIII for the month specified, the cost-of-living  adjustment
                    to be made  thereunder  shall  be  based  on the  percentage
                    difference between the Price Index for the closest preceding
                    month  for  which a Price  Index is  available  and the Base
                    Price Index.

          8.1.2     Tenant  shall  keep  the  Demised  Premises  free  from  any
                    mechanic's, materialman's, or similar liens and encumbrances
                    and any claims  therefor in connection  with any Repairs and
                    Tenant shall remove any such lien or encumbrance, by bond or
                    otherwise,   within  thirty  (30)  days  after  notice  from
                    Landlord of the same. If Tenant fails to do so, Landlord may
                    pay the amount of such  claim or take such  other  action as
                    Landlord  deems  reasonably  necessary to remove such claim,
                    lien,  or  encumbrance  after   investigating  the  validity
                    thereof.  The amount so paid and costs  incurred by Landlord
                    shall be deemed additional rent under this Lease, payable on
                    demand,   when  accompanied  by  detailed   information  and
                    invoices regarding such amount.  Nothing in this Lease shall
                    be deemed a consent by Landlord to the filing of any lien on
                    Landlord's  interest  in the Demised  Premises  and any such
                    liens  shall  attach  solely  to  Tenant's  interest  in the
                    Demised Premises and shall in all respects be subordinate to
                    Landlord's  interest in the Demised  Premises.  Tenant shall
                    not do  anything  or  permit  anything  to be done  upon the
                    Demised  Premises which will materially and adversely affect
                    the safety or security of the Demised  Premises,  which will
                    increase  the rate of fire or  casualty  insurance  upon the
                    building  or  its  contents,   without   Landlord's  written
                    consent, which consent shall not be unreasonably withheld or
                    delayed,  or  which  will  cause  structural  damage  to the
                    Demised  Premises  or any  Leased  Improvements.  Except for
                    trade  fixtures,   any  improvements  made  to  the  Demised
                    Premises  shall  become the  property of  Landlord,  free of
                    charge, if affixed to the realty.

          8.1.3     Tenant's  obligation  to perform  Repairs shall also include
                    without  limitation  the  repair and  maintenance  of Leased
                    Equipment and the replacement from time to time of obsolete,
                    damaged or  unsightly  Leased  Equipment,  so as to keep the
                    same in good operating  condition  consistent with a nursing
                    care  or  assisted  living  facility,   whichever  is  being
                    operated  at the Demised  Premises at the time in  question.
                    Notwithstanding  anything to the contrary  contained in this
                    Lease,  any Leased  Equipment which is leased or the subject
                    of  a   conditional   sales   agreement  or  other   finance
                    arrangement at the  


                                       14
<PAGE>

                    commencement of the Initial Term and any  replacement(s)  of
                    such Leased Equipment may be encumbered similarly during the
                    Lease Term.

          8.1.4     Notwithstanding  anything to the contrary  contained in this
                    Lease,  if Tenant is required to make any  expenditures  for
                    Repairs  (whether  or  not  in  order  to  comply  with  all
                    applicable  laws,  regulations and municipal  ordinances) to
                    the Demised  Premises during the last two Lease Years of the
                    Lease Term  (excluding  Repairs that are required to be made
                    as a result of Tenant's, or Tenant's agents',  employees' or
                    contractors'   negligence  or  wilful   misconduct),   which
                    expenditures  according  to  generally  accepted  accounting
                    principles ("GAAP") should be capitalized (such expenditures
                    being    hereinafter     collectively     called    "Capital
                    Expenditures")  and if any  such  Capital  Expenditure  is a
                    Major Capital Expenditure (as hereinafter  defined),  Tenant
                    shall send to Landlord a notice of such circumstance,  which
                    notice shall specify the nature of the repair,  replacement,
                    alteration  or  improvement  for  which  the  Major  Capital
                    Expenditure is being incurred (hereinafter called a "Capital
                    Improvement")   and  the  estimated  cost  of  such  Capital
                    Improvement.  Tenant  shall  only be  obligated  to pay that
                    portion  ("Tenant's  Share")  of the  cost of  such  Capital
                    Improvement  as shall be equitably  apportioned to it taking
                    into  consideration the reasonable useful life (according to
                    GAAP) of such Capital  Improvement  and the unexpired  Lease
                    Term and the cost of such Capital  Improvement  in excess of
                    Tenant's  Share (such excess cost being  hereinafter  called
                    "Landlord's Share") shall be borne by Landlord. Tenant shall
                    only be obligated to make the Capital Improvement if, within
                    ten (10)  business  days after  Landlord  receives  Tenant's
                    above-described  notice,  Tenant and  Landlord  agree on the
                    determination of Tenant's Share and Landlord's Share of such
                    Major Capital  Expenditure  and the manner in which Landlord
                    will pay and/or reimburse Landlord's Share to Tenant. If the
                    parties  cannot  agree on an  equitable  sharing of any such
                    Major Capital  Expenditure  or the manner of payment  and/or
                    reimbursement,  Tenant  may  (i)  seek to  have  the  matter
                    resolved by arbitration as elsewhere  provided in this Lease
                    prior  to   undertaking   to   perform   any  such   Capital
                    Improvement,  (ii) perform any such Capital  Improvement and
                    during and/or after the performance thereof seek to have the
                    matter resolved by arbitration as elsewhere provided in this
                    Lease,  in which case  immediately  upon  resolution of such
                    matter Landlord shall pay to Tenant and/or  reimburse Tenant
                    for Landlord's Share of the cost thereof, or (iii) terminate
                    this Lease upon not less than thirty (30) days prior written
                    notice to  Landlord.  In the  event  that  after  allocating
                    Landlord's and Tenant's  respective  Shares of the cost of a
                    Capital  Improvement,  Tenant  exercises  a renewal  option,
                    Tenant shall reimburse  Landlord for the unamortized  amount
                    of  Landlord's  Share of any such cost  theretofore  paid by
                    Landlord  with  interest  thereon  at the rate per annum set
                    forth in Article III hereof.

         As used  herein,  a  "Major  Capital  Expenditure"  means  any  Capital
Expenditure  which is required to be made during the last two Lease Years of the
Lease Term and which exceeds $25,000 


                                       15
<PAGE>

individually, or which, when added to all other Capital Expenditures theretofore
incurred by Tenant during such period, exceeds $100,000.

          8.1.5     Notwithstanding  anything to the contrary  contained in this
                    Lease,  Tenant  shall not be obligated to make or to pay for
                    any Repairs that are required as a result of the  negligence
                    or  wilful  misconduct  of  Landlord,  or  any of its or its
                    affiliates'   (which  shall  include  an  affiliate  of  The
                    Homestead Company, L.C. or of Jack West), employees,  agents
                    or contractors or as provided in paragraph 8.1.6 below.

          8.1.6     Landlord   agrees   that  if  at  any  time  or  times   any
                    governmental  authorities or insurance rating bureaus having
                    jurisdiction  shall complain that the Demised  Premises,  or
                    any portion thereof, were not constructed in compliance with
                    any  law,   ordinance  or  regulation  of  any  governmental
                    authority or insurance rating bureau having jurisdiction and
                    shall request compliance,  then Landlord shall, upon receipt
                    of notice of such complaint, cause such repairs, alterations
                    or other work to be done so as to bring about the compliance
                    requested.

         8.2 QUALITY AND  PROMPTNESS OF REPAIRS AND  REPLACEMENTS;  OWNERSHIP OF
REPLACEMENTS AND WARRANTIES . All repairs and replacements  made by Tenant shall
be made when reasonably necessary and within a reasonably prompt period of time;
shall be with new or  like-new  materials  of at least  equal or  better  value,
utility and condition to that which the same was in at the  commencement  of the
Initial Term, taking into consideration the quality of materials and workmanship
of the same, and shall be done in compliance  with all applicable  laws,  codes,
ordinances,  rules,  regulations  and  statutes of the city,  county,  state and
federal governments.

         Any such replaced Leased  Equipment shall be and remain the property of
Landlord; provided, however, that if any item of Leased Equipment is replaced by
Tenant  during the Lease Term at Tenant's sole cost and expense with an upgraded
item of Leased  Equipment,  then Tenant shall have the right prior to the end of
the Lease Term to either  remove such  upgraded item and replace the same with a
like item of Leased Equipment of equal or better quality, design and function as
existed on the Commencement Date.

         Landlord  agrees  that  it will  give  to  Tenant  the  benefit  of all
warranties and  guarantees  they may have received or be entitled to from any of
their  contractors or materialmen  with respect to the Demised Premises and that
Tenant may enforce the same either in Tenant's name or in Landlord's name.

         8.3  LIABILITY OF LANDLORD . Except if caused by  Landlord's  breach of
this Lease or by the  negligence or willful  misconduct of Landlord or of any of
its affiliates' (which shall include an affiliate of The Homestead Company, L.C.
or of Jack West),  employees,  agents or contractors,  all property belonging to
Tenant or any  occupant  of the Demised  Premises  shall be there at the risk of
Tenant or such other  occupant  only, and Landlord shall not be liable for theft
or  misappropriation  thereof,  or loss or  damage to any such  property  due to
vandalism,  water, rain, snow, frost,  fire, storm or accident,  or by breakage,
stoppage or leakage of water,  gas,  heating or sewer pipes or  plumbing,  upon,
about or adjacent to the Demised Premises or by any other cause.



                                       16
<PAGE>

         8.4  REMOVAL  OF  PERSONAL  PROPERTY  .  Provided  that  Tenant has not
accepted an offer to purchase the Demised  Premises and Other Assets pursuant to
the  Right of First  Refusal  Agreement,  dated of even date  herewith,  between
Landlord and Tenant (the "Right of First  Refusal"),  or has not  exercised  its
option to purchase the Demised  Premises and Other Assets pursuant to a separate
Purchase Option Agreement by and among the parties hereto, executed of even date
herewith (the "Option  Agreement"),  upon the  expiration or termination of this
Lease,  Tenant,  at its sole cost and  expense,  shall  remove  from the Demised
Premises all of Tenant's personal  property and equipment.  If any disfigurement
or damage  results  from such  removal,  repairs  shall be made by Tenant at its
expense to restore the Demised Premises to its original condition, ordinary wear
and tear excepted.

         If upon  surrender to Landlord of possession  of the Demised  Premises,
Tenant,  at its sole cost and  expense,  does not  within  ten (10)  days  after
Landlord's demand remove Tenant's personal property and equipment,  Landlord, at
Landlord's  election,  shall have the right to treat Tenant's property as having
been abandoned by Tenant to Landlord without any payment or offset.


                                   ARTICLE IX
                                      SIGNS

         Tenant  shall have the right to place upon the  Demised  Premises  such
sign or signs as it may desire,  at Tenant's  sole cost and  expense.  All signs
shall  comply with all  applicable  federal,  state and local  statutes,  rules,
regulations and ordinances.  Tenant shall maintain such signs in a good state of
repair  and shall  repair  any  damage  to the  Demised  Premises  caused by the
erection, maintenance or removal at the termination of this Lease of such signs.
Upon the  termination  of this  Lease,  all signs of Tenant  shall be removed in
accordance with Section 8.4.


                                    ARTICLE X
                    ASSIGNMENT, SUBLETTING AND SUBORDINATION

         10.1  ASSIGNMENT  OR  SUBLETTING  BY  TENANT.   Except  as  hereinafter
provided,  Tenant shall not assign,  transfer,  pledge,  hypothecate or encumber
this Lease or any interest  herein,  or sublet the Demised  Premises or any part
thereof or any right or privilege appurtenant thereto, or allow any person other
than Tenant and its agents,  managers,  concessionaires,  licensees,  employees,
residents,  patients and medical staff to occupy or use the Demised  Premises or
any part thereof without  Landlord's prior written consent,  which consent shall
not  be  unreasonably  withheld  or  delayed.   Notwithstanding  the  foregoing,
Landlord's  consent  shall not be required  for, and this Section 10.1 shall not
prohibit,  (i) an assignment to a corporate  parent,  affiliate or subsidiary of
Tenant,  or any  joint  venture,  partnership  or other  entity,  provided  such
assignee  is  either  Integrated  Living   Communities,   Inc.  ("ILCI")  or  is
"controlled"  directly or indirectly by ILCI (the term  "control" as used herein
shall be deemed to mean  ownership  of at least  50% of the  outstanding  voting
stock of a corporation,  or other majority  equity and voting  interest if not a
corporation);  (ii) an  assignment  in  connection  with the sale of ten percent
(10%) or more of ILCI's  assets and (iii) an  assignment  in  connection  with a
merger or  consolidation.  Any  unauthorized  assignment  or  sublease  shall be


                                       17
<PAGE>

voidable and shall  constitute a breach of this Lease at Landlord's  option.  No
assignment  of this Lease  shall be binding on  Landlord  until (a) a  duplicate
original of such assignment, duly executed by the assignor shall be delivered to
Landlord,  and (b) the  assignee  shall  execute  and  deliver  to  Landlord  an
instrument in and by which the assignee shall assume and agree to perform,  from
and after the effective date of the assignment,  all of the terms, covenants and
conditions of this Lease on Tenant's part to be performed.  At least thirty (30)
days prior to the effectiveness of any assignment as to which Landlord's consent
is required,  Tenant shall deliver to Landlord a package of relevant information
concerning the assignee.  For purposes of this Lease,  any sale or transfer of a
controlling  interest in Tenant shall be deemed an assignment of this Lease.  No
assignment,  sale, transfer, pledge,  hypothecation or encumbrance shall relieve
Tenant  of any  obligation  contained  in this  Lease.  Tenant  shall pay all of
Landlord's  reasonable  costs and expenses (not in excess of $2,500),  including
reasonable  attorney's fees,  incurred in connection with any assignment,  sale,
transfer, pledge,  hypothecation,  encumbrance or sublease, for which Landlord's
consent is required.

         10.2 LEASEHOLD MORTGAGES. Tenant shall have the right from time to time
to pledge, hypothecate, encumber or mortgage this Lease (each herein referred to
as a "leasehold mortgage").  Landlord hereby expressly agrees that the holder of
such leasehold  mortgage shall be entitled to all of the rights,  privileges and
powers  afforded to the holder or holders of leasehold  mortgages under this and
other Articles of this Lease.

          10.2.1    Notwithstanding  anything to the contrary  contained in this
                    Lease,  if so  requested  by the  holder  of  any  leasehold
                    mortgage,  any  notice  from  Landlord  to  Tenant  shall be
                    simultaneously  delivered to such leasehold mortgagee at his
                    or its address,  and no notice of default or  termination of
                    this  Lease  given by  Landlord  to  Tenant  shall be deemed
                    legally  effective  until and unless  notice of such default
                    and  notice of such  termination  shall  have been  given by
                    Landlord  to  such  leasehold   mortgagee.   Such  leasehold
                    mortgagee   entitled  to  such  notice  shall  have  and  be
                    subrogated  to any and all rights of Tenant with  respect to
                    any  default  hereunder  by Tenant.  Without  impairing  the
                    generality  of the  foregoing  right of  subrogation,  it is
                    specifically  agreed that any such leasehold mortgagee shall
                    have the right to  appoint  an  arbitrator,  in case  Tenant
                    shall fail to make such  appointment  after  written  notice
                    from  Landlord  as provided in Article XVI hereof (a copy of
                    which  notice shall have been  simultaneously  given to such
                    leasehold mortgagee),  and, for this purpose,  shall have an
                    additional   period  of  fifteen  (15)  days  to  make  such
                    appointment, and the arbitrator so appointed shall thereupon
                    be  recognized  in all  respects  as if he or she  had  been
                    appointed by Tenant.

          10.2.2    Landlord  will not accept  any  surrender,  cancellation  or
                    enter into any  modification of this Lease without the prior
                    written  consent  thereto  of the  holder  of any  leasehold
                    mortgage  who shall  become  entitled  to notice as provided
                    above.

          10.2.3    If, by reason of any default by Tenant,  this Lease shall be
                    terminated  at the election of Landlord  prior to the stated
                    expiration thereof,  Landlord will enter into a new lease of
                    the  Demised   Premises  and  the  Other  Assets  with  such

                                       18
<PAGE>


                    leasehold  mortgagee  (i.e. the holder of a mortgage on this
                    Lease who shall  become  entitled  to  notice,  as  provided
                    above)  or  its  nominee  for  the  remainder  of  the  term
                    effective  as of the date of such  termination,  at the same
                    Annual Rent and upon the same terms,  provisions,  covenants
                    and agreements herein contained,  subject,  however,  to the
                    rights,  if any, of any parties  then in  possession  of any
                    part of the Demised  Premises,  provided (a) said  leasehold
                    mortgagee  shall make written request upon Landlord for such
                    new lease within forty-five (45) days after the date of such
                    termination  and such  written  request  is  accompanied  by
                    payment to  Landlord  of all sums which would then be due to
                    Landlord under this Lease but for the  termination  thereof,
                    the amount of which Landlord agrees to advise such leasehold
                    mortgagee of in writing  upon  request;  (b) said  leasehold
                    mortgagee pays to Landlord, at the time of the execution and
                    delivery of said new lease,  any and all sums and reasonable
                    expenses,  including  reasonable  attorneys'  fees, to which
                    Landlord shall have been subjected or paid by reason of such
                    default,  the  amount of which  sums and  expenses  Landlord
                    agrees to advise such leasehold mortgagee of in writing upon
                    request,  and (c)  said  leasehold  mortgagee  shall,  on or
                    before execution and delivery of said new lease, perform and
                    observe  all  the  other  covenants  and  conditions  herein
                    contained on Tenant's  part to be performed and observed but
                    for such  termination  to the extent that Tenant  shall have
                    failed to perform  and  observe  the same,  Landlord  hereby
                    agreeing to advise such leasehold mortgagee in writing, upon
                    request,  of the covenants and conditions which Tenant shall
                    have  failed to perform and the extent of such  failure.  If
                    during such period of forty-five (45) days requests for such
                    new  lease  shall  be  made  by  more  than  one   leasehold
                    mortgagee,  then provided the provisions of this Section are
                    complied  with,  Landlord  shall be  required to execute and
                    deliver such new lease to that  leasehold  mortgagee (or the
                    nominee thereof) lowest in order of priority of lien who (i)
                    cures all defaults under all prior leasehold mortgages, (ii)
                    delivers  to  Landlord  certificates  or  letters  from  the
                    holders of all prior  leasehold  mortgages  which certify or
                    state that no default then exists under such prior leasehold
                    mortgages and (iii)  executes and  delivers,  at the time of
                    the  execution  of such  new  lease,  new  mortgages  to the
                    holders  of all  prior  leasehold  mortgages  on this  Lease
                    having the same terms and conditions,  and securing the same
                    amounts,  as  such  prior  leasehold  mortgages.   Upon  the
                    execution  and  delivery  of such new lease,  any  subleases
                    which may have  theretofore been assigned and transferred to
                    Landlord  shall  thereupon  be  assigned  and   transferred,
                    without  recourse,  by Landlord to the new tenant.  Such new
                    lease  shall  have the same  rights and  priorities  as this
                    Lease.

          10.2.4    If Landlord shall elect to terminate this Lease by reason of
                    any  default  other than a default in the  payment of money,
                    the then holder of any leasehold  mortgage on this Lease who
                    shall have become  entitled  to notice,  as provided in this
                    Article,  shall not only have and be  subrogated  to any and
                    all rights of Tenant  with  respect to curing of any default
                    and have the right to obtain a new lease as above  provided,
                    but shall  also have the right to  postpone  and 


                                       19
<PAGE>

                    extend the specified date for the termination of this Lease,
                    as  fixed by  Landlord  in a notice  of  termination,  for a
                    period of not more than six (6) months (subject to extension
                    as provided below),  provided such leasehold mortgagee shall
                    thereafter  promptly cure all defaults which may be cured by
                    the  payment  of a sum of money  and  undertake  to cure any
                    other then  existing  default of Tenant and shall  forthwith
                    initiate steps to acquire Tenant's interest in this Lease by
                    foreclosure  of its mortgage or otherwise.  Such right shall
                    be exercised by such  leasehold-mortgagee's  giving Landlord
                    notice of the exercise of the same prior to the  termination
                    date fixed in Landlord's  notice of termination.  If, before
                    the date  specified  for the  termination  of this  Lease as
                    extended by such  leasehold-mortgagee,  Tenant shall be duly
                    removed   from   possession,   and  if  an   assumption   of
                    performances  and observance of the covenants and conditions
                    herein  contained  on  Tenant's  part  to  be  performed  or
                    observed  shall be  delivered  to Landlord by the  leasehold
                    mortgagee,  or its  nominee,  then  and in  such  event  the
                    default  under this Lease shall be deemed cured and removed;
                    and  provided,  further,  that if at the end of said six (6)
                    month  period  such  leasehold  mortgagee  shall be actively
                    engaged in steps to acquire Tenant's  interest  herein,  the
                    time  of  such  leasehold   mortgagee  to  comply  with  the
                    provisions  of this  Article  shall  be  extended  for  such
                    additional  period  or  periods  as  shall be  necessary  to
                    complete  such steps with  diligence,  provided  that during
                    such extension no further default shall occur hereunder. Any
                    payment  to be made or  action  to be taken  by a  leasehold
                    mortgagee  under this Article as a prerequisite in obtaining
                    a new lease or keeping  this Lease in effect shall be deemed
                    properly to have been made or taken by a leasehold mortgagee
                    if such  payment  is made or action  taken by a  nominee  or
                    agent of such leasehold mortgagee.

         10.3 SUBORDINATION AND ATTORNMENT . Landlord covenants,  represents and
agrees that this Lease, as the same may be modified,  amended or renewed,  shall
not be subject or  subordinate  to any  mortgage or  mortgages  now or hereafter
placed upon, or any other liens or  encumbrances  hereafter  affecting,  the fee
title of the Demised  Premises  except as otherwise  expressly  provided in this
Section  10.3,  and that  Landlord  will  promptly  and  fully  pay when due all
indebtedness,  and perform when  required all  obligations,  secured by any such
mortgages  or liens,  and  shall not  commit  or  permit  any  default  to occur
thereunder.  In the event that for any reason whatsoever  Landlord shall fail or
refuse to pay,  satisfy  and  discharge  any lien or  mortgage  encumbering  the
Demised  Premises  not later  than the date the same  becomes  due and  payable,
Tenant shall have the right, but not the obligation,  itself to pay, satisfy and
discharge the same, in which event (i) Tenant shall have the right to receive an
assignment  of such  mortgage  (and  the  note  secured  thereby)  and  promptly
thereafter to institute  foreclosure  or other  proceedings  to enforce the same
(and the note secured thereby),  it being agreed that if Tenant so acquires such
mortgage  (and the note  secured  thereby)  the same  shall be  deemed  to be in
default by virtue of  Landlord's  failure to comply with the  provisions of this
Section, which provisions shall be deemed for such purpose to be an agreement of
modification  of such  mortgage  (and the note  secured  thereby);  and (ii) any
amounts  expended  and  expenses  incurred by Tenant in paying,  satisfying  and
discharging  such  mortgage,   and  in  bringing  proceedings  to  foreclose  or
otherwise,  to  enforce  the same,  including,  without  limitation,  reasonable
attorneys'  fees,  to the extent not paid by Landlord to Tenant,  together  with
interest thereon at the rate per annum set 


                                       20
<PAGE>


forth in Section  3.1.4 hereof,  shall be  deductible  by Tenant,  together with
interest  thereon at the rate  aforesaid,  from the  installments of Annual Rent
thereafter  falling  due  hereunder.  The rights and  remedies  provided  for in
subdivisions (i) and (ii) above shall be cumulative and not mutually  exclusive.
Tenant agrees that upon request of Landlord in writing,  it will subordinate the
lien of this Lease to the lien of any mortgage on the Demised  Premises,  and to
all  renewals,  modifications,  amendments,  consolidations,   replacements  and
extensions  thereof,  provided  that  Tenant  shall be  granted a  subordination
non-disturbance and recognition agreement in substantially the form of Exhibit E
attached  hereto  (a  "Subordination  Agreement")  from  the  holder(s)  of such
mortgage.  The receipt of a  Subordination  Agreement  from the holder(s) of any
mortgage  on the  Demised  Premises  to which  this  Lease is  subordinate  is a
condition to the commencement of the Lease Term.  Further,  Tenant, as a part of
any  Subordination  Agreement,  if  requested,  shall  agree  to  attorn  to the
holder(s) of such mortgage or to a purchaser at  foreclosure  or deed in lieu of
foreclosure, in a manner reasonably acceptable to the holder(s) of such mortgage
and Tenant. Landlord may not place any mortgage on the Demised Premises when the
aggregate  annual debt service on such  mortgage and all other  mortgages on the
Demised  Premises would exceed 90% of the Annual Rent which is then in effect or
will be in  effect  during  the term of such  mortgage,  or when  the  aggregate
principal  debt secured by said mortgage and all other  mortgages on the Demised
Premises  would  exceed 80% of the fair market  value of the  Demised  Premises.
Landlord shall give Tenant ten (10) days prior notice of the closing of any loan
to be secured by a mortgage on the Demised Premises.

          10.3.1    If Tenant  shall  give  Landlord  any notice of a default or
                    breach by Landlord,  Tenant agrees to give a similar written
                    notice to the  holder(s)  of  record of any fee  mortgage(s)
                    (provided   Tenant  has  received  written  notice  of  said
                    mortgage(s),  including the name(s) and  address(es)  of the
                    then holder(s) of such  mortgage(s),  in the manner provided
                    for in  Article  XVIII  hereof  for the giving of notices to
                    Tenant),  by registered or certified  mail, to such holders'
                    respective addresses specified in the aforementioned  notice
                    to  Tenant,  or to any  different  address  which  they  may
                    designate  for the purpose by notice  given to Tenant in the
                    aforesaid  manner;  and such holder(s) shall be permitted to
                    correct or remedy  such  breach or  default  within the same
                    time within  which  Landlord may do so, and with like effect
                    as if Landlord had done so. Tenant's failure to give to such
                    holder(s)  the notice  provided in this Section shall not be
                    deemed a default by Tenant  under this Lease,  but no notice
                    given by  Tenant to  Landlord  of any  default  or breach by
                    Landlord  shall be deemed  legally  effective  until  Tenant
                    shall have given such notice to the  holder(s)  of the first
                    fee mortgage at the time on the Demised  Premises  (provided
                    Tenant has  received  notice of said  holder(s)  as provided
                    above).  In no event  shall  Tenant be required to give more
                    than one notice,  to be sent to one  address,  in respect of
                    any one mortgage pursuant to this Section.

          10.3.2    In the event that any fee mortgagee comes into possession or
                    ownership of the title to the Demised Premises,  or acquires
                    the interest of Landlord by  foreclosure of its mortgage) or
                    by  proceedings  on the  bond or debt  secured  thereby,  or
                    otherwise,  Tenant agrees to attorn to such fee mortgagee as
                    its new landlord.

                                       21
<PAGE>

         10.4 SALE BY  LANDLORD .  Landlord  covenants  that it will not sell or
convey any right,  title or interest in the Demised  Premises prior to the first
anniversary of the Commencement Date, without Tenant's prior written consent. In
any event,  any sale or conveyance of the Demised  Premises or any part thereof,
shall be subject  to the Option  Agreement  and the Right of First  Refusal  and
shall be made subject to this Lease.

          10.4.1    In the event of a sale or transfer  of the Demised  Premises
                    by Landlord, with respect to either of which either Tenant's
                    consent has been obtained or is not required, the grantor or
                    transferor  shall  thereafter  be  entirely  relieved of all
                    obligations  thereafter  to be performed  by Landlord  under
                    this Lease, provided that the purchaser or transferee on any
                    such sale or transfer  has assumed and agreed  pursuant to a
                    written  instrument   satisfactory  to  Tenant  to  perform,
                    observe  and be bound by any and all  covenants,  conditions
                    and  obligations of Landlord  hereunder and under the Option
                    Agreement  and the Right of First  Refusal  arising from and
                    after such sale or transfer  and to be subject to all of the
                    rights of Tenant  under this Lease and the Option  Agreement
                    and the Right of First Refusal  whether  arising prior to or
                    after such sale or transfer,  including  without  limitation
                    all setoff rights,  and provided further that (i) any amount
                    then due and payable to Tenant or for which  Landlord or the
                    then grantor or transferor would otherwise then be liable to
                    Tenant  shall be paid to Tenant;  (ii) the  interest  of the
                    grantor  or  transferor  in any  funds  then in the hands of
                    Landlord or the then grantor or  transferor  in which Tenant
                    has an interest  shall be turned  over,  subject to Tenant's
                    interest,  to the then  grantee  or  transferee;  and  (iii)
                    notice of such sale or  transfer  signed by  Landlord or the
                    then  grantor  or  transferor  and by the  then  grantee  or
                    transferee shall be delivered to Tenant together with a true
                    copy of the transfer document and a true copy of the written
                    assumption agreement.

         10.5 ESTOPPEL  CERTIFICATES  . Tenant,  upon request by Landlord or any
prospective or actual mortgagee or purchaser of the Facility,  shall execute and
deliver to  Landlord  within ten (10)  business  days,  after such  request,  an
estoppel certificate addressed to Landlord, and if requested by Landlord also to
such  mortgagee or purchaser  as is  identified  in  Landlord's  request,  which
estoppel  certificate  shall state, to the extent true, the following facts: (a)
that a Lease,  as attached to the  estoppel  certificate,  is a true and correct
copy of this Lease and that this Lease has not been modified except as set forth
in such  attachment or terminated;  (b) that the Annual Rent in this Lease as so
modified has not been modified;  (c) that there are no outside  agreements  that
would affect such mortgagee or purchaser or any of their rights under this Lease
or  to  the  Demised   Premises  except  as  otherwise  noted  in  the  estoppel
certificate; (d) that to Tenant's knowledge there are no disputes existing as to
this Lease; (e) that to Tenant's  knowledge Landlord has complied with the terms
of this Lease (as so amended) to the date of the estoppel certificate and is not
in default under any of its obligations  contained in this Lease (as so amended)
(or if such is not the case, specifying the nature thereof) and Landlord has not
given Tenant notice of any default which remains  uncured (or if such is not the
case, specifying the nature thereof); (f) that no Annual Rent has been paid more
than thirty (30) days in advance; (g) that Tenant has accepted possession of the
Demised Premises; (h) the dates through which Annual Rent has been paid; and (i)
any other terms  reasonably  acceptable to Tenant or reasonably  required by any
actual or  prospective  mortgagee or purchaser.  Notwithstanding  the


                                       22
<PAGE>

foregoing,   Tenant  shall  not  be  obligated  to  furnish  any  such  estoppel
certificate  more often than two times  during any Lease Year unless the request
for the same is being made in  contemplation  of the sale or  mortgaging  of the
Demised  Premises and the  prospective  purchaser or mortgagee is requiring  the
same.


                                   ARTICLE XI
                                     DEFAULT

         11.1  DEFAULT  BY  TENANT  . The  occurrence  of any one or more of the
following  events  shall  constitute  a "default"  or "Event of Default" for the
purposes of this Lease:

         (a) The failure of Tenant to pay any part of an Annual Rent payment due
under this Lease on or before its due date, which failure continues for ten (10)
days after the receipt of written notice from Landlord.

         (b) Any  assignment,  transfer or sublease of this Lease or the Demised
Premises in violation of Article X hereof.

         (c) The failure to occupy the Demised Premises on the Commencement Date
or the abandonment of the Demised Premises by Tenant.

         (d)  The  failure  of  Tenant  to  perform  any  material  covenant  or
obligation contained herein other than the payment of Annual Rent, which failure
has not been  corrected  by Tenant  within  thirty (30) days  following  written
notice from Landlord specifying the covenant or obligation to be remedied, or if
the  correction  of same  reasonably  requires  longer than thirty (30) days, if
Tenant shall not have  commenced to correct the same within such thirty (30) day
period and thereafter  proceed to cure the same in good faith,  with  diligence,
and within a reasonable period of time.

         (e) If any  representation  or warranty made by Tenant under this Lease
shall prove to have been false in any  material  respect  when made and the same
has not been  corrected  by Tenant  within  thirty (30) days  following  written
notice from Landlord  specifying the representation or warranty in question,  or
if the correction of same  reasonably  requires longer than thirty (30) days, if
Tenant shall not have  commenced to correct the same within such thirty (30) day
period and  thereafter be proceeding  with  reasonable  diligence to correct the
same.

         11.2  LANDLORD'S  RIGHTS AND REMEDIES . Upon the happening of any Event
of Default and during the  continuance  thereof,  Landlord,  at its option,  and
without further demand or notice,  shall have the following  rights and remedies
in addition to any rights provided by law, all of which shall be cumulative:

         (a)  Perform  any  covenant  or  obligation  of Tenant  and  charge the
reasonable  cost of the cure to the next  installment or  installments of Annual
Rent due.

                                       23
<PAGE>

         (b) Retake possession of the Demised Premises without  terminating this
Lease and relet the Demised  Premises or any part thereof to a third  party.  If
Landlord relets the Demised  Premises (either for a term greater than, less than
or equal to the  unexpired  portion  of the Lease  Term) for an  aggregate  rent
during the  portion of such new lease  which is less than  Annual Rent and other
charges  which  Tenant  would  pay  hereunder  for  such  period,  Landlord  may
immediately  upon  the  making  of such  new  lease,  sue for  and  recover  the
difference  between the aggregate  rental provided for in said new lease for the
balance of the term  coextensive  with the Lease Term, and the Annual Rent which
Tenant  would  pay  hereunder  for such  period,  together  with any  reasonable
expenses to which  Landlord may be put for  brokerage  commissions,  placing the
Demised Premises in tenantable condition,  and other related charges or expenses
accrued  prior to the new lease or  otherwise.  In the event  Landlord  does not
collect  the entire  amount of the  aggregate  rental  provided  for in such new
lease,  Landlord  may sue for and recover the  difference  between the amount of
such aggregate rental actually  collected and the Annual Rent which Tenant would
pay hereunder.  If such new lease or tenancy is made for a shorter term than the
balance of the Lease Term, or for a greater  rental,  any such action brought by
Landlord to collect the deficit  for that  period  shall not bar  Landlord  from
thereafter suing for any loss accruing during the balance of the unexpired Lease
Term whether or not due to expiration or termination of the new lease.

         (c) Give a thirty  (30)  day's  notice  of  termination  of this  Lease
(regardless  of whether  Landlord  prior to the giving of such notice shall have
accepted  rent  or any  other  payment,  however  designated,  for  the  use and
occupancy of the Demised  Premises from or on behalf of Tenant or from any other
person) to Tenant  specifying  such Event or Events of Default and stating  that
this Lease and the Lease Term shall expire and  terminate on the date  specified
in such  notice,  which date shall be at least ten (10) days after the giving of
such  notice.  In the event such notice is given,  this Lease and the Lease Term
and all rights of Tenant  under this Lease shall expire and  terminate  upon the
date  specified in such notice with the same effect as if the date  specified in
such notice were the date  originally set forth in this Lease for the expiration
of the term, but Tenant shall remain liable as provided below.

         Upon any such  expiration or  termination  of this Lease,  Tenant shall
quit and peacefully  surrender the Demised  Premises to Landlord,  and Landlord,
upon or at any time  after any such  expiration  or  termination,  may,  without
further  notice,  enter upon and re-enter  the Demised  Premises and possess and
repossess itself thereof, by summary  proceedings,  ejectment or otherwise,  and
may dispossess  Tenant and remove Tenant and all other persons and property from
the Demised  Premises and may have, hold and enjoy the Demised  Premises and the
right to receive all rental income of and from the same.

         No such expiration or termination of this Lease, including the re-entry
of Landlord,  shall relieve  Tenant of its liability and  obligations to pay the
Annual Rent theretofore accrued or thereafter accruing, as more particularly set
forth in paragraph (g) below,  and such liability and obligations  shall survive
any such expiration or termination.

         (d)  Tenant  knowingly  and  voluntarily  waives  any and all rights of
redemption which Tenant may now have or hereafter acquire pursuant to statute or
court decision, except for notice as provided in this Article.

                                       24
<PAGE>

         (e) The  rights  and  remedies  given to  Landlord  in this  Lease  are
distinct,  separate and cumulative, and no one of them, whether or not exercised
by Landlord,  shall be deemed to be in exclusion of any of the others  herein or
by law or in equity  provided and the exercise by Landlord of any one or more of
the  rights or  remedies  provided  for in this  Lease  shall not  preclude  the
simultaneous  or later  exercise  by  Landlord  of any or all  other  rights  or
remedies.

         (f)  No  receipt  of  monies  by  Landlord   from  Tenant,   after  the
cancellation or termination of this Lease in any lawful manner, shall reinstate,
continue or extend the Lease  Term,  or affect any notice  theretofore  given to
Tenant or operate as a waiver of the right of Landlord to enforce the payment of
Annual Rent then due or  thereafter  falling  due, or operate as a waiver of the
right of Landlord to recover  possession of the Demised Premises by proper suit,
action,  proceeding or other remedy;  it being agreed that, after the service of
notice to cancel or terminate as herein  provided and the expiration of the time
therein  specified,  after the commencement of any suit,  action,  proceeding or
other  remedy or after a final order or judgment for  possession  of the Demised
Premises, Landlord may demand, receive and collect any monies due, or thereafter
falling  due,  without  in any  manner  affecting  such  notice,  suit,  action,
proceeding, order or judgment; and any and all such monies so collected shall be
deemed to be  payments  on  account  of the use and  occupation  of the  Demised
Premises,  or at the  election of  Landlord,  on account of  Tenant's  liability
hereunder.

         (g) In the event of the  termination  of this Lease as provided in this
Article  or by  operation  of law or  issuance  of a  dispossessory  warrant  or
otherwise, Tenant shall remain liable under this Lease for the payment of Annual
Rent and the observance and performance of all other covenants on its part to be
performed;  and  Landlord  shall have the right to alter,  change or remodel the
improvements  on the Demised  Premises and to lease or let the same, or portions
thereof,  or not to lease or let the same,  for such periods of time and at such
rentals and for such use and upon such  covenants and conditions as Landlord may
elect,  applying the net rentals or avails of such letting, if any, first to the
payment of Landlord's expenses in dispossessing Tenant and the costs or expenses
of making such improvements in the Demised Premises as may be necessary in order
to enable  Landlord to relet the same,  and then to the payment of any brokerage
commissions or other expenses of Landlord in connection with such reletting; and
the  balance,  if any,  shall be applied by Landlord  at least once a month,  on
account of the payments  due or payable by Tenant  hereunder,  if any,  with the
right  reserved to Landlord to bring such  action(s)  or  proceeding(s)  for the
recovery of any deficits remaining unpaid without being obliged to await the end
of the  Lease  Term  for a final  determination  of  Tenant's  account,  and the
commencement  or  maintenance  of any one or more actions shall not bar Landlord
from bringing other or subsequent  actions for further accruals  pursuant to the
provisions of this Section. Any balance remaining,  however,  after full payment
and  liquidation  of Landlord's  accounts for the remainder of the Lease Term as
aforesaid,  shall be paid to Tenant  with the right  reserved to Landlord at any
time, if it has not theretofore  terminated this Lease, to give notice to Tenant
of Landlord's  election to cancel this Lease and  discharge all the  obligations
thereunder  of either party to the other,  and the giving of such notice and the
simultaneous  payment by  Landlord  to Tenant of any credit  balance in Tenant's
favor that may at such time be owing,  shall  constitute  a final and  effective
cancellation  of this Lease and a discharge  of the  obligations  thereof on the
part of either party to the other. Tenant agrees to pay, in addition to the rent
and other sums required to be paid hereunder,  such additional sums as the court
may adjudge  reasonable  as  attorneys'  fees in any  successful  suit or action
instituted  by  Landlord  to  enforce  the  provisions  of  this  Lease  or  the
collections of the amounts due Landlord hereunder.  Should any rent collected by
Landlord be 


                                       25
<PAGE>

insufficient  to fully pay to Landlord a sum equal to all Annual  Rent  reserved
herein and other charges  payable  hereunder for the remainder of the Lease Term
originally  demised,  the balance or  deficiency  shall be paid by Tenant on the
rent days herein  specified,  that is, upon each of such rent days Tenant  shall
pay to Landlord the amount of the deficiency then existing;  and Tenant shall be
and remain liable for any such deficiency,  and the right of Landlord to recover
from  Tenant  the amount  thereof,  or a sum equal to all such  Annual  Rent and
Additional  Rent and  other  charges  payable  hereunder,  if there  shall be no
reletting,  shall  survive the  issuance of any  dispossessory  warrant or other
cancellation or termination hereof, and Landlord shall be entitled to retain any
surplus; and Tenant hereby expressly waives any defense that might be predicated
upon  the  issuance  of such  dispossessory  warrant  or other  cancellation  or
termination hereof.

         (h) In any of the  circumstances  mentioned  in  paragraph  (g) of this
Section in which  Landlord  shall have the right to hold Tenant  liable upon the
several  rent  days as  therein  provided,  Landlord  shall  have  the  right to
election, in place and instead of holding Tenant so liable, forthwith to recover
against  Tenant as damages  for loss of the  bargain  and not as a  penalty,  in
addition to any other damages  becoming due, an aggregate sum which, at the time
of the termination of this Lease or of the recovery of possession of the Demised
Premises by Landlord,  as the case may be,  represents the then present worth of
the excess  (computed by discounting  such excess at the simple rate of six (6%)
percent  per  annum),  if any,  of the  aggregate  of Annual  Rent and all other
charges  payable by Tenant  hereunder that would have accrued for the balance of
the Lease Term over the  aggregate  rental value of the Demised  Premises  (such
rental  value to be computed on the basis of a tenant  paying not only a rent to
Landlord  for the use and  occupation  of the  Demised  Premises,  but also such
additional rent and other charges as are required to be paid by Tenant under the
terms of this Lease) for the balance of such Lease Term.

         (i)  Suit or  suits  for the  recovery  of the  deficiency  or  damages
referred  to  above  in  paragraphs  (g)  and (h) of  this  Section,  or for any
installment or installments of Annual Rent hereunder,  or for a sum equal to any
such installment or installments  may be brought by Landlord,  from time to time
at Landlord's  election,  and nothing in this Lease contained shall be deemed to
require  Landlord to await the date  whereon  this Lease or the Lease Term would
have expired by  limitation  had there been no such default by Tenant or no such
cancellation or termination.

         (j)  Landlord's  failure  to insist on the  strict  performance  of and
compliance  with each  condition in this Lease shall neither  constitute  nor be
construed as  constituting a waiver by Landlord of Landlord's  rights under this
Article or by law, nor  constitute nor be construed as consisting of a waiver by
Landlord of a second or subsequent  default by Tenant of the same condition.  In
the event  litigation  is  commenced,  it shall not be necessary for Landlord to
notify Tenant of any  additional  occurrences  of default prior to proceeding as
permitted.

         (k) In the event of the termination or expiration of this Lease, Tenant
shall cooperate with Landlord in the transfer to the subsequent  operator of the
Facility  of all  licenses  and  permits  required  to  continue  to operate the
Facility as an assisted  living  facility or a nursing care facility,  whichever
was being operated at the Facility by Tenant at the time of such  termination or
expiration.

                                       26
<PAGE>

         11.3 DEFAULT BY LANDLORD . If Landlord  defaults in the  observance  or
performance  of any covenant,  condition or obligation in this Lease on its part
to be  observed  or  performed,  Landlord  shall  have  thirty  (30) days  after
receiving  written  notice from Tenant  stating  the default  complained  of and
referring to the Article and Section in this Lease relied on by Tenant,  to cure
or cause to be cured any such  default,  or if such  default  is not  capable of
being  cured  within  such  thirty (30) days to commence to cure the same during
such  thirty  (30) days and  thereafter  proceed to cure the same in good faith,
with diligence, and within a reasonable period of time.

         If Landlord fails to cure any such default or to diligently and in good
faith  pursue the cure as  provided  for  herein,  or if any  representation  or
warranty  made by or on behalf of Landlord  in this Lease or in any  document or
agreement  delivered in connection  with the  transactions  contemplated by this
Lease shall prove to have been false or  incorrect  or breached in any  material
respect  on the date as of which  made,  then  Tenant may sue  Landlord  for its
damages,  including,  without limitation,  such additional sums as the court may
adjudge  reasonable  as  attorneys'  fees  in  any  successful  suit  or  action
instituted by Tenant to enforce the  provisions  of this Lease,  and may further
obtain  injunctive  relief if  necessary  to maintain  operation  of the Demised
Premises  or comply  with  applicable  legal  requirements  of any  governmental
authority. In addition,  Tenant may at its option, without waiving any claim for
damages for breach of agreement,  at any time  thereafter  cure such default for
the  account of  Landlord,  and any  amount  paid or any  contractual  liability
incurred by Tenant in so doing shall be deemed paid or incurred  for the account
of Landlord,  and Landlord  agrees to reimburse  Tenant  therefor or save Tenant
harmless therefrom;  provided that Tenant may cure any such default as aforesaid
prior to the  expiration of said thirty (30) day period if reasonably  necessary
to cure a  default  under any  mortgage  or  encumbrance  which is a lien on the
Demised  Premises,  or to protect  the Demised  Premises  or  Tenant's  interest
therein,  or to prevent  injury or damage to persons or  property,  or to enable
Tenant to conduct its business in the Demised  Premises.  If Landlord shall fail
to reimburse  Tenant upon demand for any amount paid for the account of Landlord
hereunder  or for any other sum payable to Tenant  pursuant to this Lease,  said
amount plus  interest  thereon at the rate per annum set forth in Section  3.1.4
hereof from the date of demand upon  Landlord  for  payment,  may be deducted by
Tenant from the next or any succeeding payments of Annual Rent due hereunder.

         11.4  DELAYS .  Whenever  this Lease  requires  any act (other than the
payment of a liquidated sum of money, E.G., rental payments,  taxes,  utilities,
or any  obligation  that may be satisfied by the payment of a liquidated  sum of
money) by  Landlord  or Tenant  within a certain  period of time or by a certain
time,  the time for the  performance of such act shall be extended by the period
of any delay caused by war, strikes, lockouts, civil commotion, storms, weather,
electrical blackouts,  unpreventable material shortages, casualties, acts of God
or other  conditions  or events beyond the  reasonable  control of the obligated
party;  provided,  however,  that written notice of such delay and the cause and
circumstances  thereof  shall be given to the  other  party  promptly  after the
commencement of such delay and such delay becoming known by the obligated party.


                                       27
<PAGE>

                                   ARTICLE XII
                           DAMAGE TO DEMISED PREMISES

         12.1 MAJOR DAMAGE . In the event that the Demised  Premises are damaged
by fire or other casualty,  and the damage or loss exceeds $50,000,  then Tenant
shall promptly  notify Landlord in writing of such an event. If the damage is to
an extent that there is Major Damage,  as hereinafter  defined,  it shall be the
option of Tenant to cancel this Lease by written notice to Landlord within sixty
(60) days from the date of such Major Damage.

         The  term  "Major  Damage"  shall  mean  any  damage  wherein:  (a) the
estimated cost of fully  repairing the damage exceeds fifty percent (50%) of the
then full replacement  value or (b) 25% or more of the improvements are rendered
unsuitable  for  occupancy  or (c) the damage is caused by an event which is not
covered by the  insurance  policy which Tenant is required to carry  pursuant to
Article XV hereof,  and the estimated cost of fully repairing the damage exceeds
the net amount of insurance  proceeds received by Tenant with respect thereto by
$50,000 or more.  Annual Rent shall abate in  accordance  with  Section  12.2 if
Tenant is unable to use all or any part of the Demised  Premises  while  repairs
are being made;  provided,  however,  that any  abatement  so granted  shall not
exceed the amount of the proceeds actually received by Landlord under any policy
of rent insurance carried for the benefit of Landlord.

         If Tenant elects to terminate this Lease pursuant to this Section 12.1,
this Lease shall  terminate  fifteen (15) days after the date of notice,  Tenant
shall surrender possession to Landlord,  and all accrued rights under this Lease
shall survive termination.

         12.2  NONMAJOR  DAMAGE . Any  other  damage  to the  Facility  from any
casualty or risk which does not qualify as Major  Damage,  shall be deemed to be
nonmajor.  If Tenant  does not elect to  terminate  this  Lease  under the Major
Damage  provision in Section  12.1,  or if the damage is  nonmajor,  then Tenant
shall,  at its sole  cost  and  expense,  repair  or  rebuild  the  Facility  to
substantially the same condition as existed  immediately prior to the damage, in
accordance with applicable federal,  state and local statutes,  laws, ordinances
and codes and sufficient to meet licensure  requirements  of the State of Kansas
for  assisted  living  facilities  according  to the actual  use by Tenant.  The
restoration  shall be commenced  within ninety (90) days after  settlement shall
have been made with the insurance  companies and the insurance monies shall have
been turned over to the Insurance Trustee (as hereinafter defined) or Tenant, as
the case may be, as provided in Article XV hereof and the necessary governmental
approvals shall have been obtained, and such work shall be completed as promptly
as reasonably possible. Tenant shall also restore any damaged Leased Equipment.

         The Insurance Trustee shall,  provided this Lease shall then be in full
force and effect,  apply the net proceeds of any insurance to the payment of the
cost of such repairing or rebuilding as the same progresses, payments to be made
against properly  certified  vouchers of a competent  architect in charge of the
work who is selected by Tenant and approved by Landlord,  which  approval  shall
not be unreasonably withheld or delayed. The Insurance Trustee shall advance out
of such insurance  proceeds  toward each payment,  to be made by or on behalf of
Tenant,  an amount which shall bear the same  proportion  to such payment as the
whole amount received by the Insurance Trustee shall bear to the total estimated
cost of the repairing or rebuilding except,  however, that the Insurance Trustee
shall  withhold  from each amount so to be paid by it ten percent  (10%) thereof
until  


                                       28
<PAGE>

the work of repairing or rebuilding shall have been substantially completed, and
proof furnished that no lien has attached or will attach to the Demised Premises
in connection  with such repairs or rebuilding.  If the total  estimated cost of
the repairs or  rebuilding  shall  exceed the amount of the net proceeds of such
insurance  received by the Insurance  Trustee,  the  Insurance  Trustee shall be
entitled to require of Tenant  that,  before such  repairing  or  rebuilding  be
commenced,  the  Insurance  Trustee be secured by a surety bond or cash equal to
the amount of the excess of such estimated cost over the net insurance  proceeds
as security for the due completion, within a reasonable time, of such repairs or
rebuilding;  and if Tenant makes a cash deposit as aforesaid,  such cash deposit
shall be deemed to be part of the net insurance proceeds for the purpose of this
paragraph. The contract price fixed in Tenant's contract with the contractor who
or which will perform such  repairing  or  rebuilding  shall be deemed to be the
total  estimated  cost of such  repairs or  rebuilding  for the purposes of this
paragraph.  If the insurance  proceeds  shall exceed the cost of such repairs or
rebuilding,  the balance  remaining after payment of the cost of such repairs or
rebuilding shall be paid over and belong to Tenant.

         In the event  Tenant  is unable to use all or any part of the  Facility
while Tenant repairs or rebuilds same, then the Annual Rent shall be reduced and
abated by a just,  fair and  equitable  proportion  of the Annual  Rent  payable
according to the size, nature and extent of the property that is damaged, taking
into account the practical and economic  effect of the damage in question on the
operation of the Demised  Premises;  provided,  however,  that there shall be no
such  abatement in the event Tenant has not  maintained  insurance in accordance
with the  provisions  of Section  15.3.  The  abatement of the Annual Rent shall
commence  with the  date of the  damage  and  continue  until  the  repairs  are
substantially completed.  Other obligations of Tenant under this Lease shall not
abate in any manner.

                                  ARTICLE XIII
                    LANDLORD'S REPRESENTATIONS AND WARRANTIES

         Landlord and Jack West each hereby represents and warrants to Tenant as
follows:

         13.1  ORGANIZATION  AND  STANDING  OF  LANDLORD.  Landlord is a limited
liability  company duly organized,  validly  existing and in good standing under
the  laws of the  State of  Kansas.  Copies  of its  articles  of  organization,
operating  agreement  and all  amendments  thereto  to date  (collectively,  the
"Organizational  Documents")  have  been  delivered  to  Tenant,  and are  true,
complete and correct.  Landlord has the power and  authority to own the property
and assets now owned by it and to conduct the business presently being conducted
by it and as currently proposed to be conducted.

         13.2  AUTHORITY  . Landlord  has the full,  absolute  and  unrestricted
right,  power and  authority to make,  execute,  deliver and perform this Lease,
including all  Schedules  and Exhibits  hereto,  and the other  instruments  and
documents required or contemplated hereby and thereby  ("Landlord's  Transaction
Documents").  Such execution,  delivery,  performance and consummation have been
duly  authorized  by  all  necessary  action  (partnership,  corporate,  limited
liability  company,  trust  or  otherwise,  as the  case  may be) on the part of
Landlord,  its managing  member (as  hereinafter  defined) and members,  and all
consents of holders of indebtedness of Landlord have been obtained.

                                       29
<PAGE>

         13.3  BINDING  EFFECT.  This Lease  constitutes  the  legal,  valid and
binding obligation of Landlord,  enforceable against Landlord in accordance with
its terms and each of  Landlord's  Transaction  Documents  executed  by Landlord
constitute  the legal,  valid and binding  obligation  of Landlord,  enforceable
against Landlord in accordance with their respective terms.

         13.4  ABSENCE  OF  CONFLICTING  AGREEMENTS.  None of the  execution  or
delivery of this Lease or any of Landlord Transaction Documents, the performance
by Landlord of its  obligations  hereunder or thereunder or the  consummation of
the transactions contemplated hereby or thereby,  conflicts with, or constitutes
a breach of or a default under (i) Landlord's  Organizational Documents; or (ii)
any applicable law, rule, judgment,  order, writ,  injunction,  or decree of any
court  currently in effect;  or (iii) any  applicable  rule or regulation of any
administrative  agency or other governmental  authority  currently in effect; or
(iv)  except as set forth on  Schedule  13.4,  any  written  or oral  agreement,
indenture,  contract or  instrument  to which  Landlord or any  managing  member
thereof is now a party or by which any of them or the Demised  Premises or Other
Assets are bound. Said Schedule 13.4 shall be updated to the extent necessary on
and as of the day preceding the Commencement Date.

         13.5 CONSENTS.  Except as set forth on Schedule 13.5, no authorization,
consent,  approval,  license, exemption by filing or registration with any court
or   governmental   department,    commission,    board,   bureau,   agency   or
instrumentality,  domestic  or  foreign,  or any  other  Person  is or  will  be
necessary in connection with Landlord's  execution,  delivery and performance of
this Lease or any of Landlord Transaction Documents,  or for the consummation of
the  transactions  contemplated  hereby or thereby.  Said Schedule 13.5 shall be
updated to the extent  necessary on and as of the day preceding the Commencement
Date.

         13.6 CONTRACTS.

         (a)  Schedule  13.6  sets  forth a  complete  and  correct  list of all
agreements,  contracts and commitments, whether written or oral, relating to the
Facility,  its  operation or the Other  Assets by which  Landlord or the Demised
Premises  is bound  (the  "Contracts").  Landlord  is not in  default  under any
Contract, except any such default that, either individually or in the aggregate,
would not have a Material Adverse Effect (as hereinafter defined), and there has
not been asserted,  either by or against Landlord under any Contract, any notice
of default,  set-off or claim of default  which has not been cured.  To the best
knowledge  of  Landlord,  after due  inquiry,  none of the other  parties to the
Contracts  are  affiliated  with  Landlord  or are in  default  of any of  their
respective obligations under the Contracts, and there has not occurred any event
which  with  the  passage  of time or the  giving  of  notice  (or  both)  would
constitute  a default  or breach  under any  Contract.  All  amounts  payable by
Landlord  under the  Contracts  are, or will at the  Commencement  Date, be on a
current  basis.  Except  as set  forth  on  Schedule  13.6,  the  Contracts  are
assignable to Tenant  without the consent of the remaining  parties  thereto and
each of the Contracts can be terminated  without  penalty by Landlord upon sixty
(60) or less days  notice.  Said  Schedule  13.6  shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.
----------
*    ,  and  the  name  and  address  of  each  contractor,   subcontractor  and
     materialman  that has performed  work and supplied  materials in connection
     with the construction of the Facility

                                       30
<PAGE>

         (b) Except as listed on  Schedule  13.6,  Landlord is not a party to or
liable in  connection  with and has not granted any written or express,  oral or
implied:

          (i) contract,  agreement or commitment for the employment or retention
     of, or collective bargaining,  severance or termination agreement with, any
     employee,  consultant  or  agent  or  group  of  employees  at the  Demised
     Premises; or

          (ii) profit sharing, thrift, bonus, incentive,  deferred compensation,
     stock  option,   stock  purchase,   severance  pay,  pension,   retirement,
     hospitalization,  insurance or other similar plan, agreement or arrangement
     covering employees at the Demised Premises.

          (iii)  contract,  agreement or commitment  currently in effect for the
     sale of any of Landlord's assets, properties or rights outside its ordinary
     course of business (by sale of assets,  sale of stock, merger or otherwise)
     or any part of the Demised Premises;

          (iv)  contract,  agreement  or  arrangement  currently in effect which
     contains  any  provisions  requiring  Landlord to  indemnify or act for, or
     guarantee the obligation of, any other person or entity;

          (v) agreement  restricting  Landlord from conducting business anywhere
     in the world;

          (vi) partnership or joint venture agreement or similar  arrangement or
     agreement  which is  likely  to  involve a  sharing  of  profits  or future
     payments with respect to Landlord's business at the Facility or any portion
     thereof;

          (vii)   licensing,    distributor,   dealer,   franchise,   sales   or
     manufacturer's representative, agency or other similar contract, agreement,
     arrangement or commitment for the Facility which involves  consideration of
     more than $10,000; or

          (viii)  agreement  not  made in the  ordinary  and  normal  course  of
     business of the Facility which involves consideration of more than $10,000.

         13.7 FINANCIAL STATEMENTS . Intentionally Deleted.

         13.8 MATERIAL  CHANGES . Except as listed on Schedule  13.8,  since the
date of the purchase of the Demised Premises by Landlord, there has not been any
material  adverse  change in the  condition  (financial  or  otherwise),  of the
assets,  properties  or  operations  of the Demised  Premises,  or any damage or
destruction of the Demised  Premises by fire or other  casualty,  whether or not
covered by insurance, and Landlord has operated the Demised Premises only in the
ordinary course of business.  Landlord has identified and communicated to Tenant
all material information with respect to any fact or condition that might have a
Material  Adverse  Effect.  Said  Schedule  13.8  shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.

         13.9 LICENSES; PERMITS . Schedule 13.9 sets forth a description of each
license and all other  governmental  or other  regulatory  permits and approvals
relating to the operation of the


                                       31
<PAGE>

Demised  Premises   heretofore   obtained  and  which  is  presently  in  effect
(collectively,  the  "Licenses").  The Licenses  constitute all of the licenses,
permits,  easements,  rights or other authorizations of any Governmental Body or
any other  Person that are  necessary  for the current  operation of the Demised
Premises.  Each License is final (the effectiveness of each not being subject to
the   satisfaction  of  any  conditions   precedent),   not  subject  to  lapse,
termination,  revocation  or  expiration  for failure to meet any  conditions or
requirements  or  otherwise,  including  without  limitation  the delivery of an
unqualified certificate of need or similar certificate or document. Landlord has
delivered to Tenant copies of all of the Licenses.  Landlord owns,  possesses or
has the legal right to use the Licenses,  free and clear of all liens,  pledges,
claims or other  encumbrances of any nature  whatsoever.  Except as disclosed on
Schedule  13.9,  Landlord has not received any notice of any claim or default or
any other claim or  proceeding  relating to any such License  which has not been
cured or any notice of any  threatened  termination,  lapse or revocation of any
License.  Landlord is not in default  under any License  except any such default
that, either individually or in the aggregate, would not have a Material Adverse
Effect.  The  Demised  Premises  are  fully  and  completely   licensed  by  all
appropriate  authorities  for  Landlord  to  carry  on  the  business  presently
conducted  at the Demised  Premises.  No managing  member,  member,  employee or
former employee of Landlord,  or immediate  family member of any managing member
or member, of Landlord, or any other person, firm or corporation owns or has any
proprietary,  financial or other  interest,  direct or indirect,  in whole or in
part in any  such  License  owned,  possessed  or used in the  operation  of the
Demised  Premises as now  operated.  Said  Schedule 13.9 shall be updated to the
extent necessary on and as of the day preceding the Commencement Date.

         13.10 TITLE, CONDITION OF PERSONAL PROPERTY .

         (a) Except for the security  interests listed and described on Schedule
13.10(a), Landlord has good title to all of the Leased Equipment,  subject to no
mortgage,  security interest, pledge, lien, conditional sales agreement,  lease,
claim,  encumbrance,  easement,  title  exception  or charge,  or  restraint  on
transfer whatsoever (collectively, "Lien"). No other person has any right to the
use or possession  of any of the Leased  Equipment  and,  except as set forth on
Schedule 13.10(a),  no currently  effective  financing statement with respect to
the Leased  Equipment has been filed in any  jurisdiction,  and Landlord has not
signed any such financing  statement or any security  agreement  authorizing any
secured party thereunder to file any such financing  statement.  During the five
(5) year period  preceding the date hereof,  Landlord has conducted its business
activities  only  under  the  corporate  and/or  trade  name "The  Homestead  of
Manhattan."  All of the Leased  Equipment  is in good  operating  condition  and
repair and is  functioning  in the manner and for the  purpose  for which it was
intended  and, to the best  knowledge  of  Landlord,  after due  inquiry,  is in
compliance with (and the operation thereof is in compliance with) all applicable
federal,  state and local laws,  rules and  regulations,  and is sufficient  and
suitable  to enable  Tenant to  operate  the  Demised  Premises  in a normal and
efficient  manner.  Said  Schedule  13.10(a)  shall  be  updated  to the  extent
necessary on and as of the day preceding the Commencement Date.

         (b) Except as set forth on Schedule 13.10(b), none of the property used
by Landlord in connection with the operation of the Demised  Premises is subject
to a  conditional  sale,  security  interest  or similar  arrangement.  Schedule
13.10(b) sets forth a complete and correct  description  of each of the Personal
Property Leases relating to the Demised Premises as to which Landlord is a party
(together with all modifications or amendments  thereto),  the annual rental and


                                       32
<PAGE>


unexpired  lease  term  thereby  and all the  information  set forth  thereon is
complete,  correct and accurate.  True,  correct and complete  copies of each of
said Personal  Property Leases  (together with all  modifications  or amendments
thereto) have been delivered to Tenant. All of said Personal Property Leases are
valid, binding and enforceable in accordance with their respective terms and are
in full force and effect.  Landlord is not in default under any such lease,  the
consequences of which,  either in an individual case or in the aggregate,  would
have a Material  Adverse Effect,  and there has not been asserted,  either by or
against Landlord under any such lease, any notice of default,  set-off, or claim
of default. The parties to such leases other than Landlord are not in default of
their  respective  obligations  under any such lease, and there has not occurred
any event  which with the  passage  of time or giving of notice (or both)  would
constitute  such a default or breach  under any such lease.  Except as otherwise
set  forth on  Schedule  13.10(b),  each of said  Personal  Property  Leases  is
assignable to Tenant  without the consent of the lessor of such  property.  Said
Schedule  13.10(b) shall be updated to the extent necessary on and as of the day
preceding the Commencement Date.

         13.11 TITLE, CONDITION OF THE DEMISED PREMISES .

         (a) Landlord  has good and  marketable  title to the Demised  Premises,
insurable by any reputable, licensed title company selected by Tenant at regular
rates, free and clear of all Liens of any kind whatsoever,  other than those set
forth on Schedule 13.11(a) (the "Permitted Exceptions").  Said Schedule 13.11(a)
shall be updated  to the extent  necessary  on and as of the day  preceding  the
Commencement Date.

         (b) There are no leases or other  agreements  of  Landlord,  as lessor,
granting  any third  party the  right to use or occupy  any part of the  Demised
Premises  (except  the  rights of the  residents  and  patients  of the  Demised
Premises)  and no person,  firm or entity  other than  Tenant has any  ownership
interest or option or right of first refusal to acquire any  ownership  interest
in the Demised Premises or any building or improvements thereon.

         (c)  All  buildings  and  other  improvements  comprising  the  Demised
Premises (including all roads, parking areas, curbs, sidewalks, sewers and other
utilities)  have been  completed  and installed in  accordance  with  applicable
requirements of all governmental  authorities having jurisdiction  thereof. Such
permanent   certificates   of  occupancy  and  all  other   licenses,   permits,
authorizations  and approvals  required by all governmental  authorities  having
jurisdiction and the requisite annual fire safety and life safety inspections as
were required to be issued or conducted for the buildings and other improvements
comprising  the Demised  Premises,  have been  issued,  paid for and are in full
force and effect.

         (d) The  maintenance,  operations  and use of the  buildings  and other
improvements  comprising the Demised Premises comply with and do not violate any
zoning,  building  or  similar  law,  ordinance,  order  or  regulation  or  any
certificate of occupancy issued for the Demised Premises;  and no written notice
of any failure to comply with or  violation  of any  federal,  state,  county or
municipal law, ordinance, order, regulation or requirement affecting the Demised
Premises shall have been issued by any governmental  authority or agency.  There
have been no changes to building,  health or fire codes that would be applicable
to the Demised Premises;  and there has been no change in the use of the Demised
Premises  that would  have  caused  any  modifications  to have been made to the
Demised Premises pursuant to any such building, health or fire codes.

                                       33
<PAGE>

         (e) There is no plan, study or effort by any governmental  authority or
agency which in any way affects or would affect the present use or zoning of the
Demised  Premises or any part thereof.  There are no assessments,  except as set
forth on Schedule 13.11(e), or, to the best of Landlord's knowledge, proposed or
contemplated  assessments,  and  there  is no  existing,  or,  to  the  best  of
Landlord's knowledge,  proposed or contemplated plan to widen, modify or realign
any  street  or  highway,  and  there  is no or  existing,  or,  to the  best of
Landlord's  knowledge,  proposed or contemplated eminent domain proceedings that
would affect the Demised Premises in any way whatsoever.  Said Schedule 13.11(e)
shall be updated  to the extent  necessary  on and as of the day  preceding  the
Commencement  Date. No subdivision plan or plans (preliminary or otherwise) have
been, or will be filed by Landlord,  with respect to the Demised  Premises.  The
Demised Premises are not located in areas designated by the Secretary of Housing
and Urban  Development or any other  governmental  authority or agency as having
special flood or mud slide hazards.

         (f)  The  buildings  and  other  improvements  comprising  the  Demised
Premises and all of their systems,  including without  limitation,  the heating,
ventilation and air condition systems, and the plumbing, electrical,  mechanical
and  drainage  systems,  and roof are in good  operating  condition,  repair and
working order, and have passed all previous safety and/or licensing inspections,
and such systems are  adequate  and  sufficient  for use in  connection  with an
assisted living facility, ordinary wear and tear expected.

         (g)  There  is no  proceeding  pending  to  which  Landlord  is a party
relating to the assessed  valuation of any portion of the Demised  Premises and,
except as set forth on Schedule 13.11(e),  no assessment for public improvements
has been made against the Demised Premises that remains unpaid.

         (h) All public  utilities  required  for the  operation  of the Demised
Premises either enter the Demised Premises through adjoining public streets,  or
if they pass through  adjoining  private land,  do so in  accordance  with valid
recorded  easements  held by Landlord which run for the benefit of the Land. The
Demised  Premises are adjacent to and have direct access to each abutting street
located or  identified  on that certain  survey of the Land,  dated July,  1996,
prepared by Schwab-Eaton,  P.A. All streets  adjoining or traversing the Demised
Premises have been dedicated to and accepted by the local municipal authorities.

         (i) There are no  easements  traversing  or  contiguous  to the Demised
Premises  which are not  disclosed on any schedule to this Lease or on any title
report  delivered  to  Tenant,  or which  interfere  with the  intended  use and
operation of the Demised Premises.

         (j) All certificates of occupancy and other  authorizations  issued for
the Demised Premises have been set forth on Schedule 13.11(j).  Landlord has not
received any notice of noncompliance from any governmental  authority  regarding
any of the  improvements  constructed  at the  Demised  Premises  or the  use or
occupancy  thereof.  Said  Schedule  13.11(j)  shall be  updated  to the  extent
necessary on and as of the day preceding the Commencement Date.

                                       34
<PAGE>


         13.12 LEGAL  PROCEEDINGS.  Other than as set forth on  Schedule  13.12,
there are no disputes,  claims,  actions, suits or proceedings,  arbitrations or
investigations,  either  administrative  or judicial,  pending,  or, to the best
knowledge of Landlord,  after due inquiry,  threatened or contemplated,  and, to
the best knowledge of Landlord,  after due inquiry,  there is no basis therefor,
against or  affecting  the Demised  Premises  or  Landlord's  rights  therein or
ability to consummate the transactions  contemplated hereby, at law or in equity
or otherwise, before or by any court or governmental agency or body, domestic or
foreign,  or before an  arbitrator  of any kind.  Landlord  has not received any
requests for information  with respect to the transactions  contemplated  hereby
from any governmental agency. Said Schedule 13.12 shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.

         13.13 EMPLOYEES. Schedule 13.13 contains a complete and correct list of
the name,  position,  current rate of  compensation  and any vacation or holiday
pay, sick pay, personal leave and any other compensation  arrangements or fringe
benefits,  of each current employee,  consultant and agent of Landlord (together
with a  description  of any  specific  arrangements  or rights  concerning  such
persons)  which are not  reflected in any  agreement or document  referred to in
Schedule 13.6. Except as disclosed in Schedule 13.13, Landlord currently has no,
and has  never had any,  pension,  profit  sharing,  bonus,  incentive,  welfare
benefit, sick leave or sick pay or other plan applicable to any of the employees
of the  Demised  Premises.  Except  as  disclosed  in  Schedule  13.13,  no such
employee,  consultant or commission agent has any vested or unvested  retirement
benefits or other termination benefits.  Said Schedule 13.13 shall be updated to
the extent necessary on and as of the day preceding the Commencement Date.

         13.14 COLLECTIVE  BARGAINING,  LABOR CONTRACTS,  EMPLOYMENT  PRACTICES,
ETC.

         Intentionally Deleted.

         13.15 ERISA. Intentionally Deleted.

         13.16  INSURANCE.  Schedule  13.16 contains a true and correct list of:
(a) all policies of fire,  liability and other forms of insurance  held or owned
by  Landlord  or  otherwise  in force and  providing  coverage  for the  Demised
Premises  (including but not limited to medical malpractice  insurance,  and any
state  sponsored  plan or program  for  worker's  compensation);  (b) all bonds,
indemnity  agreements  and other  agreements of  suretyship  made for or held by
Landlord or otherwise in force and relating to the Demised Premises, including a
brief  description of the character of the bond or agreement and the name of the
surety or indemnifying party.  Schedule 13.16 sets forth for each such insurance
policy the name of the insurer,  the amount of coverage,  the type of insurance,
the policy number,  the annual premium and a brief  description of the nature of
insurance  included  under each such  policy and of any claims  made  thereunder
during the past two years.  Such  policies  are owned by and  payable  solely to
Landlord  and  such  policies  or  renewals  or  replacements  thereof  will  be
outstanding and in full force and effect at the Commencement Date. All insurance
policies listed on Schedule 13.16 are in full force and effect, all premiums due
on or before  the  Commencement  Date have been or will be paid on or before the
Commencement  Date,  Landlord  has  not  been  advised  by any of its  insurance
carriers of an  intention  to  terminate  or modify any such  policies,  nor has
Landlord failed to comply with any of the material  conditions  contained in any
such 


                                       35
<PAGE>

policies. Said Schedule 13.16 shall be updated to the extent necessary on and as
of the day preceding the Commencement Date.

         13.17  RELATIONSHIPS . Except as disclosed on Schedule 13.17,  Landlord
has not and no managing  member or member thereof or any member of such Person's
immediate  family  has,  or at any time within the last two (2) years has had, a
material  ownership  interest or claim in any business,  corporate or otherwise,
that  is a  party  to,  or in any  property  that is the  subject  of,  business
relationships  or  arrangements  of any kind  relating to the  operation  of the
Demised  Premises  or the  operation  of the  Facility,  by which  Tenant or the
Demised Premises will be bound after the Commencement  Date. Said Schedule 13.17
shall be updated  to the extent  necessary  on and as of the day  preceding  the
Commencement Date.

         13.18  ASSETS  COMPRISING  THE  DEMISED  PREMISES  . The  Land,  Leased
Equipment,  Contracts,  Licenses and Other Assets  (collectively,  the "Assets")
listed on the Schedules to this Lease as owned by Landlord, represent all of the
real and personal property,  licenses,  permits and  authorizations,  contracts,
leases and other  agreements  that are  necessary  and  material  to the use and
operation  of the Demised  Premises as now used or operated or the  operation of
the Facility.

         13.19  ABSENCE  OF  CERTAIN  EVENTS . Except  as set forth on  Schedule
13.19,  from the date of this Lease to the  Commencement  Date Landlord will not
have (except for transactions directly with Tenant):

         (a) sold,  assigned  or  transferred  any of its assets or  properties,
except in the ordinary course of business consistent with past practice;

         (b)  mortgaged,  pledged or  subjected to any lien,  pledge,  mortgage,
security interest, conditional sales contract or other encumbrance of any nature
whatsoever any of the Assets other than the liens,  if any, of current taxes not
yet due and payable;

         (c) made or suffered any  amendment  or  termination  of any  contract,
commitment, instrument or agreement materially relating to the Demised Premises;

         (d) Intentionally Deleted;

         (e)  discharged  or  satisfied  any  lien or  encumbrance,  or paid any
material  liabilities,  other than in the ordinary course of business consistent
with past practice, or failed to pay or discharge when due any liabilities,  the
failure to pay or discharge  which has caused or will cause any actual damage or
risk of loss to Landlord or the Demised Premises;

         (f) Intentionally Deleted;

         (g) made or suffered  any  amendment  or  termination  of any  material
contract,  commitment  or  agreement  to  which  it is a party or by which it is
bound,  or  cancelled,  modified or waived any debts or claims held by it, other
than in the ordinary course of business consistent with past practice, or waived
any  rights of  substantial  value,  whether  or not in the  ordinary  course of
business; or

                                       36
<PAGE>


         (h) entered  into any material  transaction  other than in the ordinary
course of business consistent with past practice.

Said  Schedule  13.19 shall be updated to the extent  necessary on and as of the
day preceding the Commencement Date.

         13.20  COMPLIANCE  WITH LAWS . Landlord  has not  received any claim or
notice that the  Demised  Premises  are not in  compliance  with any  applicable
federal,  state,  local  or  other  governmental  laws  or  ordinances,  or  any
applicable  order,  rule or  regulation  of any federal,  state,  local or other
governmental agency.

         13.21 ENVIRONMENTAL COMPLIANCE .

         (a) At any time during  Landlord's  ownership  of the Demised  Premises
and, to the best of Landlord's knowledge, after due inquiry, prior to Landlord's
ownership thereof:

          (i) the  Demised  Premises  has not been used for the  disposal of any
     industrial  refuse or  waste,  including  but not  limited  to  potentially
     infectious waste,  blood-contaminated  materials, or other wastes generated
     in the course of resident treatment (collectively, "Medical Waste"), or for
     the processing,  manufacture,  storage, handling,  treatment or disposal of
     any hazardous or toxic substance, material or waste;

         (ii) no asbestos-containing  materials have been used or disposed of in
or on the Demised Premises or used in the construction of the Demised Premises;

          (iii) no machinery,  equipment or fixtures containing poly-chlorinated
     biphenyls ("PCBs") have been located on the Demised Premises;

          (iv) no storage tanks for gasoline,  petroleum, or any other substance
     have been located on the Demised Premises;

          (v) no toxic or hazardous substances or materials have been located on
     the Demised Premises,  which substances or materials, if found in or on the
     Demised  Premises,  would  subject  the owner or  occupant  of the  Demised
     Premises to damages, penalties, liabilities or an obligation to remove such
     substances or materials under any applicable  federal,  state or local law,
     regulation or ordinance; and

          (vi) no written notice from any governmental body has ever been served
     upon Landlord,  or any of its agents or representatives,  or upon any prior
     owner of the Demised Premises, claiming any violation of any federal, state
     or local law, regulation or ordinance concerning the generation,  handling,
     storage,  or  disposal  of  Medical  Waste,  or  the  environmental  state,
     condition,  or quality of the Demised  Premises,  or  requiring  or calling
     attention  to the need  for any  work,  repairs,  or  demolition,  on or in
     connection  with the  Demised  Premises  in order to  comply  with any law,
     regulation or ordinance  concerning the  environmental  or healthful state,
     condition or quality of the Demised Premises.

                                       37
<PAGE>

         Schedule  13.21  lists all  reports  of  healthcare  and  environmental
agencies  received  by  Landlord  during  the  last  five  (5)  years  from  any
supervisory governmental authority with respect to the operations of the Demised
Premises. Said Schedule 13.21 shall be updated to the extent necessary on and as
of the day preceding the  Commencement  Date.  Landlord has delivered  copies of
each such report to Tenant.

         (b) To the best knowledge of Landlord,  after due inquiry, at all times
Landlord has complied,  and is complying in all respects with all  environmental
and related laws,  ordinances and governmental rules and regulations  applicable
to  Landlord  or to the  Demised  Premises,  including,  but not limited to, the
Resource  Conservation and Recovery Act of 1976, as amended,  the  Comprehensive
Environmental  Response  Compensation and Liability Act of 1980, as amended, the
Federal  Water  Pollution  Control  Act, as amended by the Clean Water Act,  and
subsequent amendments, the Federal Toxic Substances Control Act, as amended, and
all other federal, state and local laws, regulations and ordinances with respect
to the protection of the environment  (collectively,  "Environmental Laws"). The
foregoing representation and warranty applies to all aspects of the operation of
the  Demised  Premises,  including,  but not  limited  to,  the  use,  handling,
treatment,  storage,  transportation  and  disposal of any  hazardous,  toxic or
infectious waste,  material or substance (including Medical Waste) and petroleum
products, material or waste whether performed on any of Landlord's properties or
at any other location.

         13.22 TAX RETURNS . Landlord has filed all federal,  state,  county and
local income, excise, real property and other tax returns and abandoned facility
reports (if any) to date that are due and  required to be filed by it, and there
are no claims,  liens,  or judgments for taxes due from  Landlord  affecting the
Demised  Premises  or any of the  Leased  Equipment,  and no basis  for any such
claim, lien, or judgment exists.

         13.23  ENCUMBRANCES  CREATED BY THIS  AGREEMENT . Neither the execution
and  delivery  of  this  Lease  or the  performance  of  any of the  transaction
documents   contemplated  hereby,  nor  the  consummation  of  the  transactions
contemplated  hereby  or  thereby,  will  create  any Lien on any of the  Leased
Equipment or Other Assets in favor of any Person.

         13.24 RESIDENTS . Intentionally Deleted.

         13.25 ZONING . Except as set forth in Schedule  13.25,  there exists no
judicial,  quasi-judicial,   administrative  or  other  proceeding  which  might
adversely  affect  the  validity  of the  current  zoning of the Land and Leased
Improvements,  nor to the best of Landlord's  knowledge,  after due inquiry,  is
there any threatened action or proceeding which could result in the modification
and termination of any such zoning.  Said Schedule 13.25 shall be updated to the
extent necessary on and as of the day preceding the Commencement Date.

         13.26  LEASES . Schedule  13.26  contains an (a)  accurate and complete
list  of  each  lease,  and  all  Amendments   thereto,   of  Personal  Property
(collectively,  the "Personal Property Leases") to which Landlord or the Demised
Premises is a party or by which  Landlord  or the  Demised  Premises is bound or
which were assigned or  transferred  to Landlord in connection  with the Demised
Premises  and (b) a list of all  contracts  providing  for the  installation  or
maintenance of equipment 


                                       38
<PAGE>


purchased  or  leased  by  Landlord  relating  to the  Demised  Premises  or the
operation of the Facility.  Said  Schedule  13.26 shall be updated to the extent
necessary on and as of the day preceding the Commencement Date.

         13.27 CARE OF RESIDENTS; DEFICIENCIES; LICENSED BED AND RATE SCHEDULE .

         (a) Intentionally Deleted.

         (b)  Schedule  13.27(b)  sets  forth a true  and  complete  list of all
violations and deficiencies found or alleged by any governmental  authority with
respect to the  Facility or Landlord  within the past three (3) years.  All such
violations and deficiencies have been fully remedied by Landlord or withdrawn by
the applicable  governmental  authority.  No violations or deficiencies found or
alleged by any  governmental  authority with respect to the Facility or Landlord
(whether  or not listed in  Schedule  13.27 (b))  will,  individually  or in the
aggregate,  result in any Adverse  Effect or  adversely  effect  Tenant,  or its
operation  of the Demised  Premises  after the  Commencement  Date or any of the
transactions  contemplated hereby (including,  without  limitation,  any adverse
effect upon any  application  for Tenant's  operation of the Demised  Premises).
Said Schedule 13.27(b) shall be updated to the extent necessary on and as of the
day preceding the Commencement Date.

         (c) Schedule  13.27(c)  sets forth (i) the number of licensed  assisted
living  beds at the Demised  Premises,  (ii) the  current  rates  charged by the
Demised  Premises  to its  residents  and  (iii)  the  number  of beds or  units
presently  occupied in, and the occupancy  percentage at, the Demised  Premises,
including  the  current  rates  charged by the  Demised  Premises  for each such
occupied  bed or unit,  and the  information  set forth  thereon is complete and
correct in all material respects. Said Schedule 13.27(c) shall be updated to the
extent necessary on and as of the day preceding the Commencement Date.

         13.28 BOOKS AND RECORDS . The books and records of the Demised Premises
set forth in all  material  respects  all  transactions  affecting  the  Demised
Premises, and such books and records have been properly kept and maintained in a
manner  consistent with sound business  practice and are complete and correct in
all material respects.

         13.29  INTELLECTUAL  PROPERTY . Schedule 13.29 sets forth a list of all
patents, copyrights, trademarks, software and computer programs, corporate names
and other  intellectual  property  rights,  including the name "The Homestead of
Manhattan" and all derivations and variations  thereof and any other  tradenames
used in connection with the operation of the Demised Premises (collectively, the
"Intellectual  Property")  used by  Landlord  in  connection  with  the  Demised
Premises. Said Schedule 13.29 shall be updated to the extent necessary on and as
of the day preceding the Commencement Date.

         13.30  NO   MISSTATEMENTS   OR  OMISSIONS  .  None  of  the  documents,
certificates,  instruments  or  information  furnished  or  to be  furnished  by
Landlord  to Tenant or any of  Tenant's  representatives  is or will be false or
misleading  as to any  material  fact or omits or will omit to state a  material
fact necessary to make any of the statements  contained  therein not misleading.
Landlord has provided to Tenant all material  information  related to the Leased
Equipment, the Other Assets and the Demised Premises.

                                       39
<PAGE>

         13.31   BANKRUPTCY  .  No  insolvency   proceeding  of  any  character,
including,  without  limitation,   bankruptcy,   receivership,   reorganization,
composition or arrangement with creditors,  voluntary or involuntary,  affecting
Landlord (other than as a creditor) or the Demised Premises or any of the Leased
Equipment or Other Assets are pending or are being contemplated by Landlord,  or
are, to the best  knowledge of Landlord,  after due  inquiry,  being  threatened
against  Landlord by any other person,  and Landlord has not made any assignment
for the benefit of  creditors or taken any action in  contemplation  of or which
would constitute the basis for the institution of such insolvency proceedings.

         Tenant acknowledges that the Demised Premises are under construction as
of the date of this Lease and that the Demised  Premises  have not been operated
by Landlord as an assisted living  facility.  Tenant further  acknowledges  that
certain of the  representations  and  warranties  made by Landlord and Jack West
herein assume by their nature that the  construction of the Demised Premises has
been completed (the "Completion  Warranties")  and/or that Landlord has operated
the  Demised   Premises  as  an  assisted  living  facility  (the   "Operational
Warranties").  Tenant  agrees  that  the  Completion  Warranties  shall  not  be
effective  until such time as  construction  of the  Demised  Premises  has been
completed.  Upon  completion  of  construction  of  the  Demised  Premises,  the
Completion  Warranties shall automatically become effective except to the extent
of any matters  disclosed in the Schedules to this Lease.  Tenant further agrees
that the  Operational  Warranties  shall not be deemed  to be  effective  unless
Landlord  operates the Demised  Premises as an assisted living facility prior to
the  Commencement  Date,  and in such  event the  Operational  Warranties  shall
automatically  become effective as of the Commencement Date except to the extent
of any matters disclosed in the Schedules to this Lease.


                                   ARTICLE XIV
               TENANT'S REPRESENTATIONS, WARRANTIES AND COVENANTS

         Tenant represents and warrants to Landlord, and covenants, as follows:

         14.1 ORGANIZATION AND STANDING OF TENANT . Tenant is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Delaware. Copies of its Articles of Incorporation and By-laws and all amendments
thereof to date, have been delivered to Landlord,  and are complete and correct.
Tenant has the power and  authority  to own the property and assets now owned by
it and to conduct the business presently being conducted by it.

         14.2 AUTHORITY . Tenant has the full,  absolute and unrestricted right,
power and authority to make,  execute,  deliver and perform this Lease including
all  Schedules  and Exhibits  hereto,  and the other  instruments  and documents
required or  contemplated  hereby and thereby.  Upon  obtaining the consents and
approvals described in Section 19.5, such execution,  delivery,  performance and
consummation shall have been duly authorized by all necessary action,  corporate
or otherwise,  on the part of Tenant,  its directors  and  shareholders  and all
consents of holders of indebtedness of Tenant shall have been obtained.

                                       40
<PAGE>

         14.3 BINDING EFFECT . This Lease and all related transaction  documents
executed by Tenant constitute the legal, valid and binding obligation of Tenant,
enforceable against Tenant in accordance with their respective terms.

         14.4  ABSENCE OF  CONFLICTING  AGREEMENTS  . Neither the  execution  or
delivery of this Lease or any of the  transaction  documents  related  hereto by
Tenant nor the performance by Tenant of the transactions contemplated hereby and
thereby,  conflicts  with,  or  constitutes  a breach of or a default  under (i)
Tenant's articles of incorporation or by-laws; or (ii) any applicable law, rule,
judgment,  order, writ, injunction, or decree of any court, currently in effect;
or (iii) any applicable rule or regulation of any administrative agency or other
governmental  authority  currently  in  effect;  or (iv)  except as set forth on
Schedule 14.4, any written or oral agreement,  indenture, contract or instrument
to which Tenant or any  shareholder  thereof is now a party.  Said Schedule 14.4
shall be updated  to the extent  necessary  on and as of the day  preceding  the
Commencement Date.

         14.5  STATEMENT  OF  OPERATIONS  . Tenant  shall  furnish to Landlord a
statement of operations for the Demised  Premises  within ninety (90) days after
the end of  each  fiscal  year  for  the  Demised  Premises.  The  statement  of
operations  shall  include  occupancy  statistics  and a statement of income and
expenses for the Demised  Premises for the period which it covers,  and shall be
certified by an officer of Tenant.


                                   ARTICLE XV
                   INSURANCE, SUBROGATION AND INDEMNIFICATION

         15.1 COMPREHENSIVE  GENERAL LIABILITY AND PROFESSIONAL  INSURANCE TO BE
CARRIED BY TENANT . Tenant before  occupying the Demised  Premises,  at its sole
cost and  expense,  shall cause to be issued and kept in force  during the Lease
Term, a policy or policies of comprehensive  general  liability and professional
liability  insurance,  including  general  liability  and  property  damage  and
including  contractual liability under Tenant's  indemnification  obligations in
this Article,  by the terms of which Tenant shall be insured  against claims for
bodily  injury,  death and property  damage as a result of an  occurrence on the
Demised  Premises,  with minimum  combined  single limits of One Million Dollars
($1,000,000) per occurrence and Three Million Dollars ($3,000,000) per property,
with a Two Million Dollar ($2,000,000) umbrella policy.  Landlord shall be named
as an additional  insured or a loss payee,  as applicable,  under such policy or
policies of insurance. Tenant shall remain liable to Landlord for any deficiency
should such  insurance  under this Section 15.1 be  insufficient  to satisfy the
liability of Tenant under Section 15.4.

         15.2  CERTIFICATE OF INSURANCE . Tenant,  at its sole cost and expense,
shall carry all insurance  required by this Article XV with a financially  sound
and  reputable  insurer  qualified  to do business  in the State of Kansas,  and
Tenant shall cause each policy of insurance  procured by it and required by this
Article to be  endorsed  to provide  that each  insurer  shall have the right to
change or cancel the policy only after giving  every  insured  party  thereunder
thirty  (30)  days  prior  written  notice by  certified  mail,  return  receipt
requested,  of the  insurer's  intention  to cancel or change  the  policy.  All
insurance  required to be carried by Tenant  pursuant to the terms of this Lease
shall be effected under valid and enforceable  policies issued by insurers rated
in Best's  Insurance  Guide,  or any 


                                       41
<PAGE>

successor  thereto  (or if there  be none,  an  organization  having a  national
reputation) as having a general policyholder rating of not less than "B+".

         At Landlord's  request,  Tenant,  at its sole cost and expense,  before
commencement  of the Lease Term and upon each renewal of such  insurance,  shall
deliver to and deposit with Landlord  certificates of insurance  evidencing each
policy required by this Article.  Upon request of Landlord,  Tenant will furnish
or cause to be  furnished  to  Landlord  from  time to time,  a  summary  of the
insurance covering required by this Article XV in form and substance  reasonably
acceptable to Landlord.

         A party's  obligation  to carry the  insurance  provided  herein may be
brought within the coverage of a so-called  "blanket  policy" or policies of the
insurance  carrier   maintained  by  such  party  or  its  affiliated   business
organizations.  However,  the  other  party  to this  Lease  must be named as an
additional  insured  thereunder as its interest may appear; and the requirements
set forth herein must be otherwise satisfied.

         15.3 OTHER COVERAGE . Tenant, at its sole cost and expense, shall carry
and maintain throughout the Lease Term insurance for the benefit of Landlord and
Landlord's  first fee  mortgagee in such amount as shall be necessary to provide
coverage  for loss of Annual  Rent during the first  twelve  (12) months  during
reconstruction  following  any damage or  destruction  of the Demised  Premises.
Tenant, at its sole cost and expense,  shall also carry and maintain  throughout
the Lease Term insurance in a reasonable  amount to provide coverage for loss or
damage to or from  explosion  of steam  boilers,  pressure  vessels  or  similar
apparatus;  and workers  compensation and employer's  liability insurance with a
limit of not less than the amount required by applicable state statute.

         15.4  INDEMNIFICATION  OF  LANDLORD  .  Tenant  assumes  all  risk  and
responsibility for injury or death to persons and damage to property (damages to
the Demised Premises being waived to the extent of insurance proceeds paid to or
on behalf of Landlord) arising out of or in any way connected with or related to
Tenant's use and control of the Demised Premises  (including matters relating to
Tenant's  repair  and/or  alteration  of the Demised  Premises) and Tenant shall
defend, indemnify and hold harmless Landlord, its partners, officers, directors,
managing  member,  members  and  shareholders  (collectively,  the  "Indemnified
Parties"),  from and against any and all claims, losses,  liabilities,  actions,
proceedings and expenses  (including  reasonable  attorneys' fees) imposed upon,
incurred by or asserted  against  any of the  Indemnified  Parties by reason of,
arising out of or in any way  connected  with  Tenant's  use or operation of the
Demised  Premises or Other  Assets,  except to the extent such  claims,  losses,
liabilities, actions, proceedings and expenses (including attorneys' fees) arise
out of Landlord's negligence, willful misconduct or breach of this Lease. Tenant
shall  at  all  times  indemnify  and  hold  harmless  Landlord,  its  officers,
directors,  managing member, members and shareholders,  from and against any and
all claims, losses,  liabilities,  actions,  proceedings and expenses (including
reasonable  attorneys' fees) arising out of any inaccuracy in any representation
or breach of any warranty  set forth in Article XIV hereof.  The  provisions  of
this Section 15.4 shall survive the termination or expiration of this Lease.

         15.5  INDEMNIFICATION  OF TENANT . Landlord  and Jack West shall at all
times jointly and severally  defend,  indemnify  and hold harmless  Tenant,  its
officers,  directors and  shareholders  (collectively,  the "Tenant  Indemnified
Parties"),  from and against any and all claims, losses,  liabilities,


                                       42
<PAGE>

actions, proceedings and expenses (including reasonable attorneys' fees) imposed
upon,  incurred by or asserted against any of the Tenant Indemnified  Parties by
reason of, arising out of or in any way connected with Landlord's use, ownership
or operation of the Demised Premises prior to the Commencement  Date,  except to
the extent such claims, losses, liabilities,  actions,  proceedings and expenses
(including reasonable attorney's fees) arise out of Tenants' negligence, willful
misconduct  or breach of this Lease.  Landlord  and Jack West shall at all times
jointly and severally defend, indemnify and hold harmless the Tenant Indemnified
Parties  from and  against  any and all claims,  losses,  liabilities,  actions,
proceedings and expenses (including  reasonable  attorneys' fees) arising out of
any  inaccuracy  in any  representation  or breach of any  warranty set forth in
Article  XIII hereof.  The  provisions  of this  Section 15.5 shall  survive the
termination or expiration of this Lease.

         15.6 FIRE,  EXTENDED COVERAGE AND ADDITIONAL PERILS INSURANCE . Tenant,
at its sole cost and expense,  shall cause to be issued and kept in force during
the Lease Term,  a policy or policies of fire,  extended  coverage and all risks
insurance by which Landlord and Tenant shall be insured  against loss and damage
by fire, lightning,  windstorm, hail and sprinkler damage, resulting from damage
to  or  destruction  of  the  improvements,   including   equipment,   fixtures,
furnishings  and other  personal  property used in  connection  with the Demised
Premises  and the  Leased  Equipment,  if any,  for its full  replacement  value
(exclusive  of Land),  less cost of  excavation,  foundation  and  footings,  by
policies  containing  an agreed  amount  endorsement,  demolition  coverage (XCU
coverage) and  ordinance or law coverage,  such policy or policies to be written
on a replacement cost basis.  Notwithstanding anything to the contrary, Landlord
shall at all times be entitled to  insurance  in an amount  sufficient  to avoid
being a coinsurer.  All such insurance shall be carried in favor of Landlord and
Landlord's first fee mortgagee as their  interest(s) may appear.  Such insurance
may also be  carried  in favor of  Tenant  and the  holder(s)  of any  leasehold
mortgages on this Lease, as their interests may appear; provided,  however, that
any such policy shall effectively provide, if such provision be obtainable, that
Landlord's  interest  therein shall not be subject to  cancellation by reason of
any act or  omission  of  Tenant  or any  leasehold  mortgagee.  Notwithstanding
anything in this Lease to the contrary,  all such fire and extended coverage and
other  insurance  policies  covering  damage to or  destruction of buildings and
improvements  on the Demised  Premises shall  effectively  provide that any loss
payable  thereunder  shall  be  adjusted  solely  by  Tenant  and the  leasehold
mortgagee(s),  and that the  proceeds  of such  insurance  shall be  payable  to
Tenant, however, if in excess of One Hundred Thousand Dollars ($100,000),  shall
be paid to and deposited  with  Landlord's  first fee  mortgagee,  provided such
mortgagee is a bank, savings bank or trust company whose deposits are insured by
the FDIC,  or insurance  company,  pension fund,  credit  company or real estate
investment trust, and such mortgagee has resources in excess of $100,000,000 (an
"Institutional  Lender"),  and if not then  said  proceeds  shall be paid to and
deposited  with any  Institutional  Lender of Tenant's  selection,  as insurance
trustee (the "Insurance  Trustee"),  which shall hold,  apply and make available
the proceeds of such insurance as hereinafter provided in this Lease.

         15.7  WAIVER OF  SUBROGATION  . Each party to this Lease  releases  the
other party (which term as used in this Section includes the employees,  agents,
officers,  managing  member,  members and directors of the other party) from all
liability,  whether for negligence or otherwise, in connection with loss covered
by any fire and/or  extended  coverage  insurance  policies,  which the releasor
carries  with  respect to the  Demised  Premises,  or any  interest  or property
therein or thereon  (whether  or not such  insurance  is  required to be carried
under this Lease), but only to the extent that such loss is collected under said
fire  and/or  extended  coverage  insurance  policies.   Such  release  is  also


                                       43
<PAGE>

conditioned upon the inclusion in the policy or policies of a provision  whereby
any such release  shall not  adversely  affect said  policies,  or prejudice any
right  of the  releasor  to  recover  thereunder.  Each  party  agrees  that its
insurance  policies  aforesaid will include such a provision so long as the same
shall be  obtainable  without  extra  cost,  or if extra  cost  shall be charged
therefor,  so long as the party for whose benefit the clause or  endorsement  is
obtained shall pay such extra cost. If extra cost shall be chargeable  therefor,
each party shall advise the other of the amount of the extra cost, and the other
party at its election, may pay the same, but shall not be obligated to do so.


                                   ARTICLE XVI
                                   ARBITRATION

         If any controversy should arise between the parties in the performance,
interpretation  or application of this Lease involving any matter,  either party
may serve upon the other a written  notice  stating  that such party  desires to
have the  controversy  resolved by an  arbitrator.  If the parties  cannot agree
within  fifteen (15) days from the service of such notice upon the  selection of
such  arbitrator,  an arbitrator shall be selected or designated by the American
Arbitration Association upon written request of either party hereto. Arbitration
of such controversy,  disagreement,  or dispute shall be conducted in accordance
with the Commercial  Arbitration Rules then in force of the American Arbitration
Association  and the decision and award of the  arbitrator so selected  shall be
binding upon Landlord and Tenant. The arbitration will be held in Dallas, Texas.

         As a condition  precedent to the appointment of any arbitrator,  in any
non-monetary dispute, both parties shall be required to make a good faith effort
to resolve the  controversy,  which effort shall continue for a period of thirty
(30) days prior to any demand for arbitration.  The cost of any such arbitration
shall be shared  equally  by the  parties.  Each  party  shall pay its own costs
incurred as a result of its participation in any such arbitration.

         If the issue to be arbitrated is Landlord's or Tenant's  alleged breach
of this  Lease and as a result  thereof,  Landlord  or  Tenant  has the right to
terminate  this Lease,  Tenant  shall  continue  to lease the  Demised  Premises
pending the outcome of such  arbitration,  provided Landlord or Tenant may elect
to proceed without arbitration under its other remedies in this Lease.


                                       44
<PAGE>

                                  ARTICLE XVII
                          CERTAIN COVENANTS OF LANDLORD

         17.1 COVENANT NOT-TO-COMPETE .

         (a) For a period of five (5) years from and after the Commencement Date
neither  Landlord nor any  corporation,  partnership or other business entity or
person  controlling,  controlled  by  or  under  common  control  with  Landlord
("Restricted  Party"),  shall,  directly or indirectly,  operate,  manage,  own,
control,  finance or provide  financing for, be a consultant for or enter into a
service  contract  with,  any nursing  home,  hospital  or licensed  health care
facility or other person or entity of any type, licensed or unlicensed, existing
or to be constructed  that provides  assisted living care,  nursing home care or
any other senior  housing,  or any entity existing or to be formed that competes
in any way with the Demised  Premises  (any such person or entity  being  herein
referred to as an "Operator"),  that provides nursing home care, assisted living
care or senior housing,  and which facility is located within  twenty-five  (25)
miles from the exterior boundaries of the Land.

         (b) From and after the  Commencement  Date, no  Restricted  Party shall
disclose,  directly or  indirectly,  to any person  outside of  Tenant's  employ
without  the  express  authorization  of Tenant,  any  resident  lists,  pricing
strategies,  resident  files  and  records,  proprietary  data or trade  secrets
relating to the Demised Premises or any financial or other information about the
Demised Premises not then in the public domain.

         (c) For a period  of five (5) years  from and  after  the  Commencement
Date,  no  Restricted  Party  shall  solicit any of the  physicians,  customers,
vendors, suppliers, associates, employees, independent contractors, residents or
families of residents  admitted to, or employed at the Demised Premises prior to
the Commencement Date, or by the Facility or by Tenant, to take any action or to
refrain  from taking any action or  inaction  that would be  disadvantageous  to
Tenant or the Facility, including (but not limited to) the solicitation of their
respective physicians,  suppliers,  customers,  vendors, associates,  employees,
independent  contractors,  residents  or  families of  residents  to cease doing
business, or their association or employment with the Facility or Tenant.

         (d) The Restricted Parties acknowledge that the restrictions  contained
in this  Section 17.1 are  reasonable  and  necessary to protect the  legitimate
business interests of Tenant and that any violation thereof by any of them would
result in irreparable harm to Tenant. Accordingly,  the Restricted Parties agree
that upon the violation by any of them of any of the  restrictions  contained in
this  Section  17.1,  Tenant  shall be  entitled  to  obtain  from any  court of
competent  jurisdiction  a preliminary  and permanent  injunction as well as any
other relief  provided at law,  equity,  under this Lease or  otherwise.  In the
event  any  of the  foregoing  restrictions  are  adjudged  unreasonable  in any
proceeding,  then the parties agree that the period of time or the scope of such
restrictions (or both) shall be adjusted to such a manner or for such a time (or
both) as is adjudged to be reasonable.

         Notwithstanding  the foregoing,  for purposes of this Section 17.1, any
advertisement  prepared  for and  disseminated  to the public in general,  which
advertises  the services of any facility of Landlord not  otherwise in violation
of this Section 17.1 or advertises  the need for 

                                       45
<PAGE>


services to be supplied to such a Demised Premises, shall not be deemed to be an
inducement  or  solicitation  with  respect to any such  residents,  physicians,
suppliers or independent contractors.

         17.2   PRE-COMMENCEMENT   DATE  FINANCIAL  STATEMENTS  .  Intentionally
Deleted.


                                  ARTICLE XVIII
                            MISCELLANEOUS PROVISIONS

         18.1 NOTICE S. All notices,  requests,  demand or other  communications
required or  permitted  under this Lease shall be in writing and shall be either
personally delivered evidenced by a signed receipt, transmitted by United States
certified mail, return receipt  requested,  postage prepaid,  or by a nationally
recognized overnight delivery service, addressed as follows:

                  IF TO LANDLORD:      c/o The Homestead Company, L.C.
                                       155 North Market, Suite 910
                                       Wichita, Kansas 67202
                                       Attention:  Mr. Jack West

                  COPY TO:             Foulston & Siefkin, L.L.P.
                                       700 Fourth Financial Center
                                       Wichita, Kansas 67202
                                       Attention: Gary E. Knight, Esq.

                  IF TO TENANT:        c/o Integrated Living Communities, Inc.
                                       10065 Red Run Boulevard
                                       Owings Mills, Maryland 21117
                                       Attention: Mr. Ed Komp

                  COPIES TO:           Integrated Living Communities, Inc.
                                       10065 Red Run Boulevard
                                       Owings Mills, Maryland 21117
                                       Attention: Marshall A. Elkins, Esq.

                                                and

                                       Blass & Driggs
                                       461 Fifth Avenue
                                       New York, New York 10017
                                       Attention: Michael S. Blass, Esq.

         All  notices,  requests,  demands  and  other  communications  shall be
effective (i) upon personal  delivery  evidenced by a signed receipt,  (ii) upon
five (5) calendar days after being  deposited in the United States mail or (iii)
on the next business day following  timely deposit with a nationally  recognized
overnight  delivery service,  whichever occurs first. The time period in which a
response to any such  notice,  request,  demand or other  communication  must be
given,  however,  shall  


                                       46
<PAGE>

         17.3  TITLE  MATTERS.  At its sole  cost and  expense,  Landlord  shall
deliver, or cause to be delivered,  to Tenant: (i) promptly after the completion
of the construction of the Facility (a) final lien waivers from each contractor,
subcontractor  and  materialman  that  performed  work or supplied  materials in
connection with the  construction  of the Facility,  (b) an "as built" survey of
the Demised  Premises  that shows a state of facts  acceptable to Tenant and its
counsel prepared in accordance with ALTA standards by a surveyor licensed in the
State of  Kansas,  (c) an  endorcesment  to  Tenant's  leasehold  owner's  title
insurance  policy  reading in such "as built"  survey,  and (d) a  bringdown  of
Tenant's  leasehold owner's title insurance policy showing only title exceptions
that are  acceptable  to Tenant and its  counsel,  and (ii)  promptly  after the
passage of four (4)  months  after the  completion  of the  construction  of the
Facility,  a bringdown,  of and endorsement to, Tenant's leasehold owner's title
insurance policy showing only title exceptions that are acceptable to Tenant and
its counsel.


                                      46-A
<PAGE>

commence to run from (i) the date of  personal  delivery  evidenced  by a signed
receipt, (ii) the date of receipt on the return receipt of the notice,  request,
demand  or  other  communication;  provided,  however,  that if a party  refuses
delivery of any such  notice,  request,  demand or other  communication  sent by
certified  mail,  or fails or  neglects,  without  reasonable  cause,  to accept
delivery after three (3) attempts to so deliver by postal authorities,  it shall
be deemed  received on the date of its last being deposited in the United States
mail,  or (iii)  the  date of  delivery  by a  nationally  recognized  overnight
delivery service.  The parties hereto shall have the right, at any time and from
time to time  during the Lease Term to change  their  respective  addresses  for
notices by giving the other party hereto written notice thereof.

         18.2  UNDERSTANDING  AND AGREEMENTS . This Lease constitutes the entire
understanding  and agreements of whatsoever  nature or kind existing between the
parties with respect to Tenant's lease of the Demised  Premises and Other Assets
from Landlord.

         18.3 AMENDMENT . This Lease may be amended at any time and from time to
time;  provided,  however,  that no  amendment  to this  Lease  shall be legally
enforceable  against  Landlord or Tenant  unless it is in writing,  executed and
acknowledged by both Landlord and Tenant.

         18.4  CONSTRUCTION  . This Lease shall be construed in accordance  with
the laws of the State of Kansas.

         18.5 SPECIFIC  PERFORMANCE . Landlord and Tenant for themselves and for
each person,  business  organization,  association and corporation  claiming by,
under or through  either  Landlord or Tenant,  stipulate  that both Landlord and
Tenant shall have the remedy of specific performance against the other.

         Landlord  and Tenant,  for  themselves  and for each  person,  business
organization,  association and corporation  claiming by, under or through either
Landlord or Tenant,  knowingly and  voluntarily  waive their rights to allege or
assert in or in any and all claims or counts for  specific  performance  arising
out of or in any way connected  with this Lease the defense that the other party
has an adequate remedy at law.

         18.6 BINDING  EFFECT ON  SUCCESSORS . Except as otherwise  provided for
herein,  Landlord and Tenant expressly agree that,  subject to the terms of this
Lease,  all terms and  conditions  of this Lease shall  extend to and be binding
upon or inure to the benefit of the heirs, executors,  administrators,  personal
representative,  assigns  and  successors  in  interest  of both the  respective
parties hereto.

         18.7 LEASE (SHORT FORM) . Landlord and Tenant shall execute and deliver
to each other an instrument,  recordable in form setting forth the term and such
other  information  (other than rent) as may be necessary to constitute a "short
form lease" for recording purposes immediately upon execution of this Lease. Any
party, at its expense,  shall have the right to record such short form lease for
the purpose of giving notice of Tenant's interest in the Demised Premises.  This
Lease shall not be recorded.

                                       47
<PAGE>


         18.8 READING AND RECEIPT OF THIS LEASE . Landlord and Tenant  stipulate
that each has read and  understands  the  conditions  in this Lease and by their
respective  signatures below acknowledge the receipt of an executed copy of this
Lease.

         18.9  PROHIBITION  OF MECHANICS  LIENS . Nothing in this Lease shall be
deemed or  construed  in any way as  constituting  the  consent  or  request  of
Landlord,  expressed or implied,  by inference or otherwise,  to any contractor,
subcontractor,  laborer,  or materialman for the performance of any labor or the
furnishing  of any materials for any specific  improvements,  alteration  to, or
repair of the Demised  Premises or any part  thereof,  nor as giving  Tenant any
right,  power,  or  authority  to contract  for or permit the  rendering  of any
services or the  furnishing of any materials  that would give rise to the filing
of any lien against the Demised Premises or any part thereof.

         18.10 BROKERAGE OR AGENTS FEES . Landlord and Tenant  represent to each
other  that it has dealt  with no broker in  connection  with this  Lease or the
transactions contemplated hereby other than Southwest Retirement Properties (the
"Broker"), and Tenant shall pay any compensation,  commissions or fees earned by
the Broker.  Except for the fees payable to the Broker in  connection  with this
transaction, which fees are the sole responsibility of Tenant, each party agrees
to indemnify and hold the other harmless,  including reasonable attorney's fees,
from all claims or actions  brought by any broker or agent claiming to represent
the indemnifying party in this transaction for fees or commissions.

         18.11  CAPTIONS  AND INDEXES . Article or Section  titles,  captions or
indexes,  contained in this Lease are inserted  only as a matter of  convenience
and reference, and in no way define, limit, extend or describe the scope of this
Lease, or the intent of any provision hereof.

         18.12  PRONOUNS . All  pronouns  and any  variations  thereof  shall be
deemed to refer to the masculine,  feminine,  neuter,  singular or plural as the
identity of the person or persons may require.

         18.13   DRAFTING  OF  THIS  LEASE  .  Landlord  and  Tenant  have  been
represented by attorneys in the  negotiation  and drafting of this Lease and all
of the  parties  to this Lease  have  influenced  the  language  of this  Lease.
Therefore,  this Lease shall not be construed against any party to this Lease by
reason of drafting authorship.

         18.14   COUNTERPARTS   .  This  Lease  may  be   executed   in  several
counterparts,  each of which shall be deemed an original, and all of which shall
together constitute one and the same instrument.

         18.15 QUIET ENJOYMENT . Landlord covenants that Tenant, paying the said
rental and  performing  the  covenants and  conditions in this Lease  contained,
shall and may peaceably and quietly  have,  hold and enjoy the Demised  Premises
and all rights of Tenant  hereunder  for the Lease  Term,  without any manner of
hindrance or molestation  whatsoever  from anyone  claiming by, through or under
Landlord.


                                       48
<PAGE>
                                   ARTICLE XIX
                   CONDITIONS PRECEDENT TO LEASE COMMENCEMENT

         Unless waived by Tenant in writing, neither the Lease Term nor Tenant's
obligations  under this Lease shall commence unless and until each and every one
of the following conditions has been satisfied or fulfilled.

         19.1 REPRESENTATIONS AND WARRANTIES .

         Each of the representations and warranties  contained in this Lease and
on any Schedule (as  originally  annexed to this Lease),  list,  certificate  or
other  document  delivered  pursuant  to the  provisions  hereto or in any other
document or instrument  delivered in connection herewith made by or on behalf of
Landlord and/or Jack West shall be true and correct in all material  respects at
and as of the time made and on and as of the  Commencement  Date as though  such
representations  and warranties were made at and as of such time,  except to the
extent affected by the transactions herein contemplated.

         19.2 PERFORMANCE OF COVENANTS; NO DEFAULT .

         Landlord shall have performed or complied in all material respects with
each of its  agreements  and  covenants  under  this Lease  (including,  without
limitation,  all of its  obligations  under  Article  XXII hereof) and under all
documents  and  instruments  delivered  in  connection  herewith  required to be
performed  or complied  with by it prior to or at the  Commencement  Date of the
Lease Term. No default shall exist nor any condition or event that,  constitutes
a "default"  (as defined in Article XI of this Lease),  or, with notice or lapse
of time or both, would constitute a default on the part of Landlord.

         19.3 DELIVERY OF CERTIFICATE .

         Landlord  shall have  executed and  delivered  to Tenant a  certificate
signed by a duly authorized  managing member of Landlord dated the  Commencement
Date upon which Tenant may rely, certifying that the statements made in Sections
19.1 and 19.2, are true, correct and complete as of the Commencement Date.

         19.4  LEGAL  MATTERS  . No  suit,  action,  investigation,  or legal or
administrative  proceeding shall have been brought or shall have been threatened
by any person  that  questions  the  validity  or  legality of this Lease or the
transactions contemplated hereby.

         19.5 APPROVALS .

         (a)  The  consent  or  approval  of  all  persons   necessary  for  the
consummation  of  the  transactions   contemplated  hereby  including,   without
limitation,  all  governmental,  regulatory and other such agencies,  shall have
been granted, including without limitation, the consents and approvals set forth
on Schedule  13.5 and any tax  clearance or similar  approval and all  licenses,
certificates  of need  and  other  permits  (including  without  limitation  the
"Licenses")  necessary  for 


                                       49
<PAGE>

Tenant to lease and operate the  Facility  shall have been  issued,  in Tenant's
name,  and the  effectiveness  of each of the same  shall not be  subject to the
satisfaction of any conditions precedent;

         (b) The consent of the Board of Directors of Tenant; and

         (c) None of the  foregoing  consents or  approvals  (i) shall have been
conditioned upon the  modification,  cancellation or termination of any material
lease,  contract,  commitment,  agreement,  license,  easement,  right  or other
authorization  with respect to the Facility,  or (ii) shall impose on Tenant any
material  condition or provision or requirement  with respect to the Facility or
its operation  that is more  restrictive  than or different  from the conditions
imposed upon such operation prior to the commencement of this Lease.

         19.6 MATERIAL ADVERSE CHANGE . Since the date of this Lease there shall
not  have  been  any  material  adverse  change  to (a)  the  assets,  business,
operations,   properties,  condition  (financial  or  otherwise)  or  reasonably
foreseeable prospects of Landlord, (b) the ability of Landlord to perform all or
any part of its  obligations  under  this  Lease or any  document  or  agreement
contemplated  hereby,  (c) the  Demised  Premises  or  Other  Assets  or (d) the
operation of the Facility.

         19.7 AUTHORIZATION  DOCUMENTS . Tenant shall have received  appropriate
authorizing documents and the Organizational Documents with respect to Landlord,
certified  in  a  manner  reasonably  acceptable  to  Tenant  including  without
limitation,   a  certificate  of  the  "managing  member"  (as  defined  in  the
Organizational Documents) of Landlord certifying the authorization of Landlord's
execution  and full  performance  of each of this  Lease and all  documents  and
agreements  executed by  Landlord in  connection  herewith,  the  Organizational
Documents of Landlord and the incumbency of the managing member of Landlord.

         19.8 COBRA . Intentionally Deleted.

         19.9 ENVIRONMENTAL  COMPLIANCE . Tenant shall have received, at its own
expense,  a written  report in form and substance  acceptable to Tenant,  from a
qualified  geotechnical or engineering firm of Tenant's  choice,  concerning the
presence of  hazardous  substances,  asbestos or  asbestos-containing  products,
radon and/or  ureaformaldehyde  insulation  on or in the  Facility.  Such report
shall  disclose  at a minimum:  (1) the results of a review of prior uses of the
Land  disclosed by local public  records;  (2) contacts with local  officials to
determine  whether any records  exist with  respect to the disposal of hazardous
substances  at  the  Land;  (3) if  deemed  necessary  by  such  engineering  or
geotechnical firm, or by Tenant, soil samples and groundwater samples consistent
with good engineering practice;  and (4) evaluation of the surrounding areas for
sensitive  environmental  receptors,  such as drinking  water wells or aquifers,
hospitals and schools.

         "Hazardous  Substance"  shall  include  (a) any  material  that  may be
dangerous to health or the environment, either separately or in combination with
any other substance,  when improperly stored,  treated,  disposed,  or otherwise
managed,  including without limitation "hazardous waste," "hazardous substances"
or "toxic substances," or any other contamination,  emission,  discharge, spill,
or release  having an adverse  effect on the  environment  (as such  concepts or
terms are used and/or defined in any of the  Environmental  Laws); and (b) crude
or refined  oil,  including  but not  limited to waste  oil.


                                       50
<PAGE>

         19.10  FACILITY  PURCHASE  OPTION.  Landlord  shall have  executed  and
delivered the Option Agreement in  substantially  the form of Exhibit D attached
hereto.

         19.11   NON-DISTURBANCE   AGREEMENT.   Tenant   shall  be   granted   a
Subordination  Agreement  with respect to this Lease from the  holder(s) of each
mortgage which is a lien on the Demised Premises on the date of this Lease.

                                   ARTICLE XX
                   CERTAIN ADDITIONAL OBLIGATIONS OF LANDLORD

         20.1  DISCHARGE  OF  LIABILITIES  .  Landlord  shall  pay  all  of  its
liabilities and obligations  which arise or accrue on or before the Commencement
Date with  respect to the  Facility,  as and when the same shall  become due and
payable.

         20.2 ACCOUNTS RECEIVABLE . Intentionally Deleted.

         20.3 EMPLOYMENT OF EXISTING EMPLOYEES . Intentionally Deleted.

         20.4 AUDITED FINANCIAL STATEMENTS . Intentionally Deleted.

         20.5 LICENSES. Landlord shall use its best efforts to deliver to Tenant
not  later  than ten (10)  days  from  execution  hereof  copies  of each of the
Licenses and of each of the applications therefor.

         20.6  COLLECTIVE  BARGAINING,   LABOR  CONTRACTS,   ETC.  Intentionally
Deleted.

         20.7 CONTRACTS AND PERSONAL PROPERTY LEASES.  Landlord shall deliver to
Tenant true,  correct and complete  copies of all of the  Contracts and Personal
Property  Leases no later  than ten (10) days from  execution  hereof.  Landlord
shall terminate as of the Commencement Date any and all of such Contracts and/or
Personal  Property Leases,  other than Contracts and/or Personal Property Lease,
if any, as shall be  designated by Tenant in writing,  as the  Contracts  and/or
Personal   Property  Leases  which  Tenant  wants  assigned  to  it  as  of  the
Commencement Date.

         20.8 DEMISED PREMISES.  All public improvements  ordered,  commenced or
completed  prior to the date of this  Lease  or prior to the  Commencement  Date
shall be paid for in full by Landlord prior to the Commencement Date;  provided,
that  if  the  same  are  payable  in  installments,   Landlord  shall  pay  all
installments  that are due and payable prior to the Commencement Date and Tenant
shall pay all installments that are due and payable on or after the Commencement
Date.

         20.9 DELIVERY OF NOTICES.  Between the date hereof and the Commencement
Date, and during the Lease Term,  Landlord shall, within five (5) days after its
receipt of any of the following,  deliver to Tenant copies of (a) all notices of
any claim or default or any other  claim or  proceeding  relating to any License
and all  notices  of any  threatened  termination,  lapse or  revocation  of any
License,  (b) all  claims or  notices  that the  Demised  Premises,  or any part
thereof,  are not in compliance  with any applicable  federal,  state,  local or
other  governmental  laws  or  ordinances,  or any  applicable  order,  rule  or
regulation of any federal,  state, local or other  governmental  agency, and

                                       51
<PAGE>
         19.12  TITLE  MATTERS.  At its sole cost and  expense,  Landlord  shall
deliver,  or cause to be delivered,  to Tenant: (i) final lien waivers from each
contractor,  subcontractor  and  materialman  that  performed  work or  supplied
materials in  connection  with the  construction  of the  Facility,  (ii) an "as
built" survey of the Demised  Premises that shows a state of facts acceptable to
Tenant and its counsel  prepared in accordance with ALTA standards by a surveyor
licensed in the State of Kansas,  (iii) an  endorcesment  to Tenant's  leasehold
owner's title  insurance  policy reading in such "as built"  survey,  and (iv) a
bringdown of Tenant's  leasehold  owner's title  insurance  policy  showing only
title exceptions that are acceptable to Tenant and its counsel.
                                       
                                      51-A
<PAGE>

(c) all notices or claims of any  violation of any federal,  state or local law,
regulation  or  ordinance  concerning  the  generation,  handling,  storage,  or
disposal of Medical Waste, or the environmental state,  condition, or quality of
the Demised  Premises,  or  requiring  or calling  attention to the need for any
work, repairs,  or demolition,  on or in connection with the Demised Premises in
order  to  comply  with  any  law,   regulation  or  ordinance   concerning  the
environmental or healthful state, condition or quality of the Demised Premises.

                                   ARTICLE XXI
                 EXTENSION OF COMMENCEMENT DATE AND TERMINATION

         21.1 TERMINATION.  Without limiting any of the rights of Tenant in this
Lease  or as it may be  otherwise  lawfully  entitled,  it is  agreed  that  the
commencement of the Lease Term is conditioned upon, and shall be subject to, the
satisfaction  of all  conditions  precedent to Tenant's  obligations  hereunder,
including, without limitation, those conditions set forth in Article XIX hereof,
the  verification by Tenant of the accuracy of all of Landlord's and Jack West's
warranties and representations made herein and the due compliance by Landlord of
all of its  agreements set forth herein and elsewhere in this Lease which are to
be performed prior to the  Commencement  Date. If, on or before the Commencement
Date, Tenant, in its sole judgment,  shall determine that any of said conditions
precedent  have not been  satisfied,  or that  Landlord's  or any of Jack West's
representations  or warranties are untrue or that Landlord has not complied with
any of said  agreements,  then the  Tenant  may elect to either  (i)  extend the
Commencement  Date for a period or periods  not in excess of ninety (90) days in
the aggregate,  during which time Landlord shall use its best efforts to satisfy
the condition,  complete its required  performance and otherwise cure the defect
or  non-compliance;  or (ii) terminate this Lease, by notice to Landlord.  If at
the end of any extended period or periods for the Commencement  Date said defect
or non-compliance has not been cured to Tenant's reasonable satisfaction, Tenant
may terminate this Lease by notice to Landlord. If this Lease is terminated,  as
aforesaid,  Landlord  shall  cause  any  deposits,  pre-payments  or other  sums
theretofore delivered or paid by Tenant hereunder to be refunded to Tenant, with
all interest earned thereon, and Landlord shall pay up to $15,000 of the cost of
any survey obtained,  any title search made, any insurance  commitment issued by
Tenant's title  insurance  company,  and any other  expenses,  including but not
limited to legal fees, incurred by Tenant, in connection with this Lease.

         21.2  TENANT'S  REMEDIES.  If Landlord  fails to comply with any of the
provisions of this Lease then, in addition to all other legal remedies available
to Tenant by reason of Landlord's default, Tenant shall have the right to obtain
specific  performance  of  Landlord's  obligations  hereunder.  Each  and  every
covenant,  representation  and  warranty of  Landlord  and Jack West made herein
shall survive and continue after the Commencement Date. Nothing contained herein
shall be deemed to restrict or limit Tenant in any way from  offsetting  against
or  deducting  from any Annual  Rent or other  payments  to be made to  Landlord
herein,  the amount of any costs or damages incurred by Tenant as a result of or
arising out of the breach by Landlord of any covenant, agreement, representation
or  warranty  made by Landlord  or Jack West in this  Lease;  provided  that the
amount to be offset  against or deducted from any  particular  payment shall not
exceed ten (10%) percent of such payment, with the balance of any such amount to
be offset against or deducted from subsequent  payments  subject to such cap and
carry forward provisions.

                                       52
<PAGE>

                                  ARTICLE XXII
                     CONSTRUCTION AND DELIVERY OF POSSESSION

         22.1 CONSTRUCTION, DELIVERY OF POSSESSION AND COMMENCEMENT DATE .

         (a) Landlord agrees to improve,  construct and install upon the Demised
Premises in the location  designated on Exhibit A-1 annexed  hereto,  the Leased
Improvements  containing  not less than 22,450  square  feet of  interior  floor
space, and consisting of 35 units and 46 beds, which Leased  Improvements  shall
be part of the Demised  Premises that shall be provided to Tenant by Landlord as
a "turnkey" operation,  as hereinafter  provided in this Lease.  Landlord agrees
that the work described as "Landlord's  Construction  Work" in Exhibit C annexed
hereto will be completed at its own cost and expense.

         (b) All work  required to be  performed  by  Landlord  pursuant to this
Lease shall be performed in a good and workmanlike manner, with new materials of
good quality.  The Demised Premises shall be left at the completion of such work
in a safe,  clean and  tenantable  condition  and in  reasonably  good order and
repair. Landlord shall perform all work provided for in this Lease in compliance
and  conformity  with all  applicable  construction  and building codes and with
every applicable  requirement of (i) any statute, law, ordinance,  regulation or
order, now or hereafter made by any governmental authorities;  (ii) any board of
fire underwriters,  rating bureau or similar  organizations having jurisdiction;
and (iii) all  carriers of  insurance  on the Demised  Premises  and on the work
provided for in this Lease.  For a period of fifteen (15) months  following  the
Commencement Date, Landlord, at its expense, shall remedy any defect or make any
repairs or  replacements  made  necessary  by its  failure  to perform  the work
required to be performed by it pursuant to this Lease,  including any failure to
perform  such work in a good and  workmanlike  manner and with new  materials of
good  quality.  During the eleventh  (11th) month after the  Commencement  Date,
Landlord  and Tenant shall  create a written  list of such  defects,  repairs or
replacements  that Landlord can present to its  contractors  for remedial action
within the twelve (12) month  warranty  period  provided by such  contractors to
Landlord;  provided  that nothing in this  sentence  derogates  the fifteen (15)
month  warranty  provided  by Landlord  to Tenant in the  immediately  preceding
sentence.  Landlord shall obtain all necessary  building  permits so as to allow
Landlord to perform Landlord's  Construction Work and ready the Demised Premises
for Tenant's use and occupancy.

         (c) Landlord  agrees that as part of Landlord's  Construction  Work the
Demised  Premises  shall be connected to the electric and gas lines  serving the
municipality wherein the Demised Premises are located and to the water and sewer
system of said municipality.

         (d)  Landlord  agrees  that  Landlord's   Construction  Work  shall  be
completed and  possession of the Demised  Premises  shall be delivered to Tenant
(the term  "delivery of possession of the Demises  Premises"  being  hereinafter
defined) on or before  February 28, 1997,  subject to extension of not more than
one  hundred  eighty  (180) days in the  aggregate  for periods of time that are
deemed  excusable delays pursuant to Section 11.4 of this Lease (herein referred
to as "Excusable Delays").

         (e) Further, should Landlord fail to diligently pursue such work and to
complete Landlord's  Construction Work in accordance with the provisions of this
Article,  Tenant

                                       53

<PAGE>
may,  without  prejudice to the exercise of any other  remedy,  at its election,
either (i) extend  further time to Landlord  within  which to properly  complete
Landlord's  Construction  Work,  or (ii)  commence  and/or  complete  Landlord's
Construction  Work or  correct  such  work,  as the case may be,  and deduct and
offset Tenant's entire cost of so doing, together with interest thereon from the
date of  expenditure  thereof  at the  annual  rate set forth in  Section  3.1.4
hereof,  from any Annual Rent or other amounts  payable under this Lease. At the
expiration  of any extended  period or periods  granted by Tenant as  aforesaid,
Tenant shall have the same rights of extension or self help.

         Landlord and Jack West shall at all times jointly and severally defend,
indemnify and hold harmless the Tenant Indemnified  Parties from and against all
actions,  claims,  demands,  costs,  damages,  penalties and expense of any kind
which may be brought,  made or incurred  by reason of any work  performed  on or
about the Demised  Premises by or on behalf of or at the  direction of Landlord,
including,  without  limitation any loss of business or profits from the Demised
Premises  or any  costs and  expenses  incurred  in the  operation  of  Tenant's
business at the Demised  Premises by reason of or  resulting  from  interference
with Tenant's business operations by the performance of Landlord's  Construction
Work.  Landlord shall carry a policy of insurance,  insuring Landlord and Tenant
against public  liability on an occurrence basis with limits not less than Three
Million  ($3,000,000)  Dollars combined coverage for personal injury and against
property  damage  with a limit  of at least  Five  Hundred  Thousand  ($500,000)
Dollars,  which insurance shall be in effect at all times when any work is being
performed  by or on  behalf  of  Landlord  on or  about  the  Demised  Premises;
provided,  however,  that  Landlord  may  cause  its  contractor  to carry  such
insurance.  On or before  the date of this  Lease  with  respect  to  Landlord's
Construction Work, and before commencing any such work at other times,  Landlord
shall furnish Tenant with a certificate of insurance evidencing  compliance with
the foregoing insurance requirements.

         (f) Provided (x)  Landlord's  Construction  Work has been completed and
all  equipment and  facilities  required to be furnished by Landlord are in good
working order, and (y) all utilities and sewer facilities have been connected to
the  Demised  Premises  and are  operable,  Landlord  shall  be  deemed  to have
"delivered  possession  of the  Demised  Premises"  to  Tenant  on the fifth day
following  Tenant's receipt of written notice from Landlord of the completion of
the items set forth in clauses (x) and (y) in this paragraph (f),  provided that
said notice is accompanied by:

          (i)  a  final,   non-conditional  Certificate  of  Occupancy,  or  its
     equivalent,   and  all  necessary  licenses  and  permits,  issued  by  the
     appropriate governmental authorities, permitting Tenant's use and occupancy
     of the Demised  Premises  for the  purposes  herein  described,  including,
     without limitation,  any necessary licenses or permits for the operation of
     the Demised Premises as an assisted living facility; and

          (ii) a board of fire  underwriter's  certificate  with  respect to the
     electrical   installations   in  the  Demised   Premises   and  such  other
     certificates as are customarily obtained for similar types of buildings and
     improvements.

For purposes of this Lease,  the  "Commencement  Date" shall be deemed to be the
date upon which Tenant  officially opens the Demised  Premises for business,  or
five (5) days after Landlord's delivery of possession of the Demised Premises to
Tenant as  aforesaid,  whichever  first  occurs.  Landlord and Tenant agree that
delivery  of  possession  of the  Demised  Premises  shall not be deemed to have


                                       54
<PAGE>

occurred  until  exclusive  possession of the Demised  Premises  shall have been
delivered to Tenant with the completion of Landlord's  Construction Work (except
such non-substantial and non-material portions thereof as Landlord shall have by
reason of  Excusable  Delays been unable to  complete,  provided  the failure to
complete said items does not  interfere  with Tenant's full use and enjoyment of
the  Demised  Premises  and  further  provided  that said  incomplete  items are
thereafter  completed  within thirty (30) days,  said Demised  Premises to be in
broom clean condition.

         (g) Tenant's acceptance of possession of the Demised Premises shall not
be deemed a waiver by Tenant of any failure by Landlord to complete  and perform
Landlord's Construction Work in compliance with the provisions of this Lease.

         (h) If  Tenant  submits  to  Landlord  a  written  list of items  which
Landlord is  obligated  to  complete or correct  pursuant to the final plans and
specifications for Landlord's Construction Work, Landlord shall have a period of
thirty  (30) days from the date of said notice to  complete  such work,  failing
which Tenant shall have the right to complete such work at  Landlord's  cost and
expense,  and Tenant may  deduct and offset  from any Annual  Rent or other sums
thereafter  due  Landlord  an  amount  equal to  Tenant's  cost and  expense  in
performing  such  work,   together  with  interest  thereon  from  the  date  of
expenditure  at the annual rate set forth in Section 3.1.4  hereof,  if Landlord
does not reimburse  Tenant on demand  therefor.  It is expressly  understood and
agreed,  however,  that Tenant's  failure to submit such list to Landlord or its
failure to include any item of  incomplete  or  incorrect  work on any such list
shall not be deemed a waiver of any of  Tenant's  rights  with  respect  to such
incomplete  or  incorrect  work,  Landlord  hereby  agreeing  that it  shall  be
Landlord's  obligation  to  complete  or  correct  the  same in any  event.  The
foregoing  provisions  of  this  subsection  shall  also  be  applicable  to any
supplementary list submitted by Tenant to Landlord after the initial list, which
supplementary list may include, without limitation,  latent or other defects not
readily  ascertainable  in the  course of  Tenant's  initial  inspection  of the
Demised  Premises.  Tenant agrees to use its best efforts to furnish the initial
list to Landlord  prior to the  expiration of ninety (90) days after the opening
of the Demised Premises for the conduct of business.


                                  ARTICLE XXIII
                      GLOSSARY AND ADDITIONAL DEFINED TERMS

         Whenever  used in  this  Lease  the  following  terms  shall  have  the
respective meanings ascribed to them below:

         "Annual Rent" shall have the meaning set forth in Section 3.1.1.

         "Assets" shall have the meaning set forth in Section 13.18.

         "Broker" shall have the meaning set forth in Section 18.10.

         "Capital  Expenditures"  shall  have the  meaning  set forth in Section
8.1.4.

         "Capital  Improvement"  shall  have the  meaning  set forth in  Section
8.1.4.

                                       55
<PAGE>

         "Commencement  Date"  shall  have the  meaning  set  forth  in  Section
22.1(f).

         "Contracts" shall have the meaning set forth in Section 13.6.

         "default" shall have the meaning set forth in Section 11.1.

         "Demised Premises" shall have the meaning set forth in Section 1.1.

         "Event of Default" shall have the meaning set forth in Section 11.1.

         "Environmental  Laws"  shall  have the  meaning  set  forth in  Section
13.21(b).

         "Excusable Delays" shall have the meaning set forth in Section 22.1(d).

         "Facility" - first page

         "Fixtures" shall have the meaning set forth in Section 1.1(d).

         "GAAP" shall have the meaning set forth in Section 8.1.4.

         "ILCI" shall have the meaning set forth in Section 10.1.

         "Impositions" shall have the meaning set forth in Section 5.1.

         "Indemnified Parties" shall have the meaning set forth in Section 15.4.

         "Initial Term" shall have the meaning set forth in Section 2.1.

         "Institutional  Lender"  shall  have the  meaning  set forth in Section
15.6.

         "Insurance Trustee" shall have the meaning set forth in Section 15.6.

         "Intangibles" shall have the meaning set forth in Section 1.2(a).

         "Intellectual  Property"  shall have the  meaning  set forth in Section
13.29.

         "Land" shall have the meaning set forth in Section 1.1(a).

         "Landlord's  Construction  Work"  shall have the  meaning  set forth in
Section 22.1(a).

         "Landlord's Share" shall have the meaning set forth in Section 8.1.4.

         "Landlord's  Transaction Documents" shall have the meaning set forth in
Section 13.2.

         "Leased Equipment" shall have the meaning set forth in Section 4.2.

                                       56
<PAGE>

         "Leased  Improvements"  shall  have the  meaning  set forth in  Section
1.1(b).

         "Lease Term" shall have the meaning set forth in Section 2.3.

         "Lease Year" shall have the meaning set forth in Section 2.4.

         "leasehold mortgage" shall have the meaning set forth in Section 10.2.

         "Licenses" shall have the meaning set forth in Section 13.9.

         "Lien" shall have the meaning set forth in Section 13.10(a).

         "Major  Capital  Expenditure"  shall  have  the  meaning  set  forth in
paragraph after Section 8.1.4.

         "Major  Damage"  shall have the  meaning set forth in  paragraph  after
Section 12.1.

         "Material  Adverse Effect" shall mean, with respect to any Person,  any
material  adverse  effect  upon,  as the case may be, (a) the assets,  business,
operations,   properties,  condition  (financial  or  otherwise)  or  reasonably
foreseeable prospects of Landlord, (b) the ability of Landlord to perform all or
any part of its  obligations  under  this  Lease or any  document  or  agreement
contemplated  hereby,  (c) the  Demised  Premises  or Other  Assets,  or (d) the
operation of the Facility.

         "Medical Waste" shall have the meaning set forth in Section 13.21(a)(i)

         "Money Rates Column" shall have the meaning set forth in Section 3.1.4.

         "Operator" shall have the meaning set forth in Section 17.1(a).

         "Option Agreement" shall have the meaning set forth in Section 8.4.

         "Other Assets" shall have the meaning set forth in Section 1.2.

         "PCBs" shall have the meaning set forth in Section 13.21(a)(iii).

         "Permitted  Exceptions"  shall  have the  meaning  set forth in Section
13.11(a).

         "Person" or "person" shall include  (without  limitation) any manner of
association,  business trust, company,  corporation,  limited liability company,
estate,   governmental  or  other  authority,  joint  venture,  natural  person,
partnership, limited liability partnership, trust or other entity.

         "Personal Property" shall have the meaning set forth in Section 1.1(e).

         "Personal  Property Leases" shall have the meaning set forth in Section
13.26.

         "Price  Index" shall have the meaning set forth in Section  8.1.1.2(i).


                                       57
<PAGE>


         "Prime Rate" shall have the meaning set forth in Section 3.1.4.

         "Proper Successor" shall have the meaning set forth in Section 4.4.

         "Related Rights" shall have the meaning set forth in Section 1.1(c).

         "Renewal Term" shall have the meaning set forth in Section 2.2.

         "Repairs" shall have the meaning set forth in Section 8.1.1.

         "Restricted Party" shall have the meaning set forth in Section 17.1(a).

         "Right of First  Refusal"  shall have the  meaning set forth in Section
8.4.

         "Subordination  Agreement"  shall have the meaning set forth in Section
10.3.

         "Tenant  Indemnified  Parties"  shall  have the  meaning  set  forth in
Section 15.5.

         "Tenant's Share" shall have the meaning set forth in Section 8.1.4.



                                       58
<PAGE>


         "Trade Rights" shall have the meaning set forth in Section 1.2(b).

         IN WITNESS  WHEREOF,  the  parties  hereto have caused this Lease to be
duly executed as a sealed instrument on the day and year first above written.



                                               LANDLORD:

                                               THE HOMESTEAD
                                                  OF MANHATTAN, L.C.



Attest:                                        By: /s/ Jack West
        --------------------------------           ----------------------------
            Name:                              Name:
            Title:                             Title:


                                               TENANT:
                                               INTEGRATED LIVING COMMUNITIES
                                                            OF MANHATTAN, INC.


Attest:  /s/ Kayda Johnson                     By: /s/ Edward J. Komp
       --------------------------------           -----------------------------
            Name:  Kayda Johnson               Name: Edward J. Komp
            Title: SUP/COO                     Title: President/CEO


AS TO SECTIONS AND PROVISIONS
SPECIFICALLY IDENTIFYING JACK WEST:
/s/ Jack West
--------------------------
JACK WEST




<PAGE>



                                 ACKNOWLEDGMENTS


STATE OF Kansas          )
                         ) SS:
COUNTY OF Sedgwick       )


         This Lease was acknowledged before me on August 21, 1996, by Jack West,
as Manager of THE  HOMESTEAD  OF  MANHATTAN,  L.C., a Kansas  limited  liability
company.

                                               /s/ Kent G. Voth
  [Notary seal]                               ----------------------------------
                                                        Notary Public

                                                     My appointment expires:

STATE OF Florida       )
                       ) SS:
COUNTY OF Cllier       )


         This Lease was acknowledged  before me on August 29, 1996, by Edward J.
Komp, as President/CEO of INTEGRATED  LIVING  COMMUNITIES OF MANHATTAN,  INC., a
Delaware corporation.

                                               /s/ Judith Tamanini
   [Notary seal]                              ----------------------------------
                                                        Notary Public

                                                    My appointment expires:
STATE OF Kansas          )
                         ) SS:
COUNTY OF Sedgwick       )


                  This Lease was  acknowledged  before me on August 29, 1996, by
JACK WEST.

                                               /s/ Kent G. Voth
  [Notary seal]                               ----------------------------------
                                                        Notary Public

                                                     My appointment expires:



<PAGE>



                                GUARANTY OF LEASE


         FOR  VALUE  RECEIVED,   and  in  consideration  for  THE  HOMESTEAD  OF
MANHATTAN,  L.C., a Kansas limited  liability  company having an address c/o The
Homestead  Company,  L.C., 155 North Market,  Suite 910, Wichita,  Kansas 67202,
Attention:  Mr.  Jack  West  ("Landlord")  entering  into  the  foregoing  lease
agreement (the "Lease") with INTEGRATED LIVING COMMUNITIES OF MANHATTAN, INC., a
Delaware corporation having an office at 10065 Red Run Boulevard,  Owings Mills,
Maryland 21117 ("Tenant"),  the undersigned,  INTEGRATED  HEALTH SERVICES,  INC.
("IHS")  and  INTEGRATED  LIVING  COMMUNITIES,  INC.  ("ILC"),  each a  Delaware
corporation having an office at 10065 Red Run Boulevard,  Owings Mills, Maryland
21117 (jointly and severally  "Guarantor"),  jointly and severally  guarantee to
Landlord,  the  payment  in full of all  Annual  Rent and  Impositions  (as such
capitalized terms are defined in the Lease) which accrues under the Lease during
the  Initial  Term  and/or the  Renewal  Term (each as defined in the Lease) and
remains due and owing after the giving of any requisite notice to Tenant and the
expiration of all applicable grace periods under the Lease.  Notwithstanding the
foregoing, IHS shall have no further liability under this guaranty once ILC, the
sole shareholder of Tenant, has achieved a net worth of not less than Fifty-five
Million Dollars ($55,000,000),  determined in accordance with generally accepted
accounting principles, as shown on ILC's most recent financial statement,  which
shall be prepared and certified to by the chief financial officer of ILC.

         Guarantor  shall furnish to Landlord a copy of its Quarterly  Report on
Form 10-Q  within  thirty  (30) days  after the end of each  fiscal  quarter  of
Guarantor,  and a copy of its Annual Report on Form 10-K within ninety (90) days
after the close of each fiscal year of Guarantor. The foregoing shall only apply
to ILC after IHS is released as a guarantor hereunder.

                                     INTEGRATED HEALTH SERVICES, INC.


                                     By:________________________________
                                     Name:
                                     Title:


                                     INTEGRATED LIVING COMMUNITIES, INC.


                                     By:________________________________
                                     Name:
                                     Title:





<PAGE>



                                 ACKNOWLEDGMENTS


STATE OF MARYLAND )
                  ) SS:
COUNTY OF_________)


         This Guaranty of Lease was  acknowledged  before me on August __, 1996,
by __________________________________,  as __________________________________ of
INTEGRATED HEALTH SERVICES, INC., a Delaware corporation.



                                              ----------------------------------
                                                        Notary Public


                                                    My appointment expires:

STATE OF MARYLAND )
                  ) SS:
COUNTY OF ________)


         This Guaranty of Lease was  acknowledged  before me on August __, 1996,
by ______________________________________, as __________________________________
of INTEGRATED LIVING COMMUNITIES, INC., a Delaware corporation.



                                              ----------------------------------
                                                          Notary Public


                                                     My appointment expires:




<PAGE>



                                    EXHIBIT A

                             DESCRIPTION OF THE LAND





<PAGE>



                                   EXHIBIT A-1

                         LOCATION OF LEASED IMPROVEMENTS





<PAGE>



                                    EXHIBIT B

                           [LIST OF SELECTED PERSONAL
                              PROPERTY & FIXTURES]





<PAGE>



                                    EXHIBIT C

                         (LANDLORD'S CONSTRUCTION WORK)

                         SEE REFERENCES IN ARTICLE XXII


The  description  of the final  plans and  specifications  are  annexed  to this
Exhibit C.

All labor and materials  necessary to complete the Leased Improvements and other
improvements  to be constructed  or being  constructed on the Land in accordance
with said final plans and specifications and the provisions of this Lease, shall
be known as "Landlord's Construction Work".

Unless Tenant shall  expressly  agree in writing that any  requirements  of said
final plans and specifications shall be waived or altered,  every requirement of
said final plans and  specifications  shall be  complied  with by  Landlord.  No
employee or agent of Tenant,  other than an officer of Tenant, has any authority
to waive or alter any  requirements of said final plans and  specifications.  If
there shall be any  inconsistency  or  conflict  among the  requirements  of the
within Lease, this Exhibit C and said final plans and  specifications,  Landlord
shall  notify  Tenant   thereof  as  soon  as  Landlord   shall   discover  such
inconsistency or conflict.  In any event, unless Tenant shall notify Landlord in
writing to the contrary,  the most  stringent  requirement  shall control in the
case of any such inconsistency or conflict.

Landlord at all times assumes and accepts sole responsibility for the structural
and engineering design of the Demised Premises and all appurtenances thereto and
the quality and fitness of all materials or fixtures used therein. The review by
Tenant  of said  final  plans  and the  specifications  or the  approval  of any
suggestions   with  respect   thereto   shall  not   constitute  an  opinion  or
representation  by Tenant with respect to the  sufficiency  of the structural or
engineering  design of the  Demised  Premises  or the  quality or fitness of any
materials or fixtures used therein or impose any present or future  liability or
responsibility upon Tenant therefor.

Prior to the date of this Lease,  Landlord  shall furnish Tenant with a detailed
timetable setting forth Landlord's schedule therefor. Landlord agrees to furnish
Tenant with revisions of said timetable whenever  reasonably required during the
course of construction.





<PAGE>




                        OFF-SITE IMPROVEMENTS BY LANDLORD

Landlord's  Construction  Work includes road improvements and the other off-site
improvements  listed  below.  This is in addition to any  off-site  improvements
elsewhere referred to in the Lease and in said final plans and specifications.




<PAGE>



                                    EXHIBIT D

                                OPTION AGREEMENT




<PAGE>



                                    EXHIBIT E

                     FORM OF SUBORDINATION, NON-DISTURBANCE
                            AND RECOGNITION AGREEMENT




<PAGE>



                                  SCHEDULE ____

                               [ATTACH SCHEDULES]