Document:

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                                                                 EXHIBIT 10.50

                             MASTER LEASE AGREEMENT

                                     Between

                              LTC PROPERTIES, INC.,

                         TEXAS-LTC LIMITED PARTNERSHIP,

                                       and

                  NORTH CAROLINA REAL ESTATE INVESTMENTS, LLC,
                                    as Lessor

                                       and

                         ALTERRA HEALTHCARE CORPORATION,
                                    as Lessee

                            Dated: December 15, 2002

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                             MASTER LEASE AGREEMENT

      THIS MASTER LEASE AGREEMENT (this "LEASE") is made effective as of
December 15, 2002, by and between LTC PROPERTIES, INC., a Maryland corporation,
TEXAS-LTC LIMITED PARTNERSHIP, a Texas limited partnership, and NORTH CAROLINA
REAL ESTATE INVESTMENTS, LLC, a North Carolina limited liability company
(collectively, "LESSOR"), and ALTERRA HEALTHCARE CORPORATION, a Delaware
corporation ("LESSEE"), subject to the terms, conditions and contingencies set
forth below.

                                    RECITALS

      WHEREAS Lessor owns certain real property and improvements (as more
particularly defined below, the "FACILITIES"), and desires to lease them to
Lessee pursuant to the terms and conditions of this Lease; and

      WHEREAS it the parties' intention to set forth their respective covenants
and obligations in a single agreement, not merely as matter of convenience, but
because the leasing of the twenty one (21) Facilities as an inseparable unit is
a special and essential inducement to Lessor to enter into this transaction, and
but for the leasing of the twenty one (21) Facilities together as an inseparable
whole, Lessor would not have entered into this Lease; and

      WHEREAS the parties agree and acknowledge that the amount set forth as
Minimum Rent (defined below) is calculated on the basis of leasing of the twenty
one (21) Facilities together as a single, inseparable group and is non-allocable
among the twenty one (21) Facilities, and that it would be impossible to
allocate to any one or more of the Facilities a divisible portion of the Minimum
Rent.

      NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt,
sufficiency and mutuality of which are hereby acknowledged, it is agreed as
follows:

                                   ARTICLE I

            1.1. Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Lessor leases to Lessee, and Lessee rents or hires from
Lessor all of the following (the "LEASED PROPERTY"):

                  (a) The real property particularly described in EXHIBIT "A-1"
through EXHIBIT "A-21" (the "LAND");

                  (b) All of its right, title and interest in and to the
buildings, structures, Fixtures (as hereinafter defined) and other improvements
of every kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and offsite), parking
areas and roadways appurtenant to such buildings and structures presently
situated upon the Land, including without limitation the Facilities (as defined
below) (collectively, the "LEASED IMPROVEMENTS");

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                  (c) All of its right, title and interest in and to the
easements, rights and appurtenances relating to the Land and the Leased
Improvements;

                  (d) All of its right, title and interest in and to the
permanently affixed equipment, machinery, fixtures, and other items of real
and/or personal property, including all components thereof, now and hereafter
located in, on or used in connection with, or permanently affixed to or
incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to the greatest
extent permitted by law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto, but specifically excluding all items included within the
category of Lessee's Personal Property as defined in ARTICLE II below
(collectively the "FIXTURES"); and

                  (e) All of its right, title and interest in and to personal
tangible and intangible property including all components thereof, owned by
Lessor and now and hereafter located in, on or used in connection with the
Leased Improvements.

      Except with respect to the representations and warranties of Lessor set
forth herein, the Leased Property is demised subject to all covenants,
conditions, restrictions, easements and all other matters affecting title,
whether or not of record, the conditions and limitations expressly set forth
herein, and any and all matters created by or known to Lessee. Lessor represents
and warrants for the benefit of Lessee that as of the date of this Lease, (i)
Lessor is the fee simple title holder of the Land and the Leased Improvements as
of the Commencement Date and (ii) as of the Commencement Date, there is no
mortgage, deed of trust, ground lease, or other comparable instrument executed
by Lessor in favor of any lender or ground lessor or other obligee of Lessor,
nor any lien, judgment, or other similar encumbrance affecting or encumbering
the Leased Property or any portion thereof and arising by, through or under
Lessor (expressly excluding any such lien, judgment or other encumbrance arising
as a result of Lessee or Lessee's agents, representatives or assigns) except for
the Existing Encumbrances (defined below). Lessee represents and warrants for
the benefit of Lessor (i) as of the date of this Lease, there are no mechanic's
liens or liens of any type recorded against the Leased Property that were
recorded or attached during the period of Lessee's occupancy of the Leased
Property and that arose as a result of Lessee's or Lessee's agents,
representatives or assigns activities thereon that remain unsatisfied of record
as of the Commencement Date, and (ii) there are no Impositions currently
outstanding that have become delinquent.

            1.2. Term. The term of this Lease (the "TERM") shall commence on
January 1, 2003. From and after the Commencement Date, the Term shall continue
for a period of eighteen (18) years, expiring (if not sooner terminated) at
midnight (California time) on December 31, 2020.

                                   ARTICLE II

      2. Definitions. For all purposes of this Lease, except as otherwise
expressly provided, (i) the terms defined in this ARTICLE II have the meanings
assigned to them in this

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ARTICLE II and include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles at the time applicable,
and (iii) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Lease as a whole and not to any particular Article,
Section or other subdivision:

      Additional Charges. As defined in ARTICLE III.

      Affiliate. When used with respect to any corporation, the term "Affiliate"
shall mean any person which, directly or indirectly, controls or is controlled
by or is under common control with such corporation. For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests. For the purposes of this definition, "person" shall mean any
natural person, trust, partnership, corporation, joint venture or other legal
entity.

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

      Change of Control. As defined in ARTICLE XVIII below.

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

      Controlling Entity. As defined in ARTICLE XVIII below.

      Encumbrance. As defined in ARTICLE XXXII.

      Event of Default. As defined in ARTICLE XVI.

      Existing Encumbrances. The mortgages identified on SCHEDULE 1 attached
hereto.

      Extended Term. As defined in ARTICLE XXXIV.

      Facilities. Those certain assisted living facilities which are part of the
Leased Property, a schedule of which is attached hereto as EXHIBIT "B".

      Facility. As the context requires, any one of the Facilities.

      Facility Mortgage. As defined in ARTICLE XIII.

      Facility Mortgagee. As defined in ARTICLE XIII.

      Fiscal Year. The twelve (12) month period from January 1 through December
31 of the same calendar year (as prorated for any partial Fiscal Year during the
Term).

      Fixtures. As defined in ARTICLE I.

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      Impositions. Collectively, all taxes (including, without limitation, all
ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and all other governmental
or public charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon due to any failure in payment by Lessee), and all
increases in all the above from any cause whatsoever, including reassessment,
which at any time prior to, during or in respect of the Term may be assessed or
imposed on or in respect of or be a lien upon (a) Lessor's interest in the
Leased Property, (b) the Leased Property or any part thereof, or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased Property
or any part thereof by Lessee. Provided, however, nothing contained in this
Lease shall be construed to require Lessee to pay (1) any tax based on income
(or any tax based on outstanding corporate shares of Lessor or Lessor's equity
or capitalization, regardless of whether denominated as an income tax, franchise
tax, or capital stock tax or other tax) imposed on Lessor, or (2) any transfer,
or net revenue tax of Lessor, or (3) any sales, income, capital gain, transfer,
documentary, mortgage, intangible or other tax imposed with respect to the sale,
exchange, mortgaging or other disposition or financing by Lessor of any Leased
Property or the proceeds thereof, or (4) any single business, gross receipts
(other than a tax on any rent received by Lessor from Lessee), transaction,
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessor, and are unrelated to the Leased Property, or (5) estate, inheritance,
gift taxes or documentary transfer taxes.

      Insurance Requirements. All terms of any insurance policy required by this
Lease and all requirements of the issuer of any such policy.

      Land. As defined in ARTICLE I.

      Lease. As defined in the Preamble.

      Leased Improvements. As defined in ARTICLE I.

      Leased Property. As defined in ARTICLE I.

      Legal Requirements. All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the
construction, use or alteration thereof, whether now or hereafter enacted and in
force, including any which may (i) require repairs, modifications or alterations
in or to the Leased Property, or (ii) in any way affect the use and enjoyment
thereof, and all permits, licenses and authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments (whether or not of record) or otherwise known to Lessee, at
any time in force affecting the Leased Property; provided,

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however, as it relates to covenants, agreements, restrictions and encumbrances
contained in any Encumbrance, Lessee need comply only with (i) the Existing
Encumbrances, and (ii) any Encumbrances subsequently entered into in accordance
with the provisions of SECTION 32.1 below where Lessee receives the
non-disturbance agreement described in such SECTION 32.1 and where such
Encumbrances do not, without Lessee's consent, materially adversely affect
Lessee's rights hereunder, or materially increase Lessee's duties or obligations
hereunder).

      Lessee. As defined in the Preamble.

      Lessee's Personal Property. All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures or other
personal property, and consumable inventory/and supplies, used in Lessee's
business on the Leased Property, including without limitation, all items of
furniture, furnishings, equipment, supplies and inventory, except items (i)
included within the definition of Fixtures; and (ii) personal property described
in SECTION 1.1(e), above.

      Lessor. As defined in the Preamble.

      Minimum Rent. As defined in SECTION 3.1.

      Notice. A notice given pursuant to ARTICLE XXXI hereof.

      Other Leases. As defined in SECTION 16.1(j) below.

      Overdue Rate. On any date, a rate equal to the Prime Rate (defined below),
plus two percent (2%); provided, however, that it is the intent of Lessor and
Lessee that the Overdue Rate (and all other interest rates provided for
hereunder) be in strict compliance with applicable usury laws of the State of
California, and that in the event the Overdue Rate (or other interest rate
provided for hereunder) shall be deemed to exceed that permitted to be charged
by the laws of the State of California, any and all excess sums collected by
Lessor shall be credited against the Rent payable under this Lease or if there
is no Rent due, promptly refunded to Lessee.

      Payment Date. Any due date for the payment of the installments of Minimum
Rent.

      Primary Intended Use. As defined in SECTION 7.2.2.

      Prime Rate. On any date, a rate equal to the annual rate on such date
announced by Citibank, N.A. to be its prime rate for 90-day unsecured loans to
its corporate borrowers of the highest credit standing or, if not available,
such other rate as may be published by The Wall Street Journal as the prime rate
in its listing of "Money Rates."

      Rent. Any monetary obligations of Lessee owing under this Lease,
including, without limitation, Minimum Rent and Additional Charges.

      Term. Collectively, the Initial Term plus any Extended Terms.

      Unsuitable for its Primary Intended Use. A state or condition of any
Facility such that by reason of damage or destruction, or a partial taking by
Condemnation in the good faith judgment

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of Lessor and Lessee, reasonably exercised, such Facility cannot be operated on
a commercially practicable basis for its Primary Intended Use taking into
account, among other relevant factors, the number of usable beds affected by
such damage or destruction or partial Condemnation.

      Unavoidable Delays. Delays due to strikes, lock-outs, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto.

      The above does not include all the definitions to be used in this Lease.
Various definitions are included in the Sections below.

                                   ARTICLE III

            3.1. Minimum Rent. Lessee will pay to Lessor in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts at Lessor's address set forth in ARTICLE XXXI or at such other
place or to such other person, firms or corporations as Lessor from time to time
may designate in a Notice, Minimum Rent (as defined below), during the Term, as
follows:

                  (a) Initial Term. The initial annual "MINIMUM RENT" payable
hereunder shall be Five Million Six Hundred Seventy Nine Thousand Four Hundred
Twenty Eight and 89/100 Dollars ($5,679,428.89), payable in equal monthly
installments of Four Hundred Seventy Three Thousand Two Hundred Eighty Five and
74/100 Dollars ($473,285.74) on the first (1st) calendar day of each calendar
month of the Term. If necessary, Minimum Rent shall be prorated for any partial
month at the beginning or end of the Term.

                  (b) Extended Terms. The Minimum Rent during the Extended Terms
shall be as stated in ARTICLE XXXIV.

                  (c) Annual Escalation of Minimum Rent. Commencing on the
one-year anniversary of the Commencement Date (if the Commencement Date is the
first (1st) day of a calendar month, or, if not, on the first (1st) day of the
first (1st) full month following the Commencement Date), and continuing on each
subsequent one-year anniversary thereof during the Term (including any Extended
Term) (each, an "ADJUSTMENT DATE"), the Minimum Rent (irrespective of any
prorations made pursuant to SECTION 3.1(a) above) shall increase to an amount
equal to the Minimum Rent for the one-year period immediately preceding the
Adjustment Date multiplied by a fraction, the numerator of which shall be the
C.P.I. (defined below) for the month in which the Adjustment Date occurs, and
the denominator of which shall be the C.P.I. for the month that was one year
prior to the Adjustment Date; provided, however, that the product of said
multiplication shall not result in an increase of the Minimum Rent by more than
two percent (2%) per year on a cumulative basis ("ANNUAL MULTIPLIER"). If,
however, the Annual Multiplier is less than two percent (2%) on any Adjustment
Date (a "LESS THAN 2% ADJUSTMENT DATE"), then at such time as the Annual
Multiplier is determined for subsequent Adjustment Dates, the Minimum Rent for
each Less Than 2% Adjustment Date shall be retroactively recalculated such that
subsequent Annual Multipliers (whether less than or greater

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than 2%) shall be first applied to increase the Annual Multiplier for each Less
Than 2% Adjustment Date to an amount up to, but not greater than, 2%, with such
recalculations to be made in chronological order beginning with the earliest
Less Than 2% Adjustment Date and continuing, so long as there is Annual
Multiplier remaining, until recalculations have been made with respect to all
Less Than 2% Adjustment Dates. After each such recalculation has been made, the
shortfall in the Minimum Rent for the newly recalculated Less Than 2% Adjustment
Dates shall be billed to Lessee and Lessee shall pay such shortfall amount to
Lessor together with the next payment of Minimum Rent otherwise coming due
hereunder. Such recalculations and shortfall billings shall be made on each
Adjustment Date where there remain prior Less Than 2% Adjustment Dates which
have not yet been recalculated to 2%. For purposes of example only, if the
Commencement Date is June 1, 2002 and the initial Minimum Rent equals
$1,020,000, and if (a) the C.P.I. increased 1.5% as of June 1, 2003, the Minimum
Rent as of June 1, 2003 would increase to $1,035,300; (b) the C.P.I. increased
1.5% as of June 1, 2004, the Minimum Rent as of June 1, 2004 would increase to
$1,050,830; (c) the C.P.I. increased 6% as of June 1, 2005, the Minimum Rent as
of June 1, 2005 would increase to $1,082,354, which is the Minimum Rent
increased by 2% per year for three years (i.e. the average annual increases have
been 3% (1.5% + 1.5% + 6% for the three years, respectively) subject to the 2%
annual limitation), and the total shortfall amount to be billed to Lessee would
be $5,100 for the 2003 Adjustment Date and $10,378 for the 2004 Adjustment Date.
The "overage" in the C.P.I. increase (i.e., the remaining 3% increase that could
not be applied towards the increase in Minimum Rent on June 1, 2005 by virtue of
the 2% cap), would be "banked" and would be used to increase Minimum Rent in
subsequent years if the C.P.I. increase in such years were less than 2%. By way
of demonstration, if the C.P.I. as of June 1, 2006 and June 1, 2007 do not
increase at all, then Minimum Rent would nonetheless increase by 2% on June 1,
2006, and 1% on June 1, 2007 (such increases having been "banked" from the
remaining portion of the 6% C.P.I. increase on June 1, 2005). "C.P.I." shall
mean and refer to the Consumer Price Index of the Bureau of Labor Statistics of
the Department of Labor, U.S. Cities Average, All Items (1982-84=100); provided
that if compilation of the C.P.I. is discontinued or transferred to any other
governmental department or bureau, then the index most nearly the same as the
C.P.I. shall be used. If Lessor is unable to determine the C.P.I. by any
Adjustment Date, Lessee shall continue to pay the Minimum Rent at the rate paid
for the period immediately prior to that Adjustment Date, and once the C.P.I.
for that Adjustment Date is published, the new Minimum Rent (as increased by the
Annual Multiplier) shall be effective retroactively as of such Adjustment Date
and the aggregate amount of any additional Minimum Rent shall be paid by Lessee
promptly after written notice thereof from Lessor (but not later than the date
of the next monthly installment of Minimum Rent, unless the next installment
falls due within five (5) days after Lessor's notice, in which case not later
than the date of the second next monthly installment of Minimum Rent). No delay
by Lessor in providing notice of any such increase in Minimum Rent shall be
deemed a waiver of Lessor's right to increase the Minimum Rent as provided
hereunder.

                  (d) All payments of Minimum Rent shall be delivered to Lessor
by Lessee in a single payment (whether by wire transfer or check).

            3.2. Additional Charges. In addition to Minimum Rent, (1) Lessee,
subject to its rights under ARTICLE XII, will also pay and discharge as and when
due and payable all other amounts, liabilities, obligations and Impositions
which Lessee assumes or agrees to pay under this Lease, including but not
limited to those set forth in ARTICLES IX and XIII, below, and (2) in

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the event of any failure on the part of Lessee to pay any of those items
referred to in clause (1) above, Lessee will also promptly pay and discharge
every fine, penalty, interest and cost which may be added for non-payment or
late payment of such items (the items referred to in clauses (1) and (2) above
being referred to herein collectively as the "ADDITIONAL CHARGES"), and Lessor
shall have all legal equitable and contractual rights, powers and remedies
provided either in this Lease or by statute or otherwise in the case of
nonpayment of the Additional Charges. If any elements of Additional Charges are
not be paid within seven (7) Business Days after due (after taking into account
applicable time periods during which Lessee may contest the Additional Charges
under ARTICLE XII) and Lessor pays any such amount (which Lessor shall have the
right, but not the obligation to do), then, in addition to Lessor's other rights
and remedies, Lessee will pay Lessor on demand, as Additional Charges, interest
on such unpaid Additional Charges computed at the Overdue Rate from the due date
of such installment to the date of Lessee's payment thereof. To the extent that
Lessee pays any Additional Charges directly to Lessor (as opposed to the
applicable third party payee) pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the entity
to which they would otherwise be due, and within than three (3) Business Days
after its receipt, Lessor shall remit such payment(s) to the entity to which
such payment(s) is due .

            3.3. Net Lease. Notwithstanding any provisions in this Lease to the
contrary (except with respect to Lessee's rights set forth in ARTICLE V),
Minimum Rent shall be paid absolutely net to Lessor, so that this Lease shall
yield to Lessor the full amount of the installments of Minimum Rent throughout
the Term, all as more fully set forth in ARTICLES IV, IX AND XIII, and other
provisions of this Lease.

            3.4. Non-Allocable Minimum Rent. Notwithstanding any language
contained in this Lease to the contrary, the parties agree and acknowledge that
the amount set forth as Minimum Rent is calculated on the basis of leasing of
all twenty one (21) Facilities together as a single, inseparable group and is
non-allocable among the twenty one (21) Facilities. Further notwithstanding any
language contained in this Lease to the contrary, the parties further agree and
acknowledge that it would be impossible to allocate to any one or more of the
Facilities a divisible portion of the Minimum Rent. Further notwithstanding any
language contained in this Lease to the contrary, Lessee agrees and acknowledges
that the leasing of the twenty one (21) Facilities as an inseparable whole was
accepted by Lessor as a special and essential inducement to enter into this
transaction, and but for Lessee's agreement to lease all twenty one (21)
Facilities as an inseparable whole, Lessor would not have entered into this
Lease.

            3.5. Late Charge. LESSEE HEREBY ACKNOWLEDGES THAT LATE PAYMENT BY
LESSEE TO LESSOR OF RENT (INCLUDING WITHOUT LIMITATION MINIMUM RENT) WILL CAUSE
LESSOR TO INCUR COSTS NOT CONTEMPLATED BY THIS LEASE, THE EXACT AMOUNT OF WHICH
WILL BE EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS INCLUDE, BUT ARE NOT
LIMITED TO, PROCESSING AND ACCOUNTING CHARGES. ACCORDINGLY, IF ANY INSTALLMENT
OF RENT SHALL NOT BE RECEIVED BY LESSOR WITHIN SEVEN (7) BUSINESS DAYS AFTER
SUCH AMOUNT SHALL BE DUE, THEN WITHOUT ANY REQUIREMENT FOR NOTICE TO LESSEE,
LESSEE SHALL PAY TO LESSOR A LATE CHARGE EQUAL TO FIVE PERCENT (5%) OF SUCH
OVERDUE AMOUNT. THE PARTIES HEREBY AGREE THAT SUCH LATE CHARGE REPRESENTS A FAIR
AND REASONABLE ESTIMATE OF THE

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COSTS LESSOR WILL INCUR BY REASON OF LATE PAYMENT BY LESSEE. ACCEPTANCE OF SUCH
LATE CHARGE BY LESSOR SHALL IN NO EVENT CONSTITUTE A WAIVER OF LESSEE'S DEFAULT
OR BREACH WITH RESPECT TO ANY UNPAID OVERDUE AMOUNTS, NOR PREVENT LESSOR FROM
EXERCISING ANY OF THE OTHER RIGHTS AND REMEDIES GRANTED UNDER THIS LEASE, AT LAW
OR IN EQUITY. NOTWITHSTANDING THE FOREGOING, HOWEVER, THE ABOVE-REFERENCED LATE
CHARGE SHALL NOT BE IMPOSED ON ADDITIONAL PAYMENTS SO LONG AS LESSEE IS
CONTESTING SUCH ADDITIONAL PAYMENTS IN ACCORDANCE WITH ARTICLE XII BELOW.

                /s/ WLS                                            /s/ MWO
INITIAL: LESSOR__________________                           LESSEE______________

                                   ARTICLE IV

            4.1. Payment of Impositions. Subject to ARTICLE XII relating to
permitted contests, during the Term Lessee will pay, or cause to be paid, all
Impositions, before any fine, penalty, interest or cost may be added for
non-payment. Lessee, at its expense, shall, to the extent required or permitted
by Legal Requirements, prepare and file all tax returns and reports in respect
of any Imposition as may be required by governmental authorities. Any refund due
from any taxing authority in respect of any Imposition shall be paid over to or
retained by Lessee provided no Event of Default then exists, but if an Event of
Default has occurred and is continuing, such refund shall be paid over to
Lessor, and Lessee hereby authorizes Lessor to accept any such refunds directly,
and hereby authorizes any such taxing authority to pay such amounts directly to
Lessor upon receipt of written instructions to do so together with a statement
by Lessor that an Event of Default has occurred and is continuing. Any such
funds retained by Lessor due to an Event of Default shall be applied as provided
in ARTICLE XVI. Lessor and Lessee shall, upon request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Leased Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any property covered by
this Lease as personal property, Lessee shall file personal property tax returns
in such jurisdictions where required. Lessor, to the extent it possesses the
same, and Lessee, to the extent it possesses the same, will provide the other
party, upon request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property. Where Lessor is
legally required to file personal property tax returns, Lessee will be provided
with copies of assessment notices indicating a value in excess of the reported
value in sufficient time for Lessee to file a protest. Lessee may, upon notice
to Lessor, at Lessee's option and at Lessee's sole cost and expense, protest,
appeal or institute such other proceedings as Lessee may deem appropriate to
effect a reduction of real estate or personal property assessments and Lessor,
at Lessee's expenses as aforesaid, shall reasonably cooperate with Lessee in
such protest, appeal, or other action, provided that Lessee may not withhold
payments pending such challenges except under the conditions set forth in
ARTICLE XII. Billings for reimbursement by Lessee to Lessor of personal property
taxes shall be accompanied by copies of a bill therefor and payments thereof
which identify the personal property with respect to which such payments are
made.

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            4.2. Notice of Impositions. Upon its receipt of same, Lessor shall
give prompt Notice to Lessee for all Impositions payable by Lessee hereunder of
which Lessor obtains actual knowledge, but Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions but such failure shall obviate any default hereunder for a
reasonable time after Lessee receives notice (from any source) of any Imposition
which it is obligated to pay. However, notwithstanding the foregoing, it shall
be Lessee's sole duty to inquire and determine all of the Impositions for which
it is liable as provided herein and shall promptly pay such Impositions when
due, and Lessor shall have no duty of inquiry concerning Impositions.

            4.3. Adjustment of Impositions. Impositions imposed in respect of
the tax-fiscal periods during which the Term commences and terminates shall be
adjusted and prorated between Lessor and Lessee, whether or not such Imposition
is imposed before or after such commencement or termination, and Lessee's
obligation to pay its prorated share thereof after termination shall survive
such termination.

            4.4. Utility Charges. Lessee will pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in the
Leased Property and all operating expenses of every kind and nature during the
Term.

            4.5. Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained pursuant to
ARTICLE XIII during the Term.

                                   ARTICLE V

            5. Facility Mortgage Offset. Should Lessor default under the terms
of any Facility Mortgage, or should Lessor's representations and warranties set
forth in SECTION 1.1 be untrue and Lessee's leasehold estate is jeopardized as a
result thereof, and, provided no Event of Default hereunder exists, Lessee shall
have the right, but not the obligation, to perform Lessor's obligations under
any such Facility Mortgage and offset the amounts expended thereunder against
the payment of Minimum Rent. No other offset against the payment of Minimum Rent
(or any other Rent) of any kind is permitted.

                                   ARTICLE VI

            6.1. Ownership of the Leased Property. Lessee acknowledges and
agrees that the Leased Property is the property of Lessor and that Lessee has
only the right to the exclusive possession and use of the Leased Property upon
the terms and conditions of this Lease. Lessee acknowledges and agrees that this
Lease does not grant an option or any other type of right to purchase the Leased
Property from Lessor and that any such purchase by Lessee must be separately
negotiated and documented.

            6.2. Lessee's Personal Property. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of Lessee's
Personal Property, and Lessee may, subject to the conditions set forth below,
remove the same upon the expiration or any prior termination of the Term. Lessee
shall provide and maintain during the Term all such Lessee's

                                      -10-
<PAGE>

Personal Property as shall be necessary in order to operate each Facility in
compliance with all licensure Legal Requirements and Insurance Requirements. All
of Lessee's Personal Property not removed by Lessee within thirty (30) days
following the expiration or earlier termination of this Lease shall be
considered abandoned by Lessee and may be used, appropriated, sold, destroyed or
otherwise disposed of by Lessor without first giving notice thereof to Lessee
and without any payment to Lessee and without any obligation to account
therefor. Lessee shall, at its expense, restore the Leased Property to the
condition required by SECTION 9.1, including repair of all damage to the Leased
Property caused by the removal of Lessee's Personal Property, whether effected
by Lessee or Lessor.

                                   ARTICLE VII

            7.1. Condition of Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property and that Lessee has examined and
otherwise has knowledge of the condition of the Leased Property prior to the
execution and delivery of this Lease. Subject to Lessor's representations set
forth in SECTION 1.1, upon which Lessee is relying, Lessee accepts that the
Leased Property as is. To the extent permitted by law, Lessor hereby assigns to
Lessee, all of Lessor's rights to proceed against any predecessor in title (but
not against Lessor except as a result of breaches of representations and
warranties set forth in this Lease) for breaches of warranties or
representations, or for latent defects in the Leased Property. Lessor shall
reasonably cooperate with Lessee in the prosecution of any such claim, in
Lessor's or Lessee's name, all at Lessee's sole cost and expense; provided,
however, that all compensatory damages shall be used by Lessee for repair or
replacement of the items for which compensation was granted.

            7.2. Use of the Leased Property.

                  7.2.1 Lessee covenants that it will proceed with due diligence
and will exercise commercially reasonable efforts to obtain and to maintain all
approvals needed to use and operate the Leased Property and each Facility in
accordance with Legal Requirements.

                  7.2.2 During the Term, Lessee shall use or cause to be used
the Facilities as assisted living or residential care facilities, and for such
other uses as may be necessary or incidental to such use (the particular such
use to which the Leased Property is put is herein referred to as the "PRIMARY
INTENDED USE"). Lessee shall not use the Leased Property or any portion thereof
for any use other than the Primary Intended Use without the prior written
consent of Lessor, which consent may be withheld in Lessor's sole and absolute
discretion; provided, however, that Lessor may not unreasonably withhold its
consent to any alternate use that is within the long term care industry. No use
shall be made of the Leased Property, and no acts shall be done, which will
cause the cancellation of any insurance policy covering the Leased Property or
any part thereof, nor shall Lessee sell or otherwise provide to residents or
patients therein, or permit to be kept, used or sold in or about the Leased
Property any article which may be prohibited by Insurance Requirements or Legal
Requirements. Lessee shall, at its sole cost, comply with all Insurance
Requirements and Legal Requirements.

                                      -11-
<PAGE>

                  7.2.3 Lessee covenants and agrees that during the Term it will
operate continuously the Leased Property in accordance with its Primary Intended
Use and will maintain its certifications for reimbursement and its licensure.

                  7.2.4 Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in any Facility, nor shall Lessee cause or
permit any nuisance thereon. Lessor acknowledges that Lessee's operation of the
Facilities in accordance with the Primary Intended Use will not constitute waste
or nuisance.

                  7.2.5 Lessee shall neither suffer nor permit the Leased
Property or any portion thereof, including Lessee's Personal Property, to be
used in such a manner as it might reasonably tend to impair Lessor's (or
Lessee's, as the case may be) title thereto or to any portion thereof, or (ii)
may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.

            7.3. Lessor to Grant Easements, etc. Lessor will, from time to time
so long as no Event of Default exists, at the request of Lessee and at Lessee's
sole cost and expense (but subject to Lessor's approval), (i) grant easements
and other rights in the nature of easements with respect to the Leased Property
to third parties, (ii) release existing easements or other rights in the nature
of easements which are for the benefit of the Leased Property, (iii) dedicate or
transfer unimproved portions of the Leased Property for road, highway or other
public purposes, (iv) execute petitions to have the Leased Property annexed to
any municipal corporation or utility district, (v) execute amendments to any
covenants and restrictions affecting the Leased Property and (vi) execute and
deliver to any person any instrument appropriate to confirm or effect such
grants, releases, dedications, transfers, petitions and amendments (to the
extent of its interests in the Leased Property), but only upon delivery to
Lessor of a signed affidavit by an executive officer or equivalent person of
authority at Lessee stating that such grant, release, dedication, transfer,
petition or amendment is (a) reasonably required for the continued operation of
the Leased Property in accordance with the Primary Intended Use, (b) not
detrimental to the proper conduct of the business of Lessee on the Leased
Property and (c) does not reduce the value of the Leased Property.

                                  ARTICLE VIII

            8.1. Compliance with Legal and Insurance Requirements, Instruments,
etc. Subject to ARTICLE XII relating to permitted contests, Lessee, at its
expense, will, during the Term, (a) comply with all Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not compliance therewith requires
structural changes in any of the Leased Improvements or interfere with the use
and enjoyment of the Leased Property and (b) procure, maintain and comply with
all licenses, certificates of need, provider agreements and other authorizations
required for any use of the Leased Property and/or Lessee's Personal Property
then being made, and for the proper erection, installation, operation and
maintenance of the Leased Property or any part thereof.

            8.2. Legal Requirements Covenants. Lessee shall acquire and maintain
all licenses, certificates, permits, provider agreements and other
authorizations and approvals needed

                                      -12-
<PAGE>

to operate the Leased Property in its customary manner for the Primary Intended
Use. Lessee further covenants and agrees to perform all maintenance and
alterations necessary to operate the Leased Property in accordance with all
Legal Requirements and Insurance Requirements. Lessee, may, however, contest the
legality or applicability of any such law, ordinance, rule or regulation, or any
licensure or certification decision if Lessee maintains such action in good
faith, with due diligence, without prejudice to Lessee's rights hereunder, and
at Lessee's sole cost and expense. If by the terms of any such law, ordinance,
rule or regulation, compliance therewith pending the prosecution of any such
proceeding may legally be delayed without the occurrence of any fine, charge or
liability of any kind against the Leased Property or Lessee's leasehold interest
therein and without subjecting Lessee or Lessor to any liability, civil or
criminal, for failure so to comply therewith, Lessee may delay compliance
therewith until the final determination of such proceeding. If any lien, charge
or civil or criminal liability would be incurred by reason of any such delay,
Lessee, on the prior written consent of Lessor, may nonetheless contest as
aforesaid and delay as aforesaid provided that such delay would not subject
Lessor to criminal liability and Lessee both (a) furnishes to Lessor security
satisfactory to Lessor (in its sole and absolute discretion) against any loss or
injury by reason of such contest or delay, and (b) prosecutes the contest with
due diligence and in good faith.

                                   ARTICLE IX

            9.1. Maintenance and Repair.

                  9.1.1 Lessee, at its sole expense, will, during the Term, keep
the Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto and which are under Lessee's control (and Lessee's Personal Property) in
good order and repair (whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of the Leased
Property, or any portion thereof), and, except as provided in ARTICLE XIV, with
reasonable promptness, make all necessary and appropriate repairs thereto of
every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to or during the Term, provided, however,
that Lessee shall be permitted to prosecute claims against Lessee's predecessors
(but not Lessor except as herein provided) in title for (i) breach of any
representation or warranty, or (ii) any latent defects in the Leased Property.
All repairs shall be at least equivalent in quality to the original work. Lessee
will not take or omit to take any action the taking or omission of which might
materially impair the value or the usefulness of the Leased Property or any part
thereof for its Primary Intended Use.

                  9.1.2 Lessor shall not under any circumstances be required to
build or rebuild any improvements on the Leased Property, or to make any
repairs, replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or non-structural, foreseen/unforeseen, in connection with this
Lease, or to maintain the Leased Property in any way. Lessee hereby waives, to
the extent permitted by law, the right to make repairs at the expense of Lessor
pursuant to any law in effect at the time of the execution of this Lease or
hereafter enacted. Lessor shall have the right to give, record and post, as
appropriate, notices of non-responsibility (or similar notices) under any
mechanics' lien laws now or hereafter existing.

                                      -13-
<PAGE>

                  9.1.3 Lessee shall not make any modifications, alterations or
improvements to the Leased Improvements or any portion thereof, whether by
addition or deletion, without Lessor's prior written consent, which consent may
be given or withheld in Lessor's reasonable discretion; provided, however, that
Lessor's consent shall not be required in connection with any non-structural
modifications, alterations or improvements that do not constitute capital
improvements and that are otherwise made in compliance with this Lease, so long
as the total cost thereof, with respect to any single Facility, does not exceed
$50,000 and the total cost with respect to any single Facility in any twelve
(12) month period does not exceed $100,000. Nothing contained in this Lease and
no action or inaction by Lessor shall be construed as constituting the consent
or request of Lessor, expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Leased
Property or any part thereof, or (ii) giving Lessee any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in the
Leased Property, or any portion thereof.

                  9.1.4 Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease, and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair
during the Term).

            9.2. Expenditures to Comply with Law. Without limiting Lessee's
obligations as set forth elsewhere in this Lease, during the Term, Lessee will,
at its sole cost and expense, make whatever expenditures (including but not
limited to capital and non-capital expenditures) that are required to conform
the Leased Property to such standards as may from time to time be required by
Legal Requirements, or capital improvements required by any governmental agency
having jurisdiction over the Leased Property as a condition of the continued
operation of the Leased Property for its Primary Intended Use, pursuant to
present or future Legal Requirements.

            9.3. Encroachments, Restrictions. If any of the Leased Improvements
shall, at any time during the Term encroach upon any property, street or
right-of-way adjacent to the Leased Property, or shall violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or shall impair the rights
of others under any easement or right-of-way to which the Leased Property is
subject, then promptly upon the request of Lessor or at the behest of any person
affected by any such encroachment, violation or impairment, Lessee shall, at its
sole cost and expense, (and after Lessor's prior approval) subject to Lessee's
right to sue Lessor's predecessor in title (but not Lessor) with respect thereto
or contest the existence of any encroachment, violation or impairment and in
such case, in the event of an adverse final determination, either (i) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lessor or the Leased Property or (ii) make such changes in
the Leased Improvements, and take such other actions, as

                                      -14-
<PAGE>

Lessee in the good faith exercise of its judgment deems reasonably practicable
and necessary, to remove such encroachment, and to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Improvements for the
Primary Intended Use substantially in the manner and to the extent the Leased
Improvements were operated prior to the assertion of such violation, impairment
or encroachment. Any such alteration shall be made in conformity with the
applicable requirements of ARTICLE IX. Lessee's obligations under this SECTION
9.3 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance.

                                   ARTICLE X

            10.1. Lessee's Obligations for Hazardous Materials. Lessee shall,
during the Term, at its sole cost and expense, take all actions as required to
cause the Leased Property including, but not limited to, the Land and all Leased
Improvements, to be free and clear of the presence of all Hazardous Materials
(defined below); provided, however, that Lessee shall be entitled to use and
maintain de minimus amounts of Hazardous Materials on the Leased Property in
connection with Lessee's business and in compliance with all applicable laws.
Lessee shall, upon its discovery, belief or suspicion of the presence of
Hazardous Materials on, in or under any part of the Leased Property, including,
but not limited to, the Land and all Leased Improvements, immediately notify
Lessor and, at its sole cost and expense cause any such Hazardous Materials to
be removed immediately, in compliance with all applicable laws and in a manner
causing the least disruption of or interference with the operation of Lessee's
business. Lessee shall fully indemnify, protect, defend and hold harmless Lessor
from any costs, damages, claims, liability or loss of any kind or nature arising
out of or in any way in connection with the presence, suspected presence,
removal or remediation of Hazardous Materials in, on, or about the Leased
Property, or any part thereof. Without limiting Lessee's other obligations under
this Lease, Lessee agrees, at Lessee's sole cost, to fully comply with all
recommendations set forth in any environmental report(s) that may be obtained by
or provided to Lessor or Lessee. Lessee's obligations hereunder shall apply to
all Hazardous Materials, irrespective of whether the existence of such Hazardous
Materials is known by Lessor and no matter when they arose or were discovered
and therefore will include any Hazardous Materials that existed prior to, at, or
after the Commencement Date and during the Term.

            10.2. Definition of Hazardous Materials. For purposes of this Lease,
Hazardous Materials shall mean any biologically or chemically active or other
toxic or hazardous wastes, pollutants or substances, including, without
limitation, asbestos, PCBs, petroleum products and by-products, substances
defined or listed as "hazardous substances" or "toxic substances" or similarly
identified in or pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended, and
as hazardous wastes under the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6010, et seq., any chemical substance or mixture regulated under the
Toxic Substance Control Act of 1976, as amended, 15 U.S.C.; 2601 et seq., any
"toxic pollutant" under the Clean Water Act, 33 U.S.C. Section 466 et seq., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C. Section
7401 et seq., hazardous materials identified in or pursuant to the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1802, et seq., and any hazardous
or toxic substances or pollutant regulated under any other Legal Requirements.

                                      -15-
<PAGE>

                                   ARTICLE XI

      11. Liens. Subject to the provisions of ARTICLE XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon any part of the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) restrictions, liens and other encumbrances which
are consented to in writing by Lessor or any easements granted pursuant to the
provisions of SECTION 7.3 of this Lease, (c) liens for those taxes of Lessor
which Lessee is not required to pay hereunder, (d) subleases permitted by
ARTICLE XXII, (e) liens for Impositions or for sums resulting from noncompliance
with any Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are in the
process of being contested as permitted by ARTICLE XII, (f) liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either disputed or not yet
due, provided that any such liens are in the process of being contested as
permitted by ARTICLE XII, or (g) any lien, encumbrance, attachment, title
retention agreement or claim upon any part of the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent arising by,
through or under Lessor.

                                  ARTICLE XII

      12. Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition or any Legal Requirement or Insurance Requirement
or any attachment, levy, encumbrance, charge or claim ("CLAIMS") not otherwise
permitted by ARTICLE XI, by appropriate legal proceedings in good faith and with
due diligence (but this shall not be deemed or construed in any way as
relieving, modifying or extending Lessee's covenants to pay or its covenants to
cause to be paid any such charges at the time and in the manner as in this Lease
provided), on condition, however, that such legal proceedings cannot result in
the sale of the Leased Property, or any part thereof, to satisfy the same or
cause Lessor or Lessee to be in default under any mortgage or deed of trust
encumbering any portion of the Leased Property or any interest therein. Upon the
reasonable request of Lessor, Lessee shall provide to Lessor reasonable security
satisfactory to Lessor to assure the payment of all Claims which may be assessed
against the Leased Property together with interest and penalties, if any,
thereon. Lessor agrees to join in any such proceedings (at Lessee's sole cost
and expense) if the same be required to legally prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee shall indemnify
and save harmless Lessor from any such costs or expenses, including reasonable
attorneys' fees and costs incurred by Lessor. In the event that Lessee fails to
pay any Claims when due or, upon Lessor's request, to provide the security
therefor as provided in this ARTICLE XII and to diligently prosecute any contest
of the same, Lessor may, upon thirty (30) days advance written Notice to Lessee,
pay such charges together with any interest and penalties and the same shall be
repayable to Lessee to Lessor at the next Payment Date provided for in this
Lease. Provided, however, that should Lessor reasonably determine that the
giving of such Notice would risk loss to the Leased Property or impair the value
of the Leased Property or in any way cause damage to Lessor, then Lessor shall
give such written Notice as is practical under the circumstances. Lessee shall
be entitled to any refund of

                                      -16-
<PAGE>

any Claims and such charges and penalties or interest thereon which have been
paid by Lessee or paid by Lessor and for which Lessor has been fully reimbursed.

                                  ARTICLE XIII

            13.1. General Insurance Requirements. Subject to the provisions of
SECTION 13.8, during the Term, Lessee shall at all times keep the Leased
Property, and all property located in or on the Leased Property, including
Lessee's Personal Property, insured with the kinds and amounts of insurance
described below and any additional insurance reasonably required by Lessor to
protect its interest in the Leased Property. This insurance shall be written by
companies authorized to do insurance business in the States in which the Leased
Property is located. The policies must name Lessor as an additional insured
and/or loss payee, as applicable. Losses shall be payable to Lessor or Lessee as
provided in ARTICLE XIV. In addition, upon Lessor's written request, the
policies shall name as an additional insured and/or loss payee, as applicable,
the holder ("FACILITY MORTGAGEE") of any mortgage, deed of trust or other
security agreement and any other Encumbrance placed on the Leased Property in
accordance with the provisions of ARTICLE XXXII and expressly including, without
limitation, the Existing Encumbrances (a "FACILITY MORTGAGE") by way of a
standard form of mortgagee's loss payable endorsement. Any loss adjustment shall
require the written consent of Lessor, Lessee, and each Facility Mortgagee.
Evidence of insurance shall be deposited with Lessor and, if requested, with any
Facility Mortgagee. If any provision of any Facility Mortgage requires deposits
of premiums for insurance to be made with such Facility Mortgagee, Lessee shall
either pay to Lessor monthly the amounts required and Lessor shall transfer such
amounts to each Facility Mortgagee, or, pursuant to written direction by Lessor,
Lessee shall make such deposits directly with such Facility Mortgagee. The
policies on the Leased Property, including the Leased Improvements, Fixtures and
Lessee's Personal Property, shall insure against the following risks:

                  13.1.1 Insurance against loss or damage by fire, casualty and
other hazards as now are or subsequently may be covered by an "all risk" policy
or a policy covering "special" causes of loss, with such endorsements as Lessor
(or a Facility Mortgagee) may from time to time reasonably require and which are
customarily required by institutional lenders of similar properties similarly
situated, including, without limitation, building ordinance law, lightning,
windstorm, civil commotion, hail, riot, strike, water damage, sprinkler leakage,
collapse, malicious mischief, explosion, smoke, aircraft, vehicles, vandalism,
falling objects and weight of snow, ice or sleet, and covering the Leased
Property in an amount equal to 100% of the full insurable replacement value of
the Leased Property (exclusive of footings and foundations below the lowest
basement floor) without deduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing the coverage or, at Lessor's (or a Facility
Mortgagee's) election, by reference to such indexes, appraisals or information
as Lessor's (or a Facility Mortgagee's) determines in its reasonable discretion,
and, unless the insurance required by this paragraph shall be effected by
blanket and/or umbrella policies in accordance with the requirements of this
Lease, the policy shall include inflation guard coverage that ensures that the
policy limits will be increased over time to reflect the effect of inflation.
Each policy shall, subject to Lessor's (or a Facility Mortgagee's) approval,
contain (i) a replacement cost endorsement, without deduction for depreciation,
(ii) either an agreed amount endorsement or a waiver of any co-insurance
provisions, and (iii) an ordinance or law coverage or enforcement endorsement if
the

                                      -17-
<PAGE>

Improvements or the use of the Property constitutes any legal nonconforming
structures or uses, and shall provide for deductibles in such amounts as Lessor
(or a Facility Mortgagee) may permit in its sole discretion.;

                  13.1.2 If the Leased Property contains steam boilers, steam
pipes, steam engines, steam turbines or other high pressure vessels, insurance
covering the major components of the central heating, air conditioning and
ventilating systems, boilers, other pressure vessels, high pressure piping and
machinery, elevators and escalators, if any, and other similar equipment
installed in the Leased Improvements, in an amount equal to one hundred percent
(100%) of the full replacement cost of the Leased Improvements, which policies
shall insure against physical damage to and loss of occupancy and use of the
Leased Improvements arising out of an accident or breakdown covered thereunder;

                  13.1.3 Business and rental interruption insurance (i) covering
the same perils of loss as are required to be covered by the property insurance
required under SECTION 13.1.1 AND 13.1.2 above, (ii) in an amount equal to the
projected annual net income from the Leased Property plus carrying costs and
extraordinary expenses of the Leased Property for a period of twelve (12)
months, based upon Lessee's reasonable estimate thereof as approved by Lessor
(or a Facility Mortgagee), (iii) including either an agreed amount endorsement
or a waiver of any co-insurance provisions, so as to prevent Lessee, Lessor and
any other insured thereunder from being a co-insurer, and (iv) providing that
any covered loss thereunder shall be payable to Lessor;

                  13.1.4 Commercial general liability insurance under a policy
containing "Comprehensive General Liability Form" of coverage (or a comparably
worded form of coverage) and the "Broad Form CGL" endorsement (or a policy which
otherwise incorporates the language of such endorsement), which policy shall
include, without limitation, coverage against claims for personal injury, bodily
injury, death and property damage liability without respect to the Leased
Property and the operations related thereto, whether on or off the Leased
Property, and the following coverages: Employee as Additional Insured, Product
Liability/Completed Operations; Broad Form Contractual Liability, Independent
Contractor, Personal Injury and Advertising Injury Protection, Medical Payment
(with a minimum limit of $5,000 per person), Broad Form Cross Suits Liability
Endorsement, where applicable, hired and non-owned automobile coverage
(including rented and leased vehicles), and, if any alcoholic beverages shall be
sold, manufactured or distributed in the Leased Property, liquor liability
coverage, all of which shall be in such amounts as Lessor may from time to time
reasonably require, but not less than One Million Dollars ($1,000,000) per
occurrence, and Five Million Dollars ($5,000,000) in the aggregate. If such
policy shall cover more than one Facility, such limits shall apply on a "per
location" basis. If any swimming pool is located at any Facility in the future,
umbrella coverage shall be provided in the amount of Ten Million Dollars
($10,000,000). Such liability policy shall delete the contractual exclusion
under the personal injury coverage, if possible, and if available, shall include
the following endorsements: Notice of Accident, Knowledge of Occurrence, and
Unintentional Error and Omission;

                  13.1.5 Professional liability insurance coverage in an amount
equal to not less than One Million Dollars ($1,000,000) per occurrence and Five
Million Dollars ($5,000,000) in the aggregate;

                                      -18-
<PAGE>

                  13.1.6 Flood insurance in an amount equal to the full
insurable value of the Leased Property or the maximum amount available,
whichever is less, if the Leased Property is located in an area designated by
the Secretary of Housing and Urban Development or the Federal Emergency
Management Agency as having special flood hazards; and

                  13.1.7 Workers' compensation insurance and/or other similar
insurance which may be required by governmental authorities or applicable legal
requirements in an amount at least equal to the minimum required by law, and
employer's liability insurance with a limit of One Hundred Thousand Dollars
($100,000) per accident and per disease per employee, and Five Hundred Thousand
Dollars ($500,000) in the aggregate for disease arising in connection with the
operation of the Leased Property; and

                  13.1.8 During the period of any new construction on the Leased
Property, a so-called "Builder's All-Risk Completed Value" or "Course of
Construction" insurance policy in non-reporting form for any improvements under
construction, including, without limitation, for demolition and increased cost
of construction or renovation, in an amount equal to 100% of the estimated
replacement cost value on the date of completion, including "soft cost"
coverage, and Workers' Compensation Insurance covering all persons engaged in
such construction, in an amount at least equal to the minimum required by law.
In addition, each contractor and subcontractor shall be required to provide
Facility Mortgagee with a certificate of insurance for (i) workers' compensation
insurance covering all persons engaged by such contractor or subcontractor in
such construction in an amount at least equal to the minimum required by law,
and (ii) general liability insurance showing minimum limits of at least
$5,000,000, including coverage for products and completed operations. Each
contractor and subcontractor also shall cover Lessee and Lessor (and any
Facility Mortgagee) as an additional insured under such liability policy and
shall indemnify and hold Lessee and Lessor (and any Facility Mortgagee) harmless
from and against any and all claims, damages, liabilities, costs and expenses
arising out of, relating to or otherwise in connection with its performance of
such construction.

            13.2. Replacement Cost. The term "full replacement cost" as used
herein, shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, less exclusions provided in the standard form of fire insurance
policy. In the event either party believes that full replacement cost (the then
replacement cost less such exclusions) has increased or decreased at any time
during the Term, it shall have the right to have such full replacement cost
redetermined.

            13.3. Additional Insurance. In addition to the insurance described
above, Lessee shall maintain such additional insurance as may be reasonably
required from time to time by Lessor or any Facility Mortgagee and shall further
at all times maintain, to the extent required by applicable law, worker's
compensation insurance coverage (including self-insurance) for all persons
employed by Lessee (or its agent or operator) on the Leased Property.

            13.4. Waiver of Subrogation. All insurance policies carried by
either party covering any part of the Leased Property, the Fixtures, the
Facilities, or Lessee's Personal Property including without limitation,
contents, fire and casualty insurance, shall expressly waive any right of
subrogation on the part of the insurer against the other party. The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are

                                      -19-
<PAGE>

obtainable without extra cost, and in the event of such an extra charge the
other party, at its election, may pay the same, but shall not be obligated to do
so.

            13.5. Form Satisfactory, etc. All of the policies of insurance
referred to in this ARTICLE XIII shall be written in a form reasonably
satisfactory to Lessor and by insurance companies reasonably satisfactory to
Lessor (and, as applicable, any Facility Mortgagee). Subject to the foregoing,
Lessor agrees that it will not unreasonably withhold or delay its approval as to
the form of the policies of insurance or as to the insurance companies selected
by Lessee. Lessee shall pay all of the premiums therefor, and deliver such
policies or certificates thereof to Lessor prior to their effective date (and,
with respect to any renewal policy, prior to the expiration of the existing
policy), and in the event of the failure of Lessee either to effect such
insurance as herein called for or to pay the premiums therefor, or to deliver
such policies or certificates thereof to Lessor at the times required, Lessor
shall be entitled, but shall have no obligation, to effect such insurance and
pay the premiums therefor, which premiums shall be repayable by Lessee to Lessor
upon written demand therefor, and failure to repay the same shall constitute an
Event of Default within the meaning of SECTION 16.1. Each insurer mentioned in
this ARTICLE XIII shall agree, by endorsement on the policy or policies issued
by it, or by independent instrument furnished to Lessor, that it will give to
Lessor (and to any Facility Mortgagee, if required by the same) thirty (30)
days' written notice before the policy or policies in questions shall be
altered, allowed to expire or canceled.

            13.6. Increase in Limits. In the event that a Facility Mortgagee
shall at any time reasonably determine the limits of the personal injury or
property damage, or public liability insurance then carried to be insufficient,
Lessee shall thereafter carry the insurance with increased limits until further
change pursuant to the provisions of this Section; provided that if Lessor
desires to increase the limits of insurance, and such is not pursuant to the
request of a Facility Mortgagee, then Lessor may not demand an increase in
limits above the limits generally consistent with the requirements of owners of
long term care properties in the state in which the applicable Facility is
located.

            13.7. Blanket Policy. Notwithstanding anything to the contrary
contained in this ARTICLE XIII, Lessee's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Lessee; provided,
however, that the coverage afforded Lessor will not be reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
ARTICLE XIII shall be met in any such blanket policy.

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

                                      -20-
<PAGE>

immediately notify Lessor of the taking out of any such separate insurance or of
the increasing of any of the amount of the then existing insurance.

            13.9. Continuous Coverage. Prior to the Commencement Date, Lessee
was the tenant and operator of the Leased Property, and prior to that, Lessee
was the owner and operator of the Leased Property. Therefore, Lessee already has
in place insurance with respect to the Leased Property. Lessee shall assure that
there is no gap in the insurance coverage provided in connection with the Leased
Property at or after the Commencement Date, and therefore, the insurance
provided by Lessee shall be continuous, with the types and amounts of coverage,
described herein to be applicable on the Commencement Date. To the extent there
is not full, complete and continuous coverage for all issues, no matter when
arising, claimed or occurring, Lessee shall, at its sole cost, obtain such
insurance.

                                   ARTICLE XIV

            14.1. Insurance Proceeds. Subject to the rights of any Facility
Mortgagee, all proceeds payable by reason of any loss of or damage to the Leased
Property, or any portion thereof, which is insured under any policy of insurance
required by ARTICLE XIII of the Lease, where the total proceeds paid by the
insurer are less than $150,000.00, shall be paid to Lessee and applied to the
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property, or any portion thereof. All proceeds payable by reason of
any loss of or damage to the Leased Property, or any portion thereof, which is
insured under any policy of insurance required by ARTICLE XIII of this Lease
where the total proceeds paid by the insurer are equal to or in excess of
$150,000.00 shall be paid to Lessor and held by Lessor in trust and shall be
made available for reconstruction or repair, as the case may be, of any damage
to or destruction of the Leased Property, or any portion thereof, and shall be
paid out by Lessor from time-to-time for the reasonable costs of such
reconstruction or repair. Any excess proceeds of insurance remaining after the
completion of the restoration or reconstruction of the Leased Property shall go
to Lessee, provided the Lease is in force and there exists no uncured Event of
Default; otherwise such excess shall be paid to Lessor for application as set
forth in ARTICLE XVI hereof. All insurance proceeds that are awarded and not
applied to the restoration or repair of the Leased Property shall be retained by
Lessor. All salvage resulting from any risk covered by insurance shall belong to
Lessor except that any salvage relating to Lessee's Personal Property shall
belong to Lessee.

            14.2. Reconstruction in the Event Damage of Destruction Covered by
Insurance Proceeds.

                  14.2.1 If during the Term, the Leased Property is totally or
partially destroyed by a risk covered by the insurance described in ARTICLE XIII
and whether or not any Facility thereby is rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Leased Property to substantially the same
condition as existed immediately before the damage or destruction. Lessee shall
be entitled to the insurance proceeds for the purpose of such repair and
restoration. Lessor shall apply or make available to Lessee insurance proceeds
received by it towards the costs of such repair and restoration.

                                      -21-
<PAGE>

                  14.2.2 If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessee or Lessor from the insurance required
under ARTICLE XIII as provided in SECTION 14.1, above, Lessee shall be
obligated, prior to commencing the repair and restoration, to contribute any
excess amount needed to restore the Leased Property or to provide Lessor with
satisfactory evidence that such funds are, and throughout the entire period of
reconstruction will be, available. If Lessee contributes such excess in cash,
such excess shall be paid by Lessee to Lessor to be held in trust, together with
any insurance proceeds, for application to the cost of repair and restoration.

            14.3. Reconstruction in the Event of Damage of Destruction Not
Covered by Insurance. If during the Term, the Leased Property is damaged or
destroyed irrespective of the extent of the damage from a risk not covered by
the insurance described in ARTICLE XIII, whether or not such damage renders any
portion of the Leased Property Unsuitable for Its Primary Intended Use, Lessee
shall restore the damaged Leased Property to substantially the same condition it
was in immediately before such damage or destruction and such damage or
destruction shall not terminate this Lease nor result in any reduction in Rent
(including without limitation Minimum Rent).

            14.4. Lessee's Property. All insurance proceeds payable by reason of
any loss of or damage to any of Lessee's Personal Property shall be paid to
Lessee, and Lessee shall hold such insurance proceeds in trust to pay the cost
of repairing or replacing damaged Lessee's Personal Property.

            14.5. Restoration of Lessee's Property. Without limiting Lessee's
obligation to restore the Leased Property as provided in SECTIONS 14.2 and 14.3,
Lessee shall also restore all alterations and improvements made by Lessee,
including Lessee's Personal Property but only to the extent that Lessee's
Personal Property is necessary to the operation of the Leased Property for its
Primary Intended Use in accordance with applicable Legal Requirements.

            14.6. No Abatement of Rent. This Lease shall remain in full force
and effect and Lessee's obligation to make rental payments and to pay all other
charges required by this Lease shall not be abated during the pendency of repair
or restoration.

            14.7. Substitution of Leased Property. Notwithstanding anything to
the contrary contained in this Lease, in the event of the total destruction of
any single Facility, Lessor shall make available to Lessee and add to the Leased
Property a facility of equal or approximate value to the destroyed Facility. If
necessary, Lessor shall apply insurance proceeds received by it towards the
replacement of the destroyed Facility. Lessor may elect to satisfy the foregoing
obligation either by purchasing an already existing facility, by constructing a
new facility, or otherwise.

                                      -22-
<PAGE>

                                   ARTICLE XV

      15. Condemnation.

            15.1. Definitions.

                  15.1.1 "CONDEMNATION" means (a) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor,
(b) a voluntary sale or transfer by Lessor to any Condemnor, either under threat
of Condemnation or while legal proceedings for Condemnation are pending.

                  15.1.2 "DATE OF TAKING" means the date the Condemnor has the
right to possession of the property being condemned.

                  15.1.3 "AWARD" means all compensation, sums or anything of
value awarded, paid or received on a total or partial Condemnation.

                  15.1.4 "CONDEMNOR" means any public or quasi-public authority,
or private corporation or individual, having the power of Condemnation.

            15.2. Parties' Rights and Obligations. If during the Term there is
any taking of all or any part of the Leased Property or any interest in this
Lease by Condemnation, the rights and obligations of the parties shall be
determined by this ARTICLE XV.

            15.3. Total Condemnation. If title to the fee of the whole of the
Leased Property shall be taken or condemned by any Condemnor, this Lease shall
cease and terminate as of the Date of Condemnation by said Condemnor. Upon the
termination of the Lease following a total Condemnation, all Rent (including,
without limitation, Minimum Rent, Additional Rent and Additional Charges) paid
or payable by Lessee hereunder shall be apportioned as of the date of
termination. Notwithstanding anything to the contrary contained in this Lease,
in the event of the total condemnation of any single Facility, Lessor shall make
available to Lessee and add to the Leased Property a facility of equal or
approximate value to the condemned Facility. If necessary, Lessor shall apply
any Award received by it towards the replacement of the condemned Facility.
Lessor may elect to satisfy the foregoing obligation either by purchasing an
already existing facility, by constructing a new facility, or otherwise.

            15.4. Allocation of Portion of Award. Any Award made with respect to
all or any portion of the Leased Property or for loss of rent, or for loss of
business, whether or not beyond the Term of this Lease, or for the loss of value
of the leasehold (including the bonus value of the Lease) shall be solely the
property of and payable to Lessor. Lessee shall be entitled to make a separate
claim for the taking of Lessee's Personal Property (as long as such claim will
not diminish Lessor's Award), for the removal or relocation expenses of Lessee
(as long as such claim will not diminish Lessor's Award), or for any other loss
that can be awarded to Lessee separately from Lessor's claim and which will not
in any respect whatsoever diminish or threaten to diminish the total amounts to
be awarded to Lessor as set forth above or otherwise for Lessee's full fee
simple interest in the Leased Property. In any Condemnation proceedings, each of
the Lessor and Lessee shall each seek its own claim in conformity herewith, at
its own expense.

                                      -23-
<PAGE>

Lessor's obligation to contribute part of its Award for restoration is set forth
in SECTION 15.5, below.

            15.5. Partial Taking. If title to the fee of less than the whole of
the Leased Property shall be so taken or condemned, this Lease shall continue in
full force and effect, there shall be no reduction in Rent (including, without
limitation, Minimum Rent and Additional Charges).

            15.6. Temporary Taking. Lessee agrees that if, at any time after the
date hereof, the whole or any part of the Leased Property or of Lessee's
interest under this Lease, shall be Condemned by any Condemnor for its temporary
use or occupancy, this Lease shall not terminate by reason thereof, and Lessee
shall continue to pay, in the manner and at the times herein specified, the full
amounts of Rent (including Minimum Rent, Additional Charges and Additional
Rent). Except only to the extent that Lessee may be prevented from doing so
pursuant to the terms of the order of the Condemnor, Lessee shall also continue
to perform and observe all of the other terms, covenants, conditions and
obligations hereof, on the part of the Lessee to be performed and observed, as
though such Condemnation had not occurred. In the event of any such Condemnation
as in this SECTION 15.6 described, the entire amount of any such Award made for
such temporary use, whether paid by way of damages, rent or otherwise, shall be
paid to Lessee, Lessee covenants that upon the termination of any such period of
temporary use of occupancy as set forth in this SECTION 15.6, it will, at its
sole cost and expense, restore the Leased Property as nearly as may be
reasonably possible, to the condition in which the same was immediately prior to
the Condemnation, unless such period of temporary use or occupancy shall extend
beyond the expiration of the Term, in which case Lessee shall not be required to
make such restoration, and in such case, Lessee shall contribute to the cost of
such restoration that portion of its entire Award which is specifically
allocated to such restoration in the judgment or order of the court, if any.

                                  ARTICLE XVI

            16.1. Events of Default. Any one or more of the following events
shall be an "EVENT OF DEFAULT":

                  (a) if Lessee fails to make payment of the Rent payable by
Lessee under this Lease when the same becomes due and payable and such failure
is not cured by Lessee within a period of three (3) Business Days after Notice
thereof from Lessor; or

                  (b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Lessee
within a period of thirty (30) days after Notice thereof from Lessor, unless
such failure cannot with due diligence be cured within a period of thirty (30)
days, in which case such failure shall not be deemed an Event of Default if
Lessee proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof within ninety days of receipt of
Lessor's Notice. No Event of Default shall be deemed to exist under this clause
(b) during any time the curing thereof is prevented by an Unavoidable Delay,
provided that upon the cessation of such Unavoidable Delay, Lessee shall remedy
such default without further delay;

                                      -24-
<PAGE>

                  (c) if Lessee commits an "Event of Default" under any of the
Other Leases (defined below). Without limiting the foregoing, if Lessee commits
an "Event of Default" under this Lease, Lessee shall thereby be in default (and
shall therefore have committed an "Event of Default") under each and all of the
Other Leases; or

                  (d) if Lessee does any of the following: (i) admit in writing
its inability to pay its debts generally as they become due; (ii) file a
petition in bankruptcy or a petition to take advantage of any federal or state
insolvency law; (iii) make a general assignment for the benefit of its
creditors; (iv) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property; or (v) file a petition or answer
seeking reorganization or arrangement under the Federal bankruptcy laws or any
other applicable law or statute of the United States of America or any state
thereof, or

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

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

                  (g) if the estate or interest of Lessee in the Leased Property
or any part thereof be levied upon or attached in a proceeding and the same
shall not be vacated or discharged within the later of ninety (90) days after
commencement thereof or thirty (30) days after Notice thereof from Lessor,
(unless Lessee shall be contesting such lien or attachment in good faith in
accordance with ARTICLE XII hereof); or

                  (h) if Lessee voluntarily ceases operations on the Leased
Property for a period in excess of two (2) days; or

                  (i) if any of Lessee's representations or warranties set forth
in this Lease proves to be untrue when made in any material respect which
materially and adversely affects Lessor; or

                  (j) if Lessee (or any of its Affiliates) commits an "Event of
Default" under any other lease or sublease now or hereafter entered into between
Lessor (or any of its Affiliates) and Lessee (or any of its Affiliates) (the
"OTHER LEASES"). Without limiting the foregoing, if Lessee commits an "Event of
Default" under this Lease, Lessee (or any of its Affiliates) shall thereby have
committed an "Event of Default" under the Other Leases); or

                  (k) if Lessee attempts to assign or sublease, in violation of
the provisions of this Lease; or

                                      -25-
<PAGE>

                  (l) subject to the provisions of ARTICLE XII hereof, if Lessee
ceases to maintain in effect any license, permit, certificate or approval
necessary or otherwise required to operate any Facility in accordance with its
Primary Intended Use; or

                  (m) any Change in Control (as defined below) of Lessee
following the Commencement Date of this Lease. As used in this SECTION 16.1(m),
the term "CHANGE OF CONTROL" shall mean any change (voluntary or involuntary, by
operation of law or otherwise) in the Person or Persons (as defined below) which
ultimately exert effective control over the management of the affairs of Lessee
(a "CONTROLLING ENTITY") as of the date hereof. A Change of Control shall
specifically include, but not be limited to, any of the occurrences described in
subparagraphs (i) through (iii) below in this SECTION 16.1(m).

      Notwithstanding anything to the contrary set forth in this SECTION
16.1(m), any Change of Control which either (a) has been previously agreed to in
writing by Lessor, or (b) constitutes a Permitted Transaction (as defined
below), shall not constitute an Event of Default under this Lease. For the
purpose of this SECTION 16.1(m), the term "PERMITTED TRANSACTION" shall mean any
transaction, whether by operation of law or otherwise, resulting in a Change in
Control in which, immediately following such Change in Control, the Person or
Persons which ultimately exert effective control over the management of the
affairs of Lessee and/or Lessee's Controlling Entity (such Person or Persons,
the "SUCCESSOR PERSON") meet both of the following tests: (A) such Successor
Person or Persons has or have an audited consolidated tangible net worth,
determined in accordance with generally accepted accounting principles
consistently applied ("GAAP"), equal to or greater than One Hundred Fifty
Million and No/100 Dollars ($150,000,000.00), and (B) such Successor Person or
Persons then has or have issued and outstanding securities which are publicly
traded on the New York Stock Exchange ("NYSE"), the American Stock Exchange
("AMEX"), or the NASDAQ-National Markets System ("NASDAQ"). From and after the
occurrence of a Permitted Transaction, the failure by the Successor Person or
Persons to (AA) maintain an audited consolidated tangible net worth, determined
in accordance with GAAP, equal to or greater than One Hundred Fifty Million and
No/100 Dollars ($150,000,000.00), and (BB) continue to have issued and
outstanding securities which are publicly traded on the NYSE, the AMEX, or the
NASDAQ, shall constitute an Event of Default.

      For purposes of this SECTION 16.1(m), a Change of Control shall include,
but not be limited to, any of the following occurrences:

            (i) any Person (defined below) is or becomes the Beneficial Owner
(defined below), directly or indirectly, of securities of Lessee and/or Lessee's
Controlling Entity, whether by operation of law or otherwise, representing
thirty percent (30%) or more of the combined voting power of the then
outstanding securities of Lessee and/or its Controlling Entity (whereupon such
Person shall be deemed a Successor Person hereunder); or

            (ii) the stockholders of Lessee or its Controlling Entity approve a
merger or consolidation of Lessee or its Controlling Entity (as applicable) with
any other corporation (or other entity), other than a merger or consolidation
which would result in the voting securities of Lessee or its Controlling Entity
(as applicable) which are outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting

                                      -26-
<PAGE>

securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Lessee or its Controlling
Entity or such surviving entity immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
recapitalization of Lessee or its Controlling Entity (or similar transaction) in
which no Person acquires more than thirty percent (30%) of the combined voting
power of the then outstanding securities of Lessee and/or its Controlling Entity
shall not constitute a Change in Control; or

            (iii) the stockholders of Lessee or its Controlling Entity approve a
plan of complete liquidation of Lessee or its Controlling Entity (as applicable)
or an agreement for the sale or disposition by Lessee or its Controlling Entity
of all or substantially all of the assets of Lessee or its Controlling Entity.

      For purposes of this SECTION 16.1(m), the term "PERSON" shall have the
meaning ascribed thereto in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and the term "BENEFICIAL OWNER"
shall have the meaning ascribed thereto in Rule 13d-3 of the Exchange Act.

      Upon the occurrence of an Event of Default, in addition to all of Lessor's
other remedies, Lessor may terminate this Lease by giving Lessee not less than
ten (10) Business Days' Notice of such termination and upon the expiration of
the time fixed in such Notice, the Term shall terminate and all rights of Lessee
under this Lease shall cease.

      In the event litigation is commenced with respect to any alleged default
under this Lease, the prevailing party in such litigation shall receive, in
addition to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith. Lessor's fees, costs and expenses, including those related to any
insolvency proceedings filed by Lessee, shall constitute Additional Charges
hereunder.

      Notwithstanding the foregoing, Lessor acknowledges and agrees that the
following shall not constitute Events of Default hereunder: (i) the occurrence
of any default by Lessee under SECTIONS 16(d) AND (e) prior to January 31, 2003,
(ii) the occurrence of any default by Lessee under SECTIONS 16(d) AND (e) after
January 31, 2003 but only during the pendency of a bankruptcy proceeding in
which Lessee is a debtor, which proceeding was filed prior to January 31, 2003,
(iii) the occurrence of any default by Lessee under SECTION 16(m) prior to
January 31, 2003 or after January 31, 2003 but only during the pendency of or
the confirmation plan issued pursuant to a bankruptcy proceeding in which Lessee
is a debtor which proceeding was filed prior to January 31, 2003, or (iv) the
occurrence of any default by Lessee under SECTION 16(c) or 16(j) resulting from
any of the actions described in (i) - (iii) hereof prior to January 31, 2003 or
during the pendency or the confirmation plan issued pursuant to a bankruptcy
proceeding in which Lessee is a debtor which proceeding was filed prior to
January 31, 2003.

      Lessee further agrees that if any of the events described in SECTIONS
16(d) AND (e) should occur at anytime during the Term, Lessee shall affirm this
Lease and all of its obligations as set forth hereunder.

                                      -27-
<PAGE>

            16.2. Certain Remedies. In addition to all of its rights under this
Lease, Lessor shall have all remedies and rights provided in law and equity as a
result of an Event of Default or Lessee's other breach under this Lease. Without
limiting the foregoing, if an Event of Default occurs (and the event giving rise
to such Event of Default has not been cured within the curative period relating
thereto as set forth in SECTION 16.1 above) whether or not this Lease has been
terminated pursuant to SECTION 16.1, Lessee shall, to the extent permitted by
law, if required by Lessor so to do, immediately surrender to Lessor the Leased
Property pursuant to the provisions of SECTION 16.1 and quit the same and Lessor
may enter upon and repossess the Leased Property by reasonable force, summary
proceedings, ejectment or otherwise, and may remove Lessee and all other persons
and any and all personal property from the Leased Property subject to rights of
any residents or patients and to Legal Requirements.

            16.3. Damages. Neither (a) the termination of this Lease pursuant to
SECTION 16.1, (b) the repossession of the Leased Property, nor (c) the failure
of Lessor, notwithstanding reasonable good faith efforts, to relet the Leased
Property, shall relieve Lessee of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or reletting. In the
event of any such termination, Lessee shall forthwith pay to Lessor all Rent due
and payable through and including the date of such termination.

      Lessor shall not be deemed to have terminated this Lease unless Lessor
delivers Notice to Lessee of such election. If Lessee voluntarily elects to
terminate this Lease, then in addition to all remedies available to Lessor,
Lessor may recover the sum of: (i) the worth at the time of award of the unpaid
Rent which had been earned at the time of termination; (ii) the worth at the
time of award of the amount by which the unpaid Rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Lessee proves could have been reasonably avoided; (iii) the
worth at the time of award of the amount by which the unpaid Rent for the
balance of the Term after the time of award exceeds the amount of such rental
loss that Lessee proves could be reasonably avoided, and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
Lessee's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including
reasonable attorney fees, court costs and reasonable out-of-pocket expenses in
the enforcement of Lessor's rights hereunder.

      The "worth at the time of award" of the amounts referred to in
subparagraphs (i) and (ii) above is computed by allowing interest at the maximum
legal rate of interest permitted in accordance with the laws of the State of
California. The worth at the time of award of the amount referred to in
subparagraph (iii) is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).

      Without limiting Lessor's other remedies provided herein and provided by
law, Lessor may continue the Lease in effect after Lessee's breach and
abandonment and recover Rent as it becomes due, provided that, in such event,
Lessee has the right to sublet or assign subject only to reasonable conditions
imposed by Lessor. Accordingly, without termination of Lessee's right to
possession of the Leased Property, Lessor may demand and recover each
installment of Rent and other sums payable by Lessee to Lessor under this Lease
as the same becomes due and payable, which Rent and other sums shall bear
interest at the maximum interest rate permitted in

                                      -28-
<PAGE>

accordance with the laws of the State of California, from the date when due
until paid, and Lessor may enforce, by action or otherwise, any other term or
covenant of this Lease.

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

            16.5. Executory Contract. Should Lessee file any proceeding under
federal bankruptcy or other comparable federal or state insolvency laws, it
shall, in addition to any other requirement under 11 U.S.C., Section 365 or
other applicable provisions, be required to cure any and all obligations
hereunder prior to being allowed to assume this Lease.

                                  ARTICLE XVII

      17. Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
payment or to perform any act required to be made or performed under this Lease,
and to cure the same within the relevant time periods provided in SECTION 16.1,
Lessor, after thirty (30) days Notice to and demand upon Lessee, and without
waiving or releasing any obligation of Lessee or default, may (but shall be
under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and take all
such action thereon as, in Lessor's opinion, may be necessary or appropriate
therefor. Provided, however, that should Lessor reasonably determine that the
giving of such Notice would risk loss to the Leased Property or cause damage to
Lessor, then Lessor shall give such written Notice as is practical under the
circumstances. No such entry shall be deemed an eviction of Lessee. In
exercising any remedy under this ARTICLE XVII, Lessor shall use its good faith
efforts not to violate any rights of residents of the applicable Facility. All
sums so paid by Lessor and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, in each case) so incurred,
together with a late charge thereon (to the extent permitted by law) at the rate
set forth in SECTION 3.5 above from the date on which such sums or expenses are
paid or incurred by Lessor, shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessee contained in this Article shall
survive the expiration or earlier termination of this Lease.

                                  ARTICLE XVIII

            18. Intentionally omitted.

                                   ARTICLE XIX

            19. Holding Over. If Lessee shall for any reason remain in
possession of the Leased Property after the expiration of the Term or earlier
termination of the Term hereof, such possession shall be as a month-to-month
tenant during which time Lessee shall pay as rental each month, the aggregate of
(i) 150% multiplied by the Minimum Rent payable with respect to the last month
of the Term, (ii) all Additional Charges accruing during such month and (iii)
all other sums payable by Lessee pursuant to the provisions of this Lease.
During such period of month-to-month tenancy, Lessee shall be obligated to
perform and observe all of the terms, covenants

                                      -29-
<PAGE>

and conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent given by law to month-to-month tenancies, to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.

                                   ARTICLE XX

      20. Risk of Loss. During the Term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures
(except to the extent caused by or through Lessor), attachments, levies or
executions (other than those caused by or through Lessor) is assumed by Lessee,
and in the absence of gross negligence or willful misconduct by Lessor, Lessor
shall in no event be answerable or accountable therefor, nor shall any of the
events mentioned in this Section entitle Lessee to any abatement or offset of
Rent, or any right to terminate this Lease. Without limiting the foregoing,
Lessor shall not be liable for injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee's employees, contractors,
invitees, customers, or any other person in or about the Leased Property,
whether such damage or injury is caused by or results from fire, steam,
electricity, gas, water or rain, or from the breakage, leakage, obstruction or
other defects of pipes, fire sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether the said
injury or damage results from conditions arising upon the Leased Property, or
any part thereof, or from other sources or places, and regardless of whether the
cause of such damage or injury or the means of repairing the same is accessible
or not, unless such damage or injury is a result of the gross negligence or
willful misconduct of Lessor. Lessor shall not be liable for any damages arising
from any act or omission of Lessee, or any other party named above.

                                  ARTICLE XXI

      21. Indemnification. Notwithstanding the existence of any insurance
provided for in ARTICLE XIII, and without regard to the policy limits of any
such insurance, Lessee will protect, indemnify, save harmless and defend Lessor
from and against all liabilities, obligations, claims, damages, awards,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Lessor by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks, including
without limitation any claims of malpractice, (b) any occupancy, use, misuse,
non-use, condition, including any environmental conditions caused by Lessee,
maintenance or repair by Lessee of the Leased Property, (c) any Impositions
(which are the obligations of Lessee to pay pursuant to the applicable
provisions of this Lease), (d) any failure on the part of Lessee to in any way
perform or comply with any of the terms of this Lease, and (e) the
non-performance of any of the terms and provisions of any and all existing and
future subleases of the Leased Property (to the extent permitted) to be
performed by the Lessee thereunder. Any amounts which become payable by Lessee
under this Section shall be paid within ten (10) Business Days of receipt by
Lessee of Lessor's written demand for such sums, and if not timely paid, shall
bear a late charge (to the extent permitted by law), at the rate set forth in
SECTION 3.5 above, from the date of such determination to the date of payment.
Lessee, at

                                      -30-
<PAGE>

its sole cost and expense, shall contest, resist and defend any such claim,
action or proceeding asserted or instituted against Lessor, or may compromise or
otherwise dispose of the same as Lessee sees fit, all at Lessee's sole cost and
expense. Nothing herein shall be construed as indemnifying Lessor against its
own grossly negligent, reckless or willful misconduct or against the acts or
omissions of any subsequent lessee of the Leased Property in the event of the
termination by Lessor of Lessee's right to possession of the Leased Property
without termination of the Lease. Lessee's liability for a breach of the
provisions of this Article arising during the Term hereof shall survive any
termination of this Lease.

                                  ARTICLE XXII

      22. Subletting and Assignment. Lessee may not assign, sublease or sublet,
encumber, appropriate, pledge or otherwise transfer, the Lease or the leasehold
or other interest in the Leased Property without Lessor's consent, which consent
shall not be unreasonably withheld. Upon Lessor's consent, (a) in the case of a
subletting, the sublessee shall comply with the provisions of SECTION 22.2, (b)
in the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the part of Lessee to be kept
and performed and shall be, and become, jointly and severally liable with Lessee
for the performance thereof, (c) an original counterpart of each such sublease
and assignment and assumption, duly executed by Lessee and such sublessee or
assignee, as the case may be, in a form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor, and (d) in case of either an assignment
or subletting, Lessee shall remain primarily liable, as principal rather than as
surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Lessee
hereunder. Nothing hereunder shall preclude Lessor from selling the Leased
Property or assigning or transferring its interest hereunder, provided the new
owner or assignee expressly assumes Lessor's obligations under this Lease.

            22.1. Attornment. Lessee shall insert in a sublease permitted under
SECTION 22.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) in the event this Lease shall terminate before the
expiration of such sublease, the sublessee thereunder at Lessor's option, attorn
to Lessor and waive any right the sublessee may have to terminate the sublease
or to surrender possession thereunder, as a result of the termination of this
Lease, and (c) in the event the sublessee receives a written Notice from Lessor
or Lessees assignees, if any, stating that Lessee is in default under this
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such Notice, or as such party
may direct. All rents received from the sublessee by Lessor or Lessor's
assignees, if any, as the case may be, shall be credited against the amounts
owing by Lessee under this Lease.

            22.2. Sublease Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis, such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (i) the income or profits derived by the
business activities of the sublessee, or (ii) any other formula such that any
portion of the sublease rental received by Lessor would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto.

                                      -31-
<PAGE>

                                 ARTICLE XXIII

      23. Compliance with Mortgage. Subject to applicable requirements set forth
elsewhere in this Lease, Lessee shall comply with all applicable provisions of
any Facility Mortgage, and shall comply with any reasonable request for
information (including, without limitation, any financial information that may
not be expressly required in this Lease) from any Facility Mortgagee.

                                  ARTICLE XXIV

      24. Lessor's Right to Inspect; Officer's Certificates; Books and Records.

            24.1. Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives to inspect the Leased Property as well as Lessee's
books and records on reasonable notice (twenty-four (24) hours prior notice
shall be deemed reasonable) during usual business hours subject to any security,
health, safety or confidentiality requirements of Lessee or any Legal
Requirements or Insurance Requirements.

            24.2. Officer's Certificates. At any time from time-to-time upon not
less than ten (10) days Notice by Lessor, Lessee will furnish to Lessor a
certified written certificate from a duly authorized officer of Lessee
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which Rent has been paid and such other information
concerning this Lease as may be reasonably requested by Lessor and/or any
Facility Mortgagee. Any such certificate furnished, whether pursuant to this
SECTION 24.2 or some other provision in this Lease, may be relied upon by
Lessor, any prospective purchaser of the Leased Property and Facility Mortgagee.

            24.3. Books and Records. In addition to all other obligations to
provide financial information contained elsewhere in this Lease, Lessee will
furnish the following to Lessor:

                  (a) Lessee shall keep adequate books and records of account
with respect to the Leased Property and each Facility in accordance with GAAP
(but omitting footnotes), or in accordance with other methods elected by Lessee
from time to time and reasonably acceptable to Lessor (such as the tax basis
method of accounting, consistently applied) and Lessee shall furnish to Lessor:
(i) quarterly operating statements of each Facility (the "PERIODIC OPERATING
STATEMENTS") detailing the revenues received, the expenses incurred and the net
operating income for that quarter and containing appropriate year to date
information, the Periodic Operating Statements to be provided within forty-five
(45) days after the end of each of the first three fiscal quarters of each
fiscal year and within ninety (90) days after the end of the fourth fiscal
quarter of each fiscal year; and (ii) an annual operating statement of each
Facility (the "ANNUAL OPERATING STATEMENT") detailing the total revenues
received, total expenses incurred, and total net operating income, the Annual
Operating Statement to be provided within ninety (90) days after the close of
each fiscal year of the Lessee.

                                      -32-
<PAGE>

                  (b) In addition to the financial reports specified in the
preceding paragraph, Lessee also shall deliver occupancy reports listing the
number of units, the percentage of occupancy, and the gross revenue from
residents (the "OCCUPANCY INFORMATION"), prepared and certified by Lessee to
Lessor (and upon request any Facility Mortgagee) as true and correct, such
Occupancy Information to be provided on a quarterly basis, within forty-five
(45) days after the end of each of the first three fiscal quarters of each
fiscal year and within ninety (90) days after the end of the fourth fiscal
quarter of each fiscal year.

                  (c) Notwithstanding the foregoing, Lessor shall have the
option, which may be exercised by Notice to Lessee, to require Lessee to furnish
the Periodic Operating Statements and the Occupancy Information on a monthly
basis (within thirty (30) days after the end of each calendar month) for a
period of twelve successive calendar months, commencing with the first full
calendar month following the date of such notice.

                  (d) To the extent that Lessee, or any Controlling Entity of
Lessee, is required by any regulatory agency to file financial statements or
reports, within ten (10) calendar days of such filing, Lessee shall deliver to
Lessor a copy of any such filing(s) and report(s). To the extent prepared,
Lessee shall also provide to Lessor on an annual basis, copies of such financial
statements and/or reports and/or filings (whether audited or unaudited,
depending on the practice of such entities) prepared by any Controlling Entity.

                  (e) Lessee shall provide to Lessor (i) quarterly operating
statements (unaudited) of Lessee, detailing the revenues received, the expenses
incurred and the net operating income for that quarter and containing
appropriate year to date information, to be provided within forty-five (45) days
after the end of each of the first three fiscal quarters of each fiscal year and
within ninety (90) days after the end of the fourth fiscal quarter of each
fiscal year; and (ii) an annual operating statement (audited) of Lessee,
detailing the total revenues received, total expenses incurred, and total net
operating income, to be provided within ninety (90) days after the close of each
fiscal year of the Lessee.

      Whether or not expressly stated elsewhere above in this SECTION 24.3, all
information, reports, filings, etc. provided by Lessee to Lessor under this
SECTION 24.3 shall be (i) prepared in accordance with GAAP (but omitting
footnotes), and (ii) accompanied with a written certificate from a duly
authorized officer of Lessee certifying that to the best knowledge of the
officer executing such certificate, all accompanying information is true and
complete. In addition to all of the items expressly identified and required
elsewhere in this SECTION 24.3 (or elsewhere in this Lease), Lessee shall
promptly comply with any request by Lessor or any Facility Mortgagee for the
production of additional financial information (whether relating to Lessee, or a
Controlling Entity of Lessee) as may deemed relevant or prudent by Lessor and/or
any Facility Mortgagee.

                                  ARTICLE XXV

      25. No Waiver. The waiver by Lessor or Lessee of any term, covenant or
condition in this Lease shall not be deemed to be a waiver of any other term,
covenant or condition or any subsequent waiver of the same or any other term,
covenant or condition contained in this Lease. The subsequent acceptance of Rent
hereunder by Lessor or any payment by Lessee shall not be deemed to be a waiver
of any preceding default of any term, covenant or condition of this Lease,

                                      -33-
<PAGE>

other than the failure to pay the particular amount so received and accepted,
regardless of the knowledge of any preceding default at the time of the receipt
or acceptance.

                                  ARTICLE XXVI

      26. Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Lessor of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or subsequent
exercise by Lessor of any or all of such other rights, powers and remedies.

                                 ARTICLE XXVII

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

                                 ARTICLE XXVIII

      28. No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (a) this Lease or the leasehold estate created hereby or pay
interest in this Lease or such leasehold estate and (b) the fee estate in the
Leased Property.

                                  ARTICLE XXIX

      29. Conveyance by Lessor. If Lessor or any successor Lessor of the Leased
Property shall convey the Leased Property or assign its interest herein in
accordance with the terms hereof other than as security for a debt Lessor or
such successor Lessor, as the case may be, shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new Lessor, provided the new Lessor has agreed in writing
for the benefit of Lessee to be bound by all of the terms and conditions hereof.

                                  ARTICLE XXX

      30. Quiet Enjoyment. So long as Lessee shall pay all Rent as the same
becomes due and shall comply with all of the terms of this Lease and perform its
obligations hereunder, and except for any claims, actions, liens or encumbrances
(i) arising from the acts or omissions of Lessee or (ii) otherwise from events
occurring prior to the Commencement Date hereunder (expressly excluding events
arising by, through or under Lessor), Lessee shall peaceably and quietly have,
hold and enjoy the Leased Property for the Term hereof, free of any claim or
other

                                      -34-
<PAGE>

action by Lessor or anyone claiming by, through or under Lessor, but subject to
(i) all Encumbrances for which Lessor has delivered non-disturbance agreements
under SECTION 32.1 and (ii) all other encumbrances of record as of the date
hereof and not arising by, through or under Lessor or hereafter consented to by
Lessee. Except as otherwise provided in this Lease, no failure by Lessor to
comply with the foregoing covenant or any covenant of this Lease shall give
Lessee any right to cancel or terminate this Lease or abate, reduce or make a
deduction from or offset against the Rent or any other sum payable under this
Lease, or to fail to perform any other obligation of Lessee hereunder.

                                  ARTICLE XXXI

      31. Notices. All notices, demands, requests, consents, approvals and other
communications ("Notice" or "NOTICES") hereunder shall be in writing and served
upon the party being served either by (i) personal delivery, (ii) registered or
certified mail, return receipt requested and postage prepaid, or (iii) overnight
delivery service, addressed to the respective parties, as follows:

        If to Lessor:             c/o LTC Properties, Inc.
                                  300 Esplanade Drive, Suite 1860
                                  Oxnard, California  93036
                                  Attn:  Andre Dimitriadis
                                  Telephone: (805) 981-8660

        with a copy to:           c/o LTC Properties, Inc.
                                  300 Esplanade Drive, Suite 1860
                                  Oxnard, California  93036
                                  Attn:  Legal Department
                                  Telephone: (805) 981-3611

        If to Lessee:             Alterra Healthcare Corporation
                                  10000 Innovation Drive
                                  Milwaukee, Wisconsin  53226
                                  Attn:  Mark W. Ohlendorf
                                  Telephone: (414) 918-5403

        with a copy to:           Rogers and Hardin
                                  2700 International Tower,Peachtree Center
                                  229 Peachtree Street, N.E.
                                  Atlanta, Georgia  30303
                                   Attn:  Miriam J. Dent, Esq.
                                   Telephone: (404) 420-4608

or to such other address or person as either party may hereafter designate by a
Notice pursuant to this Section. In all instances, Notice shall be deemed
effective upon proof of receipt.

                                      -35-
<PAGE>

                                 ARTICLE XXXII

            32.1. Lessor May Grant Liens. Without the consent of Lessee, but
subject to the terms and conditions set forth below in this SECTION 32.1, Lessor
may, from time-to-time, directly or indirectly, create or otherwise cause to
exist any lien or encumbrance or any other change of title ("ENCUMBRANCE") upon
the Leased Property, or any portion thereof or interest therein, whether to
secure any borrowing or other means of financing or refinancing or otherwise.
Provided that Lessee receives the non-disturbance agreement described below,
this Lease is and at all times shall be subject and subordinate to any such
Encumbrance which may now or hereafter affect the Leased Property and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative and no further instruments of subordination
shall be required; provided, however that, at any time from time to time, within
ten (10) days after the request by Lessor or any holder of any Encumbrance,
Lessee shall execute an agreement to the effect that this Lease shall be subject
and subordinate to the lien of any such new Encumbrance on the Leased Property,
and that in the event of any default or foreclosure under such Encumbrance,
Lessee shall attorn to the holder of such lien, and as otherwise requested by
Lessor; provided further, however, that the subjection and subordination of this
Lease and Lessee's leasehold interest hereunder to any Encumbrance now in effect
or hereafter imposed by Lessor shall be conditioned upon the execution by the
holder of such Encumbrance and delivery to Lessee of a commercially reasonable
non-disturbance agreement specifying, among other things, that (a) so long as
Lessee has not committed an Event of Default, in the event of any foreclosure,
judicial sale or deed in lieu of foreclosure, Lessee's rights and leasehold
estate hereunder shall not be disturbed by the holder of such Encumbrance, its
successors or assigns or any successful bidder; and (b) notwithstanding such
subordination, so long as Lessee has not committed an Event of Default and no
event has occurred which with the passage of time or the giving of notice or
both would constitute an Event of Default under this Lease, the holder of such
Encumbrance will recognize the rights of the parties under the terms of this
Lease with respect to the disposition of insurance payments and condemnation
proceeds in the event of any casualty or condemnation.

            32.2. Attornment. If Lessor's interest in the Leased Property is
sold or conveyed upon the exercise of any remedy provided for in any
Encumbrance, or otherwise by operation of law: (i) at the new owner's option,
Lessee shall attorn to and recognize the new owner as Lessee's lessor under this
Lease, in which case this Lease shall automatically become a new lease between
Lessee and the new owner upon all of the terms and conditions hereof, or enter
into a new lease in the exact form and substance of this Lease with the new
owner, and Lessee shall take such actions to confirm the foregoing within ten
(10) Business Days after request; and (ii) the new owner (other than any new
owner or other entity which is an Affiliate of Lessor) shall not be (a) liable
for any act or omission of Lessor under this Lease occurring prior to such sale
or conveyance, or (b) subject to any offset, abatement or reduction of rent
because of any default of Lessor under this Lease occurring prior to such sale
or conveyance.

            32.3. Lessee's Right to Cure. Subject to the provisions of SECTION
32.4, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to any other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of

                                      -36-
<PAGE>

Lessor. All sums so paid by Lessee and all costs and expenses (including,
without limitation, reasonable attorneys' fees) so incurred, together with
interest thereon from the date on which such sums or expenses are paid or
incurred by Lessee, shall be paid by Lessor to Lessee on demand, but may not be
offset by Lessee against payments of Rent hereunder.

            32.4. Breach by Lessor It shall be a breach of this Lease if Lessor
fails to observe or perform any term, covenant or condition of this Lease on its
part to be performed, and such failure shall continue for a period of thirty
(30) days, after written Notice thereof from Lessee, unless such failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
such failure shall not be deemed to continue if Lessor, within said thirty (30)
day period, proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof. The time within which Lessor shall be
obligated to cure any such failure shall also be subject to extension of time
due to the occurrence of any Unavoidable Delay.

                                 ARTICLE XXXIII

      33. Miscellaneous.

            33.1. Survival of Obligations. Anything contained in this Lease to
the contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive such
termination.

            33.2. Late Charges; Interest. If any interest rate provided for in
any provision of this Lease is based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.

            33.3. Transfer of Obligations. At Lessor's request, and subject to
applicable laws, upon the expiration or earlier termination of the Term, Lessee
shall use its best efforts to transfer to Lessor or Lessor's nominee (or to
cooperate with Lessor or Lessor's nominee in connection with the processing by
Lessor or Lessor's nominee of any applications for) all licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental entities which may be
necessary for the operation of each Facility; provided that the costs and
expenses of any such transfer or the processing of any such application shall be
paid by Lessor or Lessor's nominee; and provided further that Lessor agrees
within forty-five (45) days after the termination of the Lease to change the
name of the Facility so that it will not include the word "Alterra", or any
variation thereof.

            33.4. Addendum, Amendments and Exhibits. All addenda, amendments and
exhibits attached to this Lease are hereby incorporated in this Lease and made a
part of this Lease.

            33.5. Headings. The headings and paragraph titles in this Lease are
not a part of this Lease and shall have no effect upon the construction or
interpretation of any part of this Lease.

            33.6. Time. Time is of the essence of this Lease and each and all of
its provisions.

                                      -37-
<PAGE>

            33.7. Applicable Law. This Lease shall be governed by and construed
in accordance with the laws of the State of California, but not including its
conflicts of laws rules; thus the law that will apply is the law applicable to a
transaction solely within the State of California.

            33.8. Successors and Assigns. The covenants and conditions contained
in this Lease shall, subject to the provisions regarding conveyance by Lessor
(ARTICLE XXIX), apply to and bind the heirs, successor, executor, administrators
and assigns of Lessor and Lessee.

            33.9. Limits of Lessor's Liability. Lessee specifically agrees to
look solely to Lessor's assets for recovery of any judgment against Lessor
relating to this Lease, it being specifically agreed that no constituent
shareholder, officer or director of Lessor shall ever be personally liable for
any such judgment or the payment of any monetary obligation to Lessee. The
provision contained in the foregoing sentence is not intended to, and shall not,
limit any right that Lessee might otherwise have to obtain injunctive relief
against Lessor or Lessor's successors in interest, or any action not involving
the personal liability of Lessor (original or successor). Additionally, Lessor
shall be exonerated from any further liability under this Lease upon Lessor's
transfer or other divestiture of its ownership of the Leased Property, provided
that the assignee or grantee shall expressly assume in writing the obligations
of Lessor hereunder. Furthermore, in no event shall Lessor (original or
successor) ever be liable to Lessee for any indirect or consequential damages
suffered by Lessee from whatever cause.

            33.10. Prior and Future Agreements. This Lease contains the entire
agreement of Lessor and Lessee with respect to the subject matter covered or
mentioned in this Lease, and no prior or contemporaneous agreements or
understanding pertaining to any such matters shall be effective for any purpose.
No provision of this Lease may be amended or supplemented except by an agreement
in writing signed by both Lessor and Lessee or their respective successor in
interest. This Lease shall not be effective or binding on any party until fully
executed by both Lessor and Lessee.

            33.11. Partial Invalidity. Any provision of this Lease which shall
be held by a court of competent jurisdiction to be invalid, void or illegal
shall in no way affect, impair or invalidate any other provision or term of this
Lease, and such other provision or terms shall remain in full force and effect.

            33.12. Attorneys Fees. In the event of any action or proceeding
brought by one party against the other under this Lease, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and costs in such
action or proceeding from the other party, including all attorneys, fees
incurred in connection with any appeals, and any post-judgment attorneys' fees
incurred in efforts to collect on any judgment.

            33.13. Authority of Lessor and Lessee. Lessor and Lessee each hereby
represent and warrant that the individuals signing on its behalf are duly
authorized to execute and deliver this Lease in their respective capacities, and
that this Lease is binding upon the entity for which it has been executed.

                                      -38-
<PAGE>

            33.14. Relationship of the Parties. Nothing contained in this Lease
shall be deemed or construed by Lessor or Lessee, nor by any third party, as
creating the relationship of principal and agent or a partnership, or a joint
venture by Lessor or Lessee, it being understood and agreed that no provision
contained in this Lease nor any acts of Lessor and Lessee shall be deemed to
create any relationship other than the relationship of landlord and tenant.

            33.15. Counterparts; Signatures by Facsimile. This Lease may be
executed in one or more separate counterparts, each of which, once they are
executed, shall be deemed to be an original. Such counterparts shall be and
constitute one and the same instrument. The parties may accept and rely upon
signatures delivered via facsimile.

            33.16. Brokers. Lessor and Lessee each warrants that it has had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease and it knows of no real estate broker or agent who is entitled to
a commission in connection with this Lease. Lessor and Lessee hereby agree to
indemnify the other and to hold the other harmless from and against any and all
costs, expenses, claims, damages, suits, including attorneys' fees, in any way
resulting from claims or demands for commissions or other compensation from any
real estate brokers claiming through such party with respect to this Lease.

            33.17. Condition on Termination. Upon any termination of the Lease
or any abandonment for whatever reason by Lessee of the Leased Property, Lessee
shall deliver up to Lessor the Leased Property in substantially the same or
better condition than it was at the commencement of the Lease, reasonable wear
and tear only excepted, and in a clean and sanitary state.

            33.18. Intentionally Omitted.

            33.19. Joint and Several. If either Lessor or Lessee is comprised of
more than one person or entity, then all such persons and/or entities comprising
Lessor or Lessee, respectively, shall be jointly and severably liable hereunder.

            33.20. Lessor Estoppel Certificates; Lessee's Obligations
Independent. Upon reasonable request (and in connection with Lessee's efforts to
obtain financing), Lessor shall deliver to Lessee a certificate in form and
substance to be determined solely by Lessor (but containing fundamentally the
same information as is required of Lessee pursuant to SECTION 24.2 above). Any
breach, or alleged breach, by Lessor of the foregoing covenant (or any other
covenant to be performed by Lessor under this Lease) shall not entitle Lessee to
any right of offset or provide an excuse for non-performance by Lessee of its
obligations under this Lease, all of which shall continue and survive
irrespective and independent of any such breach or alleged breach by Lessor. To
the extent permitted by law, Lessee hereby waives any and all rights of offset
and other "self-help" remedies available at law or in equity.

                                 ARTICLE XXXIV

            34.1. Options to Extend. Provided there exists no uncured defaults
under this Lease at the time Lessee exercises any option to extend (in
accordance with this ARTICLE XXXIV), Lessee will have the right to extend this
Lease for two (2) periods of ten (10)

                                      -39-
<PAGE>

years each (each such additional term shall be referred to herein as an
"EXTENDED TERM"), commencing immediately following the end of the Initial Term
or the immediately preceding Extended Term, as the case may be. The Lease during
any Extended Term shall be on the same terms and conditions as during the
Initial Term, except that the Minimum Rent shall be determined as set forth in
SECTION 34.2 below. In the event Lessee desires to exercise any option to extend
granted in this ARTICLE XXXIV, Lessee shall give Lessor written notice ("NOTICE
TO EXTEND") not more than three hundred sixty (360) days prior and not less than
one hundred eighty (180) days prior to the expiration of the Initial Term or the
immediately preceding Extended Term, as the case may be. If Lessee fails to give
Lessor any such notice, then such option to extend and all future options to
extend granted in this ARTICLE XXXIV shall be null and void and of no further
force or effect.

            34.2. Minimum Rent During Extended Terms. The Minimum Rent at the
commencement of the first Extended Term shall be the higher of: (i) the previous
year's Minimum Rent amount increased by two percent (2%); or (ii) the Minimum
Rent during the first lease year of the Initial Term (i.e., June 1, 2002 through
May 31, 2003) multiplied by a fraction the numerator of which is the C.P.I. as
of the commencement date of the first Extended Term and the denominator of which
is the C.P.I. as of the Commencement Date. Provided, however, in no event shall
the Minimum Rent for the first year of the first Extended Term exceed by fifteen
percent (15%) or more the amount of Minimum Rent at the end of the Initial Term.
The initial Minimum Rent payable during the second Extended Term, shall be the
higher of (i) the Minimum Rent payable during the last twelve (12) months of the
previous Extended Term increased by two percent (2%), or (ii) the Fair Market
Rent, as determined in SECTION 34.3 below, or (iii) the Minimum Rent during the
first lease year of the first Extended Term multiplied by a fraction the
numerator of which is the C.P.I. as of the commencement date of the second
Extended Term and the denominator of which is the C.P.I. as of the commencement
date of the first Extended Term Minimum Rent during the Extended Term shall be
subject to annual adjustments as provided in SECTION 3.1. Provided, however, in
no event shall the Minimum Rent for the first year of the Second Extended Term
exceed by fifteen percent (15%) or more the amount of Minimum Rent at the end of
the first Extended Term.

            34.3. Determination of Fair Market Rent.

                  (i) If Lessor and Lessee cannot agree on the Fair Market Rent
within thirty (30) days after the date of any Notice to Extend with respect to
the first or second Extended Term, each party shall, by notice to the other,
appoint a disinterested and licensed M.A.I. Real Estate Appraiser of national
reputation and renown with at least five years of experience in appraising
assisted living facilities throughout the United States with the same types of
operating licenses then being in effect at each respective Facility to determine
the Fair Market Rent. If any party should fail to appoint an appraiser within
ten (10) days after notice, the appraiser selected by the other party shall
determine the Fair Market Rent. In determining the Fair Market Rent, each
appraiser shall give appropriate consideration to, among other things, generally
applicable minimum rent for tenancies of property comparable to the Leased
Property in the area in which the Leased Property is located.

                  (ii) If the two appraisers selected pursuant to SECTION
34.3(i) above, cannot agree upon the Fair Market Rent within forty-five (45)
days, they shall immediately give

                                      -40-
<PAGE>

written notice of such inability ("NOTICE OF DISAGREEMENT") to both Lessor and
Lessee setting forth the Fair Market Rent determinations of each of the
appraisers. If the determinations of each of the two appraisers of the Fair
Market Rent at the commencement of such Extended Term differ by less than ten
percent (10%) of the lower determination, the Fair Market Rent shall be fixed at
an amount equal to the average of the two determinations.

                  (iii) If the determinations of each of the two appraisers
selected pursuant to SECTION 34.3(i), above, differ by ten percent (10%) or more
of the lower determination with respect to the Fair Market Rent to be paid at
the commencement of such Extended Term, then within thirty (30) days after the
giving of the Notice of Disagreement, the two appraisers shall appoint a third
disinterested and licensed M.A.I. Real Estate Appraiser of national reputation
and renown with at least five (5) years of experience appraising assisted living
facilities throughout the United States with the same types of operating
licenses then being in effect at each respective Facility. If the parties cannot
then agree on the Fair Market Rent, the third appraiser shall determine the Fair
Market Rent, and in so doing, shall give appropriate consideration to those
items described in SECTION 34.3(i). The third appraiser shall not select a Fair
Market Rent either (i) higher than the highest of the two appraisals made
pursuant to SECTION 34.3(i); or (ii) lower than the lowest of the two appraisals
made pursuant to SECTION 34.3(i), above. If the first two appraisers cannot
agree on the selection of a third appraiser within such thirty (30) days, or if
the first two appraisers fail to provide a Notice of Disagreement (as stated
above in SECTION 34.3(ii), above, then the Fair Market Rent shall be determined
by a third appraiser selected by the American Arbitration Association upon
application by Lessor.

                  (iv) During the time before the determination of the Fair
Market Rent, Lessee shall pay Minimum Rent at the rate paid immediately
preceding such Extended Term, increased by two percent (2%); provided, however,
that, if the Fair Market Rent is determined to be higher than such amount, the
Minimum Rent owed by Lessee at the Fair Market Rent shall be effective
retroactively as of the first day of such Extended Term. If, after the Minimum
Rent for an Extended Term is adjusted and applied retroactively as of the first
day of such Extended Term, it is determined that additional Minimum Rent is due
Lessor, the aggregate amount of any such additional Minimum Rent shall be paid
to Lessor within thirty (30) days of the determination of the Fair Market Rent
for such Extended Term.

            34.4. Appraisal Fee. Each of the parties shall pay the fees of the
appraiser that it selects pursuant to SECTION 34.3(i), above, and shall equally
share the cost of the third appraiser, if necessary, and shall equally share the
cost of arbitration (excluding attorneys' fees), if necessary.

                                      -41-
<PAGE>

      WHEREFORE, each of the parties has accepted and agreed by affixing their
respective authorized signatures below as of the date first above written.

"LESSOR"                  LTC PROPERTIES, INC.,
                          a Maryland corporation

                          By:      /s/ Wendy L. Simpson
                                   -------------------------------------------
                          Name:    Wendy L. Simpson
                          Title:   Vice Chairman and Chief Financial Officer

                          TEXAS-LTC LIMITED PARTNERSHIP,
                          a Texas limited partnership

                          BY:   L-TEX GP, INC.
                                ITS GENERAL PARTNER

                          By:      /s/ Wendy L. Simpson
                                   -------------------------------------------
                          Name:     Wendy L. Simpson
                          Title:    Vice Chairman and Chief Financial Officer

                          NORTH CAROLINA REAL ESTATE
                          INVESTMENTS, LLC,
                          a North Carolina limited liability company

                          BY:    LTC-DEARFIELD, INC. AND LTC-RICHMOND, INC.
                                 ITS GENERAL PARTNERS

                          LTC-DEARFIELD, INC.

                          By:      /s/ Wendy L. Simpson
                                   -------------------------------------------
                          Name:     Wendy L. Simpson
                          Title:    Vice Chairman and Chief Financial Officer

                          LTC-RICHMOND, INC.

                          By:      /s/ Wendy L. Simpson
                                   -------------------------------------------
                          Name:     Wendy L. Simpson
                          Title:    Vice Chairman and Chief Financial Officer

                          ALTERRA HEALTHCARE CORPORATION,
"LESSEE"                  a Delaware corporation

                          By:      /s/ Mark W. Ohlendorf
                                   -------------------------------------------
                          Name:     Mark W. Ohlendorf
                          Title:    Senior Vice President

                                      -42-
<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

Schedule "1"             Existing Encumbrances

Exhibit "A-1"
through
Exhibit "A-21"           Land

Exhibit "B"              List of Facilities by Name and Address

                                      -43-
<PAGE>

                                  SCHEDULE "1"

                              EXISTING ENCUMBRANCES

  COLORADO

      1.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            February 9, 1002 as Instrument Number 2824958 in the Official
            Records of Weld County (Sterling House of Greeley).

      2.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            February 12, 2002 as Instrument Number 2001009874 in the Official
            Records of Larimer County (Clare Bridge).

      3.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            July 6, 2001 as Instrument Number 2001054796 in the Official Records
            of Larimer County (Sterling House of Fort Collins).

  FLORIDA

      4.    Mortgage, Security Agreement, Assignment of Rents and Leases and
            Fixture Filing executed by LTC Properties, Inc. and recorded on
            August 8, 2001 in Volume 1445, Page 113 in the Official Records of
            Hernando County (Sterling House of Spring Hill).

      5.    Mortgage, Security Agreement, Assignment of Rents and Leases and
            Fixture Filing executed by LTC Properties, Inc. and recorded on
            August 8, 2001 in Volume 2309, Page 2058 in the Official Records of
            Okaloosa County (Sterling House of Bluewater Bay).

NORTH CAROLINA

      6.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            February 16, 2001 in Book 1825, Page 117 in the Official Records of
            Wayne County (Sterling House - Goldsboro).

      7.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded
            October 5, 2001 in Book 1309, Page 1967 in the Official Records of
            Cleveland County (Sterling House of Shelby).

      8.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            or about October 5, 2001 in Book 1206, Page 565 in the Official
            Records of Pitt County (Sterling House of Greenville).

                                      -44-
<PAGE>

      9.    Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            October 5, 2001 in Book 1814, Page 652 in the Official Records of
            Nash County (Sterling House of Rocky Mount).

      10.   Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            October 5, 2001 as No. 2001-00032075 in Book 1854, Page 863 in the
            Official Records of Craven County (Sterling House of New Bern).

   OKLAHOMA

      11.   Mortgage, Assignment of Leases, Rents, Issues, and Profits, Security
            Agreement and Fixture Filing executed by LTC Properties, Inc. and
            recorded on December 16, 2002 in Book 1016, Pages 452-478 in the
            Official Records of Bryan County (Sterling House of Durant).

     OHIO

      12.   Open-End Mortgage, Security Agreement, Assignment of Rents and
            Leases and Fixture Filing executed by LTC Properties, Inc. and
            recorded on August 3, 2001 as Instrument Number 200100020591 in the
            Official Records of Clark County (Sterling House of Springfield).

SOUTH CAROLINA

      13.   Mortgage, Security Agreement, Assignment of Rents and Leases and
            Fixture Filing executed by LTC Properties, Inc. and recorded on
            February 13, 2001 as Instrument Number 010010096 in the Official
            Records of Pickens County (Sterling House - Clemson).

      14.   Mortgage, Security Agreement, Assignment of Rents and Leases and
            Fixture Filing executed by LTC Properties, Inc. and recorded on
            February 13, 2001 in Volume 1103, Page 1 in the Official Records of
            Greenwood County (Sterling House - Greenwood).

      15.   Mortgage, Security Agreement, Assignment of Rents and Leases and
            Fixture Filing executed by LTC Properties, Inc. and recorded on
            September 19, 2001 in Volume 816, Page 1504 in the Official Records
            of Sumter County (Sterling House of Sumter).

     TEXAS

      16.   Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by Texas-LTC Limited Partnership and
            recorded on February 12, 2001 in Volume 2230, Page 568 in the
            Official Records of Wichita County (Sterling House of Wichita
            Falls).

      17.   Deed of Trust, Security Agreement, Assignment of Rents and Leases
            and Fixture Filing executed by LTC Properties, Inc. and recorded on
            July 3, 2001 as Instrument Number 2001020675 in the Official Records
            of McLennan County (Sterling House of Waco).

                                      -45-
<PAGE>

                                  EXHIBIT "A-1"

                                LEGAL DESCRIPTION

                            GOLDSBORO, NORTH CAROLINA

That certain tract or parcel of land lying and being in Stoney Creek Township,
Wayne County, North Carolina being bound on the north by U.S. Highway 13 North
(Berkeley Boulevard), on the east by Maplewood Drive, on the south by Maplewood
Subdivision, and on the west by Northwood Subdivision and the property of
Russell W. Dawley and wife Beth A. Dawley and being more particularly described
as follows:

BEGINNING at an iron pipe located at the intersection of the southern right of
way line of U.S. Highway 13 North (Berkeley Boulevard) and the western right of
way line of Maplewood Drive, said U.S. Highway 13 North (Berkeley Boulevard)
having a right of way width of 70 feet and Maplewood Drive having a right of way
width that varies from 60 feet to 70 feet; thence from said POINT OF BEGINNING
and with the western right of way line of Maplewood Drive S 33 degrees 18'00" E
250.05 feet to a point of curve in the western right of way line of Maplewood
Drive; thence with said right of way line along a curve in a counterclockwise
direction, said curve having a radius of 2091.339 feet, a chord bearing of S 33
degrees 17"58" E and a chord distance of 80.39 feet to an iron pipe in said
right of way line, the northeast corner of Lot 31, Maplewood Subdivision
recorded in Plat Cabinet H, Slide 217 of the Wayne County Registry; thence
leaving the western right of way line of Maplewood Drive and with the northern
line of Maplewood Subdivision S 55 degrees 35'57" W 121.97 feet to an iron pipe,
the northwest corner of Lot 31, Maplewood Subdivision; thence continuing with
the northern line of Maplewood Subdivision S 43 degrees 34'57" W 255.71 feet to
an iron pipe, a common corner between Lots 33 and 34, Maplewood Subdivision;
thence continuing with the northern line of Maplewood Subdivision S 43 degrees
43'12" W 93.17 feet to an iron pipe in the eastern line of Lot 16, Northwood
Subdivision recorded in Map Book 8, Page 2, Wayne County Registry, said point
being a corner in Lot 34, Maplewood Subdivision; thence leaving the northern
line of Maplewood Subdivision and with the eastern line of Northwood Subdivision
N 02 degrees 19'50" W 266.14 feet to an iron pipe at the northeast corner of Lot
18, Northwood Subdivision, said point being a corner in the property of Russell
W. Dawley and wife Beth A. Dawley recorded in Deed Book 1495, Page 634 of the
Wayne County Registry; thence with the Dawley line N 02 degrees 35'15" W 54.95
feet to an iron pipe; thence N 57 degrees 38'07" E 38.34 feet to an iron pipe;
thence N 32 degrees 11'45" W 136.87 feet to an iron pipe; thence continuing N 32
degrees 11'45" W 5.00 feet to an iron pipe in the southern right of way line of
U.S. Highway 13 North (Berkeley Boulevard), said point being the northeast
corner of the Russell W. Dawley and wife Beth A. Dawley property; thence with
the southern right of way line of U.S. Highway 13 North (Berkeley Boulevard) N
57 degrees 48'06" E 255.74 feet to the POINT OF BEGINNING containing 2.68 acres
as shown on a plat of survey entitled "ALTA/ACSM Land Title Survey for Sterling
House Corporation" dated June 27th, 1997 and last revised July 28th, 1997
prepared by Rivers and Associates, Inc. and having drawing number W-2131-A.

<PAGE>

                                  EXHIBIT "A-2"

                                LEGAL DESCRIPTION

                             Shelby, North Carolina

Located in Cleveland County, North Carolina. Commencing on N.C.G.S. monument
"Cleveland" whose North Carolina Grid Coordinates are North 569682.206 feet and
East 1255445.183 feet; thence North 52-48-00 West for a distance of 1223.80 feet
to a new iron pin set in the Northern right of way of East Marion Street the
beginning corner of the 2.173 acre tract herein described; thence a new line
through the Tillman property North 17-49-48 East for a distance of 257.17 feet
to a new iron pin set inside the Proposed 50 foot right of way of Elizabeth
Avenue; thence continuing inside the right of way of Elizabeth Avenue with a
curve to the right having a radius of 1298.71 feet and an arc length of 25.23
feet, being subtended by a chord of North 65-33-50 West for a distance of 224.95
feet to an existing iron pin; thence North 60-22-30 West for a distance of
100.34 feet to a bent pipe located inside the proposed right of way of Elizabeth
Avenue; thence leaving Elizabeth Avenue and running with a common line between
the Carolyn K. London property as described in Deed Book 975 at Page 598 and the
Tillman property South 18-16-35 West for a distance of 146.26 feet to an
existing rebar; thence continuing with the common line of London and Tillman
North 69-32-59 West for a distance of 24.56 feet to an existing pipe a common
corner between London, Tillman and the Barbara S. Smith property as recorded in
Deed Book 13-V at Page 226; thence with the common line between Smith and
Tillman South 17-50-38 West for a distance of 174.23 feet to an existing pipe
located inside the right of way of East Marion Street; thence continuing inside
the right of way of East Marion Street South 72-32-23 East for a distance of
124.97 feet to an existing iron pin located inside the right of way; thence
North 17-54-41 East for a distance of 13.68 feet to an existing iron pin located
in the Northern edge of the right of way of East Marion Street; thence running
along with the Northern edge of the right of way of East Marion Street South
72-30-31 East for a distance of 222.42 feet to the BEGINNING.

<PAGE>

                                  EXHIBIT "A-3"

                                LEGAL DESCRIPTION

                           Greenville, North Carolina

Being all Lot no.4 in Block "B" of Park Place Subdivision as shown on the plat
recorded in Map Book 48, Page 127, of the pitt County Register of Deeds Office.

<PAGE>

                                  EXHIBIT "A-4"

                                LEGAL DESCRIPTION

                           Rocky Mount, North Carolina

Located in Nash County, North Carolina. BEGINNING at the point where the western
right of way line of N.C. Highway 48 (Gold Rock Road), if extended, would
intersect the southern right of way line of Beaver Pond Drive, if extended,
thence from said point of beginning and with the western right of way line of
N.C. Highway 48 (Gold Rock Road) along a curve in a clockwise direction, said
curve having a radius of 2,574.354 feet, a chord bearing of S. 00-56-07 E. and a
chord distance of 171.71 feet to a point of tangency in said right of way line;
thence continuing with the western right of way line of N.C. Highway 48 (Gold
Rock Road), S. 00-58-34 W. 43.98 feet to a point of curvature in said right of
way line; thence along a curve in a clockwise direction, said curve having a
radius of 2,834.89 feet, a chord bearing of S. 01-19-22 W. and a chord distance
of 34.31 feet to an iron pipe in said right of way line, the true point of
beginning; thence from said point of beginning and with the western right of way
line of N.C. Highway 48 (Gold Rock Road) along a curve in a clockwise direction,
said curve having a radius of 2,834.789 feet, a chord bearing of S. 02-21-22 W.
and a chord distance of 67.94 feet to a point of compound curvature in the
western right of way line of N.C. Highway 48 (Gold Rock Road); thence continuing
with said right of way line along a curve in a clockwise direction, said curve
having a radius of 17,317.755 feet, a chord bearing of S. 03-24-14 W. and a
chord distance of 218.31 feet to an iron pipe in the western right of way line
of N.C. Highway 48 (Gold Rock Road); thence leaving said right of way line N.
86-50-42 W. 350.00 feet to an iron pipe; thence N. 03-09-18 E. 286.25 feet to an
iron pipe; thence S. 86-50-42 E. 350.00 feet to the true point of beginning, and
being Lot 1, Block B, as shown on "Minor Construction Plat - Lot 1, Block B
Property of Bonnie, G. Barnes, Jo Lynn G. Doughtie, Betsy G. Fletcher and James
R. Griffin, Jr., Stony Creek Township, Nash County, North Carolina, Drawing
Number FP-464", and recorded in Map Book 25, Page 87, Nash County Registry.
<PAGE>

                                  EXHIBIT "A-5"

                               LEGAL DESCRIPTION

                            New Bern, North Carolina

Located in Craven County, North Carolina and being all of Lot 1 of the Sterling
Park Subdivision, as shown on the plat recorded in Plat Cabinet G, Slide 33-B,
aforesaid County Registry.

<PAGE>

                                  EXHIBIT "A-6"

                                LEGAL DESCRIPTION

                                Greeley, Colorado

A tract of land located in the SW 1/4 of the SE 1/4 of Section 11, Township 5
North, Range 66 West of the 6th p.m., City of Greely, Weld County, Colorado,
which is more particularly described as follows:

Commencing at the SE Corner of said Section 11, and considering the South line
of said Section 11 to bear North 90 degrees 00'00" West and with all other
bearings contained herein being relative thereto;

Thence North 90 degrees 00'00" West, 1767.99 feet to the True Point of
Beginning;

Thence North 01 degrees 44'06" West, 457.65 feet;

Thence South 79 degrees 35'13" West, 437.10 feet;

Thence South 01 degrees 52'00" East, 378.65 feet;

Thence North 90 degrees 00'00" East, 431.41 feet to the True Point of Beginning;

EXCEPTING THEREFROM THE FOLLOWING DESCRIBED TRACTS OF LAND:

1)    That portion conveyed to the City of Greely by instrument recorded March
      18, 1983 in Book 991 as Reception No. 1920725;

2)    That portion dedicated as 38th Avenue by Map recorded May 19, 1970 in
      Book 626 as Reception No. 1547624; and

3)    That portion dedicated as 38th Avenue by Map recorded July 19, 1984 in
      Book 1037 as Reception No. 1974489.

<PAGE>

                                  EXHIBIT "A-7"

                               LEGAL DESCRIPTION

                             Fort Collins, Colorado

                 FORT COLLINS - CLARE BRIDGE COTTAGE, COLORADO

Lot 1, Wovenhearts Memory Care, County Of Larimer, State Of Colorado.

<PAGE>

                                  EXHIBIT "A-8"

                                LEGAL DESCRIPTION

                             Fort Collins, Colorado

                         FORT COLLINS, COLORADO PROPERTY

Lot 1, Sterling House P.U.D. according to the Plat recorded June 26, 1997 at
Reception No. 97040425, County of Larimer, State of Colorado.

<PAGE>

                                  EXHIBIT "A-9"

                               LEGAL DESCRIPTION

                               Niceville, Florida

A parcel of land lying in Section 23, Township 1 South, Range 22 West, Okaloosa
County, Florida and lying southwesterly of Merchants Way; being more
particularly described as follows:

Commencing at the C.L.O. monument marking the northeast corner of the northwest
1/4 of aforesaid Section 23, thence run N 89 degrees 04'00" W (reference
bearing) along the north line thereof for 294.17 feet; thence departing said
north line run S 01 degrees 22'01" W for 310.00 feet to the south right-of-way
line of aforementioned Merchants Way (35' R/W); thence run S 89 degrees 04'00" E
for 131.17 feet to the point of curvature of a curve concave southwesterly and
having a radius of 1097.44 feet; thence run along said curve in a southeasterly
direction through a central angle of 16 degrees 57'37", an arc distance of
324.86 feet (chord = 323.67 feet, chord bearing = S 80 degrees 35'14" E) to the
POINT OF BEGINNING; thence continue along said curve and right-of-way line
through a central angle of 09 degrees 40'00", an arc distance of 185.15 feet
(chord = 184.93 feet, chord bearing = S 67 degrees 16'30" E) to the point of
tangency of said curve; thence run S 62 degrees 26'30" E for 184.04 feet to the
point of curvature of a curve concave northeasterly and having a radius of
553.74 feet; thence run along said curve in a southeasterly direction through a
central angle of 11 degrees 27'29", an arc distance of 110.74 feet (chord =
110.55 feet, chord bearing = S 68 degrees 10'14" E); thence departing said curve
and right-of-way line, run S 39 degrees 59'50" W for 271.13 feet; thence N 50
degrees 00'10" W for 408.25 feet to the point of curvature of a curve concave
northeasterly and having a radius of 30.00 feet; thence run along said curve in
a northwesterly direction through a central angle of 65 degrees 50'20", an arc
distance of 34.47 feet (chord = 32.61 feet, chord bearing = N 17 degrees 05'00"
W) to the point of tangency of said curve; thence run N 15 degrees 50'10" E for
79.38 feet to the point of curvature of a curve concave southeasterly and having
a radius of 50.00 feet; thence run along said curve in a northeasterly direction
through a central angle of 63 degrees 12'59", an arc distance of 55.17 feet
(chord = 52.41 feet, chord bearing = N 47 degrees 26'40" E) to its intersection
with the aforesaid southerly right-of-way line of Merchants Way and the POINT OF
BEGINNING.

Together with a nonexclusive easement over Merchants Way for ingress/egress and
utilities, as well as nonexclusive easement rights to utilize the water and
sewer mains referenced in the Joint Use and Reservations of Easement Agreement
dated November 21, 1996, and recorded in Official Records Book 2036, Page 1774,
Public Records of Okaloosa County, Florida.

<PAGE>

                                 EXHIBIT "A-10"

                                LEGAL DESCRIPTION

                              Spring Hill, Florida

PARCEL I:

A parcel of land lying in and being a part of Section 31, Township 23 South,
Range 18 East, Hernando County, Florida and being more particularly described as
follows: Commence at the Northeast corner of Lot 1 of the RESERVE AT SEVEN
HILLS, PHASE ONE, as recorded in Plat Book 23, pages 13 and 14, public records
of Hernando County, Florida; thence South 66 degrees 20'25" East, along the
Southerly right-of-way of Palmgren Lane, 174.95 feet to the Point of Beginning;
thence continue South 66 degrees 20'25" East, along said right-of-way line,
410.05 feet to the Westerly right-of-way line of Mariner Boulevard; thence South
23 degrees 39'35" West, along said right-of-way line, 274.92 feet; thence North
66 degrees 20'25" West 527.60 feet to the Easterly boundary of that certain
parcel of land recorded in O.R. Book 713, pages 399 through 408, public records
of Hernando County, Florida; thence North 46 degrees 48'36" East, along said
Easterly boundary, 299.00 feet to the Point of Beginning. Subject to easements
and rights-of-way of record.

PARCEL II:

Together with 20 foot wide drainage easement described as follows:

A parcel of land lying in and being a part of Section 31, Township 23 South,
Range 18 East, Hernando County, Florida, and being more particularly described
as follows: Commence at the Northeast corner of Lot 1 of The Reserve at Seven
Hills Phase One as recorded in Plat Book 23, pages 13 and 14, public records of
Hernando County, Florida; thence South 66 degrees 20'25" East along the
Southerly right-of-way line of Palmgren Lane, 174.95 feet; thence South 46
degrees 48'36" West along the Easterly boundary of that certain parcel of land
described in O.R. Book 713, pages 399 through 408, public records of Hernando
County, Florida, 299.00 feet to the Point of Beginning; thence South 66 degrees
20'25" East, 21.75 feet; thence South 46 degrees 48'36" West, 520.72 feet;
thence North 48 degrees 18'39" West, 20.08 feet to the Easterly boundary of said
certain parcel of land; thence North 46 degrees 48'36" East along said Easterly
boundary, 513.96 feet to the Point of Beginning.

ALSO together with drainage retention area easement described as follows:

A parcel of land lying in and being a part of Section 31, Township 23 South,
Range 18 East, Hernando County, Florida and being more particularly described as
follows: Commence at the Northeast corner of Lot 1 of The Reserve at Seven Hills
Phase One as recorded in Plat Book 23, pages 13 and 14, public records of
Hernando County, Florida; thence South 66 degrees 20'25" East along the
Southerly right-of-way line of Palmgren Lane, 174.95 feet; thence South 46
degrees 48'36" West along the Easterly boundary of that certain parcel of land
described in O.R. Book 713, pages 399 through 408, public records of Hernando
County, Florida, 550.70 feet to the Point of Beginning; thence continue South 46
degrees 48'36" West along said Easterly boundary, 262.26 feet; thence North 48
degrees 18'39" West, 82.83 feet; thence North 06 degrees 53'25" East, 71.65
feet; thence North 36 degrees 53'01 East, 66.81 feet; thence North 59 degrees
16'43" East, 107.01 feet; thence North 85 degrees 47'31" East, 75.30 feet;
thence South 31 degrees 42'04" East, 70.94 feet to the Point of Beginning.

Said easements as recorded on October 2, 1997 in O.R. Book 1150, page(s) 142,
public records of Hernando County, Florida.

<PAGE>

                                 EXHIBIT "A-11"

                                LEGAL DESCRIPTION

                              Fort Meyers, Florida

A parcel of land lying in Section 27, Township 45 South, Range 24 East; Lee
County, Florida, being more particularly described as follows:

Commencing at the Southeast corner of said Section 27; thence North
88 degrees 54'09" West along the South line of said Section 27, a distance of
960.00 feet to a line lying parallel to and 960.00 feet West of, as measured at
right angles to the East line of said Section 27; thence North 00 degrees 17'36"
West along said parallel line, a distance of 1879.99 feet to the South line of
lands recorded in Official Records Book 1739, Pages 768 through 770, of the
Public records of Lee County, Florida (Said lands also known as Lakewood Drive);
thence South 89 degrees 29'58" East along said South line, a distance of 257.90
feet to the Point of Beginning of this description;

Thence continue South 89 degrees 29'58" East along said South line, a distance
of 352.00 feet to a line lying parallel to and 349.88 feet West of, as measured
at right angles to, said East line of Section 27; thence South 00 degrees 17'36"
East along said parallel line, a distance of 225.00 feet; thence South 38
degrees 40'32" West, a distance of 146.27 feet to a line lying parallel to and
340.00 feet South of as measured at right angles to said south line of Official
Records Book 1739, Pages 768 through 770; thence North 89 degrees 29'58" West
along said parallel line, a distance of 260.00 feet to a line lying parallel to
and 701.84 feet West of as measured at right angles to said East line of Section
27; thence North 00 degrees 17'36" West along said parallel line, a distance of
340.00 feet to the Point of Beginning.

<PAGE>

                                 EXHIBIT "A-12"

                                LEGAL DESCRIPTION

                                  Ada, Oklahoma

A part of Lot 3, Section 3, Township 3 North, Range 6 East, Pontotoc County,
Oklahoma, more particularly described as follows, to-wit:

BEGINNING at the Northeast corner of said Lot 3; Thence due West 282.56 feet;
Thence due South 330 feet; Thence East 282.56 feet; Thence due North 330 feet to
the point of beginning.

<PAGE>

                                 EXHIBIT "A-13"

                                LEGAL DESCRIPTION

                                Durant, Oklahoma

The North 335 feet of the W/2 SE/4 SW/4 NE/4 of Section 30, Township 6 South,
Range 9 East of the Indian Base and Meridian, in Bryan County, Oklahoma
according to the Government Survey thereof.

<PAGE>

                                 EXHIBIT "A-14"

                               LEGAL DESCRIPTION

                              Weatherford, Oklahoma

All of Block 4, Ridge Crest Addition to the City of Weatherford, Custer County,
Oklahoma according to the recorded plat thereof.

<PAGE>

                                 EXHIBIT "A-15"

                               LEGAL DESCRIPTION

                             Central, South Carolina

                        CLEMSON (CENTRAL), SOUTH CAROLINA

            All that certain piece, parcel or tract of land, with the
improvements thereon, if any, situate, lying and being in the County of Pickens,
State of South Carolina being described as follows:

            BEGINNING AT A NAIL AND CAP(o) at the intersection near the
approximate centerline of Oglesby Lane and Vickery Drive; thence running N35
degrees 43'50" along Vickery Drive for a distance of 276.39 feet to a nail(o);
thence turning and running along a portion of Tract C (property of Now or
Formerly Bobby C. Price and Joe B. Vickery) N40 degrees 58'02"E for a distance
of 300.80 feet to a 1/2" rod(o); thence and turning and running S57 degrees
45'39"E along property Now or Formerly Bobby C. Price and Joe B. Vickery for a
distance of 120.41 feet to a 1/2" rod(o); thence turning and running S54 degrees
33'30"E along property of Now or Formerly Bobby C. Price and Joe B. Vickery for
a distance of 81.00 feet to a 1/2" rod(o); thence turning and running S51
degrees 56'19"E along property of Now or Formerly Bobby C. Price and Joe B.
Vickery for a distance of 229.32 feet to a 1/2" rebar(o); thence turning and
running S48 degrees 07'12"W along Oglesby Lane for a distance 184.86 feet to a
nail and cap(o); thence turning and running S72 degrees 58'26"W along oglesby
Lane for a distance of 257.87 feet to a nail and cap(o), the POINT OF BEGINNING
(P.O.B.)

<PAGE>

                                 EXHIBIT "A-16"

                               LEGAL DESCRIPTION

                            Greenwood, South Carolina

All that certain piece, parcel or tract of land situate, lying and being in the
City of Greenwood, Greenwood County, South Carolina, containing 2.60 acres, more
or less, and being shown and delineated on a plat prepared for Sterling House
Corporation by Cox and Dinkins, Inc., dated February 6, 1998 and recorded in the
Office of the Clerk of Court for Greenwood County in Plat Book 106 at page 112;
and according to said plat having the following metes and bounds:

Beginning at a 5/8" rebar (o) at the intersection of the western right-of-way of
Parkway (private road) and the northern right-of-way of Epting Avenue
(S-24-168), Point of Beginning; thence running N81 degrees 19'57"W along the
northern right-of-way of Epting Avenue (S-24-168) for a distance of 391.79 feet
to a 5/8" rebar(o); thence turning and running N08 degrees 39'35"E along
property now or formerly PTA Enterprises for a distance of 204.06 feet to a PK
nail(o); thence turning and running N47 degrees 00'05"E along property now or
formerly Piedmont Physicians for Women, PA for a distance of 87.03 feet to a
5/8" rebar(o); thence turning and running S43 degrees 27'56"E along the
southwestern right-of-way of Katie Court (private road) for a distance of 50.06
feet to a 1/2" rebar(o); thence turning and running N46 degrees 59'58"E along
the southeastern right-of-way of Katie Court (private road) for a distance of
213.65 feet to a 5/8" rebar (o); thence turning and running S76 degrees 56'44"E
along the right-of-way of Katie Court (private road) and right-of-way of Parkway
(private road) for a distance of 8.34 feet to a 5/8" rebar(o); thence turning
and running S22 degrees 22'33"E along the southwestern right-of-way of Parkway
(private road) for a distance of 305.60 feet to an "X" on concrete (n); thence
turning and running S08 degrees 42'29"W along the western right-of-way of
Parkway (private road) for a distance of 146.72 feet to a 5/8" rebar (o), POINT
OF BEGINNING.

<PAGE>

                                 EXHIBIT "A-17"

                                LEGAL DESCRIPTION

                             Sumter, South Carolina

      All that certain piece, parcel or tract of land, with the improvements
thereon, if any, situate, lying and being in the County of Sumter, State of
South Carolina being shown and designated as 2.840 acres, on a plat prepared for
Sterling House Corporation by Cox and Dinkins, Inc., dated May 27, 1998, and
recorded in the Office of the R.M.C. for Sumter County in Plat Book _______,
page ____; and according to said plat having the following, metes, bounds,
courses and distances to wit:

      Beginning at a point at the intersection of the northern right-of-way of
Carter Road (S-467) and the western right-of-way of Wilson Hall Road (S692),
thence continuing in a northeasterly direction for a distance of approximately
210 feet along the western right-of-way of Wilson Hall Road (S-692) to a 1/2"
rebar (o), the POINT OF BEGINNING; thence turning and running N58 degrees
24'09"W along property of now or formerly Henry C., H. Clarke, Jr. and Edward K.
Bynum for a distance of 400.10 feet to a 1/2" rebar (o); thence turning and
running along property of now or formerly Mary Jennings Terry for the following
distances N30 degrees 54'30"E - 40.01 feet, N30 degrees 56'20"E - 41.83 feet,
N30 degrees 55'34"E - 38.14 feet, N30 degrees 51'03"E - 38.90 feet, N30 degrees
55'54"E - 98.00 feet, N30 degrees 57'42"E - 49.97 feet to a nail in tree (o);
thence turning and running S59 degrees 05'37"E along property now or formerly
Bullock Crawford Funeral Home, Inc., for a distance of 400.08 feet to a 1/2"
rebar (o) on the western right-of-way of Wilson Hall Road (S-692); thence
turning and running along the western right-of-way of Wilson Hall Road (S-692)
for the following distances; S30 degrees 59'59"W - 49.89 feet, S30 degrees
55'42"W - 98.06 feet, S30 degrees 51'10"W - 43.72 feet, S30 degrees 54'43"W -
33.23 feet, S30 degrees 56'35"W - 46.80 feet, S30 degrees 53'41"W - 39.99 feet
to a 1/2" rebar (o), the POINT OF BEGINNING. Be all measurements a little more
or less.

<PAGE>

                                 EXHIBIT "A-18"

                                LEGAL DESCRIPTION

                              Wichita Falls, Texas

Legal description of the land:

All of Lot 2-A, County Farm Addition to the City of Wichita Falls, Wichita
County, Texas, according to plat of record in the Plat Records of Wichita
County, Texas, and more fully described as follows:

A tract of land out of Block 8, Kemp & Newby Subdivision of the Cherokee County
School Land, Wichita County, Texas, and being a part of Lot 2 County Farm
Addition to the City of Wichita Falls, Texas, as recorded in Volume 26, Page
768, Wichita County Plat Records, and being more specifically described by metes
and bounds as follows:

BEGINNING at a Texas Electric Service Company monument in the intersection of
the North right-of-way line of Midwestern Parkway and the East right-of-way line
of Reddy Drive, said monument being the Southwest corner of said Lot 2 and of
this description;

THENCE along the East right-of-way line of Reddy Drive North 01 degrees  02' 57"
East a distance of 330.65 feet to a 1/2 inch iron rod for the Northwest corner
of this description;

THENCE South 88 degrees  57' 03" East a distance of 250.00 feet to a 1/2 inch
iron rod for the Northeast corner of this description;

THENCE South 01 degrees  02' 57" West a distance of 330.00 feet to a 1/2 inch
iron rod lying in the North right-of-way line of Midwestern Parkway for the
Southeast corner of this description;

THENCE along the North right-of-way line of Midwestern Parkway North 89 degrees
06' 02" West a distance of 250.00 feet to the PLACE OF BEGINNING and containing
1.90 acres, more or less.

<PAGE>

                                 EXHIBIT "A-19"

                                LEGAL DESCRIPTION

                                 Watauga, Texas

Lot 3-A, BLOCK 1 of NORTHPARK VILLAGE, an addition to the City of Watauga,
Tarrant County, Texas, according to the plat thereof recorded in Cabinet A,
Slide 3237, Plat Records, Tarrant County, Texas.

<PAGE>

                                 EXHIBIT "A-20"

                               LEGAL DESCRIPTION

                                   Waco, Texas

BEING all of a 3.987 acre tract of land located in the JOHN TUCKER SURVEY
Abstract No. 41 McLennan County, Texas, as described by deed to Sterling House
Corporation as recorded in Volume 68, page 627 of the Official Public Records of
McLennan County, Texas, and more particularly described by metes and bounds, as
follows:

BEGINNING at a 1/2-inch iron rod found at the Northeast corner of said 3.987
acre tract, lying in the South right-of-way line of Lake Shore Drive (a 135 foot
wide right-of-way). Said point of beginning also being the Northwest corner of
Lot 3, Block 1 HILLSIDE VILLAGE ADDITION, Part Three, an addition to the City of
Waco, McLennan County, Texas,

THENCE S 10 degrees  51' 10" E, 442.57 feet along the East boundary line of said
3.987 acre tract and the West boundary line of said Lot 3, to a 5/8" iron rod
found at the Southeast corner of said 3.987 acre Tract being the more Northerly
Northeast corner of Lot 1, Block B MCLENNAN COMMUNITY COLLEGE ADDITION to the
City of Waco, McLennan County, Texas according to the plat recorded in Volume
1680, Page 271 of the Deed Records of McLennan County, Texas,

THENCE S 65 degrees  37' 15" W, 299.91 feet along the Southeast boundary line of
said 3.987 acre Tract and the Northwest boundary line of said Lot 1, Block B
MCLENNAN COMMUNITY COLLEGE ADDITION to a 1/2" iron rod found,

THENCE N 25 degrees  23' 19" W, 531.13 feet to a 1/2" iron rod found in the
North boundary line of said 3.47 acre Tract, and the South right-of-way line of
aforesaid Lake Shore Drive,

THENCE N 79 degrees  20' 17" E, 424.90 feet, along North boundary line of said
3.987 acre Tract, and the South right-of-way line of said Lake Shore Drive to
THE PLACE OF BEGINNING, containing 3.987 acres (173,657 square feet) of land.

<PAGE>

                                 EXHIBIT "A-21"

                                LEGAL DESCRIPTION

                                Springfield, Ohio

Situated in the City of Springfield, County of Clark, State of Ohio, and within
the corporate limits of the City of Springfield, and being part of the Southeast
Quarter of Section 20, Town 5, Range 10, between the Miami Rivers Survey, and
being described as follows: Commence at a stone (found) at the South quarter
corner of Section 20, Town 5, Range 10, BMRS, the same being the intersection of
the centerline of Middle Urbana Road with the centerline of Villa Road; thence
measure with the centerline of Middle Urbana Road, North 5 degrees 02 minutes 50
seconds East, 1380.60 feet; thence measure South 84 degrees 57 minutes 10
seconds East, 50.00 feet to a 5/8 inch re-bar with metal cap (found) at the
northwesterly corner of a 0.808 acre tract described in deed to Midvill Realty,
Ltd., recorded Volume 868, Page 270 of the Deed Records of Clark County, Ohio,
the true point of the beginning herein; thence parallel with and 50 feet distant
from the centerline of Middle Urbana Road, North 5 degrees 02 minutes 50 seconds
East, 245.48 feet to a one-inch iron pipe with plastic cap (set) on the South
line of a future 60 foot right-of-way; thence with the South line of said future
right-of-way, South 84 degrees 57 minutes 10 seconds East, 330.00 feet to a
one-inch iron pipe with plastic cap (set) at a point of curvature; thence along
a curve to the right having a radius of 15.00 feet and a central angle of 90
degrees 00 minutes 00 seconds, an arc distance of 23.56 feet to a one-inch iron
pipe with plastic cap (set) at a point of tangency; thence with the West line of
a future 50 foot right-of-way, South 5 degrees 02 minutes 50 seconds West,
369.94 feet to a one-inch iron pipe with plastic cap (set) at a point of
curvature, thence along a curve to the right having a radius of 50.00 feet, and
a chord which bears South 19 degrees 35 minutes 35 seconds West at 25.12 feet,
an arc distance of 25.39 feet to a one-inch iron pipe with plastic cap (set)
thence North 84 degrees 57 minutes 10 seconds West, 188.69 feet to a one-inch
iron pipe with plastic cap (set); thence with part of the East line of said
0.808 acre tract, South 5 degrees 02 minutes 50 seconds West, 70.75 feet to a
one-inch iron pipe with plastic cap (set) at the southeast corner thereof;
thence with the south line of said 0.808 acre tract, North 84 degrees 57 minutes
10 seconds West, 150.00 feet to a one-inch iron pipe with plastic cap (set) at
the Southwest corner thereof; thence with the West line of said 0.808 acre
tract, the same being the easterly right-of-way line of Middle Urbana Road and
being parallel with and 50 feet distant from the centerline thereof, North 5
degrees 02 minutes 50 seconds East, 234.52 feet to the point of beginning and
containing 3.483 acres, more or less.

<PAGE>

                                  EXHIBIT "B"

                     List of Facilities by Address and Name
<TABLE>
<S>                                             <C>
Sterling House of Goldsboro                     1800 N. Berkeley Blvd., Goldsboro, North Carolina 27534

Sterling House of Shelby                        1426 E. Marion, Shelby, North Carolina 28150

Sterling House of Greenville                    2105 W. Arlington Blvd., Greenville, North Carolina 27834

Sterling House of Rocky Mount                   650 Goldrock Road, Rocky Mount, North Carolina 27804

Sterling House of New Bern                      1336 S. Glenburnie Road, New Bern, North Carolina 28562

Sterling House of Greeley                       1999 38th Avenue, Greeley, Colorado 86034

Clare Bridge Cottage                            1008 Rule Drive, Ft. Collins, Colorado 80525

Sterling House of Fort Collins                  1007 Rule Drive, Ft. Collins, Colorado 80525

Sterling House of Bluewater Bay                 1551 Merchants Way, Niceville, Florida 32578

Sterling House of Spring Hill                   10440 Palmgren Lane, Spring Hill, Florida 34606

Sterling House of Ft. Meyers                    14521 Lakewood Boulevard, Ft. Meyers, Florida 33919

Sterling House of Ada                           801 South Stadium Drive, Ada, Oklahoma

Sterling House of Durant                        1500 North 19th, Durant, Oklahoma 74701

Sterling House of Legacy Square                 800 Gartrell Place, Weatherford, Oklahoma 73096

Sterling House of Clemson                       131 Victory Drive, Central, South Carolina 29630

Sterling House of Greenwood                     1408 Parkway Road, Greenwood, South Carolina 29646

Sterling House of Sumter                        1180 Wilson Hall Road, Sumter, South Carolina 29150

Sterling House of Wichita Falls                 918 Midwestern Parkway, Wichita Falls, Texas

Sterling House of North Park Square             5900 North Park Drive, Watauga, Texas 76148

Sterling House of Waco                          1700 Lakeshore Drive, Waco, Texas 76708

Sterling House of Springfield                   3720 Middle Urbana Road, Springfield, Ohio 45502
</TABLE><PAGE>

                                                                 EXHIBIT 10.51.1

                                LEASE AGREEMENT,

                         dated as of February 28, 2003,

                                 by and between

                        SNH ALT LEASED PROPERTIES TRUST,

                                  AS LANDLORD,

                                       AND

                              AHC TRAILSIDE, INC.,

                                    AS TENANT

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  Page
                                                                                                                  ----
<S>                                                                                                               <C>
ARTICLE 1  DEFINITIONS....................................................................................           1
            1.1  "ACCOUNTING PERIOD"......................................................................           1
            1.2  "ACQUIRING GUARANTOR"....................................................................           1
            1.3  "ADDITIONAL CHARGES".....................................................................           2
            1.4  "ADDITIONAL RENT"........................................................................           2
            1.5  "AFFILIATED PERSON"......................................................................           2
            1.6  "AGREEMENT"..............................................................................           2
            1.7  "ALTERRA"................................................................................           2
            1.8  "ANNUAL RENT LIMITATION AMOUNT"..........................................................           2
            1.9  "APPLICABLE LAWS"........................................................................           2
            1.10  "AWARD".................................................................................           3
            1.11  "BASE NET RESIDENT REVENUES"............................................................           3
            1.12  "BASE YEAR".............................................................................           4
            1.13  "BORROWER"..............................................................................           4
            1.14  "BORROWER INDEBTEDNESS".................................................................           4
            1.15  "BUSINESS DAY"..........................................................................           4
            1.16  "CAPITAL ADDITION"......................................................................           4
            1.17  "CAPITAL EXPENDITURE"...................................................................           4
            1.18  "CHANGE IN CONTROL".....................................................................           4
            1.19  "CLAIMS"................................................................................           5
            1.20  "CODE"..................................................................................           5
            1.21  "COMMENCEMENT DATE".....................................................................           5
            1.22  "CONDEMNATION"..........................................................................           5
            1.23  "CONDEMNOR".............................................................................           5
            1.24  "CONFORMING BANKRUPTCY PROCEEDING"......................................................           5
            1.25  "CONFORMING PLAN".......................................................................           5
            1.26  "CONSOLIDATED FINANCIALS"...............................................................           6
            1.27  "DATE OF TAKING"........................................................................           6
            1.28  "DEFAULT"...............................................................................           6
            1.29  "DISBURSEMENT RATE".....................................................................           6
            1.30  "DISTRIBUTION"..........................................................................           6
            1.31  "EASEMENT AGREEMENT"....................................................................           6
            1.32  "ENCUMBRANCE"...........................................................................           7
            1.33  "ENTITY"................................................................................           7
            1.34  "ENVIRONMENT"...........................................................................           7
            1.35  "ENVIRONMENTAL OBLIGATION"..............................................................           7
            1.36  "ENVIRONMENTAL NOTICE"..................................................................           7
            1.37  "EVENT OF DEFAULT"......................................................................           7
            1.38  "EXCESS NET RESIDENT REVENUES"..........................................................           7
            1.39  "EXCLUDED ASSETS".......................................................................           7
            1.40  "EXHIBIT C PERSON"......................................................................           7
            1.41  "EXTENDED TERMS"........................................................................           7
            1.42  "FACILITY"..............................................................................           7
            1.43  "FACILITY MORTGAGE".....................................................................           7
            1.44  "FACILITY MORTGAGEE"....................................................................           7
</TABLE>

                                      - i -

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                                                  Page
                                                                                                                  ----
<S>                                                                                                               <C>
            1.45  "FINANCIAL OFFICER'S CERTIFICATE"......................................................            8
            1.46  "FISCAL YEAR"..........................................................................            8
            1.47  "FIXED TERM"...........................................................................            8
            1.48  "FIXTURES".............................................................................            8
            1.49  "GAAP".................................................................................            8
            1.50  "GOVERNMENT AGENCIES"..................................................................            8
            1.51  "GUARANTOR"............................................................................            8
            1.52  "GUARANTY".............................................................................            8
            1.53  "HAZARDOUS SUBSTANCES".................................................................            8
            1.54  "IMMEDIATE FAMILY".....................................................................            9
            1.55  "IMPOSITIONS"..........................................................................            9
            1.56  "INDEBTEDNESS".........................................................................           10
            1.57  "INSURANCE REQUIREMENTS"...............................................................           11
            1.58  "INTEREST RATE"........................................................................           11
            1.59  "LAND".................................................................................           11
            1.60  "LANDLORD".............................................................................           11
            1.61  "LANDLORD DEFAULT".....................................................................           11
            1.62  "LANDLORD LIENS".......................................................................           11
            1.63  "LEASE DOCUMENTS"......................................................................           11
            1.64  "LEASE YEAR"...........................................................................           11
            1.65  "LEASED IMPROVEMENTS"..................................................................           11
            1.66  "LEASED INTANGIBLE PROPERTY"...........................................................           11
            1.67  "LEASED PERSONAL PROPERTY".............................................................           12
            1.68  "LEASED PROPERTY"......................................................................           12
            1.69  "LEGAL REQUIREMENTS"...................................................................           12
            1.70  "LENDER"...............................................................................           12
            1.71  "LIEN".................................................................................           12
            1.72  "LOAN AGREEMENT".......................................................................           12
            1.73  "LOAN DOCUMENTS".......................................................................           12
            1.74  "MANAGEMENT AGREEMENT".................................................................           13
            1.75  "MANAGER"..............................................................................           13
            1.76  "MATERIAL INVESTMENT"..................................................................           13
            1.77  "MINIMUM RENT".........................................................................           13
            1.78  "NET RESIDENT REVENUES"................................................................           13
            1.79  "NET WORTH"............................................................................           14
            1.80  "NOTICE"...............................................................................           14
            1.81  "OFFICER'S CERTIFICATE"................................................................           14
            1.82  "OVERDUE RATE".........................................................................           14
            1.83  "PARENT"...............................................................................           14
            1.84  "PERMITTED CONTROL PERSON".............................................................           14
            1.85  "PERMITTED ENCUMBRANCES"...............................................................           14
            1.86  "PERMITTED LIENS"......................................................................           15
            1.87  "PERMITTED MERGER".....................................................................           15
            1.88  "PERMITTED USE"........................................................................           15
            1.89  "PERSON"...............................................................................           15
            1.90  "PROPERTY".............................................................................           15
            1.91  "PROVIDER AGREEMENTS"..................................................................           15
            1.92  "PURCHASE AGREEMENT"...................................................................           15
</TABLE>

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<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
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            1.93  "RECORDS"..............................................................................     16
            1.94  "REGULATED MEDICAL WASTES".............................................................     16
            1.95  "RENT".................................................................................     16
            1.96  "REQUIRED SUBLEASE"....................................................................     16
            1.97  "SEC"..................................................................................     16
            1.98  "SNDA".................................................................................     16
            1.99  "SECURED MERGER".......................................................................     16
            1.100  "SECURITY AGREEMENT"..................................................................     16
            1.101  "SECURITY DEPOSIT"....................................................................     16
            1.102  "STATE"...............................................................................     17
            1.103  "STOCK PLEDGE"........................................................................     17
            1.104  "SUBSIDIARY"..........................................................................     17
            1.105  "SUCCESSOR LANDLORD"..................................................................     17
            1.106  "TANGIBLE NET WORTH"..................................................................     17
            1.107  "TENANT"..............................................................................     17
            1.108  "TENANT'S PERSONAL PROPERTY"..........................................................     17
            1.109  "TERM"................................................................................     18
            1.110  "THIRD PARTY PAYOR PROGRAMS"..........................................................     18
            1.111  "THIRD PARTY PAYORS"..................................................................     18
            1.112  "UNSUITABLE FOR ITS PERMITTED USE"....................................................     18
            1.113  "WORK"................................................................................     18

ARTICLE 2  LEASED PROPERTY AND TERM......................................................................     18
            2.1  LEASED PROPERTY.........................................................................     18
            2.2  CONDITION OF LEASED PROPERTY............................................................     19
            2.3  FIXED TERM..............................................................................     20
            2.4  EXTENDED TERMS..........................................................................     20

ARTICLE 3  RENT..........................................................................................     21
            3.1  RENT....................................................................................     21
            3.2  LATE PAYMENT OF RENT, ETC...............................................................     25
            3.3  NET LEASE...............................................................................     26
            3.4  NO TERMINATION, ABATEMENT, ETC..........................................................     26
            3.5  SECURITY DEPOSIT........................................................................     27

ARTICLE 4  USE OF THE LEASED PROPERTY....................................................................     28
            4.1  PERMITTED USE...........................................................................     28
            4.2  COMPLIANCE WITH LEGAL/INSURANCE REQUIREMENTS, ETC.......................................     29
            4.3  COMPLIANCE WITH MEDICAID AND MEDICARE REQUIREMENTS......................................     29
            4.4  ENVIRONMENTAL MATTERS...................................................................     29

ARTICLE 5  MAINTENANCE AND REPAIRS.......................................................................     31
            5.1  MAINTENANCE AND REPAIR..................................................................     31
            5.2  TENANT'S PERSONAL PROPERTY..............................................................     33
            5.3  YIELD UP................................................................................     33
            5.4  MANAGEMENT AGREEMENT....................................................................     33

ARTICLE 6  IMPROVEMENTS, ETC.............................................................................     34
            6.1  IMPROVEMENTS TO THE LEASED PROPERTY.....................................................     34
            6.2  SALVAGE.................................................................................     35

ARTICLE 7  LIENS.........................................................................................     35
            7.1  LIENS...................................................................................     35
</TABLE>

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<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
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            7.2  LANDLORD'S LIEN.........................................................................     35

ARTICLE 8  PERMITTED CONTESTS............................................................................     36

ARTICLE 9  INSURANCE AND INDEMNIFICATION.................................................................     37
            9.1  GENERAL INSURANCE REQUIREMENTS..........................................................     37
            9.2  WAIVER OF SUBROGATION...................................................................     38
            9.3  FORM SATISFACTORY, ETC..................................................................     38
            9.4  NO SEPARATE INSURANCE; SELF-INSURANCE...................................................     39
            9.5  INDEMNIFICATION OF LANDLORD.............................................................     39
            9.6  FUTURE INSURANCE........................................................................     40

ARTICLE 10  CASUALTY.....................................................................................     40
            10.1  INSURANCE PROCEEDS.....................................................................     40
            10.2  DAMAGE OR DESTRUCTION..................................................................     41
            10.3  DAMAGE NEAR END OF TERM................................................................     42
            10.4  TENANT'S PROPERTY......................................................................     42
            10.5  RESTORATION OF TENANT'S PROPERTY.......................................................     43
            10.6  NO ABATEMENT OF RENT...................................................................     43
            10.7  WAIVER.................................................................................     43

ARTICLE 11  CONDEMNATION.................................................................................     43
            11.1  TOTAL CONDEMNATION, ETC................................................................     43
            11.2  PARTIAL CONDEMNATION...................................................................     43
            11.3  NO ABATEMENT OF RENT...................................................................     44
            11.4  TEMPORARY CONDEMNATION.................................................................     45
            11.5  ALLOCATION OF AWARD....................................................................     45

ARTICLE 12  DEFAULTS AND REMEDIES........................................................................     45
            12.1  EVENTS OF DEFAULT......................................................................     45
            12.2  REMEDIES...............................................................................     48
            12.3  TENANT'S WAIVER........................................................................     50
            12.4  APPLICATION OF FUNDS...................................................................     50
            12.5  LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT..............................................     50

ARTICLE 13  HOLDING OVER.................................................................................     50

ARTICLE 14  LANDLORD DEFAULT.............................................................................     51

ARTICLE 15  PURCHASE RIGHTS..............................................................................     52

ARTICLE 16  SUBLETTING AND ASSIGNMENT....................................................................     52
            16.1  SUBLETTING AND ASSIGNMENT..............................................................     52
            16.2  SUBLEASE PROVISIONS....................................................................     53
            16.3  REQUIRED SUBLEASE......................................................................     54
            16.4  PERMITTED SUBLEASE.....................................................................     55
            16.5  SUBLEASE LIMITATION....................................................................     55

ARTICLE 17  ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS...............................................     55
            17.1  ESTOPPEL CERTIFICATES..................................................................     55
            17.2  FINANCIAL STATEMENTS...................................................................     56
            17.3  GENERAL OPERATIONS.....................................................................     57

ARTICLE 18  LANDLORD'S RIGHT TO INSPECT..................................................................     58

ARTICLE 19  EASEMENTS....................................................................................     58
            19.1  GRANT OF EASEMENTS.....................................................................     58
</TABLE>

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<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
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            19.2  EXERCISE OF RIGHTS BY TENANT...........................................................     58
            19.3  PERMITTED ENCUMBRANCES.................................................................     59

ARTICLE 20  FACILITY MORTGAGES...........................................................................     59
            20.1  LANDLORD MAY GRANT LIENS...............................................................     59
            20.2  SUBORDINATION OF LEASE.................................................................     59
            20.3  NOTICE TO MORTGAGEE AND SUPERIOR LANDLORD..............................................     61

ARTICLE 21  ADDITIONAL COVENANTS OF TENANT...............................................................     61
            21.1  PROMPT PAYMENT OF INDEBTEDNESS.........................................................     61
            21.2  CONDUCT OF BUSINESS....................................................................     62
            21.3  MAINTENANCE OF ACCOUNTS AND RECORDS....................................................     62
            21.4  NOTICE OF LITIGATION, ETC..............................................................     62
            21.5  INDEBTEDNESS...........................................................................     62
            21.6  FINANCIAL CONDITION OF TENANT..........................................................     63
            21.7  FINANCIAL CONDITION OF ALTERRA.........................................................     63
            21.8  DISTRIBUTIONS, PAYMENTS TO AFFILIATED PERSONS, ETC.....................................     63
            21.9  PROHIBITED TRANSACTIONS................................................................     63
            21.10  LIENS AND ENCUMBRANCES................................................................     64
            21.11  MERGER; SALE OF ASSETS; ETC...........................................................     64
            21.12  CHANGE OF CONTROL OF GUARANTOR........................................................     64

ARTICLE 22  ARBITRATION..................................................................................     65

ARTICLE 23  MISCELLANEOUS................................................................................     66
            23.1  LIMITATION ON PAYMENT OF RENT..........................................................     66
            23.2  NO WAIVER..............................................................................     66
            23.3  REMEDIES CUMULATIVE....................................................................     66
            23.4  SEVERABILITY...........................................................................     67
            23.5  ACCEPTANCE OF SURRENDER................................................................     67
            23.6  NO MERGER OF TITLE.....................................................................     67
            23.7  CONVEYANCE BY LANDLORD.................................................................     67
            23.8  QUIET ENJOYMENT........................................................................     67
            23.9  NO RECORDATION.........................................................................     68
            23.10  NOTICES...............................................................................     68
            23.11  CONSTRUCTION..........................................................................     69
            23.12  COUNTERPARTS; HEADINGS................................................................     69
            23.13  APPLICABLE LAW, ETC...................................................................     70
            23.14  RIGHT TO MAKE AGREEMENT...............................................................     70
            23.15  ATTORNEYS' FEES.......................................................................     70
            23.16  NONLIABILITY OF TRUSTEES..............................................................     70
            23.17  BANKRUPTCY REMOTE ENTITIES............................................................     71
</TABLE>

                                      - v -
<PAGE>

                                 LEASE AGREEMENT

      THIS LEASE AGREEMENT is entered into as of February 28, 2003, by and
between (i) SNH ALT LEASED PROPERTIES TRUST, a Maryland real estate investment
trust, as landlord ("Landlord"), and (ii) AHC TRAILSIDE, INC., a Delaware
corporation, as tenant ("Tenant").

                                  WITNESSETH :

      WHEREAS, Landlord owns fee simple title to the twenty-five (25) Properties
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article 1) located in eighteen (18)
locations as more particularly described on Exhibits A-1 through A-18 attached
hereto and made a part hereof; and

      WHEREAS, Landlord wishes to lease the Leased Property to Tenant and Tenant
wishes to lease the Leased Property from Landlord, all subject to and upon the
terms and conditions herein set forth;

      NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:

                                   ARTICLE 1

                                  DEFINITIONS

      For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, (a) the terms defined in this Article
shall have the meanings assigned to them in this Article and include the plural
as well as the singular, (b) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP, (c) all
references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (d) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.

      1.1 "ACCOUNTING PERIOD" shall mean, with respect to any Property, each
calendar month or such other accounting period designated by Landlord and
Tenant.

      1.2 "ACQUIRING GUARANTOR" shall mean any successor in interest to any
Guarantor, which shall be deemed to include, without limitation, (a) any Person
or group of two or more Persons acting in concert (other than a Permitted
Control Person or a group comprised exclusively of Permitted Control Persons),
that acquire the ownership of fifty percent (50%) or more of the voting power of
the outstanding shares of voting stock of any Guarantor, (b) any Person
resulting from the merger or consolidation of any Guarantor, and (c) any Person
<PAGE>

acquiring through any one or more sales or conveyances all or substantially all
of any Guarantor's assets (including its capital stock) or business, except that
this clause (c) shall not apply to any Person solely because such Person
acquires all or substantially all of Borrower's assets in accordance with the
terms and conditions of the Loan Documents.

      1.3 "ADDITIONAL CHARGES" shall have the meaning given such term in Section
3.1.4.

      1.4 "ADDITIONAL RENT" shall have the meaning given such term in Section
3.1.2(a).

      1.5 "AFFILIATED PERSON" shall mean, with respect to any Person, (a) in the
case of any such Person which is a partnership, any partner in such partnership,
(b) in the case of any such Person which is a limited liability company, any
member of such company, (c) any other Person which is a Parent, a Subsidiary, or
a Subsidiary of a Parent with respect to such Person or to one or more of the
Persons referred to in the preceding clauses (a) and (b), (d) any other Person
who is an officer, director, trustee or employee of, or partner in or member of,
such Person or any Person referred to in the preceding clauses (a), (b) and (c),
and (e) any other Person who is a member of the Immediate Family of such Person
or of any Person referred to in the preceding clauses (a) through (d).

      1.6 "AGREEMENT" shall mean this Lease Agreement, including Exhibits A and
B attached hereto and made a part hereof, as it and they may be amended from
time to time as herein provided.

      1.7 "ALTERRA" shall mean Alterra Healthcare Corporation, a Delaware
corporation, and its permitted successors and assigns.

      1.8 "ANNUAL RENT LIMITATION AMOUNT" shall mean (x) for the 2004 calendar
year, Seven Million Two Hundred Twenty-Five Thousand Four Hundred Fifty Dollars
($7,225,450) and (y) for each full calendar year thereafter, the Annual Rent
Limitation Amount for the preceding annualized calendar year increased by three
percent (3%); provided however that there shall be an appropriate adjustment
made to the Annual Rent Limitation Amount simultaneously with any adjustment to
Minimum Rent pursuant to the terms of Section 3.1.1(b) or (c) or any decrease in
the amount of Additional Rent payable hereunder as a result of the reduction in
the number of units available at any of the Facilities or in the services
provided therein.

      1.9 "APPLICABLE LAWS" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health or
the Environment, including, without limitation, all valid and lawful

                                     - 2 -
<PAGE>

requirements of courts and other Government Agencies pertaining to reporting,
licensing, permitting, investigation, remediation and removal of underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pesticides, petroleum or
petroleum products, pollutants, contaminants or hazardous or toxic substances,
materials or wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances or
Regulated Medical Wastes, underground improvements (including, without
limitation, treatment or storage tanks, or water, gas or oil wells), or
pollutants, contaminants or hazardous or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature.

      1.10 "AWARD" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord, in connection with obtaining any such award).

      1.11 "BASE NET RESIDENT REVENUES" shall mean, with respect to any
Property, Net Resident Revenues at such Property for the Base Year; provided,
however, that in the event that, with respect to any Lease Year, or portion
thereof, if there shall occur a casualty, Condemnation or a change in Legal
Requirements which necessitates a reduction in the number of units available at
the Facility located at such Property or in the services provided at such
Facility from the number of such units or the services provided during the Base
Year, in determining Additional Rent payable with respect to such Property for
such Lease Year, Base Net Resident Revenues with respect to the affected
Property shall be reduced as follows: (a) in the event of the termination of
this Agreement with respect to any Property pursuant to Article 10, 11 or 12,
all Net Resident Revenues for such Property for the period during the Base Year
equivalent to the period after the termination of this Agreement with respect to
such Property shall be subtracted from Base Net Resident Revenues; (b) in the
event of a partial closing of such Facility affecting the number of units, or
the services provided, at such Facility, Net Resident Revenues attributable to
units or services at such Facility shall be ratably allocated among all units in
service at such Facility during the Base Year and all such Net Resident Revenues
attributable to units no longer in service shall be subtracted from Base Net
Resident Revenues throughout the period of such closing; and (c) in the event of
any other change in circumstances affecting any Facility, Base Net Resident
Revenues shall be equitably adjusted in such manner as Landlord and Tenant shall
reasonably agree. It is understood and agreed that Base Net Resident Revenues
shall be calculated separately for each Property and shall not be determined on
an aggregate basis for the Leased Property.

                                     - 3 -
<PAGE>

      1.12 "BASE YEAR" shall mean the 2003 Fiscal Year.

      1.13 "BORROWER" shall mean Pomacy Corporation, a Delaware corporation, and
its permitted successors and assigns, as the borrower with respect to the
Borrower Indebtedness.

      1.14 "BORROWER INDEBTEDNESS" shall mean the Indebtedness evidenced by the
Loan Documents.

      1.15 "BUSINESS DAY" shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.

      1.16 "CAPITAL ADDITION" shall mean, with respect to any Property, any
renovation, repair or improvement to such Property, the cost of which
constitutes a Capital Expenditure.

      1.17 "CAPITAL EXPENDITURE" shall mean any expenditure treated as capital
in nature in accordance with GAAP.

      1.18 "CHANGE IN CONTROL" shall mean (a) the acquisition by any Person, or
two or more Persons acting in concert, of record ownership of, or the right to
vote, or the power to direct the vote of, in excess of fifty percent (50%) of
the voting power of the outstanding shares of voting stock of Tenant or any
Guarantor, as the case may be, other than pursuant to a Permitted Merger or a
Secured Merger, (b) the merger or consolidation of Tenant or any Guarantor with
or into any other Person (other than a Permitted Merger, a Secured Merger or a
merger or consolidation of any Person with or into Tenant or any Guarantor that
does not result in a Change in Control of Tenant or such Guarantor under clauses
(a), (c) or (d) of this definition), (c) any one or more sales or conveyances to
any Person of all or substantially all of its assets (including capital stock)
or business of Tenant or any Guarantor, as the case may be (other than any sale
or disposition by Borrower of all of or substantially all of its assets) or (d)
the cessation, for any reason, of the individuals who, on the Commencement Date,
constituted the board of directors of Tenant or any Guarantor (together with any
new directors elected or appointed pursuant to, and on the effective date of, a
Conforming Plan and any new directors whose election by such board or whose
nomination for election by the shareholders of Tenant or such Guarantor, as the
case may be, was approved by a vote of a majority of the directors then still in
office who were either directors on the Commencement Date or the effective date
of a Conforming Plan as aforesaid or whose election or nomination for election
was previously so approved) to constitute a majority of the board of directors
of Tenant or such Guarantor then in office; provided, however, that no Change in
Control shall be deemed to have occurred as a result or arising out of: (i) any
change in ownership resulting from the issuance of equity securities in
connection with the confirmation of any Conforming Plan or (ii) any acquisition
referred to in clause (a) of this definition with respect to the voting power of
the outstanding shares of voting stock of any

                                     - 4 -
<PAGE>

Parent of Tenant so long as such Parent is a Guarantor and at the time of such
acquisition and immediately thereafter such Parent has a consolidated Tangible
Net Worth at least equal to Fifty Million Dollars ($50,000,000).

      1.19 "CLAIMS" shall have the meaning given such term in Article 8.

      1.20 "CODE" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.

      1.21 "COMMENCEMENT DATE" shall mean the date of this Agreement.

      1.22 "CONDEMNATION" shall mean, with respect to any Property, (a) the
exercise of any governmental power with respect to such Property, whether by
legal proceedings or otherwise, by a Condemnor of its power of condemnation, (b)
a voluntary sale or transfer of such Property by Landlord to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending, or (c) a taking or voluntary conveyance of all or part of such
Property, or any interest therein, or right accruing thereto or use thereof, as
the result or in settlement of any condemnation or other eminent domain
proceeding affecting such Property, whether or not the same shall have actually
been commenced.

      1.23 "CONDEMNOR" shall mean any public or quasi-public Person, having the
power of Condemnation.

      1.24 "CONFORMING BANKRUPTCY PROCEEDING" shall mean a proceeding in United
States Bankruptcy Court which is instituted pursuant to a voluntary petition for
reorganization filed by Alterra under Chapter 11 (or an involuntary petition
filed by any Person that is converted by Alterra within ten (10) days after such
filing into a voluntary petition under Chapter 11) so long as Alterra is
diligently pursuing confirmation of a Conforming Plan at all times during the
pendency of such proceeding.

      1.25 "CONFORMING PLAN" shall mean a plan of reorganization of Alterra that
contains each of the following elements:

            (a) The effectiveness and finality of all of the transactions
      contemplated by this Agreement, the other Lease Documents, the Loan
      Agreement and the other Loan Documents shall be unaffected and any
      obligation of Alterra thereunder shall continue unimpaired and in full
      force and effect; and

            (b) Assumption by Alterra of the Required Sublease; and

            (c) At least seventy percent (70%) of the voting power of the
      outstanding shares of voting stock of Alterra being owned by (i) Persons
      who had, prior to the filing of the bankruptcy petition instituting the
      Conforming Bankruptcy Proceeding, (A) an

                                     - 5 -
<PAGE>

      ownership or other interest in Alterra's stock or debt (including any debt
      of Alterra's subsidiaries guaranteed by Alterra) and/or (B) a joint
      venture ownership interest in Alterra's assets or Alterra's subsidiaries'
      assets, (ii) Affiliated Persons of Persons described in the foregoing
      clause (i), but excluding each such Person or Affiliated Person who (1) on
      the commencement of such bankruptcy case, held less than a Material
      Investment in Alterra and (2) subsequent to the commencement of such
      bankruptcy case and prior to or contemporaneously with the confirmation
      and implementation of such plan, increases their respective investment (on
      a cost basis) in Alterra by greater than ten percent (10%) and (iii)
      Permitted Control Persons; and

            (d) Alterra having a consolidated Net Worth of at least Thirty
      Million Dollars ($30,000,000).

      1.26 "CONSOLIDATED FINANCIALS" shall mean, for any Fiscal Year or other
accounting period of Alterra, annual audited and quarterly unaudited financial
statements of Alterra prepared on a consolidated basis, including Alterra's
consolidated balance sheet and the related statements of income and cash flows,
all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal Year,
and prepared in accordance with GAAP throughout the periods reflected.

      1.27 "DATE OF TAKING" shall mean, with respect to any Property, the date
the Condemnor has the right to possession of such Property, or any portion
thereof, in connection with a Condemnation.

      1.28 "DEFAULT" shall mean any event or condition which with the giving of
notice and/or lapse of time would ripen into an Event of Default.

      1.29 "DISBURSEMENT RATE" shall mean an annual rate of interest, as of the
date of determination, equal to the greater of (i) the Interest Rate and (ii)
the per annum rate for fifteen (15) year U.S. Treasury Obligations as published
in The Wall Street Journal plus five hundred (500) basis points; provided,
however, that in no event shall the Disbursement Rate exceed eleven and one half
percent (11.5%).

      1.30 "DISTRIBUTION" shall mean (a) any declaration or payment of any
dividend (except ordinary cash dividends or dividends payable in common stock of
Tenant) on or in respect of any shares of any class of capital stock of Tenant,
(b) any purchase, redemption, retirement or other acquisition of any shares of
any class of capital stock of a corporation, (c) any other distribution on or in
respect of any shares of any class of capital stock of a corporation or (d) any
return of capital to shareholders.

      1.31 "EASEMENT AGREEMENT" shall mean any conditions, covenants and
restrictions, easements, declarations, licenses and other agreements which are
Permitted Encumbrances and such other agreements as may be granted in accordance
with Section 19.1.

                                     - 6 -
<PAGE>

      1.32 "ENCUMBRANCE" shall have the meaning given such term in Section 20.1.

      1.33 "ENTITY" shall mean any corporation, general or limited partnership,
limited liability company or partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency, authority or political subdivision
thereof or any other entity.

      1.34 "ENVIRONMENT" shall mean soil, surface waters, ground waters, land,
stream, sediments, surface or subsurface strata and ambient air.

      1.35 "ENVIRONMENTAL OBLIGATION" shall have the meaning given such term in
Section 4.4.1.

      1.36 "ENVIRONMENTAL NOTICE" shall have the meaning given such term in
Section 4.4.1.

      1.37 "EVENT OF DEFAULT" shall have the meaning given such term in Section
12.1.

      1.38 "EXCESS NET RESIDENT REVENUES" shall mean, with respect to any
Property, with respect to any Lease Year, or portion thereof, the amount of Net
Resident Revenues for such Property for such Lease Year, or portion thereof, in
excess of Base Net Resident Revenues for such Property for the equivalent period
during the Base Year.

      1.39 "EXCLUDED ASSETS" shall mean all (a) vehicles, (b) computers,
copiers, fax machines, employee cell phones and pagers and other similar
equipment subject to purchase money financing, all of which are listed on
Exhibit B attached hereto and made a part hereof, (c) proprietary materials and
software and trademarks, tradenames and (d) all modifications, replacements,
alterations and additions of the foregoing (but, with respect to (ii), only to
the extent the same are subject to purchase money financing).

      1.40 "EXHIBIT C PERSON" shall mean any Person listed on Exhibit C attached
hereto.

      1.41 "EXTENDED TERMS" shall have the meaning given such term in Section
2.4.

      1.42 "FACILITY" shall mean, with respect to any Property, the assisted
living/special care facility being operated on such Property.

      1.43 "FACILITY MORTGAGE" shall mean any Encumbrance placed upon the Leased
Property, or any portion thereof, in accordance with Article 20.

      1.44 "FACILITY MORTGAGEE" shall mean the holder of any Facility Mortgage.

                                     - 7 -
<PAGE>

      1.45 "FINANCIAL OFFICER'S CERTIFICATE" shall mean, as to any Person, a
certificate of the chief executive officer, chief financial officer or chief
accounting officer (or such officers' authorized designee) of such Person, duly
authorized, accompanying the financial statements required to be delivered by
such Person pursuant to Section 17.2, in which such officer shall certify (a)
that such statements have been properly prepared in accordance with GAAP
(omitting footnotes) and are true, correct and complete in all material respects
and fairly present the consolidated financial condition of such Person at and as
of the dates thereof and the results of its and their operations for the periods
covered thereby, and (b), in the event that the certifying party is an officer
of Tenant and the certificate is being given in such capacity, certify that no
Event of Default has occurred and is continuing hereunder.

      1.46 "FISCAL YEAR" shall mean the calendar year or such other annual
period designated by Tenant and approved by Landlord.

      1.47 "FIXED TERM" shall have the meaning given such term in Section 2.3.

      1.48 "FIXTURES" shall have the meaning given such term in Section 2.1(d).

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

      1.50 "GOVERNMENT AGENCIES" shall mean any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or any State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or any Facility operated thereon.

      1.51 "GUARANTOR" shall mean any of Alterra, Borrower and each and every
other guarantor of Tenant's obligations under this Agreement, and each such
guarantor's successors and assigns.

      1.52 "GUARANTY" shall mean any guaranty agreement executed by a Guarantor
in favor of Landlord pursuant to which the payment or performance of Tenant's
obligations under this Agreement are guaranteed, together with all
modifications, amendments and supplements thereto.

      1.53 "HAZARDOUS SUBSTANCES" shall mean any substance:

            (a) the presence of which requires or may hereafter require
      notification, investigation or remediation under any federal, state or
      local statute, regulation, rule, ordinance, order, action or policy; or

                                     - 8 -
<PAGE>

            (b) which is or becomes defined as a "hazardous waste", "hazardous
      material" or "hazardous substance" or "pollutant" or "contaminant" under
      any present or future federal, state or local statute, regulation, rule or
      ordinance or amendments thereto including, without limitation, the
      Comprehensive Environmental Response, Compensation and Liability Act (42
      U.S.C. section 9601 et seq.) and the Resource Conservation and Recovery
      Act (42 U.S.C. section 6901 et seq.) and the regulations promulgated
      thereunder; or

            (c) which is toxic, explosive, corrosive, flammable, infectious,
      radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
      becomes regulated by any governmental authority, agency, department,
      commission, board, agency or instrumentality of the United States, any
      state of the United States, or any political subdivision thereof; or

            (d) the presence of which on the Leased Property, or any portion
      thereof, causes or materially threatens to cause an unlawful nuisance upon
      the Leased Property, or any portion thereof, or to adjacent properties or
      poses or materially threatens to pose a hazard to the Leased Property, or
      any portion thereof, or to the health or safety of persons on or about the
      Leased Property, or any portion thereof; or

            (e) without limitation, which contains gasoline, diesel fuel or
      other petroleum hydrocarbons or volatile organic compounds; or

            (f) without limitation, which contains polychlorinated biphenyls
      (PCBs) or asbestos or urea formaldehyde foam insulation; or

            (g) without limitation, which contains or emits radioactive
      particles, waves or material; or

            (h) without limitation, constitutes Regulated Medical Wastes.

      1.54 "IMMEDIATE FAMILY" shall mean, with respect to any individual, such
individual's spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law,
sisters-in-law, nephews and nieces and the heirs, executors, administrators,
legal representatives and successors and assigns of such individuals (if
permitted) where the context so admits or requires.

      1.55 "IMPOSITIONS" shall mean, collectively, all taxes (including, without
limitation, all taxes imposed under the laws of any State, as such laws may be
amended from time to time, and all ad valorem, sales and use, or similar taxes
as the same relate to or are imposed upon Landlord, Tenant or the business
conducted upon the Leased Property), assessments (including, without limitation,
all
                                     - 9 -
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assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof), ground rents (including any minimum rent
under any ground lease, and any additional rent or charges thereunder), water,
sewer or other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees), and
all other governmental charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character in
respect of the Leased Property or the business conducted thereon by Tenant
(including all interest and penalties thereon due to any failure in payment by
Tenant), which at any time prior to, during or in respect of the Term hereof
(regardless of whether such tax, assessment, excise, tax levy, fee or lien
relates to periods prior to the Commencement Date) may be assessed or imposed on
or in respect of or be a lien upon (a) Landlord's interest in the Leased
Property, (b) the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein, or (c) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Leased Property or the leasing or use of the Leased Property or any
part thereof by Tenant; provided, however, that nothing contained herein shall
be construed to require Tenant to pay and the term "Impositions" shall not
include (i) any tax based on net income imposed on Landlord, (ii) any net
revenue tax of Landlord, (iii) any transfer fee or other tax imposed with
respect to the sale, exchange or other disposition by Landlord of the Leased
Property or the proceeds thereof, (iv) any intangible, documentary, transfer or
other tax imposed with respect to any Facility Mortgage or any other document or
instrument evidencing or securing any Indebtedness of Landlord or the financing
or refinancing of the Leased Property or any portion thereof, including, without
limitation, any Lien on the Leased Property arising by, through or under
Landlord or imposed with respect to any Superior Lease and any ground rents or
other rents or costs payable under the foregoing, (v) any single business, gross
receipts tax, transaction privilege, rent or similar taxes as the same relate to
or are imposed upon Landlord, (vi) any interest or penalties imposed on Landlord
as a result of the failure of Landlord to file any return or report timely and
in the form prescribed by law or to pay any tax or imposition, except to the
extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vii) any impositions imposed on Landlord that are a
result of Landlord not being considered a "United States person" as defined in
Section 7701(a)(30) of the Code, (viii) any impositions that are enacted or
adopted by their express terms as a substitute for any tax that would not have
been payable by Tenant pursuant to the terms of this Agreement or (ix) any
impositions imposed as a result of a breach of covenant or representation by
Landlord in any agreement governing Landlord's conduct or operation or as a
result of the negligence or willful misconduct of Landlord.

      1.56 "INDEBTEDNESS" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.

                                     - 10 -
<PAGE>

      1.57 "INSURANCE REQUIREMENTS" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations and any other requirements of the National
Board of Fire Underwriters (or any other body exercising similar functions)
binding upon Landlord, Tenant, any Manager or the Leased Property.

      1.58 "INTEREST RATE" shall mean ten percent (10%) per annum.

      1.59 "LAND" shall have the meaning given such term in Section 2.1(a).

      1.60 "LANDLORD" shall have the meaning given such term in the preambles to
this Agreement and shall also include its permitted successors and assigns.

      1.61 "LANDLORD DEFAULT" shall have the meaning given such term in Article
14.

      1.62 "LANDLORD LIENS" shall mean liens on or against the Leased Property
or any payment of Rent (a) which result from any act of, or any claim against,
Landlord or any owner of a direct or indirect interest in the Leased Property
(excluding liens imposed by the lessor under any ground lease affecting any
portion of the Leased Property which did not arise by, through or under
Landlord), or which result from any violation by Landlord of any terms of this
Agreement, or (b) which result from liens in favor of any taxing authority by
reason of any tax owed by Landlord or any fee owner of a direct or indirect
interest in the Leased Property (excluding liens imposed by the lessor under any
ground lease affecting any portion of the Leased Property which did not arise
by, through or under Landlord); provided, however, that "Landlord Lien" shall
not include any lien resulting from any tax for which Tenant is obligated to pay
or indemnify Landlord against until such time as Tenant shall have already paid
to or on behalf of Landlord the tax or the required indemnity with respect to
the same.

      1.63 "LEASE DOCUMENTS" shall mean, collectively, this Agreement, the
Purchase Agreement, the Required Sublease, the Security Agreement, the Stock
Pledge, any Guaranty and any other documents executed or delivered in connection
with any of the foregoing.

      1.64 "LEASE YEAR" shall mean any Fiscal Year or portion thereof during the
Term.

      1.65 "LEASED IMPROVEMENTS" shall have the meaning given such term in
Section 2.1(b).

      1.66 "LEASED INTANGIBLE PROPERTY" shall mean all agreements, service
contracts, equipment leases, booking agreements and other arrangements or
agreements to which Landlord is a party and affecting the ownership, repair,
maintenance, management, leasing or operation of the Leased Property, or any
portion thereof; all books, records and files owned by Landlord and relating to
the leasing, maintenance,

                                     - 11 -
<PAGE>

management or operation of the Leased Property, or any portion thereof; to the
extent owned by Landlord, all transferable or assignable permits, certificates
of occupancy, operating permits, sign permits, development rights and approvals,
certificates, licenses, warranties and guarantees, rights to deposits and
telephone exchange numbers identified with the Leased Property; and all other
transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character owned by or belonging to Landlord with respect to the
Leased Property or any portion thereof, but expressly excluding the Excluded
Assets.

      1.67 "LEASED PERSONAL PROPERTY" shall have the meaning given such term in
Section 2.1(e), but expressly excluding the Excluded Assets.

      1.68 "LEASED PROPERTY" shall have the meaning given such term in Section
2.1, but expressly excluding the Excluded Assets.

      1.69 "LEGAL REQUIREMENTS" shall mean all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates of need, authorizations and
regulations necessary to operate any Property for its Permitted Use, and (b) all
covenants, agreements, restrictions and encumbrances contained in any
instruments at any time in force affecting any Property, including those which
may (i) require material repairs, modifications or alterations in or to any
Property or (ii) in any way materially and adversely affect the use and
enjoyment thereof, but excluding any requirements arising as a result of
Landlord's status as a real estate investment trust.

      1.70 "LENDER" shall mean SNH ALT Mortgaged Properties Trust, a Maryland
real estate investment trust, and its successors and assigns as the lender with
respect to the Borrower Indebtedness.

      1.71 "LIEN" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors.

      1.72 "LOAN AGREEMENT" shall mean the Loan Agreement, dated as of the date
hereof, between Borrower and Lender, as it may be amended, restated,
supplemented or otherwise modified from time to time as provided therein.

      1.73 "LOAN DOCUMENTS" shall have the meaning given such term in the Loan
Agreement.

                                     - 12 -
<PAGE>

      1.74 "MANAGEMENT AGREEMENT" shall mean, with respect to any Property, any
operating or management agreement from time to time entered into by Tenant with
respect to such Property in accordance with the provisions of this Agreement,
together with all amendments, modifications and supplements thereto.

      1.75 "MANAGER" shall mean, with respect to any Property, the operator or
manager under any Management Agreement from time to time in effect with respect
to such Property, and its permitted successors and assigns.

      1.76 "MATERIAL INVESTMENT" as used in the definition of Conforming Plan,
shall mean an investment in the stock or debt of Alterra or any subsidiary of
Alterra, to the extent that such debt is guaranteed by Alterra in an amount
equal to at least Two Million Dollars ($2,000,000) on a cost basis.

      1.77 "MINIMUM RENT" shall mean an amount equal to Five Hundred Eighty-Four
Thousand Five Hundred Eighty-Three Dollars and 34/100s Dollars ($584,583.34) per
calendar month.

      1.78 "NET RESIDENT REVENUES" shall mean, with respect to any Property, for
each Fiscal Year during the Term, all revenues and receipts (determined on an
accrual basis and in all material respects in accordance with GAAP) of every
kind derived from renting, using and/or operating such Property and parts
thereof, including, but not limited to: all patient, client or resident rents
and revenues received or receivable for the use of or otherwise by reason of all
units, beds and other facilities provided, meals served, services performed,
space or facilities subleased or goods sold on such Property, or any portion
thereof, including, without limitation, any other arrangements with third
parties relating to the possession or use of any portion of such Property; and
proceeds, if any, from business interruption or other loss of income insurance;
provided, however, that Net Resident Revenues shall not include the following:
revenue from professional fees or charges by physicians and unaffiliated
providers of services, when and to the extent such charges are paid over to such
physicians and unaffiliated providers of services, or are separately billed and
not included in comprehensive fees; contractual allowances (relating to any
period during the Term) for billings not paid by or received from the
appropriate governmental agencies or third party providers; allowances according
to GAAP for uncollectible accounts, including credit card accounts and charity
care or other administrative discounts; all proper patient or resident billing
credits and adjustments according to GAAP relating to health care accounting;
provider discounts for hospital or other medical facility utilization contracts
and credit card discounts; any amounts actually paid by Tenant for the cost of
any federal, state or local governmental programs imposed specially to provide
or finance indigent patient or resident care; federal, state or municipal
excise, sales, use, occupancy or similar taxes collected directly from patients,
clients or residents or included as part of the sales price of any goods or
services; insurance proceeds (other than proceeds from

                                     - 13 -
<PAGE>

business interruption or other loss of income insurance); Award proceeds (other
than for a temporary Condemnation); revenues attributable to services actually
provided off-site or otherwise away from such Property, such as home health
care, to persons that are not patients, clients or residents at such Property;
revenues attributable to child care services provided primarily to employees of
such Property; any proceeds from any sale of such Property or from the
refinancing of any debt encumbering such Property; proceeds from the disposition
of furnishings, fixture and equipment no longer necessary for the operation of
the Facility located thereon; any security deposits and other advance deposits,
until and unless the same are forfeited to Tenant or applied for the purpose for
which they were collected; and interest income from any bank account or
investment of Tenant. It is understood and agreed that Net Resident Revenues
shall be calculated separately for each Property and shall not be determined on
an aggregate basis for the Leased Property.

      1.79 "NET WORTH" shall mean, at the time of determination, the excess of
total assets over total liabilities, total assets and total liabilities each to
be determined in accordance with GAAP.

      1.80 "NOTICE" shall mean a notice given in accordance with Section 23.10.

      1.81 "OFFICER'S CERTIFICATE" shall mean a certificate signed by an officer
or other duly authorized individual of the certifying Entity duly authorized by
the board of directors or other governing body of the certifying Entity.

      1.82 "OVERDUE RATE" shall mean, on any date, a per annum rate of interest
equal to the lesser of fifteen percent (15%) and the maximum rate then permitted
under applicable law.

      1.83 "PARENT" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more Subsidiaries or Affiliated
Persons, fifty percent (50%) or more of the voting or beneficial interest in, or
otherwise has the right or power (whether by contract, through ownership of
securities or otherwise) to control, such Person.

      1.84 "PERMITTED CONTROL PERSON" shall mean any Exhibit C Person which,
immediately following confirmation of the Conforming Plan, has record ownership
of, or the right to vote, or the power to direct the vote of, at least five
percent (5%) of the voting power of the outstanding shares of voting stock of
Alterra, and any Person that controls, is controlled by, or is under common
control with, an Exhibit C Person (but only for so long as such Person continues
to control, be controlled by, or be under common control with, an Exhibit C
Person).

      1.85 "PERMITTED ENCUMBRANCES" shall mean, with respect to any Property,
all rights, restrictions, and easements of record set forth on Schedule B to the
applicable owner's or leasehold title insurance

                                     - 14 -
<PAGE>

policy issued to Landlord with respect to such Property, plus any other
encumbrances as may have been granted or caused by Landlord or otherwise
consented to in writing by Landlord from time to time.

      1.86 "PERMITTED LIENS" shall mean any Liens granted in accordance with
Section 21.10(a) and any Liens which relate exclusively to the Excluded Assets.

      1.87 "PERMITTED MERGER" shall mean any merger, consolidation or business
combination of any Guarantor (including, without limitation, a forward or
reverse triangular merger of a Subsidiary of such Guarantor) provided that
either (a) Landlord shall have consented to such merger, consolidation or
business reorganization in its sole and absolute discretion or (b) immediately
following such merger, consolidation or business combination: (i) the
consolidated Tangible Net Worth of such Guarantor (or, in the event of a
triangular merger of such Guarantor, the Parent of such Guarantor or the Parent
of such Guarantor's successor by merger, as applicable) shall equal or exceed
the greater of (A) Fifty Million Dollars ($50,000,000) or (B) such Guarantor's
(or, in the event of a triangular merger of such Guarantor, the Parent of such
Guarantor or the Parent of such Guarantor's successor by merger, as applicable)
consolidated Tangible Net Worth immediately prior to such merger, consolidation
or business combination and (ii) no Person, or group of two or more Persons
acting in concert (other than a Permitted Control Person or a group comprised
exclusively of Permitted Control Persons) shall acquire record ownership of, or
the right to vote, or the power to direct the vote of, in excess of fifty
percent (50%) of the voting power of the outstanding shares of the voting stock
of such Guarantor (excluding any Parent of any Guarantor that holds one hundred
percent (100%) of the voting stock of such Guarantor following such merger,
consolidation or business combination, and is an Acquiring Guarantor that
complies with the provisions of Section 21.12 hereof).

      1.88 "PERMITTED USE" shall mean, with respect to any Property, any use of
such Property permitted pursuant to Section 4.1.1.

      1.89 "PERSON" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person (if permitted) where the context so admits or requires.

      1.90 "PROPERTY" shall have the meaning given such term in Section 2.1.

      1.91 "PROVIDER AGREEMENTS" shall mean all participation, provider and
reimbursement agreements or arrangements now or hereafter in effect for the
benefit of Tenant or any Manager in connection with the operation of any
Facility relating to any right of payment or other claim arising out of or in
connection with Tenant's participation in any Third Party Payor Program.

      1.92 "PURCHASE AGREEMENT" shall mean the Purchase and Sale Agreement,
dated as of the date hereof, by and among ALS-Venture II, Inc., Wynwood of
Chapel Hill, LLC and Senior Housing Properties Trust with respect to the
purchase of the Properties.

                                     - 15 -
<PAGE>

      1.93 "RECORDS" shall have the meaning given such term in Section 7.2.

      1.94 "REGULATED MEDICAL WASTES" shall mean all materials generated by
Tenant, any Affiliated Person as to Tenant, subtenants, patients, occupants or
the operators of the Leased Property which are now or may hereafter be subject
to regulation pursuant to the Material Waste Tracking Act of 1988, or any
Applicable Laws promulgated by any Government Agencies.

      1.95 "RENT" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.

      1.96 "REQUIRED SUBLEASE" shall have the meaning given such term in Section
16.3.

      1.97 "SEC" shall mean the Securities and Exchange Commission.

      1.98 "SNDA" shall have the meaning set forth in Section 20.2.

      1.99 "SECURED MERGER" shall mean any merger, consolidation or business
combination of any Guarantor (including, without limitation, a forward or
reverse triangular merger of a Subsidiary of such Guarantor) that would be a
Permitted Merger but for the failure to satisfy the Tangible Net Worth
requirement set forth in clause (b)(i)(B) of the Permitted Merger definition in
Section 1.87 (i.e., such Guarantor or Parent of such Guarantor, as applicable,
has consolidated Tangible Net Worth in excess of $50,000,000, but such
consolidated Tangible Net Worth immediately following such merger, consolidation
or business combination does not equal or exceed such Guarantor's or Parent's
(as applicable) consolidated Tangible Net Worth immediately prior to such
merger, consolidation or business combination), provided that prior to, or
simultaneously with, and as a condition of, such merger, consolidation or
business combination, Tenant or any Guarantor shall have deposited with Landlord
a security deposit in an amount equal to the annual Minimum Rent due and payable
for the preceding twelve (12) month period under this Agreement (or, if at the
time of such merger, consolidation or business combination this Agreement was in
effect for less than twelve (12) months, an amount equal to the product of (x)
the Minimum Rent times (y) twelve(12)), such security deposit to be held and
applied by Landlord subject to and upon the terms and conditions hereof.

      1.100 "SECURITY AGREEMENT" shall mean the Security Agreement, dated as of
the date hereof, made by Tenant for the benefit of Landlord, as it may be
amended, restated, supplemented or otherwise modified from time to time as
provided therein.

      1.101 "SECURITY DEPOSIT" shall mean any security deposit required to be
deposited with Landlord in connection with a Secured Merger.

                                     - 16 -
<PAGE>

      1.102 "STATE" shall mean, with respect to any Property, the state,
commonwealth or district in which such Property is located.

      1.103 "STOCK PLEDGE" shall mean the Stock Pledge Agreement, dated as of
the date hereof, made by Alterra in favor of Landlord with respect to the stock
of Tenant, as it may be amended, restated, supplemented or otherwise modified
from time to time as provided therein.

      1.104 "SUBSIDIARY" shall mean, with respect to any Person, any Entity (a)
in which such Person owns directly, or indirectly through one or more
Subsidiaries, [fifty percent (50%)] or more of the voting or beneficial interest
or (b) which such Person otherwise has the right or power to control (whether by
contract, through ownership of securities or otherwise).

      1.105 "SUCCESSOR LANDLORD" shall have the meaning given such term in
Section 20.2.

      1.106 "TANGIBLE NET WORTH" shall mean, at the time of determination, the
excess of total assets over total liabilities, total assets and total
liabilities each to be determined in accordance with GAAP, excluding, however,
from the determination of total assets: (a) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights, patents,
patent applications, licenses and rights in any thereof, and other similar
intangibles; (b) all deferred charges or unamortized debt discount and expense;
(c) all reserves carried and not deducted from assets; (d) treasury stock and
capital stock, obligations or other securities of, or capital contributions to,
or investments in, any Subsidiary; (e) securities which are not readily
marketable; (f) any write-up in the book value of any asset resulting from a
revaluation thereof subsequent to the Commencement Date; (g) deferred gain; and
(h) any items not included in clauses (a) through (g) above that are treated as
intangibles in conformity with GAAP.

      1.107 "TENANT" shall have the meaning given such term in the preambles to
this Agreement and shall also include its permitted successors and assigns.

      1.108 "TENANT'S PERSONAL PROPERTY" shall mean all of the following: (i)
consumable inventory and supplies; (ii) equipment subject to Permitted Liens;
(iii) furniture, furnishings, equipment, movable walls and partitions, machinery
and all other tangible personal property of Tenant, if any, acquired by Tenant
on and after the date hereof and located at the Leased Property or used in
Tenant's business at the Leased Property; and (iv) all modifications,
replacements, alterations and additions to such personal property installed at
the expense of Tenant, expressly excluding, however, any items included within
the definition of Excluded Assets, Fixtures and Leased Personal Property.

                                     - 17 -
<PAGE>

      1.109 "TERM" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.

      1.110 "THIRD PARTY PAYOR PROGRAMS" shall mean all third party payor
programs in which Tenant presently or in the future may in its sole discretion
elect to participate, including, without limitation, Medicare, Medicaid,
CHAMPUS, Blue Cross and/or Blue Shield, Managed Care Plans, other private
insurance programs and employee assistance programs.

      1.111 "THIRD PARTY PAYORS" shall mean Medicare, Medicaid, CHAMPUS, Blue
Cross and/or Blue Shield, private insurers and any other Person which presently
or in the future maintains Third Party Payor Programs.

      1.112 "UNSUITABLE FOR ITS PERMITTED USE" shall mean, with respect to any
Facility, a state or condition of such Facility such that (a) following any
damage or destruction involving a Facility, (i) such Facility cannot be operated
on a commercially practicable basis for its Permitted Use and it cannot
reasonably be expected to be restored to substantially the same condition as
existed immediately before such damage or destruction, and as otherwise required
by Section 10.2.4, within twelve (12) months following such damage or
destruction or such longer period of time as to which business interruption
insurance is available to cover Rent and other costs related to the applicable
Property following such damage or destruction, (ii) the damage or destruction,
if uninsured, exceeds $1,000,000 or (iii) the cost of such restoration exceeds
ten percent (10%) of the fair market value of such Property immediately prior to
such damage or destruction, or (b) as the result of a partial taking by
Condemnation, such Facility cannot be operated, in the good faith judgment of
Tenant, on a commercially practicable basis for its Permitted Use.

      1.113 "WORK" shall have the meaning given such term in Section 10.2.4.

                                   ARTICLE 2

                            LEASED PROPERTY AND TERM

      2.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following (each
of items (a) through (g) below which, as of the Commencement Date, relates to
any single Facility, a "Property" and, collectively, the "Leased Property"):

            (a) those certain tracts, pieces and parcels of land, as more
      particularly described in Exhibits A-1 through A-18 (the "Land");

                                     - 18 -
<PAGE>

            (b) all buildings, structures and other improvements of every kind
      including, but not limited to, alleyways and connecting tunnels,
      sidewalks, utility pipes, conduits and lines (on-site and off-site),
      parking areas and roadways appurtenant to such buildings and structures
      presently situated upon the Land (collectively, the "Leased
      Improvements");

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

            (d) all equipment, machinery, fixtures, and other items of property,
      now or hereafter permanently affixed to or incorporated into the Leased
      Improvements, including, without limitation, all furnaces, boilers,
      heaters, electrical equipment, heating, plumbing, lighting, ventilating,
      refrigerating, incineration, air and water pollution control, waste
      disposal, air-cooling and air-conditioning systems and apparatus,
      sprinkler systems and fire and theft protection equipment, all of which,
      to the maximum extent permitted by law, are hereby deemed by the parties
      hereto to constitute real estate, together with all replacements,
      modifications, alterations and additions thereto, but specifically
      excluding all items included within the category of Tenant's Personal
      Property (collectively, the "Fixtures");

            (e) all machinery, equipment, furniture, furnishings, moveable walls
      or partitions, computers or trade fixtures or other personal property of
      any kind or description used or useful in Tenant's business on or in the
      Leased Improvements, and located on or in the Leased Improvements, and all
      modifications, replacements, alterations and additions to such personal
      property, except items, if any, included within the category of Fixtures,
      but specifically excluding all items included within the category of
      Tenant's Personal Property (collectively, the "Leased Personal Property");

            (f) all of the Leased Intangible Property; and

            (g) any and all leases of space in the Leased Improvements.

      The Leased Property does not include the Excluded Assets.

      2.2 CONDITION OF LEASED PROPERTY. Tenant acknowledges receipt and delivery
of possession of the Leased Property and Tenant accepts the Leased Property in
its "as is" condition, subject to the rights of parties in possession, the
existing state of title, including all covenants, conditions, restrictions,
reservations, mineral leases, easements and other matters of record or that are
visible or apparent on the Leased Property, all applicable Legal Requirements,
the lien of any financing instruments, mortgages and deeds of trust existing
prior to the Commencement Date or permitted by the terms of this Agreement, and
such other matters which would be disclosed by an inspection of the Leased
Property and the record title thereto or by an accurate

                                     - 19 -
<PAGE>

survey thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND
ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in interest or insurer for breaches of warranties or
representations or for latent defects in the Leased Property. Landlord shall
fully cooperate with Tenant in the prosecution of any such claims, in Landlord's
or Tenant's name, all at Tenant's sole cost and expense. Tenant shall indemnify,
defend, and hold harmless Landlord from and against any loss, cost, damage or
liability (including reasonable attorneys' fees) incurred by Landlord in
connection with such cooperation.

      2.3 FIXED TERM. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire on December 31, 2017.

      2.4 EXTENDED TERMS. Provided that no Event of Default shall have occurred
and be continuing, Tenant shall have the right to extend the Term for two (2)
consecutive renewal terms of fifteen (15) years each (collectively, the
"Extended Terms").

      Each Extended Term shall commence on the day succeeding the expiration of
the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall elect to exercise the
aforesaid options, it shall do so by giving Landlord Notice thereof not later
than twelve (12) months prior to the scheduled expiration of the then current
Term, it being understood and agreed that time shall be of the essence with
respect to the giving of such Notice. If Tenant shall fail to give such Notice,
this Agreement shall automatically terminate at the end of the Fixed Term or the
preceding Extended Term, as the case may be, and Tenant shall have no further
option to extend the Term of this Agreement. If Tenant shall give such Notice,
the extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed, however,
that Tenant and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same. Notwithstanding the
provisions of the foregoing sentence, if, subsequent to the giving of such
Notice, an Event of Default shall occur, at Landlord's option, the extension of
this Agreement shall cease to take effect and this Agreement shall automatically
terminate

                                     - 20 -
<PAGE>

at the end of the Fixed Term or the preceding Extended Term, as the case may be,
and Tenant shall have no further option to extend the Term of this Agreement.

                                   ARTICLE 3

                                     RENT

      3.1 RENT. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Additional Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion. Rent for any partial Accounting Period shall be prorated on
a per diem basis.

            3.1.1 MINIMUM RENT.

            (a) PAYMENTS. Minimum Rent shall be paid monthly in advance on or
      before the first Business Day of each calendar month.

            (b) ADJUSTMENTS OF MINIMUM RENT FOLLOWING DISBURSEMENTS UNDER
      SECTIONS 5.1.2(b), 10.2.3 AND 11.2. Effective on the date of each
      disbursement to pay for the cost of any repairs, maintenance, renovations
      or replacements pursuant to Sections 5.1.2(b), 10.2.3 or 11.2, the annual
      Minimum Rent shall be increased by a per annum amount equal to the
      Disbursement Rate times the amount so disbursed. If any such disbursement
      is made during any month on a day other than the first Business Day of an
      Accounting Period, Tenant shall pay to Landlord on the first Business Day
      of the immediately following Accounting Period (in addition to the amount
      of Minimum Rent payable with respect to such Accounting Period, as
      adjusted pursuant to this paragraph (b)) the amount by which Minimum Rent
      for the preceding Accounting Period, as adjusted for such disbursement on
      a per diem basis, exceeded the amount of Minimum Rent paid by Tenant for
      such preceding Accounting Period.

            (c) ADJUSTMENTS OF MINIMUM RENT FOLLOWING PARTIAL LEASE TERMINATION.
      If this Agreement shall terminate with respect to any Property but less
      than all of the Leased Property, Minimum Rent shall be reduced by the
      affected Property's allocable share of Minimum Rent as reasonably
      determined by Landlord and Tenant.

            3.1.2 ADDITIONAL RENT.

            (a) AMOUNT. Tenant shall pay additional rent ("Additional Rent")
      with respect to each Lease Year during the Term subsequent to the Base
      Year, with respect to each Property, in an amount,

                                     - 21 -
<PAGE>

      not less than zero, equal to ten percent (10%) of Excess Net Resident
      Revenues with respect to such Property. During the first Lease Year
      following the Base Year, Tenant shall reasonably estimate the amount of
      Additional Rent. For each Lease Year thereafter, monthly payments of
      Additional Rent for each Property shall be calculated by Tenant using Net
      Resident Revenues for such month during the preceding Lease Year.
      Additional Rent shall be due and payable and delivered to Landlord as
      provided in Section 3.1.2(b) and shall be reconciled on an annual basis as
      provided in Section 3.1.2(c).

            (b) ACCOUNTING PERIOD INSTALLMENTS. Installments of Additional Rent
      for each Lease Year during the Term, or portion thereof, shall be
      calculated and paid monthly in arrears, together with an Officer's
      Certificate setting forth the calculation of Additional Rent due and
      payable for such month.

            (c) RECONCILIATION OF ADDITIONAL RENT. In addition, within ninety
      (90) days after the end of the Base Year and each Lease Year thereafter
      (or any portion thereof occurring during the Term), Tenant shall deliver,
      or cause to be delivered, to Landlord (i) a financial report setting forth
      the Net Resident Revenues for each Property for such preceding Lease Year,
      or portion thereof, together with an Officer's Certificate from Tenant's
      chief financial or accounting officer certifying that such report is true
      and correct and (ii) for all Lease Years other than the Base Year, a
      statement showing Tenant's calculation of Additional Rent due for such
      preceding Lease Year based on the Net Resident Revenues set forth in such
      financial report, together with an Officer's Certificate from Tenant's
      chief financial or accounting officer certifying that such statement is
      true and correct.

            If the annual Additional Rent for such preceding Lease Year as set
      forth in Tenant's statement thereof exceeds the amount previously paid
      with respect thereto by Tenant, Tenant shall pay such excess to Landlord
      at such time as the statement is delivered, together with interest at the
      Interest Rate, which interest shall accrue from the close of such
      preceding Lease Year until the date that such statement is required to be
      delivered and, thereafter, such interest shall accrue at the Overdue Rate,
      until the amount of such difference shall be paid or otherwise discharged.
      If the annual Additional Rent for such preceding Lease Year as shown in
      such statement is less than the amount previously paid with respect
      thereto by Tenant, provided that no Event of Default shall have occurred
      and be continuing, Landlord shall grant Tenant a credit against the
      Additional Rent next coming due in the amount of such difference, together
      with interest at the Interest Rate, which interest shall accrue from the
      date of payment by Tenant until the date such credit is applied or paid,
      as the case may be. If such credit cannot be made because the Term has
      expired prior to application in full thereof, provided no Event of Default
      has occurred and is

                                     - 22 -
<PAGE>

      continuing, Landlord shall pay the unapplied balance of such credit to
      Tenant, together with interest at the Interest Rate, which interest shall
      accrue from the date of payment by Tenant until the date of payment by
      Landlord.

            (d) CONFIRMATION OF ADDITIONAL RENT. Tenant shall utilize, or cause
      to be utilized, an accounting system for the Leased Property in accordance
      with its usual and customary practices and in accordance with GAAP, which
      will accurately record all Net Resident Revenues and Tenant shall retain,
      for at least three (3) years after the expiration of each Lease Year,
      reasonably adequate records conforming to such accounting system showing
      all Net Resident Revenues for such Lease Year. Landlord, except as
      provided hereinbelow, shall have the right, exercisable by Notice to
      Tenant, by its accountants or representatives, to audit the information
      set forth in the Officer's Certificate referred to in subparagraph (c)
      above and, in connection with such audits, to examine Tenant's books and
      records with respect thereto (including supporting data and sales and
      excise tax returns). If any such audit discloses a deficiency in the
      payment of Additional Rent and, either Tenant agrees with the result of
      such audit or the matter is otherwise compromised with Landlord, Tenant
      shall forthwith pay to Landlord the amount of the deficiency, as finally
      agreed or determined, together with interest at the Interest Rate, from
      the date such payment should have been made to the date of payment
      thereof. If any such audit discloses that Tenant paid more Additional Rent
      for any Lease Year than was due hereunder, and either Landlord agrees with
      the result of such audit or the matter is otherwise determined, provided
      no Event of Default has occurred and is continuing, Landlord shall grant
      Tenant a credit against the Additional Rent next coming due in the amount
      of such difference, as finally agreed or determined, together with
      interest at the Interest Rate, which interest shall accrue from the time
      of payment by Tenant until the date such credit is applied or paid, as the
      case may be. If such credit cannot be made because the Term has expired
      prior to application in full thereof, provided no Event of Default has
      occurred and is continuing, Landlord shall pay the unapplied balance of
      such credit to Tenant, together with interest at the Interest Rate, which
      interest shall accrue from the date of payment by Tenant until the date of
      payment from Landlord. Any dispute concerning the correctness of an audit
      shall be settled by arbitration pursuant to the provisions of Article 22.
      Landlord shall pay for the cost of any such audit; provided, however, in
      the event that such audit reveals a deficiency in the payment of
      Additional Rent by Tenant of an aggregate of three percent (3%) or more,
      then Tenant shall reimburse Landlord for the actual costs of such audit.

      Any proprietary information obtained by Landlord with respect to Tenant
pursuant to the provisions of this Agreement shall be treated as confidential,
except that such information may be used, subject to appropriate confidentiality
safeguards, in any litigation between the

                                     - 23 -
<PAGE>

parties and except further that Landlord may disclose such information to its
prospective lenders, provided that Landlord shall direct such lenders to
maintain such information as confidential. The obligations of Tenant and
Landlord contained in this Section 3.1.2 shall survive the expiration or earlier
termination of this Agreement.

      3.1.3 ANNUAL RENT LIMITATION AMOUNT. Notwithstanding anything to the
contrary contained in this Agreement, in no event shall the aggregate amount of
Minimum Rent and Additional Rent payable in any calendar year during the Term
hereof exceed an amount equal to the Annual Rent Limitation Amount.

      3.1.4 ADDITIONAL CHARGES. In addition to the Minimum Rent and Additional
Rent payable hereunder, Tenant shall pay (or cause to be paid) to the
appropriate parties and discharge (or cause to be discharged) as and when due
and payable the following (collectively, "Additional Charges"):

            (a) IMPOSITIONS. Subject to Article 8 relating to permitted
      contests, Tenant shall pay, or cause to be paid, all Impositions before
      any fine, penalty, interest or cost (other than any opportunity cost as a
      result of a failure to take advantage of any discount for early payment)
      may be added for non-payment, such payments to be made directly to the
      taxing authorities where feasible, and shall promptly, upon request,
      furnish to Landlord copies of official receipts or other reasonably
      satisfactory proof evidencing such payments. If any such Imposition may,
      at the option of the taxpayer, lawfully be paid in installments (whether
      or not interest shall accrue on the unpaid balance of such Imposition),
      Tenant may exercise the option to pay the same (and any accrued interest
      on the unpaid balance of such Imposition) in installments and, in such
      event, shall pay, or cause to pay, such installments during the Term as
      the same become due and before any fine, penalty, premium, further
      interest or cost may be added thereto. Landlord, at its expense, shall, to
      the extent required or permitted by Applicable Law, prepare and file, or
      cause to be prepared and filed, all tax returns and pay all taxes due in
      respect of Landlord's net income, gross receipts, sales and use, single
      business, transaction privilege, rent, ad valorem, franchise taxes and
      taxes on its capital stock, and Tenant, at its expense, shall, to the
      extent required or permitted by Applicable Laws and regulations, prepare
      and file all other tax returns and reports in respect of any Imposition as
      may be required by Government Agencies. Provided no Event of Default shall
      have occurred and be continuing, if any refund shall be due from any
      taxing authority in respect of any Imposition paid by or on behalf of
      Tenant, the same shall be paid over to or retained by Tenant. Landlord and
      Tenant shall, upon request of the other, provide such data as is
      maintained by the party to whom the request is made with respect to the
      Leased Property as may be necessary to prepare any required returns and
      reports. In the event Government Agencies classify any property covered by
      this

                                     - 24 -
<PAGE>

      Agreement as personal property, Tenant shall file, or cause to be filed,
      all personal property tax returns in such jurisdictions where it may
      legally so file. Each party shall, to the extent it possesses the same,
      provide the other, upon request, with cost and depreciation records
      necessary for filing returns for any property so classified as personal
      property. Where Landlord is legally required to file personal property tax
      returns for property covered by this Agreement, Landlord shall provide
      Tenant with copies of assessment notices in sufficient time for Tenant to
      file a protest. All Impositions assessed against such personal property
      shall be (irrespective of whether Landlord or Tenant shall file the
      relevant return) paid by Tenant not later than the last date on which the
      same may be made without interest or penalty, subject to the provisions of
      Article 8.

            Landlord shall give prompt Notice to Tenant of all Impositions
      payable by Tenant hereunder of which Landlord at any time has knowledge;
      provided, however, that Landlord's failure to give any such Notice shall
      in no way diminish Tenant's obligation hereunder to pay such Impositions.

            (b) UTILITY CHARGES. Tenant shall pay or cause to be paid all
      charges for electricity, power, gas, oil, water and other utilities used
      in connection with the Leased Property.

            (c) INSURANCE PREMIUMS. Tenant shall pay or cause to be paid all
      premiums for the insurance coverage required to be maintained pursuant to
      Article 9.

            (d) OTHER CHARGES. Tenant shall pay or cause to be paid all other
      amounts, liabilities and obligations, including, without limitation,
      ground rents (other than those ground rents arising from any ground leases
      placed on the Leased Property or any portion thereof by Landlord), if any,
      and all amounts payable under any equipment leases and all agreements to
      indemnify Landlord under Sections 4.4.2 and 9.5.

            (e) REIMBURSEMENT FOR ADDITIONAL CHARGES. If Tenant pays or causes
      to be paid property taxes or similar or other Additional Charges
      attributable to periods after the end of the Term, whether upon expiration
      or sooner termination of this Agreement (other than termination by reason
      of an Event of Default), Tenant may, within a reasonable time after the
      end of the Term, provide Notice to Landlord of its estimate of such
      amounts. Landlord shall promptly reimburse Tenant for all payments of such
      taxes and other similar Additional Charges that are attributable to any
      period after the Term of this Agreement.

      3.2 LATE PAYMENT OF RENT, ETC. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, on demand, as Additional Charges,
a late charge (to the

                                     - 25 -
<PAGE>

extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due. If any payments due
from Landlord to Tenant shall not be paid within ten (10) days after its due
date, Landlord shall pay to Tenant, on demand, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such installment
from the due date of such installment to the date of payment thereof.

      In the event of any failure by Tenant to pay any Additional Charges when
due, Tenant shall promptly pay and discharge, as Additional Charges, every fine,
penalty, interest and cost which is added for non-payment or late payment of
such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement or by statute or otherwise
in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent and Additional Rent.

      3.3 NET LEASE. The Rent shall be absolutely net to Landlord so that this
Agreement shall yield to Landlord the full amount of the installments or amounts
of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including those provisions for
adjustment or abatement of such Rent.

      3.4 NO TERMINATION, ABATEMENT, ETC. Except as otherwise specifically
provided in this Agreement, each of Landlord and Tenant, to the maximum extent
permitted by law, shall remain bound by this Agreement in accordance with its
terms and shall not take any action without the consent of the other to modify,
surrender or terminate this Agreement. In addition, except as otherwise
expressly provided in this Agreement, Tenant shall not seek, or be entitled to,
any abatement, deduction, deferment or reduction of the Rent, or set-off against
the Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected by reason of (a) any damage to or destruction of the Leased
Property or any portion thereof from whatever cause or any Condemnation, (b) the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default (other than a monetary
default) or breach of any warranty by Landlord under this Agreement or any other
agreement between Landlord and Tenant, or to which Landlord and Tenant are
parties; (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord; or (e) for any
other cause whether similar or dissimilar to any of the foregoing (other than a
monetary default by Landlord). Except as otherwise specifically provided in this
Agreement, Tenant hereby waives all rights arising from any

                                     - 26 -
<PAGE>

occurrence whatsoever, which may now or hereafter be conferred upon it by law
(i) to modify, surrender or terminate this Agreement or quit or surrender the
Leased Property or any portion thereof, or (ii) which would entitle Tenant to
any abatement, reduction, suspension or deferment of the Rent or other sums
payable or other obligations to be performed by Tenant hereunder. The
obligations of Tenant hereunder shall be separate and independent covenants and
agreements, and the Rent and all other sums payable by Tenant hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Agreement.

      3.5 SECURITY DEPOSIT. The Security Deposit (if any) shall be held by
Landlord as security for the faithful performance by Tenant of all the terms,
covenants and conditions of this Agreement to be observed and performed by
Tenant. The Security Deposit shall not be mortgaged, assigned, transferred or
otherwise encumbered by Tenant, any Guarantor or any of their respective
Affiliated Persons without the prior written consent of Landlord and any such
act on the part of Tenant or any such Guarantor or Affiliated Person without
first having obtained Landlord's consent shall be without force and effect and
shall not be binding upon Landlord.

      If any Default or Event of Default shall occur and be continuing, Landlord
may, at its option and without prejudice to any other remedy which Landlord may
have on account thereof, appropriate and apply the entire Security Deposit or so
much thereof as may be necessary to compensate Landlord toward the payment of
the Rent or other sums or loss or damage sustained by Landlord due to such
breach by Tenant and Tenant shall, upon demand, restore the Security Deposit to
the original sum deposited. It is understood and agreed that the Security
Deposit is not to be considered as prepaid rent, nor shall damages be limited to
the amount of the Security Deposit. Landlord shall have no obligation to pay
interest on the Security Deposit and shall have the right to commingle the same
with Landlord's other funds. Should Tenant comply with all the terms, covenants
and conditions of this Agreement, the Security Deposit shall be returned in full
to Tenant at the end of the Term. If Landlord conveys Landlord's interest under
this Agreement, the Security Deposit, or any part thereof not previously
applied, shall be turned over by Landlord to Landlord's grantee, and Tenant
shall look solely to such grantee for proper application of the Security Deposit
in accordance with the terms of this Section 3.5 and the return thereof in
accordance herewith. Landlord agrees that it shall not pledge the Security
Deposit to any Facility Mortgagee. No Facility Mortgagee shall be responsible to
Tenant for the return or application of the Security Deposit, whether or not it
succeeds to the position of Landlord hereunder.

                                     - 27 -
<PAGE>

                                   ARTICLE 4

                           USE OF THE LEASED PROPERTY

      4.1   PERMITTED USE.

            4.1.1 PERMITTED USE. Tenant shall, at all times during the Term, and
at any other time that Tenant shall be in possession of the Leased Property,
continuously use and operate, or cause to be used and operated, each Property as
an assisted living/special care facility and any uses incidental thereto. Tenant
shall not use (and shall not permit any Person to use) any Property or any
portion thereof for any other use without the prior written consent of Landlord,
which approval shall not be unreasonably withheld, delayed or conditioned. No
use shall be made or permitted to be made of any Property and no acts shall be
done thereon which will cause the cancellation of any insurance policy covering
such Property or any part thereof (unless another adequate policy is available)
or which would constitute a default under any ground lease affecting such
Property (other than a ground lease placed on such Property by Landlord), nor
shall Tenant sell or otherwise provide to residents or patients therein, or
permit to be kept, used or sold in or about any Property any article which may
be prohibited by law or by the standard form of fire insurance policies, or any
other insurance policies required to be carried hereunder, or fire underwriter's
regulations. Tenant shall, at its sole cost (except as expressly provided in
Section 5.1.2(b)), comply or cause to be complied with all Insurance
Requirements. Tenant shall not take or omit to take, or permit to be taken or
omitted to be taken, any action, the taking or omission of which materially
impairs the value or the usefulness of any Property or any part thereof for its
Permitted Use.

            4.1.2 NECESSARY APPROVALS. Tenant shall proceed with all due
diligence and exercise reasonable efforts to obtain and maintain, or cause to be
obtained and maintained, all approvals necessary to use and operate, for its
Permitted Use, each Property and the Facility located thereon under applicable
law and, without limiting the foregoing, shall exercise reasonable efforts to
maintain (or cause to be maintained) appropriate certifications for
reimbursement and licensure.

            4.1.3 LAWFUL USE, ETC. Tenant shall not, and shall not permit any
Person to use or suffer or permit the use of any Property or Tenant's Personal
Property, if any, for any unlawful purpose. Tenant shall not, and shall not
permit any Person to, commit or suffer to be committed any waste on any
Property, or in any Facility, nor shall Tenant cause or permit any unlawful
nuisance thereon or therein. Tenant shall not, and shall not permit any Person
to, suffer nor permit any Property, or any portion thereof, to be used in such a
manner as (a) may materially and adversely impair Landlord's title thereto or to
any portion thereof or (b) may reasonably allow a claim or claims for adverse
usage or adverse possession by the public, as

                                     - 28 -
<PAGE>

such, or of implied dedication of such Property or any portion thereof.

      4.2 COMPLIANCE WITH LEGAL/INSURANCE REQUIREMENTS, ETC. Subject to the
provisions of Section 5.1.2(b) and Article 8, Tenant, at its sole expense, shall
(a) comply with (or cause to be complied with) all material Legal Requirements
and Insurance Requirements in respect of the use, operation, maintenance,
repair, alteration and restoration of the Leased Property and with the terms and
conditions of any ground lease affecting any Property (other than a ground
leases placed on the Property by Landlord), (b) perform (or cause to be
performed) all of Landlord's obligations under any ground lease affecting any
Property (other than a ground leases placed on the Property by Landlord) and (c)
procure, maintain and comply with (or cause to be procured, maintained and
complied with) all material licenses, certificates of need, permits, provider
agreements (if Tenant, in Tenant's sole discretion, elects to participate in
such provider agreements) and other authorizations and agreements required for
any use of the Leased Property and Tenant's Personal Property, if any, then
being made, and for the proper erection, installation, operation and maintenance
of the Leased Property or any part thereof.

      4.3 COMPLIANCE WITH MEDICAID AND MEDICARE REQUIREMENTS. Tenant, at its
sole cost and expense, shall make (or shall cause to be made), whatever
improvements (capital or ordinary) as are required to conform the Leased
Property to such standards as may, from time to time, be required by Federal
Medicare (Title 18) or Medicaid (Title 19) for skilled and/or intermediate care
nursing programs, to the extent Tenant, in Tenant's sole discretion, elects to
participate in such programs, or any other applicable programs or legislation,
or capital improvements required by any other governmental agency having
jurisdiction over the Leased Property as a condition of the continued operation
of each Property for its Primary Intended Use.

      4.4 ENVIRONMENTAL MATTERS.

            4.4.1 RESTRICTION ON USE, ETC. During the Term and any other time
that Tenant shall be in possession of any Property, Tenant shall not, and shall
not permit any Person to, store, spill upon, dispose of or transfer to or from
such Property any Hazardous Substance, except in compliance with all Applicable
Laws. During the Term and any other time that Tenant shall be in possession of
any Property, Tenant shall maintain (or shall cause to be maintained) such
Property at all times free of any Hazardous Substance (except in compliance with
all Applicable Laws). Tenant shall promptly: (a) upon receipt of notice or
knowledge, notify Landlord in writing of any material change in the nature or
extent of Hazardous Substances at any Property, (b) transmit to Landlord a copy
of any report which is required to be filed by Tenant or any Manager with
respect to any Property pursuant to SARA Title III or any other Applicable Law,
(c) transmit to Landlord copies of any citations, orders, notices or other
governmental communications received by Tenant or any Manager or their
respective agents or representatives with respect thereto

                                     - 29 -
<PAGE>

(collectively, "Environmental Notice"), which Environmental Notice requires a
written response or any action to be taken and/or if such Environmental Notice
gives notice of and/or presents a material risk of any material violation of any
Applicable Law and/or presents a material risk of any material cost, expense,
loss or damage (an "Environmental Obligation"), (d) observe and comply with (and
cause to be observed and complied with) all Applicable Laws relating to the use,
maintenance and disposal of Hazardous Substances and all orders or directives
from any official, court or agency of competent jurisdiction relating to the use
or maintenance or requiring the removal, treatment, containment or other
disposition thereof, and (e) pay or otherwise dispose (or cause to be paid or
otherwise disposed) of any fine, charge or Imposition related thereto, unless
Tenant or any Manager shall contest the same in good faith and by appropriate
proceedings and the right to use and the value of any of the Leased Property is
not materially and adversely affected thereby.

      If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on any Property, subject to Tenant's right to contest the same in
accordance with Article 8, Tenant shall take (and shall cause to be taken) all
actions and incur any and all expenses, as are required by any Government Agency
and by Applicable Law, (i) to clean up and remove from and about such Property
all Hazardous Substances thereon, (ii) to contain and prevent any further
release or threat of release of Hazardous Substances on or about such Property
and (iii) to use good faith efforts to eliminate any further release or threat
of release of Hazardous Substances on or about such Property.

            4.4.2 INDEMNIFICATION OF LANDLORD. Tenant shall protect, indemnify
and hold harmless Landlord and each Facility Mortgagee, their trustees,
officers, agents, employees and beneficiaries, and any of their respective
successors or assigns with respect to this Agreement (collectively, the
"Indemnitees" and, individually, an "Indemnitee") for, from and against any and
all debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the presence in, upon
or under the soil or ground water of any Property or any properties surrounding
such Property of any Hazardous Substances in violation of any Applicable Law,
except to the extent the same arise from the acts or omissions of Landlord or
any other Indemnitee or during any period that Landlord or a Person designated
by Landlord (other than Tenant or any Affiliated Person as to Tenant) is in
possession of such Property from and after the date hereof. Tenant's duty herein
includes, but is not limited to, costs associated with personal injury or
property damage claims as a result of the presence prior to the expiration or
sooner termination of the Term and the surrender of such Property to Landlord in
accordance with the terms of this Agreement of Hazardous Substances in, upon or
under the soil or ground water of such Property in violation of any Applicable

                                     - 30 -
<PAGE>

Law. Upon Notice from Landlord and any other of the Indemnitees, Tenant shall
undertake the defense, at Tenant's sole cost and expense, of any indemnification
duties set forth herein, in which event, Tenant shall not be liable for payment
of any duplicative attorneys' fees incurred by any Indemnitee.

      Tenant shall, upon demand, pay (or cause to be paid) to Landlord, as an
Additional Charge, any cost, expense, loss or damage (including, without
limitation, reasonable attorneys' fees) reasonably incurred by Landlord and
arising from a failure of Tenant to observe and perform (or to cause to be
observed and performed) the requirements of this Section 4.4, which amounts
shall bear interest from the date ten (10) Business Days after written demand
therefor is given to Tenant until paid by Tenant to Landlord at the Overdue
Rate.

            4.4.3 SURVIVAL. The provisions of this Section 4.4 shall survive the
expiration or sooner termination of this Agreement.

                                   ARTICLE 5

                             MAINTENANCE AND REPAIRS

      5.1 MAINTENANCE AND REPAIR.

            5.1.1 TENANT'S GENERAL OBLIGATIONS. Tenant shall keep (or cause to
be kept), at Tenant's sole cost and expense, the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto (and Tenant's Personal
Property) in good order and repair, reasonable wear and tear excepted (whether
or not the need for such repairs occurs as a result of Tenant's or any Manager's
use, any prior use, the elements or the age of the Leased Property or Tenant's
Personal Property or any portion thereof), and shall promptly make or cause to
be made all necessary and appropriate repairs and replacements thereto of every
kind and nature, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term (concealed or
otherwise). All repairs shall be made in a good, workmanlike manner, consistent
with industry standards for comparable Facilities in like locales, in accordance
with all applicable federal, state and local statutes, ordinances, codes, rules
and regulations relating to any such work. Tenant shall not take or omit to take
(or permit any Person to take or omit to take) any action, the taking or
omission of which would materially and adversely impair the value or the
usefulness of the Leased Property or any material part thereof for its Permitted
Use. Tenant's obligations under this Section 5.1.1 shall be limited in the event
of any casualty or Condemnation as set forth in Article 10 and Article 11 and
Tenant's obligations with respect to Hazardous Substances are as set forth in
Section 4.4.

                                     - 31 -
<PAGE>

            5.1.2 LANDLORD'S OBLIGATIONS.

            (a) Except as otherwise expressly provided in this Agreement,
      Landlord shall not, under any circumstances, be required to build or
      rebuild any improvement on the Leased Property, or to make any repairs,
      replacements, alterations, restorations or renewals of any nature or
      description to the Leased Property, whether ordinary or extraordinary,
      structural or nonstructural, foreseen or unforeseen, or to make any
      expenditure whatsoever with respect thereto, or to maintain the Leased
      Property in any way. Except as otherwise expressly provided in this
      Agreement, Tenant hereby waives, to the maximum extent permitted by law,
      the right to make repairs at the expense of Landlord pursuant to any law
      in effect on the date hereof or hereafter enacted. Landlord shall have the
      right to give, record and post, as appropriate, notices of
      nonresponsibility under any mechanic's lien laws now or hereafter
      existing.

            (b) If, pursuant to the terms of this Agreement, Tenant is required
      to make any expenditures in connection with any repair, maintenance or
      renovation with respect to any Property, Tenant may, at its election,
      advance such funds or give Landlord Notice thereof, which Notice shall set
      forth, in reasonable detail, the nature of the required repair, renovation
      or replacement, the estimated cost thereof and such other information with
      respect thereto as Landlord may reasonably require. Provided that no Event
      of Default shall have occurred and be continuing and Tenant shall
      otherwise comply with the applicable provisions of Article 6, Landlord
      shall, within ten (10) Business Days after such Notice, subject to and in
      accordance with the applicable provisions of Article 6, disburse such
      required funds to Tenant (or, if Tenant shall so elect, directly to the
      Manager or any other Person performing the required work) and, upon such
      disbursement, the Minimum Rent shall be adjusted as provided in Section
      3.1.1(b).

            5.1.3 NONRESPONSIBILITY OF LANDLORD, ETC. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished to Tenant or any Manager
or for any other purpose during the term of this Agreement.

      Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or 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

                                     - 32 -
<PAGE>

would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any mechanic's lien law of any State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.

      5.2 TENANT'S PERSONAL PROPERTY. Tenant shall provide and maintain (or
cause to be provided and maintained) throughout the Term all such Tenant's
Personal Property as shall be necessary in order to operate in compliance with
applicable material Legal Requirements and Insurance Requirements and otherwise
in accordance with customary practice in the industry for the Permitted Use, and
all of such Tenant's Personal Property shall, upon the expiration or earlier
termination of this Agreement, become the property of Landlord. If, from and
after the Commencement Date, Tenant acquires an interest in any item of tangible
personal property (other than the Excluded Assets) on, or in connection with,
the Leased Property, or any portion thereof, which belongs to anyone other than
Tenant, Tenant shall require the agreements permitting such use to provide that
Landlord or its designee may assume Tenant's rights and obligations under such
agreement upon the termination of this Agreement and the assumption of
management or operation of the Facility by Landlord or its designee.

      5.3 YIELD UP. Upon the expiration or sooner termination of this Agreement,
Tenant shall vacate and surrender the Leased Property to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Agreement, reasonable wear and
tear excepted (and excluding casualty damage and Condemnation, in the event that
this Agreement is terminated following a casualty or Condemnation in accordance
with Article 10 or Article 11 excepted).

      In addition, upon the expiration or earlier termination of this Agreement,
Tenant shall, at Landlord's sole cost and expense, use its reasonable good faith
efforts to transfer (or cause to be transferred) to and cooperate with Landlord
or Landlord's nominee in connection with the processing of all applications for
licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental Entities
which may be necessary for the use and operation of the Facility as then
operated (other than contracts related exclusively to the Excluded Assets). If
requested by Landlord, Tenant shall continue to manage one or more of the
Facilities after the expiration of the Term for up to one hundred eighty (180)
days, on such reasonable terms as Landlord and Tenant shall reasonably agree
upon (which terms shall include an agreement to reimburse Tenant for its
reasonable out-of-pocket costs and expenses and reasonable administrative costs
and an agreement to pay Tenant a reasonable management fee at the
then-prevailing market rates in the industry for such a Facility).

      5.4 MANAGEMENT AGREEMENT. Tenant shall not, without Landlord's prior
written consent (which consent shall not be unreasonably

                                     - 33 -
<PAGE>

withheld, delayed or conditioned), enter into, amend or modify the provisions of
any Management Agreement with respect to any Property provided, however, that
Tenant may enter into a Management Agreement with Alterra or any Subsidiary of
Alterra acting as Manager without the prior written consent of Landlord so long
as such Management Agreement complies with the remaining provisions of this
Section 5.4 and Section 21.8 and Tenant delivers a copy of such Management
Agreement to Landlord. Any Management Agreement entered into pursuant to the
provisions of this Section 5.4 shall be subordinate to this Agreement and shall
provide, inter alia, that all amounts due from Tenant to the Manager thereunder
shall be subordinate to all amounts due from Tenant to Landlord (provided that,
as long as no Event of Default has occurred and is continuing, Tenant may pay
all amounts due to a Manager pursuant to such Management Agreement) and for
termination thereof, at Landlord's option, upon the termination of this
Agreement. Tenant shall not take any action, grant any consent or permit any
action under any such Management Agreement which might have a material adverse
effect on Landlord, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld, delayed or conditioned.

                                   ARTICLE 6

                               IMPROVEMENTS, ETC.

      6.1 IMPROVEMENTS TO THE LEASED PROPERTY. Tenant shall not make, construct
or install (or permit to be made, constructed or installed) any Capital
Additions without, in each instance, obtaining Landlord's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned
provided that (a) construction or installation of the same would not adversely
affect or violate any material Legal Requirement or Insurance Requirement
applicable to the Leased Property and (b) Landlord shall have received an
Officer's Certificate certifying as to the satisfaction of the conditions set
out in clause (a) above; provided, however, that no such consent shall be
required in the event immediate action is required to prevent imminent harm to
person or property. Prior to commencing construction of any Capital Addition,
Tenant shall submit to Landlord, in writing, a proposal setting forth, in
reasonable detail, any such proposed improvement and shall provide to Landlord
such plans and specifications, and such permits, licenses, contracts and such
other information concerning the same as Landlord may reasonably request.
Landlord shall have thirty (30) days to review all materials submitted to
Landlord in connection with any such proposal. Failure of Landlord to respond to
Tenant's proposal within thirty (30) days after receipt of all information and
materials requested by Landlord in connection with the proposed improvement
shall be deemed to constitute approval of the same. Without limiting the
generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such proposed improvement and the use or uses to
which it will be put. No Capital Addition shall be made which would tie in or
connect any Leased Improvements with any other improvements on property adjacent
to the Leased

                                     - 34 -
<PAGE>

Property (and not part of the Land) including, without limitation, tie-ins of
buildings or other structures or utilities. Except as permitted herein, Tenant
shall not finance the cost of any construction of such improvement by the
granting of a lien on or security interest in the Leased Property or such
improvement, or Tenant's interest therein, without the prior written consent of
Landlord, which consent may be withheld by Landlord in Landlord's sole
discretion. Any such improvements shall, upon the expiration or sooner
termination of this Agreement, remain or pass to and become the property of
Landlord, free and clear of all encumbrances other than Permitted Encumbrances.

      6.2 SALVAGE. All materials which are scrapped or removed in connection
with the making of either Capital Additions or non-Capital Additions or repairs
required by Article 5 shall be or become the property of the party that paid for
such work.

                                   ARTICLE 7

                                     LIENS

      7.1 LIENS. Subject to Article 8, Tenant shall not, directly or indirectly,
create or allow to remain and shall promptly discharge (or cause to be
discharged), at its expense, any lien, encumbrance, attachment, title retention
agreement or claim upon the Leased Property, or any portion thereof, or Tenant's
leasehold interest therein or any attachment, levy, claim or encumbrance in
respect of the Rent, other than (a) Permitted Encumbrances, (b) restrictions,
liens and other encumbrances which are consented to in writing by Landlord in
Landlord's sole discretion, (c) liens for those taxes of Landlord which Tenant
is not required to pay hereunder, (d) subleases permitted by Article 16, (e)
liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as the same (i) are not yet due and payable, or (ii) are
being contested in accordance with Article 8, (f) liens of mechanics, laborers,
materialmen, suppliers or vendors incurred in the ordinary course of business
that are not yet due and payable or are for sums that are being contested in
accordance with Article 8, (g) any Facility Mortgages or other liens which are
the responsibility of Landlord pursuant to the provisions of Article 20, (h)
Landlord Liens and any other voluntary liens created by Landlord and (i) liens
related exclusively to the Excluded Assets.

      7.2 LANDLORD'S LIEN. In addition to any statutory landlord's lien and in
order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Agreement, Tenant hereby grants unto
Landlord, to the maximum extent permitted by Applicable Law, a security interest
in and an express contractual lien upon Tenant's Personal Property and Tenant's
interest in all ledger sheets, files, records, documents and instruments
(including, without limitation, computer programs, tapes and related electronic
data processing but specifically excluding the

                                     - 35 -
<PAGE>

Excluded Assets) relating to the operation of the Facilities (the "Records") and
all proceeds therefrom, in each case subject to any Permitted Encumbrances or
Permitted Liens; and such Tenant's Personal Property shall not be removed from
the Leased Property at any time when an Event of Default has occurred and is
continuing.

      Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in a form sufficient to perfect the security interest of
Landlord in that portion of Tenant's Personal Property in which Landlord is
entitled to a security interest and the proceeds thereof in accordance with the
provisions of the applicable laws of the State. During the continuance of an
Event of Default, Tenant hereby grants Landlord an irrevocable limited power of
attorney, coupled with an interest, to execute all such financing statements in
Tenant's name, place and stead. The security interest herein granted is in
addition to any statutory lien for the Rent.

                                   ARTICLE 8

                               PERMITTED CONTESTS

      Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay (or
cause to be paid) any Claims as finally determined, (b) such contest shall not
cause Landlord or Tenant to be in default under any mortgage or deed of trust
encumbering the Leased Property or any portion thereof (Landlord agreeing that
any such mortgage or deed of trust shall permit Tenant to exercise the rights
granted pursuant to this Article 8) or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased Property or
any portion thereof (provided that Tenant shall have the right to proceed with
any such contest so long as Tenant posts collateral or otherwise bonds over any
such lien in accordance with Applicable Law and in a manner and amount which are
otherwise satisfactory to Landlord in its sole discretion), (c) no part of the
Leased Property nor any Rent therefrom shall be in any immediate danger of sale,
forfeiture, attachment or loss, and (d) Tenant shall indemnify and hold harmless
Landlord from and against any cost, claim, damage, penalty or reasonable
expense, including reasonable attorneys' fees, incurred by Landlord in
connection therewith or as a result thereof. Landlord agrees to join in any such
proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith) unless Tenant agrees by agreement in form and substance reasonably
satisfactory to Landlord, to assume and indemnify Landlord with respect to the
same. Tenant shall be entitled to any refund of any Claims and such charges and
penalties or interest thereon which have

                                     - 36 -
<PAGE>

been paid by Tenant or paid by Landlord to the extent that Landlord has been
fully reimbursed by Tenant. If Tenant shall fail (i) to pay or cause to be paid
any Claims when finally determined, (ii) to provide reasonable security therefor
or (iii) to prosecute or cause to be prosecuted any such contest diligently and
in good faith, Landlord may, upon reasonable notice to Tenant (which notice
shall not be required if Landlord shall reasonably determine that the same is
not practicable), pay such charges, together with interest and penalties due
with respect thereto, and Tenant shall reimburse Landlord therefor, upon demand,
as Additional Charges.

                                   ARTICLE 9

                          INSURANCE AND INDEMNIFICATION

      9.1 GENERAL INSURANCE REQUIREMENTS. At all times during the Term and at
any other time Tenant shall be in possession of any Property, Tenant shall
maintain the following insurance:

            (a) Fire and extended risk with respect to each Property against
      loss or damage from all causes under standard "all risk" property
      insurance coverage with an agreed amount endorsement (such that the
      insurance carrier has accepted the amount of coverage and has agreed that
      there will be no co-insurance penalty), without exclusion for fire,
      lightning, windstorm, explosion, smoke damage, vehicle damage, sprinkler
      leakage, flood, vandalism, earthquake, malicious mischief or any other
      risks normally covered under an extended coverage endorsement, in amounts
      that are not less than the actual replacement value of the Property and
      all Landlord Personal Property associated therewith (including the cost of
      compliance with changes in zoning and building codes and other laws and
      regulations, demolition and debris removal and increased cost of
      construction);

            (b) Commercial general and professional liability coverage against
      claims for bodily injury, death or property damage occurring on, in or
      about the Leased Property, affording the parties protection of not less
      than Two Million Dollars ($2,000,000) for bodily injury or death to any
      one person, and not less than Two Million Dollars ($2,000,000) in the
      aggregate, each of which limits shall be increased to Five Million Dollars
      ($5,000,000 in the aggregate upon the earlier of June 30, 2003 or the
      effective date of a Conforming Plan (and, subject to the provisions of
      Section 9.6, Ten Million Dollars ($10,000,000) as and when such amount of
      insurance becomes generally available to operators of assisted living
      facilities owned by institutional landlords and similar to the Facilities
      at commercially reasonable rates), and not less than One Million Dollars
      ($1,000,000) for property damage;

            (c) Workers compensation coverage with respect to Leased Property
      for injuries sustained by Tenant's or Manager's

                                     - 37 -
<PAGE>

      employees in the course of their employment and otherwise consistent with
      all applicable legal requirements;

            (d) Boiler and pressure vessels coverage with respect to the Leased
      Property on fixtures and equipment which are capable of bursting or
      exploding, in commercially reasonable amounts, for resulting damage to
      property, bodily injury or death and with an endorsement for boiler
      business interruption insurance; and

            (e) Business interruption and extra expense coverage with respect to
      the Leased Property for loss of rental value for a period of not less than
      one year, provided that so long as Tenant continues to pay all Rent and
      other amounts due hereunder and no other Event of Default exists, Tenant
      shall be entitled to receive all proceeds of such business interruption
      insurance.

      9.2 WAIVER OF SUBROGATION. Landlord and Tenant agree that (insofar as and
to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in any State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, the party
carrying such insurance and suffering said loss releases the others of and from
any and all claims with respect to such loss; and they further agree that their
respective insurance companies (and, if Landlord shall self insure in accordance
with the terms hereof, Landlord or Tenant, as the case may be) shall have no
right of subrogation against the other on account thereof, even though extra
premium may result therefrom. In the event that any extra premium is payable by
Tenant as a result of this provision, Landlord shall not be liable for
reimbursement to Tenant for such extra premium.

      9.3 FORM SATISFACTORY, ETC. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable, be
issued by insurance carriers authorized to do business in the State, and shall
be issued by reputable insurance companies, and otherwise be issued by insurance
carriers, having a general policy holder's rating of no less than "A-" in Best's
latest rating guide. All property, business interruption and liability policies
(excluding earthquake coverage) shall include no deductible in excess of Two
Hundred Fifty Thousand Dollars ($250,000) per incident. Any liability policy
carried hereunder may be a "claims made" policy, rather than an occurrence
policy, and Tenant may choose to implement an insurance program which is a fully
funded rent-a-captive program (such funding to be in an amount not less than
$2,000,000). At all times, all property, business interruption, liability and
flood insurance policies, with the exception of worker's compensation insurance
coverage, shall name Landlord and any Facility Mortgagee as additional insureds,
as their interests may appear. All loss adjustments shall be payable as provided
in Article 10, except that losses under liability and worker's compensation
insurance policies shall be payable directly to the party entitled thereto.
Tenant shall cause all insurance premiums to be paid and shall deliver

                                     - 38 -
<PAGE>

(or cause to be delivered) policies or certificates thereof to Landlord on or
prior to their effective date (and, with respect to any renewal policy, on or
prior to the expiration of the existing policy). All such policies shall provide
Landlord (and any Facility Mortgagee if required by the same) thirty (30) days
prior written notice of any material change or cancellation of such policy. In
the event Tenant shall fail to effect (or cause to be effected) such insurance
as herein required, to pay (or cause to be paid) the premiums therefor or to
deliver (or cause to be delivered) such policies or certificates to Landlord or
any Facility Mortgagee at the times required, Landlord shall have the right,
upon Notice to Tenant, but not the obligation, to acquire such insurance and pay
the premiums therefor, which amounts shall be payable to Landlord, upon demand,
as Additional Charges, together with interest accrued thereon at the Overdue
Rate from the date such payment is made until (but excluding) the date repaid.

      9.4 NO SEPARATE INSURANCE; SELF-INSURANCE. Tenant shall not take (or
permit any Person to take) out separate insurance, concurrent in form or
contributing in the event of loss with that required by this Article 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including Landlord and all Facility
Mortgagees, are included therein as additional insureds and the loss is payable
under such insurance in the same manner as losses are payable under this
Agreement. In the event Tenant shall take out any such separate insurance or
increase any of the amounts of the then existing insurance, Tenant shall give
Landlord prompt Notice thereof. Except as expressly permitted in Section 9.3,
Tenant shall not self-insure (or permit any Person to self-insure).

      9.5 INDEMNIFICATION OF LANDLORD. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of the following,
except to the extent caused by Landlord's gross negligence or willful
misconduct: (a) any accident, injury to or death of persons or loss of or damage
to property occurring on or about any Property or adjoining sidewalks or rights
of way, (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant, any Manager or anyone claiming
under any of them of any Property or Tenant's Personal Property or any
litigation, proceeding or claim by governmental entities or other third parties
to which Landlord is made a party or participant relating to any Property or
Tenant's Personal Property or such use, misuse, non-use, condition, management,
maintenance, or repair thereof including, failure to perform obligations (other
than Condemnation proceedings) to which Landlord is made a party, (c) any
Impositions that are the obligations of Tenant

                                     - 39 -
<PAGE>

to pay pursuant to the applicable provisions of this Agreement, and (d) any
failure on the part of Tenant or anyone claiming under Tenant to perform or
comply with any of the terms of this Agreement. Tenant, at its expense, shall
contest, resist and defend any such claim, action or proceeding asserted or
instituted against Landlord (and shall not be responsible for any duplicative
attorneys' fees incurred by Landlord) or may compromise or otherwise dispose of
the same, with Landlord's prior written consent (which consent may not be
unreasonably withheld, delayed or conditioned). The obligations of Tenant under
this Section 9.5 are in addition to the obligations set forth in Section 4.4 and
shall survive the termination of this Agreement.

      9.6 FUTURE INSURANCE. Tenant agrees that as and when insurance on an
occurrence basis or an insurance program which does not involve a rent-a-captive
insurance program becomes generally available to operators of assisted living
facilities owned by institutional landlords and similar to the Facilities at
commercially reasonable rates, jointly determined by Landlord and Tenant in
their respective reasonable judgment, Tenant shall purchase and maintain such
insurance in lieu of the rent-a-captive program described in Section 9.3.

                                   ARTICLE 10

                                    CASUALTY

      10.1 INSURANCE PROCEEDS. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and insured under any policy of insurance required by
Article 9 (other than the proceeds of any business interruption insurance),
shall be paid directly to Landlord (subject to the provisions of Section 10.2)
and all loss adjustments with respect to losses payable to Landlord shall
require the prior written consent of Landlord, which consent shall not be
unreasonably withheld, delayed or conditioned; provided, however, that, so long
as no Event of Default shall have occurred and be continuing, all such proceeds
less than or equal to Two Hundred Fifty Thousand Dollars ($250,000) shall be
paid directly to Tenant and such losses may be adjusted without Landlord's
consent. If Tenant is required to reconstruct or repair any Property as provided
herein, such proceeds shall be paid out by Landlord from time to time for the
reasonable costs of reconstruction or repair of such Property necessitated by
such damage or destruction, subject to and in accordance with the provisions of
Section 10.2.4. Provided no Default or Event of Default has occurred and is
continuing, any excess proceeds of insurance remaining after the completion of
the restoration shall be paid to Tenant. In the event that the provisions of
Section 10.2.1 are applicable, the insurance proceeds shall be retained by the
party entitled thereto pursuant to Section 10.2.1.

                                     - 40 -
<PAGE>

      10.2 DAMAGE OR DESTRUCTION.

            10.2.1 DAMAGE OR DESTRUCTION OF LEASED PROPERTY. If, during the
Term, any Property shall be totally or partially destroyed and the Facility
located thereon is thereby rendered Unsuitable for Its Permitted Use, either
Landlord or Tenant may, by the giving of Notice thereof to the other, terminate
this Agreement with respect to such affected Property, whereupon, this Agreement
shall terminate with respect to such affected Property and Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage. In
such event, Tenant shall pay to Landlord the amount of any deductible under the
insurance policies covering such Facility, the amount of any uninsured loss and
any difference between the replacement cost of the affected Property and the
casualty insurance proceeds therefor.

            10.2.2 PARTIAL DAMAGE OR DESTRUCTION. If, during the Term, any
Property shall be totally or partially destroyed but the Facility is not
rendered Unsuitable for Its Permitted Use, Tenant shall, subject to Section
10.2.3, promptly restore such Facility as provided in Section 10.2.4.

            10.2.3 INSUFFICIENT INSURANCE PROCEEDS. If the cost of the repair or
restoration of the applicable Facility exceeds the amount of insurance proceeds
received by Landlord and Tenant pursuant to Section 9.1, Tenant shall give
Landlord Notice thereof which notice shall set forth in reasonable detail the
nature of such deficiency and whether Tenant shall pay and assume the amount of
such deficiency (Tenant having no obligation to do so, except that, if Tenant
shall elect to make such funds available, the same shall become an irrevocable
obligation of Tenant pursuant to this Agreement). In the event Tenant shall
elect not to pay and assume the amount of such deficiency, Landlord shall have
the right (but not the obligation), exercisable at Landlord's sole election by
Notice to Tenant given within sixty (60) days after Tenant's notice of the
deficiency, to elect to make available for application to the cost of repair or
restoration the amount of such deficiency; provided, however, in such event,
upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted as
provided in Section 3.1.1(b). In the event that neither Landlord nor Tenant
shall elect to make such deficiency available for restoration, either Landlord
or Tenant may terminate this Agreement with respect to the affected Property by
Notice to the other, whereupon, this Agreement shall so terminate and insurance
proceeds shall be distributed as provided in Section 10.2.1. It is expressly
understood and agreed, however, that, notwithstanding anything in this Agreement
to the contrary, Tenant shall be strictly liable and solely responsible for the
amount of any deductible and shall, upon any insurable loss, pay over the amount
of such deductible to Landlord at the time and in the manner herein provided for
payment of the applicable proceeds to Landlord.

            10.2.4 DISBURSEMENT OF PROCEEDS. In the event Tenant is required to
restore any Facility pursuant to Section 10.2 and this Agreement is not
terminated as to the applicable Property pursuant to

                                     - 41 -
<PAGE>

this Article 10, Tenant shall commence (or cause to be commenced) promptly and
continue diligently to perform (or cause to be performed) the repair and
restoration of such Facility (hereinafter called the "Work"), so as to restore
(or cause to be restored) the applicable Property in material compliance with
all Legal Requirements and so that such Property shall be, to the extent
practicable, substantially equivalent in value and general utility to its
general utility and value immediately prior to such damage or destruction.
Subject to the terms hereof, Landlord shall advance the insurance proceeds and
any additional amounts payable by Landlord pursuant to Section 10.2.3 or
otherwise deposited with Landlord to Tenant regularly during the repair and
restoration period so as to permit payment for the cost of any such restoration
and repair. Any such advances shall be made not more than monthly within ten
(10) Business Days after Tenant submits to Landlord a written requisition and
substantiation therefor on AIA Forms G702 and G703 (or on such other form or
forms as may be reasonably acceptable to Landlord). Landlord may, at its option,
condition advancement of such insurance proceeds and other amounts on (a) the
absence of any Event of Default, (b) its approval of plans and specifications of
an architect satisfactory to Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned), (c) general contractors' estimates, (d)
architect's certificates, (e) conditional lien waivers of general contractors,
if available, (f) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required, (g), if Tenant has elected to
advance deficiency funds pursuant to Section 10.2.3, Tenant depositing the
amount thereof with Landlord and (h) such other certificates as Landlord may,
from time to time, reasonably require.

      Landlord's obligation to disburse insurance proceeds under this Article 10
shall be subject to the release of such proceeds by any Facility Mortgagee to
Landlord.

      Tenant's obligation to restore the applicable Facility pursuant to this
Article 10 shall be subject to the release of available insurance proceeds to
Tenant by the applicable Facility Mortgagee, if any, or Landlord, if applicable,
and, in the event such proceeds are insufficient, Landlord electing to make such
deficiency available therefor (and disbursement of such deficiency).

      10.3 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of any Property occurs
during the last twelve (12) months of the Term and if such damage or destruction
cannot reasonably be expected to be fully repaired and restored prior to the
date that is six (6) months prior to the end of the Term, the provisions of
Section 10.2.1 shall apply as if such Property had been totally or partially
destroyed and the Facility thereon rendered Unsuitable for Its Permitted Use.

      10.4 TENANT'S PROPERTY. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid to Tenant
and, to the extent necessary to repair or replace Tenant's Personal Property in
accordance with Section 10.5,

                                     - 42 -
<PAGE>

Tenant shall hold such proceeds in trust to pay the cost of repairing or
replacing damaged Tenant's Personal Property.

      10.5 RESTORATION OF TENANT'S PROPERTY. If Tenant is required to restore
any Property as hereinabove provided, Tenant shall either (a) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(b) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of such Property.

      10.6 NO ABATEMENT OF RENT. This Agreement shall remain in full force and
effect and Tenant's obligation to make all payments of Rent and to pay all other
charges as and when required under this Agreement shall remain unabated during
the Term notwithstanding any damage involving the Leased Property or any portion
thereof (provided that Landlord shall credit against such payments any amounts
paid to Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or destruction
to the Leased Property or any portion thereof and, to the maximum extent
permitted by law, no local or State statute, law, rule, regulation or ordinance
in effect during the Term which provides for such a contingency shall have any
application in such case.

      10.7 WAIVER. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property,
or any portion thereof.

                                   ARTICLE 11

                                  CONDEMNATION

      11.1 TOTAL CONDEMNATION, ETC. If either (a) the whole of any Property
shall be taken by Condemnation or (b) a Condemnation of less than the whole of
any Property renders any Property Unsuitable for Its Permitted Use, this
Agreement shall terminate with respect to such Property, Tenant and Landlord
shall seek the Award for their interests in the applicable Property as provided
in Section 11.5.

      11.2 PARTIAL CONDEMNATION. In the event of a Condemnation of less than the
whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall, to the extent of the Award and any additional
amounts disbursed by Landlord as hereinafter provided, commence (or cause to be
commenced) promptly and continue diligently to restore (or cause to be restored)
the untaken portion of the applicable Leased Improvements so that such Leased
Improvements shall constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as such Leased Improvements existing immediately prior to such Condemnation, in
material compliance with all Legal Requirements, subject to the provisions of
this Section 11.2. If the

                                     - 43 -
<PAGE>

cost of the repair or restoration of the affected Property exceeds the amount of
the Award, Tenant shall give Landlord Notice thereof which notice shall set
forth in reasonable detail the nature of such deficiency and whether Tenant
shall pay and assume the amount of such deficiency (Tenant having no obligation
to do so, except that if Tenant shall elect to make such funds available, the
same shall become an irrevocable obligation of Tenant pursuant to this
Agreement). In the event Tenant shall elect not to pay and assume the amount of
such deficiency, Landlord shall have the right (but not the obligation),
exercisable at Landlord's sole election by Notice to Tenant given within sixty
(60) days after Tenant's Notice of the deficiency, to elect to make available
for application to the cost of repair or restoration the amount of such
deficiency; provided, however, in such event, upon any disbursement by Landlord
thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In
the event that neither Landlord nor Tenant shall elect to make such deficiency
available for restoration, either Landlord or Tenant may terminate this
Agreement with respect to the affected Property by Notice to the other and the
entire Award shall be allocated as set forth in Section 11.5.

      Subject to the terms hereof, Landlord shall contribute to the cost of
restoration that part of the Award necessary to complete such repair or
restoration, together with severance and other damages awarded for the taken
Leased Improvements and any deficiency Landlord has agreed to disburse, to
Tenant regularly during the restoration period so as to permit payment for the
cost of such repair or restoration. Landlord may, at its option, condition
advancement of such Award and other amounts on (a) the absence of any Event of
Default, (b) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld,
delayed or conditioned), (c) general contractors' estimates, (d) architect's
certificates, (e) conditional lien waivers of general contractors, if available,
(f) evidence of approval by all governmental authorities and other regulatory
bodies whose approval is required, (g), if Tenant has elected to advance
deficiency funds pursuant to the preceding paragraph, Tenant depositing the
amount thereof with Landlord and (h) such other certificates as Landlord may,
from time to time, reasonably require. Landlord's obligation under this Section
11.2 to disburse the Award and such other amounts shall be subject to (i) the
collection thereof by Landlord, (ii) the satisfaction of any applicable
requirements of any applicable Facility Mortgage, and (iii) the release of such
Award by the applicable Facility Mortgagee to Landlord. Tenant's obligation to
restore the applicable Leased Improvements shall be subject to the release of
the Award by any applicable Facility Mortgagee or by Landlord.

      11.3 NO ABATEMENT OF RENT. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property, or any portion
thereof. The provisions

                                     - 44 -
<PAGE>

of this Article 11 shall be considered an express agreement governing any
Condemnation involving the Leased Property, or any portion thereof, and, to the
maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.

      11.4 TEMPORARY CONDEMNATION. In the event of any temporary Condemnation of
any Property or Tenant's interest therein, this Agreement shall continue in full
force and effect and Tenant shall continue to pay (or cause to be paid), in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe (or cause to be performed and observed)
all of the other terms and conditions of this Agreement on the part of the
Tenant to be performed and observed. Provided no Event of Default has occurred
and is continuing, the entire amount of any Award made for such temporary
Condemnation allocable to the Term, whether paid by way of damages, rent or
otherwise, shall be paid to Tenant. Tenant shall, promptly upon the termination
of any such period of temporary Condemnation, at its sole cost and expense,
restore the affected Property to the condition that existed immediately prior to
such Condemnation, in material compliance with all applicable Legal
Requirements, unless such period of temporary Condemnation shall extend beyond
the expiration of the Term, in which event Tenant shall not be required to make
such restoration.

      11.5 ALLOCATION OF AWARD. Except as provided in Section 11.4 and the
second sentence of this Section 11.5, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property, the
taking of Capital Additions paid for by Tenant and Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant (subject
to the provisions of Section 11.2). In any Condemnation proceedings, Landlord
and Tenant shall each seek its own Award in conformity herewith, at its own
expense.

                                   ARTICLE 12

                              DEFAULTS AND REMEDIES

      12.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:

            (a) should Tenant fail to make any payment of the Minimum Rent or
      Additional Rent hereunder and such failure continues for five (5) days
      after the date such payment was due, or should Tenant fail to make any
      payment of the Additional Charges or any other sum payable by Tenant
      hereunder and such failure continues for five (5) days after Tenant
      receives Notice of such nonpayment; or

                                     - 45 -
<PAGE>

            (b) should Tenant fail to maintain the insurance coverages required
      under Article 9; or

            (c) should Tenant default in the due observance or performance of
      any of the terms, covenants or agreements contained herein to be performed
      or observed by it hereunder (other than as specified in clauses (a) and
      (b) above) and should such default continue for a period of thirty (30)
      days after Notice thereof from Landlord to Tenant; provided, however, that
      if such default is susceptible of cure but such cure cannot be
      accomplished with due diligence within such period of time and if, in
      addition, Tenant commences to cure or cause to be cured such default
      within thirty (30) days after Notice thereof from Landlord and thereafter
      prosecutes the curing of such default with all due diligence, such period
      of time shall be extended to such period of time (not to exceed an
      additional sixty (60) days in the aggregate) as may be necessary to cure
      such default with all due diligence; or

            (d) should any obligation of Tenant in respect of any Indebtedness
      for money borrowed or for any material property or services, or any
      guaranty relating thereto, be declared to be or become due and payable
      prior to the stated maturity thereof, or should there occur and be
      continuing with respect to any such Indebtedness any event of default
      under any instrument or agreement evidencing or securing the same, the
      effect of which is to permit the holder or holders of such instrument or
      agreement or a trustee, agent or other representative on behalf of such
      holder or holders, to cause any such obligations to become due prior to
      its stated maturity; or

            (e) should an event of default by Tenant, any Guarantor or any
      Affiliated Person as to Tenant or any Guarantor occur and be continuing
      beyond the expiration of any applicable cure period under any of the other
      Lease Documents (other than this Agreement); or

            (f) should an event of default by Alterra, Borrower, or any
      Guarantor or any Affiliated Person as to such Entities (including, without
      limitation, Tenant), occur and be continuing beyond the expiration of any
      applicable cure period under any of the Loan Documents; or

            (g) should Tenant or any Guarantor generally not be paying its debts
      as they become due or should Tenant or any Guarantor make a general
      assignment for the benefit of creditors; provided, however that (i) the
      failure of Alterra to generally not be paying its debts as they become due
      or the making of a general assignment by Alterra for the benefit of
      creditors shall not constitute an Event of Default hereunder if such
      failure or assignment occurs on or prior to January 31, 2003 or at any
      time during the pendency of a Conforming Bankruptcy Proceeding filed on or
      prior to January 31, 2003 and (ii) the sale or disposition

                                     - 46 -
<PAGE>

      by Borrower of the collateral pledged for the Borrower Indebtedness shall
      not constitute an Event of Default hereunder provided Lender releases the
      applicable Mortgage for such collateral in connection therewith; or

            (h) should any petition be filed by or against Tenant or any
      Guarantor under the Federal bankruptcy laws, or should any other
      proceeding be instituted by or against Tenant or any Guarantor seeking to
      adjudicate Tenant or any Guarantor bankrupt or insolvent, or seeking
      liquidation, reorganization, arrangement, adjustment or composition of
      Tenant's debts under any law relating to bankruptcy, insolvency or
      reorganization or relief of debtors, or seeking the entry of an order for
      relief or the appointment of a receiver, trustee, custodian or other
      similar official for Tenant or any Guarantor or for any substantial part
      of the property of Tenant or any Guarantor and such proceeding is not
      dismissed within one hundred eighty (180) days after institution thereof;
      provided, however, that the failure of Alterra to comply with this clause
      (h) shall not constitute an Event of Default hereunder if such failure or
      assignment occurs on or prior to January 31, 2003 or at any time during
      the pendency of a Conforming Bankruptcy Proceeding filed on or prior to
      January 31, 2003; or

            (i) should Tenant or any Guarantor cause or institute any proceeding
      for its dissolution or termination (provided that Borrower may institute a
      proceeding for its dissolution once the Borrower Indebtedness has been
      satisfied and paid in full); or

            (j) should the estate or interest of Tenant in the Leased Property
      or any part thereof be levied upon or attached in any proceeding and the
      same shall not be vacated or discharged within the later of (x) ninety
      (90) days after commencement thereof, unless the amount in dispute is less
      than One Hundred Thousand Dollars ($100,000), in which case Tenant shall
      give notice to Landlord of the dispute but Tenant may defend in any
      suitable way, and (y) two hundred seventy (270) days after receipt by
      Tenant of Notice thereof from Landlord (unless Tenant shall be contesting
      such lien or attachment in good faith in accordance with Article 8); or

            (k) should there occur any direct or indirect Change in Control of
      Tenant or any Guarantor, except as otherwise permitted by Article 16; or

            (l) should Tenant fail to provide a Guaranty from any Acquiring
      Guarantor in accordance with the provisions of Section 21.12 and such
      failure shall continue for a period of fifteen (15) days after Notice
      thereof from Landlord to Tenant; or

            (m) should a final unappealable determination be made by the
      applicable Government Agency that Tenant shall have failed to comply with
      applicable Medicare and/or Medicaid regulations in

                                     - 47 -
<PAGE>

      the operation of any Facility, as a result of which failure Tenant is
      declared ineligible to receive reimbursements under the Medicare and/or
      Medicaid programs for such Facility; provided, however, that Tenant may
      elect, in Tenant's sole discretion, to not participate in Medicare and/or
      Medicaid programs for all or any portion of the Leased Property at any
      time and from time, and if Tenant so elects by Notice to Landlord given
      within thirty (30) days after a determination has been reached with
      respect to any Facility for which Tenant has been declared ineligible,
      then such determination shall not constitute an Event of Default
      hereunder;

then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of the
Leased Property by giving Notice thereof to Tenant and upon the expiration of
the time, if any, fixed in such Notice, this Agreement shall terminate with
respect to all or the designated portion of the Leased Property and all rights
of Tenant under this Agreement with respect thereto shall cease. Landlord shall
have and may exercise all rights and remedies available at law and in equity to
Landlord as a result of Tenant's breach of this Agreement.

      Upon the occurrence of an Event of Default, Landlord may, in addition to
any other remedies provided herein, enter upon the Leased Property or any
portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant's Personal Property, if any, unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice shall be
met if such Notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including,
reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the security interest granted in Section 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.

      12.2 REMEDIES. None of (a) the termination of this Agreement pursuant to
Section 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to relet the Leased Property or any portion
thereof, nor (d) the reletting of all or any of portion of the Leased Property,
shall relieve Tenant of its liability and obligations hereunder, all of which
shall survive any such termination, repossession or reletting. In the event of
any such termination, Tenant shall forthwith pay to Landlord all Rent due and
payable with respect to the Leased Property, or terminated portion

                                     - 48 -
<PAGE>

thereof, through and including the date of such termination. Thereafter, Tenant,
until the end of what would have been the Term of this Agreement in the absence
of such termination, and whether or not the Leased Property or any portion
thereof shall have been relet, shall be liable to Landlord for, and shall pay to
Landlord, as current damages, the Rent (Additional Rent to be reasonably
calculated by Landlord based on historical Net Resident Revenues) and other
charges which would be payable hereunder for the remainder of the Term had such
termination not occurred, less the net proceeds, if any, of any reletting of the
Leased Property, or any portion thereof, after deducting all reasonable expenses
in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and expenses of preparation
for such reletting. Tenant shall pay such current damages to Landlord monthly on
the days on which the Minimum Rent would have been payable hereunder if this
Agreement had not been so terminated with respect to such of the Leased
Property.

      At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord an
amount equal to the present value (as reasonably determined by Landlord) of the
excess, if any, of the Rent and other charges which would be payable hereunder
from the date of such termination (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Impositions and Additional
Rent would be the same as payments required for the immediately preceding twelve
calendar months, or if less than twelve calendar months have expired since the
Commencement Date, the payments required for such lesser period projected to an
annual amount) for what would be the then unexpired term of this Agreement if
the same remained in effect, over the fair market rental for the same period.
Nothing contained in this Agreement shall, however, limit or prejudice the right
of Landlord to prove and obtain in proceedings for bankruptcy or insolvency an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater than, equal to, or less than the
amount of the loss or damages referred to above.

      In case of any Event of Default, re-entry, expiration and dispossession by
summary proceedings or otherwise, Landlord may, (a) relet the Leased Property or
any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations,

                                     - 49 -
<PAGE>

repairs and decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for any failure to relet all or any portion of the Leased
Property, or, in the event that the Leased Property is relet, for failure to
collect the rent under such reletting. To the maximum extent permitted by law,
Tenant hereby expressly waives any and all rights of redemption granted under
any present or future laws in the event of Tenant being evicted or dispossessed,
or in the event of Landlord obtaining possession of the Leased Property, by
reason of the occurrence and continuation of an Event of Default hereunder.

      12.3 TENANT'S WAIVER. IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION
12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A
TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET
FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE
EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.

      12.4 APPLICATION OF FUNDS. Any payments received by Landlord under any of
the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State. Any balance shall be paid to
Tenant.

      12.5 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the maximum extent permitted by law, enter upon the Leased Property or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.

                                   ARTICLE 13

                                  HOLDING OVER

      Any holding over by Tenant after the expiration or sooner termination of
this Agreement shall be treated as a daily tenancy at

                                     - 50 -

<PAGE>

sufferance at a rate equal to two (2) times the Minimum Rent and other charges
herein provided (prorated on a daily basis). Tenant shall also pay to Landlord
all damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement.
Notwithstanding the foregoing, if Landlord or Landlord's nominee fails to obtain
all licenses, operating permits and other governmental or quasi-governmental
authorizations or contracts which may be necessary for the use and operation of
any Facility on or before the expiration of the Term, and provided that Tenant
has cooperated with Landlord or Landlord's nominee to effect the transfer of
such licenses, permits, authorizations and contracts pursuant to Section 5.3,
then Tenant's occupancy after the Term has been terminated or expires shall not
be deemed to be holding over under this Article 13, but rather Tenant shall
continue to manage the Facility as a tenant at will pursuant to the provisions
of Section 5.3 until such time as Landlord or its nominee shall be obtained all
such necessary authorizations or contracts.

                                   ARTICLE 14

                                LANDLORD DEFAULT

      If Landlord shall default in the performance or observance of any of its
covenants or obligations set forth in this Agreement or any obligation of
Landlord, if any, under any agreement affecting any Property, the performance of
which is not Tenant's obligation pursuant to this Agreement, and any such
default shall continue for a period of thirty (30) days after Notice thereof
from Tenant to Landlord and any applicable Facility Mortgagee, or such
additional period as may be reasonably required to correct the same, Tenant may
declare the occurrence of a "Landlord Default" by a second Notice to Landlord
and to such Facility Mortgagee. Thereafter, Tenant may forthwith cure the same
and, subject to the provisions of the following paragraph, invoice Landlord for
costs and expenses (including reasonable attorneys' fees and court costs)
incurred by Tenant in curing the same, together with interest thereon (to the
extent permitted by law) from the date Landlord receives Tenant's invoice until
paid, at the Overdue Rate. Tenant shall have no right to terminate this
Agreement for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim against any Rent or other charges due
hereunder.

      If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof. If Tenant and Landlord shall fail, in good faith, to resolve any such
dispute

                                     - 51 -

<PAGE>

within ten (10) days after Landlord's Notice of dispute, either may submit the
matter for resolution in accordance with Article 22.

                                   ARTICLE 15

                                 PURCHASE RIGHTS

      Landlord shall have the option to purchase Tenant's Personal Property, at
the expiration or termination of this Agreement, for an amount equal to the then
fair market value thereof (current replacement cost as determined by agreement
of the parties or, in the absence of such agreement, appraisal), subject to, and
with appropriate price adjustments for, all equipment leases, conditional sale
contracts, UCC-1 financing statements and other encumbrances to which such
Personal Property is subject. Upon the expiration or sooner termination of this
Agreement, Tenant shall use its reasonable efforts to transfer and assign, or
cause to be transferred and assigned, to Landlord or its designee, or assist
Landlord or its designee in obtaining, any contracts, licenses, and certificates
required for the then operation of the Leased Property.

                                   ARTICLE 16

                            SUBLETTING AND ASSIGNMENT

      16.1 SUBLETTING AND ASSIGNMENT. Except as provided in Sections 16.3 and
16.4, Tenant shall not, without Landlord's prior written consent (which consent
may be given or withheld in Landlord's sole and absolute discretion), assign,
mortgage, pledge, hypothecate, encumber or otherwise transfer this Agreement or
sublease or permit the sublease (which term shall be deemed to include the
granting of concessions, licenses and the like), of all or any part of the
Leased Property or suffer or permit this Agreement or the leasehold estate
created hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or operation of all or any part of the Leased Property by anyone other than
Tenant, any Manager approved by Landlord pursuant to the applicable provisions
of this Agreement or residents and patients of Tenant, or the Leased Property or
any part thereof to be offered or advertised for assignment or subletting. For
purposes of this Section 16.1, an assignment of this Agreement shall be deemed
to include, without limitation, any direct or indirect Change in Control of
Tenant.

      If this Agreement is assigned or if all or any part of the Leased Property
is sublet (or occupied by anybody other than Tenant or any Manager, their
respective employees or residents or patients of Tenant), Landlord may collect
the rents from such assignee, subtenant or occupant, as the case may be, and
apply the net amount collected to the Rent herein reserved, but no such
collection shall be deemed a waiver of the provisions set forth in the first
paragraph of this Section 16.1, the acceptance by Landlord of such assignee,
subtenant

                                     - 52 -

<PAGE>

or occupant, as the case may be, as a tenant, or a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Agreement.

      Any assignment or transfer of Tenant's interest under this Agreement shall
be subject to such assignee's or transferee's delivery to Landlord of (a) a
pledge of the stock, partnership, membership or other ownership interests of
such assignee or other transferee to secure Tenant's obligations under the Lease
Documents, which pledge shall be in form and substance satisfactory to Landlord
in its sole discretion and (b) a security agreement granting Landlord a security
interest in all of such assignee's or transferee's right, title and interest in
and to any personal property, intangibles and fixtures (other than accounts
receivable and subject to Permitted Liens) with respect to any Property which is
subject to any such assignment or transfer to secure Tenant's obligations under
the Lease Documents, which security agreement shall be in form and substance
satisfactory to Landlord in its sole discretion.

      No subletting or assignment shall in any way impair the continuing primary
liability of Tenant hereunder (unless Landlord and Tenant expressly otherwise
agree that Tenant shall be released from all obligations hereunder), and no
consent to any subletting or assignment in a particular instance shall be deemed
to be a waiver of the prohibition set forth in this Section 16.1. No assignment,
subletting or occupancy shall affect any Permitted Use. Any subletting,
assignment or other transfer of Tenant's interest under this Agreement in
contravention of this Section 16.1 shall be voidable at Landlord's option.

      16.2 SUBLEASE PROVISIONS. Any sublease of all or any portion of the Leased
Property entered into on or after the date hereof shall provide as follows: (a)
that it is subject and subordinate to this Agreement and to the matters to which
this Agreement is or shall be subject or subordinate; (b) that in the event of
termination of this Agreement or reentry or dispossession of Tenant by Landlord
under this Agreement, Landlord may, at its option, terminate such sublease or
take over all of the right, title and interest of Tenant, as sublessor under
such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
neither Landlord nor any Facility Mortgagee, as holder of a mortgage or as
Landlord under this Agreement, if such Facility Mortgagee succeeds to that
position, shall (i) be liable for any act or omission of Tenant under such
sublease, (ii) be subject to any credit, counterclaim, offset or defense which
theretofore accrued to such subtenant against Tenant, (iii) be bound by any
previous modification of such sublease not consented to in writing by Landlord
or by any previous prepayment of more than one (1) month's Rent, (iv) be bound
by any covenant of Tenant to undertake or complete any construction of the
Leased Property or any applicable portion thereof, (v) be required to account
for any security deposit of the subtenant other than any security deposit
actually delivered to Landlord by Tenant, (vi) be bound by any obligation to
make any payment to such

                                     - 53 -

<PAGE>

subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease that are performed after the date of
such attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant unless actually delivered to Landlord by Tenant, or
(viii) be required to remove any Person occupying any applicable portion of the
Leased Property; and (c), in the event that such subtenant receives a written
Notice from Landlord or any Facility Mortgagee stating that an Event of Default
has occurred and is continuing, such subtenant shall thereafter be obligated to
pay all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited
against the amounts owing by Tenant under this Agreement and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. An original
counterpart of each such sublease and assignment and assumption, duly executed
by Tenant and such subtenant or assignee, as the case may be, in form and
substance reasonably satisfactory to Landlord, shall be delivered promptly to
Landlord and (a) in the case of an assignment, the assignee shall assume in
writing and agree to keep and perform all of the terms of this Agreement on the
part of Tenant to be kept and performed and shall be, and become, jointly and
severally liable with Tenant for the performance thereof and (b) in case of
either an assignment or subletting, Tenant shall remain primarily liable, as
principal rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.

      The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.

      16.3 REQUIRED SUBLEASE. On the Commencement Date, Tenant and Alterra shall
enter into a sublease agreement (the "Required Sublease") pursuant to which
Tenant shall sublease to Alterra, and Alterra shall sublease from Tenant, all of
Tenant's right, title and interest in and to the Leased Property. The Required
Sublease shall require Alterra to pay and perform all of the obligations and
liabilities of Tenant under this Agreement, shall be in a form and substance
reasonably satisfactory to Landlord and shall be subject to the provisions of
this Article 16 (including, without limitation, the requirements that a
counterpart of such Required Sublease shall be delivered to Landlord and that
Tenant shall assign its interests under thereunder to Landlord) and any other
express conditions or limitations set forth in this Agreement. Neither Tenant
nor Alterra shall terminate or otherwise amend or modify any of the terms or
provisions of the Required Sublease without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole discretion; provided,
however, that following the first anniversary of the effective date of the
confirmation of a Conforming Plan or upon Landlord's consent, which consent
shall not be unreasonably withheld or delayed, and , provided, further, that no
Event of Default shall be

                                     - 54 -

<PAGE>

outstanding hereunder, Tenant may terminate, amend or modify the Required
Sublease in its discretion.

      16.4 PERMITTED SUBLEASE Notwithstanding the foregoing, including, without
limitation, Section 16.2, but subject to the provisions of Section 16.5 and any
other express conditions or limitations set forth herein, Tenant or Alterra may
(a) enter into third party residency or occupancy leases or agreements with
respect to the beds or units located at the Facilities; (b) enter into subleases
of space at any Property for use as a laundry, commissary, beauty or barber
shop, physical therapist, pharmacy or child care purposes or other similar
concessions in furtherance of the Permitted Use, so long as (i) such subleases
will not reduce the number of units at any Facility, (ii) such subleases will
not violate or affect any Legal Requirement or Insurance Requirement, (iii) any
such sublease will not demise, in the aggregate, more than fifteen percent (15%)
of the and square footage of the applicable Facility; and (iv) Tenant shall
provide such additional insurance coverage applicable to the activities to be
conducted in such subleased space as Landlord and any Facility Mortgagee may
reasonably require; and (c) in each instance after Notice to Landlord, enter
into one or more subleases with wholly-owned subsidiaries (direct or indirect)
of Alterra with respect to the Leased Property or any portion thereof, provided
Tenant and/or Alterra (as applicable) assign their interests under any such
sublease to Landlord and the sublessee delivers to Landlord a Guaranty in form
and substance satisfactory to Landlord in its sole discretion (except that once
any sublessee provides such a Guaranty, so long as such Guaranty remains in full
force and effect, no subsequent subletting to such Sublessee at another facility
shall require the delivery of an additional Guaranty).

      16.5 SUBLEASE LIMITATION. Anything contained in this Agreement to the
contrary notwithstanding, Tenant shall not sublet all or any portion of the
Leased Property on any basis such that the rental to be paid by any sublessee
thereunder would be based, in whole or in part, on the net income or profits
derived by the business activities of such sublessee or any other formula such
that any portion of such sublease rental would fail to qualify as "rents from
real property" within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto or would otherwise disqualify Landlord for
treatment as a "real estate investment trust" under the Code.

                                   ARTICLE 17

                 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

      17.1 ESTOPPEL CERTIFICATES. At any time and from time to time, but not
more than a reasonable number of times per year, upon not less than ten (10)
Business Days prior Notice by either party, the party receiving such Notice
shall furnish to the other an Officer's Certificate certifying that this
Agreement is unmodified and in full force and effect (or that this Agreement is
in full force and effect as modified and setting forth the modifications), the
date to which

                                     - 55 -

<PAGE>

the Rent has been paid, that no Default or an Event of Default has occurred and
is continuing or, if a Default or an Event of Default shall exist, specifying in
reasonable detail the nature thereof, and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably
request. Any such certificate furnished pursuant to this Section 17.1 may be
relied upon by the requesting party, its lenders and any prospective purchaser
or mortgagee of all or any portion of the Leased Property or the leasehold
estate created hereby.

      17.2 FINANCIAL STATEMENTS. Tenant shall furnish or cause Alterra to
furnish, as applicable, the following statements to Landlord:

            (a) within forty-five (45) days after each of the first three fiscal
      quarters of any Fiscal Year, the most recent Consolidated Financials,
      accompanied by the Financial Officer's Certificate;

            (b) within ninety (90) days after the end of each Fiscal Year, the
      most recent Consolidated Financials and financials of Tenant for such
      year, certified by an independent certified public accountant reasonably
      satisfactory to Landlord and accompanied by a Financial Officer's
      Certificate, together with an unaudited balance sheet and the related
      statements of income and cash flow for Tenant, accompanied by a Financial
      Officer's Certificate;

            (c) within forty-five (45) days after the end of each month, an
      unaudited operating statement and statement of capital expenditures
      prepared on a Facility by Facility basis and a combined basis, including
      occupancy percentages and average rate, accompanied by a Financial
      Officer's Certificate;

            (d) at any time and from time to time upon not less than ten (10)
      days Notice from Landlord or such additional period as may be reasonable
      under the circumstances, any Consolidated Financials or any other audited
      or unaudited financial reporting information required to be filed by
      Landlord with any securities and exchange commission, the SEC or any
      successor agency, or any other governmental authority, or required
      pursuant to any order issued by any court, governmental authority or
      arbitrator in any litigation to which Landlord is a party, for purposes of
      compliance therewith; provided, however, that, except as to calculations
      pertaining to Net Resident Revenues, Tenant shall not be required to
      provide audited financials with respect to Tenant or with respect to any
      individual Facility unless Landlord shall agree to pay for the cost
      thereof;

            (e) promptly, after receipt or sending thereof, copies of all
      notices given or received by Tenant under any Management Agreement; and

                                     - 56 -

<PAGE>

            (f) promptly, upon Notice from Landlord, such other information
      concerning the business, financial condition and affairs of Tenant and any
      Guarantor as Landlord reasonably may request from time to time.

      Landlord may at any time, and from time to time, provide any Facility
Mortgagee with copies of any of the foregoing statements, subject to Landlord
obtaining the agreement of such Facility Mortgagee to maintain such statements
and the information therein as confidential. Notwithstanding anything contained
in this Section 17.2, if the SEC shortens the time periods for filing of
financial reporting information required to be filed with the SEC by Alterra,
Landlord or any Affiliated Person as to Landlord, then the time periods in
Sections 17.2(a), (b) and (c) shall be reduced to the shorter time period
required in order to permit Landlord to satisfy any requirements of the SEC.

      17.3 GENERAL OPERATIONS. Tenant covenants and agrees to furnish to
Landlord, within twenty (20) days after receipt or modification thereof, copies
of:

            (a) all licenses authorizing Tenant or any Manager to operate any
      Facility for its Primary Intended Use;

            (b) all Medicare and Medicaid certifications, together with provider
      agreements and all material correspondence relating thereto with respect
      to any Facility (excluding, however, correspondence which may be subject
      to any attorney client privilege);

            (c) if required under Applicable Law with respect to any Facility, a
      license for each individual employed as administrator with respect to such
      Facility;

            (d) all reports of surveys, statements of deficiencies, plans of
      correction, and all material correspondence relating thereto, including,
      without limitation, all reports and material correspondence concerning
      compliance with or enforcement of licensure, Medicare/Medicaid, and
      accreditation requirements, including physical environment and Life Safety
      Code survey reports (excluding, however, correspondence which may be
      subject to any attorney client privilege) and further provided that any
      such report or statement indicating a finding of "Immediate Jeopardy"
      shall be forwarded to Landlord immediately upon Tenant's receipt thereof;
      and

            (e) with reasonable promptness, such other confirmation as to the
      licensure and Medicare and Medicaid participation of Tenant as Landlord
      may reasonably request from time to time.

                                     - 57 -

<PAGE>

                                   ARTICLE 18

                           LANDLORD'S RIGHT TO INSPECT

      Tenant shall permit Landlord and its authorized representatives to inspect
all or any portion of the Leased Property during usual business hours upon not
less than forty-eight (48) hours' notice and to make such repairs as Landlord is
permitted or required to make pursuant to the terms of this Agreement, provided
that any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's use and operation of the same and further
provided that in the event of an emergency, as determined by Landlord in its
reasonable discretion, prior Notice shall not be necessary.

                                   ARTICLE 19

                                    EASEMENTS

      19.1 GRANT OF EASEMENTS. Provided no Event of Default has occurred and is
continuing, Landlord will join in granting and, if necessary, modifying or
abandoning such rights-of-way, easements and other interests as may be
reasonably requested by Tenant for ingress and egress, and electric, telephone,
gas, water, sewer and other utilities so long as:

            (a) the instrument creating, modifying or abandoning any such
      easement, right-of-way or other interest is satisfactory to and approved
      by Landlord (which approval shall not be unreasonably withheld, delayed or
      conditioned);

            (b) Landlord receives an Officer's Certificate from Tenant stating
      (i) that such grant, modification or abandonment is not detrimental to the
      proper conduct of business on such Property, (ii) the consideration, if
      any, being paid for such grant, modification or abandonment (which
      consideration shall be paid by Tenant), (iii) that such grant,
      modification or abandonment does not impair the use or value of such
      Property for the Permitted Use, and (iv) that, for as long as this
      Agreement shall be in effect, Tenant will perform all obligations, if any,
      of Landlord under any such instrument; and

            (c) Landlord receives evidence satisfactory to Landlord that the
      Manager has granted its consent to such grant, modification or abandonment
      in accordance with the requirements of such Manager's Management Agreement
      or that such consent is not required.

      19.2 EXERCISE OF RIGHTS BY TENANT. So long as no Event of Default has
occurred and is continuing, Tenant shall have the right to exercise all rights
of Landlord under the Easement Agreements and, in connection therewith, Landlord
shall execute and promptly return to Tenant such documents as Tenant shall
reasonably request. Tenant

                                     - 58 -

<PAGE>

shall perform all obligations of Landlord under the Easement Agreements.

      19.3 PERMITTED ENCUMBRANCES. Any agreements entered into in accordance
with this Article 19 shall be deemed a Permitted Encumbrance.

                                   ARTICLE 20

                               FACILITY MORTGAGES

      20.1 LANDLORD MAY GRANT LIENS. Without the consent of Tenant, Landlord
may, from time to time, directly or indirectly, create or otherwise cause to
exist any lien, encumbrance or title retention agreement, including, without
limitation, any Facility Mortgage ("Encumbrance") upon the Leased Property, or
any portion thereof or interest therein, to secure any borrowing or other means
of financing or refinancing. Any such Facility Mortgage shall be subject to the
terms and conditions of Article 10 and Article 11 of this Agreement and Landlord
shall exercise reasonable efforts to have provisions included in each such
Facility Mortgage requiring the Facility Mortgagee thereunder to disburse
insurance proceeds and Condemnation awards received in accordance with the terms
and conditions of Articles 10 and 11 of this Agreement. Notwithstanding the
foregoing, any such requirement to release insurance proceeds or Condemnation
awards shall be subject to such Facility Mortgagee's standard terms and
conditions for borrowings and other financings or refinancings of comparable
size, nature and type, such as provisions granting the Facility Mortgagee the
right to review and approve the plans and specifications for the work, the
architect and contractor for the work and any contracts relating thereto,
Tenant's providing evidence of compliance with applicable law and having
obtained all permits and approvals relating thereto, Tenant providing bonds or
other guaranties of completion of the work, requirements relating to progress
payments and retainage and the like.

      20.2 SUBORDINATION OF LEASE. Provided that Tenant receives the SNDA
required under this Section 20.2, this Agreement and any and all rights of
Tenant hereunder are, and shall be, subject and subordinate (as applicable) to
(i) any ground or master lease entered into by Landlord and all renewals,
extensions, modifications and replacements thereof (collectively, "Superior
Leases") and (ii) all Encumbrances entered into by Landlord which may now or
hereafter affect the Leased Property or any portion thereof or any improvements
thereon, whether or not such Encumbrances shall also cover other lands and/or
buildings and/or leases, to each and every advance made or hereafter to be made
under such Encumbrances, and to all renewals, modifications, replacements and
extensions of such Encumbrances and all consolidations of such Encumbrances
(collectively "Superior Mortgages"). Furthermore, if any lessor under any
Superior Lease (a "Superior Lessor") or the holder, trustee or beneficiary of a
Superior Mortgage (a "Superior Mortgagee") shall succeed to the rights of
Landlord under this Agreement (such person, a "Successor Landlord")

                                     - 59 -

<PAGE>

whether through possession or foreclosure or delivery of a new lease or deed, or
otherwise, at such Successor Landlord's request, Tenant shall attorn to and
recognize such Successor Landlord as Tenant's landlord under this Agreement.
This section shall be self operative and no further instrument of subordination
shall be required. In confirmation of such subordination and attornment, Tenant
shall promptly execute, acknowledge and deliver any instrument that Landlord,
any Superior Lessor or any Superior Mortgagee or any of their respective
successors in interest may reasonably request to evidence such subordination
and/or attornment.

      Simultaneously with Landlord subjecting the Leased Property or any portion
thereof to any Superior Lease or Superior Mortgage, and as a condition to the
subordination of Tenant's estate hereunder, Landlord shall cause the Superior
Landlord or the Superior Mortgagee, as the case may be, to execute and deliver
to Tenant a recordable subordination, nondisturbance and attornment agreement
(the "SNDA") on such Superior Landlord's or Superior Mortgagee's standard form;
provided, however, that such standard form shall not impose any additional
obligations or burdens on Tenant which are not otherwise provided for in this
Agreement. Pursuant to such SNDa, Tenant and such Superior Landlord or Superior
Mortgagee shall agree that in the event such Superior Landlord, Superior
Mortgagee or the nominee, designee or successor or assign of any Superior
Landlord or Superior Mortgagee shall succeed to the rights of Landlord under
this Agreement and become a "Successor Landlord", whether through possession or
successful bid at foreclosure or other similar action or delivery of a new lease
or deed, or otherwise, then (a) this Agreement and Tenant's leasehold estate
shall not be disturbed or affected thereby and shall remain in full force and
effect as a lease between Successor Landlord and Tenant and (b) Tenant shall
attorn to and recognize the Successor Landlord as Tenant's landlord under this
Agreement, whereupon, this Agreement shall continue in full force and effect as
a direct lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Agreement, except that the
Successor Landlord (unless formerly the landlord under this Agreement or its
Affiliate, nominee or designee) shall not be (i) liable in any way to Tenant for
any act or omission, neglect or default on the part of any prior Landlord under
this Agreement, (ii) responsible for any monies owing by or on deposit with any
prior Landlord to the credit of Tenant (except to the extent actually paid or
delivered to the Successor Landlord), (iii) subject to any counterclaim or
setoff which theretofore accrued to Tenant against any prior Landlord, (iv)
bound by any modification of this Agreement subsequent to such Superior Lease or
Superior Mortgage, or by any previous prepayment of Rent for more than one (1)
month in advance of the due date hereunder, which was not approved in writing by
the Superior Landlord or Superior Mortgagee thereto, (v) liable to Tenant beyond
the Successor Landlord's interest in the Leased Property and the rents, income,
receipts, revenues, issues and profits issuing from the Leased Property, (vi)
responsible for the performance of any work to be done by the Landlord under
this Agreement to render the Leased Property ready for occupancy by Tenant
(subject to Landlord's

                                     - 60 -

<PAGE>

obligations under Section 5.1.2(b) or with respect to any insurance or
Condemnation proceeds), or (vii) required to remove any Person occupying the
Leased Property or any part thereof, except if such person claims by, through or
under the Successor Landlord. The SNDA shall further provide, and each Superior
Landlord, Superior Mortgagee and any Successor Landlord shall agree and be
liable (A) to pay to Tenant any amounts owed under Section 5.1.2(b), and (B) to
pay to Tenant any portions of insurance proceeds or Awards received by any of
them and required to be paid to Tenant pursuant to the terms of this Agreement,
and, as a condition to any mortgage, lien or lease in respect of the Leased
Property, or any portion thereof, and the subordination of this Agreement
thereto, the mortgagee, lienholder or lessor, as applicable, shall expressly
agree, for the benefit of Tenant, to make such payments, which agreement shall
be embodied in an instrument in form reasonably satisfactory to Tenant.

      20.3 NOTICE TO MORTGAGEE AND SUPERIOR LANDLORD. Subsequent to the receipt
by Tenant of Notice from Landlord as to the identity of any Superior Landlord or
Superior Mortgagee under a Superior Lease or Superior Mortgage which affects all
or any portion of the Leased Property and which complies with Section 20.1
(which Notice shall be accompanied by a copy of the applicable mortgage or
lease), no Notice from Tenant to Landlord as to a default by Landlord under this
Agreement shall be effective with respect to such Superior Landlord or Superior
Mortgagee unless and until a copy of the same is given to such Superior Landlord
or Superior Mortgagee at the address set forth in the above described Notice,
and the curing of any of Landlord's defaults within the applicable notice and
cure periods set forth in Article 14 by such Superior Landlord or Superior
Mortgagee shall be treated as performance by Landlord.

                                   ARTICLE 21

                         ADDITIONAL COVENANTS OF TENANT

      21.1 PROMPT PAYMENT OF INDEBTEDNESS. Tenant shall (a) pay or cause to be
paid when due all payments of principal of and premium and interest on Tenant's
Indebtedness for money borrowed (including, without limitation, causing Alterra
and Borrower to pay the Borrower Indebtedness) and shall not permit or suffer
any such Indebtedness to become or remain in default beyond any applicable grace
or cure period, (b) pay or cause to be paid when due all lawful claims for labor
and rents with respect to the Leased Property, (c) pay or cause to be paid when
due all trade payables and (d) pay or cause to be paid when due all other of
Tenant's Indebtedness upon which it is or becomes obligated, except, in each
case, other than that referred to in clause (a), to the extent payment is being
contested in good faith by appropriate proceedings in accordance with Article 8
and if Tenant shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP, if appropriate, or unless and until
foreclosure, distraint sale or other similar proceedings shall have been
commenced.

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      21.2 CONDUCT OF BUSINESS. Tenant shall not engage in any trade or business
other than the leasing and operation of the Leased Property (including any
incidental or ancillary business relating thereto) pursuant to the terms and
conditions of this Agreement and shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect and in good
standing its corporate existence and its rights and licenses necessary to
conduct such business.

      21.3 MAINTENANCE OF ACCOUNTS AND RECORDS. Tenant shall keep or cause to be
kept true records and books of account of Tenant in which full, true and correct
entries will be made of dealings and transactions in relation to the business
and affairs of Tenant in accordance with GAAP. Tenant shall apply accounting
principles in the preparation of the financial statements of Tenant which are in
accordance with GAAP.

      21.4 NOTICE OF LITIGATION, ETC. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which it may
hereafter become a party of which Tenant has notice or actual knowledge which
involves a potential liability equal to or greater than One Hundred Thousand
Dollars ($100,000) or which may otherwise result in any material adverse change
in the business, operations, property, prospects, results of operation or
condition, financial or other, of Tenant. Forthwith upon Tenant obtaining
knowledge of any Default, Event of Default or any default or event of default
under any agreement relating to Indebtedness for money borrowed in an aggregate
amount exceeding, at any one time, One Hundred Thousand Dollars ($100,000), or
any event or condition that would be required to be disclosed in a current
report filed by Tenant on Form 8-K or in Part II of a quarterly report on Form
10-Q if Tenant were required to file such reports under the Securities Exchange
Act of 1934, as amended, Tenant shall furnish Notice thereof to Landlord
specifying the nature and period of existence thereof and what action Tenant has
taken or is taking or proposes to take with respect thereto.

      21.5 INDEBTEDNESS. Tenant shall not create, incur, assume or guarantee, or
permit to exist, or become or remain liable directly or indirectly upon, any
Indebtedness except the following:

            (a) Borrower Indebtedness; or

            (b) Indebtedness of Tenant to Landlord; or

            (c) Indebtedness of Tenant for Impositions, to the extent that
      payment thereof shall not at the time be required to be made in accordance
      with the provisions of Article 8; or

            (d) Indebtedness of Tenant in respect of judgments or awards (i)
      which have been in force for less than the applicable appeal period and in
      respect of which execution thereof shall have been stayed pending such
      appeal or review, or (ii) which are

                                     - 62 -

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      fully covered by insurance payable to Tenant or Manager (subject to any
      applicable deductible), or (iii) which are for an amount not in excess of
      One Hundred Thousand Dollars ($100,000) in the aggregate at any one time
      outstanding in excess of any insurance in effect, plus any applicable
      deductible and (A) which have been in force for not longer than the
      applicable appeal period, so long as execution is not levied thereunder or
      (B) in respect of which an appeal or proceedings for review shall at the
      time be prosecuted in good faith in accordance with the provisions of
      Article 8, and in respect of which execution thereof shall have been
      stayed pending such appeal or review; or

            (e) Indebtedness for purchase money financing in accordance with
      Section 21.10(a) and other operating liabilities incurred in the ordinary
      course of Tenant's business; or

            (f) Indebtedness of Tenant to suppliers of goods and services in the
      ordinary course of the operation of Tenant's business at the Leased
      Property.

      21.6 FINANCIAL CONDITION OF TENANT. Tenant shall at all times maintain a
positive Tangible Net Worth. Each Officer's Certificate delivered by Tenant to
Landlord under Section 17.2(b) shall certify as to Tenant's compliance with this
requirement.

      21.7 FINANCIAL CONDITION OF ALTERRA. At the time of the confirmation of
the Conforming Plan, Alterra shall have a consolidated Net Worth of at least
Thirty Million Dollars ($30,000,000). Tenant shall provide Landlord with, or
cause Landlord to be provided with, evidence satisfactory to Landlord, in its
sole discretion, of compliance with the foregoing requirement within five (5)
days of the date of the confirmation of the Conforming Plan.

      21.8 DISTRIBUTIONS, PAYMENTS TO AFFILIATED PERSONS, ETC. Tenant shall not
declare, order, pay or make, directly or indirectly, any Distributions or any
payment to any Affiliated Person of Tenant (including payments in the ordinary
course of business) or set apart any sum or property therefor, or agree to do
so, if, at the time of such proposed action, or immediately after giving effect
thereto, any Event of Default shall have occurred and be continuing. Otherwise,
as long as no Event of Default shall have occurred and be continuing, Tenant may
make Distributions and payments to Affiliated Persons without restriction;
provided, however, that Tenant may enter into a Management Agreement, subject to
the provisions of Section 5.4, with any Affiliated Person of Tenant provided
that no Event of Default shall have occurred and be continuing.

      21.9 PROHIBITED TRANSACTIONS. Tenant shall not permit to exist or enter
into any agreement or arrangement whereby it engages in a transaction of any
kind with any Affiliated Person as to Tenant or any Guarantor, except on terms
and conditions which are commercially reasonable.

                                     - 63 -

<PAGE>

      21.10 LIENS AND ENCUMBRANCES. Except as permitted by Section 7.1 and
Section 21.5, Tenant shall not create or incur or suffer to be created or
incurred or to exist any Lien on this Agreement or any of Tenant's assets,
properties, rights or income, or any of its interest therein, now or at any time
hereafter owned, other than the following Permitted Liens:

            (a) Security interests securing the purchase price of equipment or
      personal property whether acquired before or after the Commencement Date;
      provided, however, that (i) such Lien shall at all times be confined
      solely to the asset in question and (ii) the aggregate principal amount of
      Indebtedness secured by any such Lien shall not exceed the cost of
      acquisition or construction of the property subject thereto;

            (b) Permitted Encumbrances;

            (c) Security interests in Accounts or Chattel Paper, in Support
      Obligations, General Intangibles or Deposit Accounts relating to such
      Accounts or Chattel Paper, in any Instruments or Investment Property
      evidencing or arising from such Accounts or Chattel Paper, in any
      documents, books, records or other information (including, without
      limitation, computer programs, tapes, discs, punch cards, data processing
      software and related property and rights) maintained with respect to any
      property described in this Section 21.10(c) or in any Proceeds of any of
      the foregoing (capitalized terms used in this Section 21.10(c) without
      definition being used as defined in or for purposes of Article 9 of the
      Uniform Commercial Code as in effect in the Commonwealth of
      Massachusetts); and

            (d) To secure Indebtedness permitted pursuant to Section(s) 21.5
      (a)-(e).

      21.11 MERGER; SALE OF ASSETS; ETC. Without Landlord's prior written
consent (which consent may be given or withheld in Landlord's sole discretion),
Tenant shall not (i) sell, lease (as lessor or sublessor), transfer or otherwise
dispose of, or abandon, all or any material portion of its assets (including
capital stock) or business other than the Excluded Assets to any Person, (ii)
merge into or with or consolidate with any other Entity, or (iii) sell, lease
(as lessor or sublessor), transfer or otherwise dispose of, or abandon, any
personal property or fixtures or any real property other than the Excluded
Assets; provided, however, that, notwithstanding the provisions of clause (iii)
preceding, Tenant may dispose of equipment or fixtures which have become
inadequate, obsolete, worn-out, unsuitable, undesirable or unnecessary, provided
substitute equipment or fixtures having equal or greater value and utility (but
not necessarily having the same function) have been provided.

      21.12 CHANGE OF CONTROL OF GUARANTOR. Tenant shall cause each Acquiring
Guarantor, as a condition of, and prior to, such Person becoming an Acquiring
Guarantor, to execute a Guaranty in favor of

                                     - 64 -

<PAGE>

Landlord pursuant to which the Acquiring Guarantor shall guarantee the payment
and performance of Tenant's obligations under this Lease. It is expressly
understood and agreed that the foregoing is not intended to release any
Guarantor from its liabilities and obligations under its Guaranty and that all
Guarantors shall in all events remain liable under its Guaranty.

                                   ARTICLE 22

                                   ARBITRATION

      Landlord or Tenant may elect to submit any dispute hereunder or arising in
connection herewith that has an amount in controversy in excess of Two Hundred
Fifty Thousand Dollars ($250,000) to arbitration hereunder. Any such dispute
shall be conducted in Boston, Massachusetts in accordance with the Commercial
Arbitration Rules of the American Association as then in effect and the decision
of the arbitrators with respect to such dispute shall be binding, final and
conclusive on the parties. Any arbitration hereunder shall occur under the
auspices of the Massachusetts Arbitration Act.

      In the event Landlord or Tenant shall elect to submit any such dispute to
arbitration hereunder, Landlord and Tenant shall each appoint and pay all fees
of a fit and impartial person as arbitrator with at least ten (10) years' recent
professional experience in the general subject matter of the dispute. Notice of
such appointment shall be sent in writing by each party to the other, and the
arbitrators so appointed, in the event of their failure to agree within thirty
(30) days after the appointment of the second arbitrator upon the matter so
submitted, shall appoint a third arbitrator. If either Landlord or Tenant shall
fail to appoint an arbitrator, as aforesaid, for a period of twenty (20) days
after written notice from the other party to make such appointment, then the
arbitrator appointed by the party having made such appointment shall appoint a
second arbitrator and the two (2) so appointed shall, in the event of their
failure to agree upon any decision within thirty (30) days thereafter, appoint a
third arbitrator. If such arbitrators fail to agree upon a third arbitrator
within forty five (45) days after the appointment of the second arbitrator, then
such third arbitrator shall be appointed by the American Arbitration Association
from its qualified panel of arbitrators, and shall be a person having at least
ten (10) years' recent professional experience as to the subject matter in
question. The fees of the third arbitrator and the expenses incident to the
proceedings shall be borne equally between Landlord and Tenant, unless the
arbitrators decide otherwise. The fees of respective counsel engaged by the
parties, and the fees of expert witnesses and other witnesses called for the
parties, shall be paid by the respective party engaging such counsel or calling
or engaging such witnesses.

      The decision of the arbitrators shall be rendered within thirty (30) days
after appointment of the third arbitrator. Such decision shall be in writing and
in duplicate, one counterpart thereof to be

                                     - 65 -

<PAGE>

delivered to Landlord and one to Tenant. A judgment of a court of competent
jurisdiction may be entered upon the award of the arbitrators in accordance with
the rules and statutes applicable thereto then obtaining.

      Landlord and Tenant acknowledge and agree that, to the extent any such
dispute shall involve any Manager and be subject to arbitration pursuant to such
Manager's Management Agreement, Landlord and Tenant shall cooperate to
consolidate any such arbitration hereunder and under such Management Agreement
into a single proceeding.

                                   ARTICLE 23

                                  MISCELLANEOUS

      23.1 LIMITATION ON PAYMENT OF RENT. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.

      23.2 NO WAIVER. No failure by Landlord or Tenant to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.

      23.3 REMEDIES CUMULATIVE. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
or Tenant of any or all of such other rights, powers and remedies.

                                     - 66 -

<PAGE>

      23.4 SEVERABILITY. Any clause, sentence, paragraph, section or provision
of this Agreement held by a court of competent jurisdiction to be invalid,
illegal or ineffective shall not impair, invalidate or nullify the remainder of
this Agreement, but rather the effect thereof shall be confined to the clause,
sentence, paragraph, section or provision so held to be invalid, illegal or
ineffective, and this Agreement shall be construed as if such invalid, illegal
or ineffective provisions had never been contained therein.

      23.5 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this Agreement
or of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.

      23.6 NO MERGER OF TITLE. It is expressly acknowledged and agreed that it
is the intent of the parties that there shall be no merger of this Agreement or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.

      23.7 CONVEYANCE BY LANDLORD. If Landlord or any successor owner of all or
any portion of the Leased Property shall convey all or any portion of the Leased
Property in accordance with the terms hereof other than as security for a debt,
and the grantee or transferee of such of the Leased Property shall expressly
assume all obligations of Landlord hereunder arising or accruing from and after
the date of such conveyance or transfer, Landlord or such successor owner, as
the case may be, shall thereupon be released from all future liabilities and
obligations of Landlord under this Agreement with respect to such of the Leased
Property arising or accruing from and after the date of such conveyance or other
transfer and all such future liabilities and obligations shall thereupon be
binding upon the new owner.

      23.8 QUIET ENJOYMENT. Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate any Facility and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant any right to cancel or terminate this Agreement or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant hereunder.

                                     - 67 -

<PAGE>

      23.9 NO RECORDATION. Neither Landlord nor Tenant shall record this
Agreement; provided, however, that, upon Tenant's request and at Tenant's sole
cost and expense, Landlord shall execute (and Tenant may record) a Memorandum of
Lease, in each county in which any portion of the Leased Property is located.

      23.10 NOTICES.

            (a) Any and all notices, demands, consents, approvals, offers,
      elections and other communications required or permitted under this
      Agreement shall be deemed adequately given if in writing and the same
      shall be delivered (i) by hand, (ii) by telecopier with electronic
      confirmation of receipt (provided a conforming copy is immediately
      delivered by hand or by Federal Express or a similar expedited commercial
      carrier) or (iii) by mail or Federal Express or similar expedited
      commercial carrier, addressed to the recipient of the notice with all
      freight charges prepaid.

            (b) All notices required or permitted to be sent hereunder shall be
      deemed to have been given for all purposes of this Agreement upon the date
      of acknowledged receipt, in the case of a notice by telecopier, and, in
      all other cases, upon the date of receipt or refusal, except that whenever
      under this Agreement a notice is either received on a day which is not a
      Business Day or is required to be delivered on or before a specific day
      which is not a Business Day, the day of receipt or required delivery shall
      automatically be extended to the next Business Day.

            (c) All such notices shall be addressed,

      if to Landlord:

            c/o Senior Housing Properties Trust
            400 Centre Street
            Newton, Massachusetts  02458
            Attn:  Mr. David J. Hegarty
            Telecopier No. (617) 796-8349

      with a copy to:

            Sullivan & Worcester LLP
            One Post Office Square
            Boston, Massachusetts 02109
            Attn:  Nancy S. Grodberg, Esq.
            Telecopier No. (617) 338-2880

      if to Tenant to:

            Alterra Healthcare Corporation
            10000 Innovation Drive
            Milwaukee, Wisconsin 53226
            Attn:  Mr. Mark W. Ohlendorf

                                     - 68 -

<PAGE>

            Telecopier No. (414) 918-5055

      with a copy to:

            Rogers & Hardin LLP
            2700 International Tower
            229 Peachtree Street, N.E.
            Atlanta, Georgia 30303-1601
            Attn:  Miriam J. Dent, Esq.
            Telecopier No. (404) 525-2224

            (d) By notice given as herein provided, the parties hereto and their
      respective successors and assigns shall have the right from time to time
      and at any time during the term of this Agreement to change their
      respective addresses effective upon receipt by the other parties of such
      notice and each shall have the right to specify as its address any other
      address within the United States of America.

      23.11 CONSTRUCTION. Anything contained in this Agreement to the contrary
notwithstanding, all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination or expiration of this Agreement with
respect to the Leased Property shall survive such termination or expiration. In
no event shall Landlord be liable for any consequential damages suffered by
Tenant as the result of a breach of this Agreement by Landlord. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party to be charged.
All the terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Each term or provision of this Agreement to be performed by Tenant
shall be construed as an independent covenant and condition. Time is of the
essence with respect to the provisions of this Agreement. Except as otherwise
set forth in this Agreement, any obligations of Tenant (including without
limitation, any monetary, repair and indemnification obligations) and Landlord
shall survive the expiration or sooner termination of this Agreement. Whenever
it is provided in this Agreement that Tenant shall direct any Manager to take
any action, Tenant shall not be deemed to have satisfied such obligation unless
Tenant shall have exhausted all applicable rights and remedies of Tenant as
"Owner" under such Manager's Management Agreement.

      23.12 COUNTERPARTS; HEADINGS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.

                                     - 69 -

<PAGE>

      23.13 APPLICABLE LAW, ETC. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than Massachusetts; or (vii) any combination of
the foregoing. Notwithstanding the foregoing, the laws of the State shall apply
to the perfection and priority of liens upon and the disposition of any
Property.

      23.14 RIGHT TO MAKE AGREEMENT. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.

      23.15 ATTORNEYS' FEES. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees incurred in connection therewith, in preparation therefor and on
appeal therefrom, which amounts shall be included in any judgment therein.

      23.16 NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (COLLECTIVELY,
THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES, AND TENANT AGREES, THAT THE NAME
["SNH ALT LEASED PROPERTIES TRUST"] REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK
ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.

                                     - 70 -

<PAGE>

      23.17 BANKRUPTCY REMOTE ENTITIES. At Landlord's request, Tenant shall make
such amendments, modifications or other changes to its charter documents and
governing bodies (including, without limitation, Tenant's board of directors),
and take such other action, as may from time to time be necessary to qualify
Tenant as a "bankruptcy remote entity," provided that Landlord shall reimburse
Tenant for all costs and expenses reasonably incurred by Tenant in connection
with the making of such amendments or modifications.

                                     - 71 -

<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.

                                    LANDLORD:

                                    SNH ALT LEASED PROPERTIES TRUST, a
                                    Maryland real estate investment trust

                                    By: /s/ John R. Hoadley
                                        ------------------------------------
                                        John R. Hoadley
                                        Treasurer

                                    TENANT:

                                    AHC TRAILSIDE, INC., a Delaware corporation

                                    By: /s/ Mark W. Ohlendorf
                                        ------------------------------------
                                        Mark W. Ohlendorf
                                        Vice President

                                     - 72 -

<PAGE>

                            EXHIBITS A-1 THROUGH A-18

                                      LAND

                             [SEE ATTACHED COPIES.]

<PAGE>

                                    EXHIBIT B

                 LIST OF PURCHASE MONEY FINANCING ARRANGEMENTS,
                    EQUIPMENT LEASES AND SIMILAR ARRANGEMENTS

                              [SEE ATTACHED COPY.]

<PAGE>

                                    EXHIBIT C

                            PERMITTED CONTROL PERSONS

                              [SEE ATTACHED COPY.]

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