Document:

<PAGE>

                                                                   EXHIBIT 10.4

                               FIRST AMENDMENT TO
                      MASTER LEASE AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT (the "AGREEMENT")
is made as of February 7, 2002 by and among NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation, NH TEXAS PROPERTIES LIMITED PARTNERSHIP, a Texas
limited partnership (collectively, "LANDLORD"), the entities listed, as
"Tenant" on Schedule 1 attached hereto (collectively, "TENANT"), and AMERICAN
RETIREMENT CORPORATION, a Tennessee corporation ("GUARANTOR"), with reference
to the following Recitals:

                                   RECITALS:

         A. Landlord and the Tenant entities listed as Nos. 1 through 7 on
Schedule 1 attached hereto have entered into that certain Master Lease and
Security Agreement dated as of July 31, 2001 (the "LEASE"), with respect to the
personal care or memory enhancement assisted living facilities described
therein. All initially-capitalized terms used herein shall have the same
meanings given to such terms in the Lease, unless otherwise defined herein.

         B. Pursuant to that certain Guaranty of Lease and Letter of Credit
Agreement dated as of July 31, 2001 (the "GUARANTY") executed by Guarantor, as
guarantor, in favor of Landlord, Guarantor agreed to guarantee the obligations
of Tenant under the Lease.

         C. The Tenant entities listed as Nos. 8 through 11 on Schedule 1
attached hereto have acquired, or are about to acquire, the leasehold interests
in four (4) additional Facilities owned by Landlord, which additional
Facilities are more particularly described in Item Nos. 8 through 11 on
Schedule 2 attached hereto (the "ADDITIONAL FACILITIES").

         D. Pursuant to the terms of that certain Agreement to Amend Master
Lease and Termination of Leases of even date herewith by and among Landlord,
Tenant and Guarantor, the parties hereto have agreed to terminate the existing
leases relating to Additional Facilities and to modify the Lease to include the
Additional Facilities in accordance with the terms and conditions set forth
this Agreement.

         NOW, THEREFORE, taking into account the foregoing Recitals, and in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree to amend the Lease in the
following particulars only:

         1.       AMENDMENTS TO LEASE.

                  (A) Schedules 1, 2 and 3 of the Lease are hereby deleted in
their entirety and substituted with Schedules 1, 2 and 3 attached to this
Agreement.

                                       1
<PAGE>

                  (B) Exhibit A and Exhibit C of the Lease are hereby deleted
in their entirety and substituted with Exhibit A and Exhibit C attached to this
Agreement.

                  (C) Section 2.1 of the Lease is hereby deleted in its
entirety and the following substituted therefor:

         "2.1     INITIAL TERM MINIMUM RENT. During the Initial Term, Tenant
         shall pay to Landlord Minimum Rent of Twelve Million Four Hundred
         Eight Thousand Dollars ($12,408,000) annually. Such Minimum Rent with
         respect to each month shall be paid by wire transfer in advance and in
         equal monthly installments of One Million Thirty-Four Thousand Dollars
         ($1,034,000) on the first business day of each such calendar month."

                  (D) Section 2.2.3 of the Lease is hereby deleted in its
entirety and the following substituted therefor:

                  "2.2.3 Notwithstanding the foregoing, in no event shall the
         Minimum Rent for the first Renewal Term exceed one hundred twenty-five
         percent (125%) of the difference obtained by subtracting Three Hundred
         Seventeen Thousand Dollars ($317,000) from the Total Rent (as such
         term is defined in Section 2.5.1 below) payable during the last Lease
         Year of the Initial Term, and in no event shall the Minimum Rent for
         any Renewal Term other than the first Renewal Term exceed one hundred
         twenty-five percent (125%) of the Total Rent in effect for the Lease
         Year immediately preceding the first Lease Year of such Renewal Term.
         Furthermore, in no event shall the Minimum Rent for the first Renewal
         Term be less than one hundred percent (100%) of the difference
         obtained by subtracting Three Hundred Seventeen Thousand Dollars
         ($317,000) from the Total Rent payable during the last Lease Year of
         the Initial Term, and in no event shall the Minimum Rent for any
         Renewal Term other than the first Renewal Term be less than one
         hundred percent (100%) of the Total Rent payable during the last Lease
         Year of the immediately preceding Renewal Term."

                  (E) Section 2.2.5 of the Lease is hereby deleted in its
entirety and the following substituted therefor:

                  "2.2.5 As used herein, "LANDLORD'S ADJUSTED INVESTMENt" in
         the Premises shall mean shall mean Landlord's Original Investment (as
         hereinafter defined in this Section 2.2.5) multiplied at the end of
         each Lease Year by a percentage equal to one hundred percent (100%)
         plus one-half (1/2) of the CPI Increase (as defined in Section 2.2.6
         below) for such Lease Year. As used herein, "LANDLORD'S ORIGINAL
         INVESTMENT" shall mean One Hundred Twenty-Five Million Eight Hundred
         Twenty-Four Thousand Dollars ($125,824,000) as increased by (A) any
         amount paid by Landlord pursuant to Section 5.7 and Section 5.9 below,
         and as decreased by (B) any net award paid to Landlord pursuant to
         Section 13.2 below, all as applicable."

                                       2
<PAGE>

                  (F) Sections 2.5.1, 2.5.2 and 2.5.5 of the Lease are hereby
deleted in their entirety and the following substituted therefor:

                  "2.5.1 Except to the extent provided to the contrary in the
         immediately succeeding sentence, for all purposes of calculating and
         paying Minimum Rent and Additional Rent under this Lease, the total of
         the Minimum Rent and Additional Rent ("TOTAL RENT") payable by Tenant
         in any quarter of any Lease Year will not be less than the Total Rent
         paid by Tenant for the immediately preceding quarterly period.
         Notwithstanding the foregoing, Total Rent payable by Tenant with
         respect to the first quarter of the first Lease Year of the first
         Renewal Term will not be less than the difference obtained by
         subtracting Seventy-Nine Thousand Two Hundred Fifty Dollars ($79,250)
         from the Total Rent paid by Tenant for the immediately preceding
         quarterly period.

                  2.5.2 Notwithstanding any of the other terms of this Section
         2, but subject to Section 2.5.3 below, the Total Rent due during each
         Lease Year shall not increase from one Lease Year to the next by an
         amount in excess of (i) two and one-half percent (2.5%), multiplied by
         (ii) the difference obtained by subtracting Three Hundred Seventeen
         Thousand Dollars ($317,000) from the Total Rent due during the
         immediately preceding Lease Year (the "ANNUAL RENT CAP"). For purposes
         of applying the Annual Rent Cap to the quarterly installments of
         Additional Rent due under Section 2.3.1, the Total Rent due during each
         quarter of any Lease Year shall not increase by an amount in excess of
         one-fourth (1/4) of the Annual Rent Cap for the then applicable Lease
         Year.

                  2.5.5 For the purpose of comparing the Total Rent due during
         each quarter of any Lease Year to the Total Rent due in the
         immediately preceding quarterly period pursuant to this Section 2.5,
         the increase in Minimum Rent by reason of any disbursement by Landlord
         pursuant to Section 5.7 or Section 5.9 of this Lease shall be treated
         as follows: (i) for the purpose of comparing the Total Rent in the
         quarterly period in which such disbursement is made against the Total
         Rent due in the immediately preceding quarter, such increase in
         Minimum Rent shall be ignored, and (ii) for the purpose of comparing
         the Total Rent in the quarterly period in which such disbursement is
         made to the Total Rent due in the following quarter, such increase in
         Minimum Rent shall be deemed effective on the first day of the
         quarterly period in which the disbursement is made."

                  (G) The first sentence of Section 5.2.1 of the Lease is
hereby deleted in its entirety and the following substituted therefor:

         "Tenant and each Facility shall comply in all material respects with
         all federal, state and local licensing and other laws and regulations
         applicable to the Personal Care Facilities (including, without
         limitation and with respect to each Facility located in Colorado,
         Colorado Revised Statute ss. 25-1-101 and the core regulations found
         at 6 C.C.R. 1011-1, Chapter VII) as well as with the certification
         requirements of Medicare and Medicaid (or any successor program)

                                       3
<PAGE>

         that are obtained by Tenant."

                  (H) The following is hereby added as Section 5.2.4 of the
Lease:

                  "5.2.4 It is acknowledged that while this Lease refers to the
         Personal Care Facilities as "assisted living facilities", such use in
         Colorado is referred to as a "personal care boarding home." Any
         reference in this Lease to "assisted living facility" or "Personal
         Care Facility" shall be deemed to refer to a "personal care boarding
         home" within the meaning of the applicable Colorado statutes, rules
         and regulations."

                  (I) The following is hereby added as Section 5.9 of the
Lease:

                  "5.9 CAPITAL IMPROVEMENTS TO TRINITY TOWERS. Tenant has
         heretofore installed, at its own expense, various items of furniture,
         fixtures and equipment (the "NEW FF&E") in the Trinity Towers Facility
         (which is identified as Facility No. 3 on Schedule 2). Landlord has
         agreed to reimburse (in a single funding) Tenant, at Tenant's option,
         for a portion of the New FF&E, the amount of such reimbursement to
         equal Five Hundred Thousand Dollars ($500,000), upon the following
         terms and conditions:

                           5.9.1 Such amount shall be requested by Tenant on or
                  before December 31, 2003;

                           5.9.2 No Event of Default or event which, with the
                  giving of notice or the passage of time, or both, would
                  constitute an Event of Default hereunder shall have occurred
                  and be continuing at the time of any such request for
                  disbursement of such amount;

                           5.9.3 Effective as of the date of the advance of
                  funds by Landlord under this Section 5.9, the annual Minimum
                  Rent payable hereunder shall be increased by reason of such
                  capital improvements funded by Landlord as follows: The
                  amount of such funds so disbursed by Landlord on such date
                  multiplied by a rate equal to ten and one-half percent
                  (10.5%) per annum; the monthly Minimum Rent shall be equal to
                  1/12th of such annual amount as so increased, prorated,
                  however, for any partial year or month, as applicable. All
                  Minimum Rent, as so increased, shall continue to be due and
                  payable by Tenant on the first business day of each calendar
                  month;

                           5.9.4 Tenant's request for disbursement shall be
                  accompanied with (i) a schedule describing the New FF&E for
                  which Tenant is to be reimbursed; and (ii) a bill of sale in
                  form and substance satisfactory to Landlord pursuant to which
                  the New FF&E shown on the schedule shall be conveyed to
                  Landlord; and

                                       4
<PAGE>

                           5.9.5 If Landlord or Tenant requests, Landlord and
                  Tenant shall, at Tenant's sole expense, execute an amendment
                  or amendments to this Lease reflecting the advances made by
                  Landlord and increase in Minimum Rent relating thereto.

                  Upon Tenant's delivery of the bill of sale described above,
                  the New FF&E conveyed to Landlord shall immediately become a
                  part of the Landlord Personal Property and shall belong to
                  Landlord subject to the terms and conditions of this Lease."

                  (J) The first two sentences of Section 11 of the Lease are
hereby deleted in their entirety and the following substituted therefor:

         "Tenant shall post with Landlord cash or letters of credit in the face
         amount of, or a combination of cash and such letters of credit, in the
         aggregate amount of Three Million Nine Hundred Twenty-Six Thousand Two
         Hundred Dollars ($3,926,200), representing a security deposit against
         the faithful performance of the terms and conditions contained in this
         Lease. If Landlord funds any additional improvements pursuant to
         Section 5.7 or Section 5.9 of this Lease, draws upon such cash or
         letters of credit pursuant to the terms hereof or if Minimum Rent is
         increased pursuant to the terms hereof, Tenant shall, at the time of
         such funding, drawing or increase, deposit with Landlord additional
         cash or an additional letter of credit such that the total amount of
         the security deposit, represented by cash and the undrawn amounts
         available under letters of credit, held by Landlord shall at all times
         be equal to thirty-one and 30/100 percent (31.30%) of the then due and
         payable annual Minimum Rent."

         2.       REAFFIRMATION OF OBLIGATIONS.

                  (A) Notwithstanding the modifications to the Lease contained
         herein, Tenant and Landlord each hereby acknowledges and reaffirms its
         obligations under the Lease (as modified hereby) and all other
         documents executed by such party in connection therewith.

                  (B) Notwithstanding the modifications to the Lease contained
         herein, Guarantor hereby acknowledges and reaffirms its obligations
         under the Guaranty and all documents executed by Guarantor in
         connection therewith, and further agrees that any reference made in
         the Guaranty to the Lease or any terms or conditions contained
         therein, shall mean such Lease or such terms or conditions as modified
         by this Agreement.

         3.       INTERPRETATION; GOVERNING LAW. This Agreement shall be
construed as a whole and in accordance with its fair meaning. Headings are for
convenience only and shall not be used in construing meaning. This Agreement
shall be governed by and construed in accordance with the internal laws of the
State of California without regard to rules concerning the choice of law.

         4.       FURTHER INSTRUMENTS. Each party will, whenever and as often
as it shall be reasonably requested so to do by another party, cause to be
executed, acknowledged or delivered,

                                       5
<PAGE>

any and all such further instruments and documents as may be necessary or
proper, in the reasonable opinion of the requesting party, in order to carry
out the intent and purpose of this Agreement.

         5.       INCORPORATION OF RECITALS. The Recitals to this Agreement are
incorporated hereby by reference.

         6.       COUNTERPARTS. This Agreement may be executed in counterparts,
all of which executed counterparts shall together constitute a single document.
Signature pages may be detached from the counterparts and attached to a single
copy of this document to physically form one document.

         7.       ATTORNEYS' FEES. In the event of any dispute or litigation
concerning the enforcement, validity or interpretation of this Agreement, or
any part thereof, the losing party shall pay all costs, charges, fees and
expenses (including reasonable attorneys' fees) paid or incurred by the
prevailing party, regardless of whether any action or proceeding is initiated
relative to such dispute and regardless of whether any such litigation is
prosecuted to judgment.

         8.       EFFECT OF AMENDMENT. Except as specifically amended pursuant
to the terms of this Agreement, the terms and conditions of the Lease shall
remain unmodified and in full force and effect. In the event of any
inconsistencies between the terms of this Agreement and any terms of the Lease,
the terms of this Agreement shall govern and prevail.

         9.       ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties relating to the subject matters contained herein.
Any oral representations or statements concerning the subject matters herein
shall be of no force or effect.

                           [SIGNATURES ON NEXT PAGE]

                                       6
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this First Amendment to
Master Lease and Security Agreement as of the date first above written.

                                    TENANT:

                                    ARC PINEGATE, L.P.,
                                    a Tennessee limited partnership

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    ARC PEARLAND, L.P.,
                                    a Tennessee limited partnership

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    AMERICAN RETIREMENT CORPORATION,
                                    a Tennessee corporation

                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------

                                       7
<PAGE>

                                    ARC NAPLES, LLC,
                                    a Tennessee limited liability company

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its managing member

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    TRINITY TOWERS LIMITED PARTNERSHIP, a
                                    Tennessee limited partnership

                                    By: ARC CORPUS CHRISTI, INC.,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    ARC LAKEWAY, L.P.,
                                    a Tennessee limited partnership

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                       8
<PAGE>

                                    ARC SPRING SHADOW, L.P.,
                                    a Tennessee limited partnership

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    ARC AURORA, LLC,
                                    a Tennessee limited liability company

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its sole member

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    ARC LAKEWOOD, LLC,
                                    a Tennessee limited liability company

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its sole member

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                       9
<PAGE>

                                    ARC SHADOWLAKE, L.P.,
                                    a Tennessee limited partnership

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    ARC WILLOWBROOK, L.P.,
                                    a Tennessee limited partnership

                                    By: AMERICAN RETIREMENT CORPORATION,
                                        a Tennessee corporation,
                                        its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                    GUARANTOR:

                                    AMERICAN RETIREMENT CORPORATION,
                                    a Tennessee corporation

                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------

                                      10
<PAGE>

                                    LANDLORD:

                                    NATIONWIDE HEALTH PROPERTIES, INC.,
                                    a Maryland corporation

                                    By:
                                       -----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title:
                                          --------------------------------------

                                    NH TEXAS LIMITED PARTNERSHIP,
                                    a Texas limited partnership

                                    By: MLD TEXAS CORPORATION,
                                        a Texas corporation

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                      11
<PAGE>

                                  SCHEDULE 1-1

                          LANDLORD AND TENANT ENTITIES

         LANDLORD

1.       NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation

2.       NH TEXAS PROPERTIES LIMITED PARTNERSHIP,
         a Texas limited partnership

         TENANT

1.       ARC PINEGATE, L.P., a Tennessee limited partnership

2.       ARC PEARLAND, L.P., a Tennessee limited partnership

3.       AMERICAN RETIREMENT CORPORATION, a Tennessee corporation

4.       ARC NAPLES, LLC, a Tennessee limited liability company

5.       TRINITY TOWERS LIMITED PARTNERSHIP, a Tennessee limited partnership

6.       ARC LAKEWAY, L.P., a Tennessee limited partnership

7.       ARC SPRING SHADOW, L.P., a Tennessee limited partnership

8.       ARC AURORA, LLC, a Tennessee limited liability company

9.       ARC LAKEWOOD, LLC, a Tennessee limited liability company

10.      ARC SHADOWLAKE, L.P., a Tennessee limited partnership

11.      ARC WILLOWBROOK, L.P., a Tennessee limited partnership

                                 Schedule 1-1
<PAGE>

                                   SCHEDULE 2

                LOCATION OF FACILITIES AND FACILITY INFORMATION

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
          FACILITY                             FACILITY LOCATION                               NO. OF BEDS/UNITS
------------------------------------------------------------------------------------------------------------------------------
  <S>    <C>                   <C>                                                <C>
  1.     Spring Shadow         9889 Kempwood Drive                                           52 Personal Care Beds
                               Houston (Harris County), Texas 77080                       15 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
  2.     Lakeway               1915 Lohmans Crossing Road                                    66 Personal Care Beds
                               Lakeway (Travis County), Texas 78734                       15 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
                                                                                           76 Nursing Facility Beds
                               101 North Upper Broadway                                 84 Personal Care Facility Unit
  3.     Trinity Towers        Corpus Christi (Nueces County),                                (Type A Large) Beds
                               Texas 78401                                           196 Independent Living Facility Units
                                                                                            15 Dementia Care Units
------------------------------------------------------------------------------------------------------------------------------
                                                                                       100 Assisted Living Facility Beds
  4.     Naples                770 Goodlette Road North                           (comprised of 76 Personal Care Beds and 24
                               Naples (Collier County), Florida 34202                      Memory Enhancement Beds)
------------------------------------------------------------------------------------------------------------------------------
                               9797 Bay Pines Boulevard
  5.     Bay Pines             St. Petersburg (Pinellas County),                              60 Assisted Living
         (Carriage Inn)        Florida 33708                                                     Facility Beds
------------------------------------------------------------------------------------------------------------------------------
                                                                                              15 Independent Beds
  6.     Pearland              2121 Scarsdale Boulevard                                      52 Personal Care Beds
                               Pearland (Harris County), Texas 77581                      15 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
  7.     Pinegate              2121 Pinegate Drive                                           80 Personal Care Beds
                               Houston  (Harris County), Texas 77008                      15 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------

<CAPTION>

-----------------------------------------------------------------------
          FACILITY                  TYPE OF PERSONAL CARE FACILITY
-----------------------------------------------------------------------
  <S>    <C>                     <C>
  1.     Spring Shadow                    Personal Care and
                                    Memory Enhancement Facilities
-----------------------------------------------------------------------
  2.     Lakeway                          Personal Care and
                                    Memory Enhancement Facilities
-----------------------------------------------------------------------
                                               Nursing
  3.     Trinity Towers                     Personal Care
                                        Independent Living and
                                       Dementia Care Facilities
-----------------------------------------------------------------------
                                 Assisted Living Facility (including
  4.     Naples                  Personal Care and Memory Enhancement
                                             Facilities)
-----------------------------------------------------------------------

  5.     Bay Pines                     Assisted Living Facility
         (Carriage Inn)
-----------------------------------------------------------------------
                                            Personal Care
  6.     Pearland                       Independent Living and
                                    Memory Enhancement Facilities
-----------------------------------------------------------------------
  7.     Pinegate                         Personal Care and
                                    Memory Enhancement Facilities
-----------------------------------------------------------------------
</TABLE>

                                 Schedule 2-1
<PAGE>

<TABLE>
  <S>    <C>                   <C>                                                        <C>
  8.     Aurora                1820 South Potomac                                            80 Personal Care Beds
                               Aurora (Arapahoe County), Colorado 80012                   17 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
  9.     Lakewood              3151 South Wadsworth Blvd                                     78 Personal Care Beds
                               Lakewood (Jefferson County), Colorado 80227                18 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
  10.    Shadowlake            2835 Shadow Drive                                             79 Personal Care Beds
                               Houston (Harris County), Texas 77072                       17 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
  11.    Willowbrook           7450 Willowchase Blvd.                                        53 Personal Care Beds
                               Houston (Harris County), Texas 77070                       16 Memory Enhancement Beds
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
-----------------------------------------------------------------------
  <S>    <C>                        <C>
  8.     Aurora                      Personal Care Boarding Home

-----------------------------------------------------------------------
  9.     Lakewood                    Personal Care Boarding Home

-----------------------------------------------------------------------
  10.    Shadowlake                       Personal Care and
                                    Memory Enhancement Facilities
-----------------------------------------------------------------------
  11.    Willowbrook                      Personal Care and
                                    Memory Enhancement Facilities
-----------------------------------------------------------------------
</TABLE>

                                 Schedule 2-2
<PAGE>

                                   SCHEDULE 3

                           LANDLORD PERSONAL PROPERTY

All of Landlord's right, title and interest in and to (a) all improvements
located upon the real property described on Exhibit A attached hereto, and (b)
all furniture, machinery, equipment, appliances, fixtures, supplies and other
personal property (tangible and intangible) located upon or within, or used in
connection with the such real property and/or the Facilities located thereon,
including, without limitation, all such personal property acquired in
connection with the development of the Facilities.

                                 Schedule 3-1

<PAGE>

                                   EXHIBIT A

                      LEGAL DESCRIPTIONS OF THE FACILITIES

                                   (Attached)

                                  Exhibit A-1
<PAGE>

                               LEGAL DESCRIPTION

                                 SPRING SHADOW

                              9889 Kempwood Drive
                      Houston (Harris County), Texas 77080

                   DESCRIPTION OF A 5,000 ACRE TRACT OF LAND
                    SITUATED IN THE A.T. MILES SURVEY, A-556
                     CITY OF HOUSTON, HARRIS COUNTY, TEXAS

BEING a 5,000 acre tract of land situated in the A.T. Miles Survey, Abstract
No. 556 City of Houston, Harris County, Texas and being part of an 8,000 acre
tract of land as described under Harris County Clerk's File (H. C. C. F.) No.
P514591 and same being out of Block 14 of the Spring Shadows, Section 6
subdivision as shown in Volume 155, Page 50, of the Harris County Map Records
and said 5,000 acres being more particularly described by metes and bounds as
follows:

BEGINNING at a found 1 1/2" galvanized iron pipe for a corner in the curved
south right-of-way line of Kempwood Drive (100' width), as recorded in Volume
7047, Page 187 of the Harris County Deed Records, and at the most northerly
northwest corner of the said Block 14, Section 6;

THENCE in a southeasterly direction 155.14 feet with the south right-of-way
line of said Kempwood Drive (100' width) and the northerly line of said Block
14, Section 6 and arc of a curve to the right having a radius of 1950.00 feet,
a central angle of 04(degree) 33' 30" and a chord which bears S 71(degree) 36'
47" E, 155.10 feet to a found 1 1/2" galvanized iron pipe at the point of a
reverse curve to the left;

THENCE in a southeasterly direction 232.40 feet with the south right-of-way
line of said Kempwood Drive (100' width) and the northerly line of said Block
14, Section 6 and the arc of a curve to the left having a radius of 2050.00
feet, a central angle of 06(degree) 29' 43" and a chord which bears S
72(degree) 34' 54" E, 232.27 feet to a set 5/8" iron rod in the arc of said
curve, for the northeast corner of the herein described tract;

THENCE S 01(degree) 33' 20" E, 517.64 feet to a set 5/8" iron rod in the south
line of said Block 14, Section 6 and in the north line of Lot 20, Block 6 of
Spring Shadows Section 4, a subdivision recorded in Volume 141, Page 50 of the
Harris County Map Records;

THENCE S 88(degree) 26' 40" W, along the south line of said Block 14, Section 6
and the north line of said Block 6 of Spring Shadows, Section 4, at 264.51 feet
pass through the northwest corner of said Spring Shadows, Section 4 and the
northeast corner of Spring Shadows Section 2, recorded in Volume 128, Page 13
of the Harris County Map Records and continuing a total distance of 374.51 feet
to a set 5/8" iron rod in the east right-of-way line of Rosefield Drive (60'
width) as shown on the plat of Spring Shadows, Section 2 recorded in Volume
128, Page 13 of the Harris County Map Records and on the plat of Spring
Shadows, Section 6, a subdivision recorded in Volume 155, Page

                                  Exhibit A-2
<PAGE>

50, of the Harris County Map Records and at the southwest corner of said Block
14, Section 6. From said 5/8" iron rod a found 1 3/4" galvanized iron pipe
bears S 88 (degree) 26' 40" W, a distance of 0.49 feet;

THENCE N 01(degree) 33' 20" W, 638.91 feet along the east right-of-way line of
said Rosefield Drive (60' width) and the west line of said Block 14, Section 6
to a found 1 3/4" galvanized iron pipe at the southwesterly corner of a
right-of-way line cut-back;

THENCE N 50 (degree) 12' 00" E, 11.54 feet with the southeasterly line of said
cut-back to the POINT OF BEGINNING and containing 5,000 acres of land.

                                  Exhibit A-3
<PAGE>

                               LEGAL DESCRIPTION

                                    LAKEWAY

                           1915 Lohmans Crossing Road
                      Lakeway (Travis County), Texas 78734

LOT 1, OF THE TOWERS OF LAKEWAY, A SUBDIVISION IN TRAVIS COUNTY, TEXAS,
ACCORDING TO THE MAP OR PLAT OF RECORD IN VOLUME 98, PAGES 297-299, OF THE PLAT
RECORDS OF TRAVIS COUNTY, TEXAS.

                                  Exhibit A-4
<PAGE>

                               LEGAL DESCRIPTION

                                 TRINITY TOWERS

                            101 North Upper Broadway
                  Corpus Christi (Nueces County), Texas 78401

                         Legal Description of Premises

TRACT I:

Field Notes for a 2.02 acre tract of land, comprising all of Lots 1 through 22,
Block 2, W.E. POPE'S BROADWAY ADDITION, a map of which is recorded in Volume 1,
Page 56 of the Map Records of Nueces County, Texas, SAVE AND EXCEPT that
portion of Lot 22, Block 2 conveyed to the City of Corpus Christi by Deed
recorded in Volume 263, Page 605 of the Deed Records of Nueces County, Texas,
and also comprising all of Block 6 of the BLUFF PORTION OF THE CENTRAL WHARF
AND WAREHOUSE COMPANY'S SUBDIVISION as shown by a map recorded in Volume A,
Page 15 of the Nueces County Map Records, and being a portion of the other land
lying North of said Block 6, CENTRAL WHARF AND WAREHOUSE SUBDIVISION and being
shown as Cooper's Alley on the map of said BROADWAY ADDITION; said 2.02 acre
tract being more particularly described by metes and bounds as follows:

BEGINNING at a 1" iron pipe found in concrete at the intersection of the
northerly Right-Of-Way line of present Cooper's Alley (formerly Telco Street,
formerly Kennedy Street), and the westerly line of Carancahua Street for the
most southeasterly corner of Block 6, CENTRAL WHARF AND WAREHOUSE SUBDIVISION;
said 1" iron pipe also being the most southeasterly corner of this tract;

THENCE South 88 degrees 50 minutes 15 seconds West, along and with said
southerly line of Block 6, being the said northerly line of Cooper's Alley, a
distance of 250.16 feet to a 5/8" iron pipe found for the most southwesterly
corner of said Lot 6, Block 1, same being a southwesterly exterior corner of
this tract;

THENCE North 00 degrees 42 minutes 29 seconds West, a distance of 43.82 feet to
drill hole set for a point in the southerly line of said Lot 22, Block 2, W.E.
POPE'S BROADWAY ADDITION; said drill hole also being an interior corner of this
tract;

THENCE South 59 degrees 42 minutes 29 seconds West, along and with the
southerly line of said Lot 22, Block 2, W.E. POPE'S BROADWAY ADDITION, a
distance of 13.28 feet to a 5/8" iron rod found for the most southeasterly
corner of said portion of Lot 22, Block 2, conveyed to the City of Corpus
Christi and also being in the most easterly Right-Of-Way line of present
Tancahua Street for an exterior corner of this tract;

THENCE North 04 degrees 19 minutes 38 seconds West, along and with said
easterly line of Tancahua Street, a distance of 109.70 feet to a 5/8" iron rod
found for an angle point of this tract;

                                  Exhibit A-5
<PAGE>

THENCE North 02 degrees 51 minutes 52 seconds West, continuing along and with
said easterly line of Tancahua Street a distance of 30.06' to 5/8" iron rod
found for the most northwesterly corner of said Lot 22, Block 2, BROADWAY
ADDITION, also being the most southwesterly corner of said Lot 1, Block 2,
BROADWAY ADDITION, also being an angle point of this tract;

THENCE North 01 degrees 00 minutes 30 seconds East, continuing along and with
said easterly line of Tancahua Street, a distance of 107.29 feet to 5/8" iron
rod found at the intersection of said easterly line of Tancahua Street and the
southerly line of Blucher Street, (formerly Chatham Street) for the most
northwesterly corner of said Lot 1, Block 2, Broadway Addition, also being the
most northwesterly corner of this tract;

THENCE North 75 degrees 24 minutes 20 seconds East, along and with the
southerly line of said Blucher Street, also being the North line of Block 2,
W.E. POPE'S BROADWAY ADDITION, a distance of 298.31 feet to a drill hole found
in concrete at the intersection of the said southerly line of Blucher Street
and the westerly line of said Carancahua Street for the most northeasterly
corner of this tract;

THENCE southerly, along and with the said westerly line of Carancahua Street,
the following courses;

South 01 degrees 00 minutes 30 seconds West, a distance of 107.29 feet to a
drill hole found in concrete for the southwesterly corner of Lot 11, Block 2,
W.E. POPE'S ADDITION for an angle point of this tract;

South 00 degrees 05 minutes 32 seconds West, a distance of 105.14 feet to a
drill hole found in concrete for an angle point of this tract;

South 86 degrees 47 minutes 35 seconds West, a distance of 7.98 feet to a drill
hole found in concrete for an angle point of this tract;

South 14 degrees 49 minutes 41 seconds West, a distance of 41.75 feet to a 1"
iron rod found for an angle point of this tract;

Thence South 01 degrees 08 minutes 51 seconds East, continuing along and with
said westerly line of Carancahua Street, a distance of 100.71 feet to the POINT
OF BEGINNING and containing 2.02 acres of land more or less.

TRACT II:

Description of 2.3638 acres of land out of Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10,
11, 12, 13, 14, 15, Block 1, of W.E. POPE'S BROADWAY ADDITION, Corpus Christi,
Nueces County, Texas, as shown by map recorded in Volume 1, Page 56 of the
Nueces County Map Records; a portion of the WILLIAM HOFFMAN ARROYO TRACT, as
shown in Volume 1, Page 56 of the Nueces County Map Records; and a portion of
Block 1, of the BLUFF PORTION OF THE CENTRAL WHARF AND WAREHOUSE COMPANY'S
SUBDIVISION, as shown by map or plat of record in Volume A, Page 15, of the
Nueces County Map Records; said 2.3638 acre tract being more particularly
described by metes and bound as follows:

                                  Exhibit A-6

<PAGE>
BEGINNING at a 5/8 inch iron rod found for the northwest corner of Lot 1, Block
1, of the W.E. POPE'S BROADWAY ADDITION, Corpus Christi, Nueces County, Texas,
as shown by map recorded in Volume 1, Page 56 of the Nueces County Map Records,
said point being the intersection of the east line of Carancahua Street
(variable width R.O.W.) and the south line of Blucher (formerly Chatham Street)
(60 foot R.O.W.);

THENCE N 75 degrees 36 minutes 04 seconds E, with the said south line of
Blucher Street, along the north line of Lots 1, 2, 3, 4, 5, 6 and 7 said Block
1, a distance of 314.44 feet to a 5/8 inch iron rod found for the northeast
corner of said Lot 7, Block 1 for the northeast corner of this tract;

THENCE S 01 degrees 46 minutes 04 seconds W, with the west line of Upper North
Broadway Street (variable width R.O.W.), a distance of 176.77 feet to a 5/8
inch iron rod found at the point of curvature of a circular curve to the right,
the west line of said Broadway Street being shown on Exhibit A of a deed from
Whole Life, Inc. to the City of Corpus Christi and recorded in Volume 1868,
Page 763, of the Nueces County Deed Records;

THENCE continuing along the west line of said Broadway Street and along the arc
of a circular curve to the right having a central angle of 32 degrees 00
minutes 00 seconds and a radius of 84.84 feet, a distance of 47.38 feet to a
5/8 inch iron rod found for the point of tangency;

THENCE S 33 degrees 46 minutes 04 seconds W, continuing along the west line of
said Broadway Street, a distance of 54.57 feet to a P.K. nail set in asphalt
for the point of curvature of a circular curve to the left;

THENCE continuing along the west line of said Broadway Street and along the arc
of a circular curve to the left with a central angle of 34 degrees 34 minutes
20 seconds and a radius of 51.50 feet, a distance of 31.08 feet to a 5/8 inch
iron rod set for the point of tangency;

THENCE S 00 degrees 48 minutes 16 seconds E, continuing along the west line of
said Broadway Street, a distance of 47.96 feet to a 5/8 inch iron rod found at
the intersection of the west line of said Broadway Street and the north line of
Cooper's Alley (variable width R.O.W.) as described in a deed recorded in
Volume 1570, Page 956 of the Nueces County Deed Records;

THENCE S 46 degrees 28 minutes 22 seconds W, along the north line of said
Cooper's Alley, a distance of 36.00 feet to a point for a corner from which a
5/8 inch iron rod found bears S 81 degrees 45 minutes 43 seconds E, a distance
of 0.37 feet, said point being the point of curvature of a circular curve to
the right;

THENCE continuing along the north line of said Cooper's Alley with the arc of a
circular curve to the right having a central angle of 42 degrees 43 minutes 22
seconds and a radius of 230.00 feet, a distance of 171.50 feet to a 5/8 inch
iron rod found for the point of tangency;

THENCE S 89 degrees 11 minutes 44 second W, continuing along the north line of
said Cooper's Alley, a distance of 10.54 feet to a 5/8 inch iron rod found for
a point of curvature of a circular curve to the right;

                                  Exhibit A-7
<PAGE>

THENCE continuing along the north line of said Cooper's Alley with the arc of a
circular curve to the right having a central angle of 92 degrees 00 minutes 30
seconds and a radius of 60.00 feet, a distance of 96.35 feet to a 5/8 inch iron
rod set in the east line of Carancahua Street.

THENCE N 01 degrees 12 minutes 14 seconds E, with the east line of Carancahua
Street, a distance of 292.67 feet to the POINT OF BEGINNING and containing
2.3638 acres of land, more or less.

                     Legal Description of Expansion Parcel

TRACT I:

Field Notes for a 2.02 acre tract of land, comprising all of Lots 1 through 22,
Block 2, W.E. POPE'S BROADWAY ADDITION, a map of which is recorded in Volume 1,
Page 56 of the Map Records of Nueces County, Texas, SAVE AND EXCEPT that
portion of Lot 22, Block 2 conveyed to the City of Corpus Christi by Deed
recorded in Volume 263, Page 605 of the Deed Records of Nueces County, Texas,
and also comprising all of Block 6 of the BLUFF PORTION OF THE CENTRAL WHARF
AND WAREHOUSE COMPANY'S SUBDIVISION as shown by a map recorded in Volume A,
Page 15 of the Nueces County Map Records, and being a portion of the other land
lying North of said Block 6, CENTRAL WHARF AND WAREHOUSE SUBDIVISION and being
shown as Cooper's Alley on the map of said BROADWAY ADDITION; said 2.02 acre
tract being more particularly described by metes and bounds as follows:

BEGINNING at a 1" iron pipe found in concrete at the intersection of the
northerly Right-Of-Way line of present Cooper's Alley (formerly Telco Street,
formerly Kenedy Street), and the westerly line of Carancahua Street for the
most southeasterly corner of Block 6, CENTRAL WHARF AND WAREHOUSE SUBDIVISION;
said 1" iron pipe also being the most southeasterly corner of this tract;

THENCE South 88 degrees 50 minutes 15 seconds West, along and with said
southerly line of Block 6, being the said northerly line of Cooper's Alley, a
distance of 250.16 feet to a 5/8" iron pipe found for the most southwesterly
corner of said Lot 6, Block 1, same being a southwesterly exterior corner of
this tract;

THENCE North 00 degrees 42 minutes 29 seconds West, a distance of 43.82 feet to
drill hole set for a point in the southerly line of said Lot 22, Block 2, W.E.
POPE'S BROADWAY ADDITION; said drill hole also being an interior corner of this
tract;

THENCE South 59 degrees 42 minutes 29 seconds West, along and with the
southerly line of said Lot 22, Block 2, W.E. POPE'S BROADWAY ADDITION, a
distance of 13.28 feet to a 5/8" iron rod found for the most southeasterly
corner of said portion of Lot 22, Block 2, conveyed to the City of Corpus
Christi and also being in the most easterly Right-Of-Way line of present
Tancahua Street for an exterior corner of this tract;

THENCE North 04 degrees 19 minutes 38 seconds West, along and with said
easterly line of Tancahua Street, a distance of 109.70 feet to a 5/8" iron rod
found for an angle point of this tract;

                                  Exhibit A-8
<PAGE>

THENCE North 02 degrees 51 minutes 52 seconds West, continuing along and with
said easterly line of Tancahua Street a distance of 30.06' to 5/8" iron rod
found for the most northwesterly corner of said Lot 22, Block 2, BROADWAY
ADDITION, also being the most southwesterly corner of said Lot 1, Block 2,
BROADWAY ADDITION, also being an angle point of this tract;

THENCE North 01 degrees 00 minutes 30 seconds East, continuing along and with
said easterly line of Tancahua Street, a distance of 107.29 feet to 5/8" iron
rod found at the intersection of said easterly line of Tancahua Street and the
southerly line of Blucher Street, (formerly Chatham Street) for the most
northwesterly corner of said Lot 1, Block 2, Broadway Addition, also being the
most northwesterly corner of this tract;

THENCE North 75 degrees 24 minutes 20 seconds East, along and with the
southerly line of said Blucher Street, also being the North line of Block 2,
W.E. POPE'S BROADWAY ADDITION, a distance of 298.31 feet to a drill hole found
in concrete at the intersection of the said southerly line of Blucher Street
and the westerly line of said Carancahua Street for the most northeasterly
corner of this tract;

THENCE southerly, along and with the said westerly line of Carancahua Street,
the following courses;

South 01 degrees 00 minutes 30 seconds West, a distance of 107.29 feet to a
drill hole found in concrete for the southwesterly corner of Lot 11, Block 2,
W.E. POPE'S ADDITION for an angle point of this tract;

South 00 degrees 05 minutes 32 seconds West, a distance of 105.14 feet to a
drill hole found in concrete for an angle point of this tract;

South 86 degrees 47 minutes 35 seconds West, a distance of 7.98 feet to a drill
hole found in concrete for an angle point of this tract;

South 14 degrees 49 minutes 41 seconds West, a distance of 41.75 feet to a 1"
iron rod found for an angle point of this tract;

Thence South 01 degrees 08 minutes 51 seconds East, continuing along and with
said westerly line of Carancahua Street, a distance of 100.71 feet to the POINT
OF BEGINNING and containing 2.02 acres of land more or less.

                                  Exhibit A-9
<PAGE>

                               LEGAL DESCRIPTION

                                     NAPLES

                            770 Goodlette Road North
                        Naples (Collier County), Florida

LOT 6, COMMON PROFESSIONAL PARK, ACCORDING TO THE PLAT THEREOF RECORDED IN PLAT
BOOK 23, PAGE 23, OF THE PUBLIC RECORDS OF COLLIER COUNTY, FLORIDA.

                                 Exhibit A-10
<PAGE>

                               LEGAL DESCRIPTION

                                   BAY PINES
                                 (CARRIAGE INN)

                            9797 Bay Pines Boulevard
                St. Petersburg (Pinellas County), Florida 33708

That certain real property located in Pinellas County, Florida, more
particularly described as follows:

A portion of the Northwest 1/4 of Section 2, Township 31 South, Range 15 East,
Pinellas County, Florida, described as follows:

From the Southwest corner of the Northwest 1/4 of said Section 2 run South
89 (Degree) 25'17" East, 991.93 feet along the South line of said Northwest 1/4;
thence North 00 (Degree) 19'21" East, 50.00 feet to the point of beginning. Said
point also falls in the North right-of-way line of U.S. Alternate 19; thence
continue North 00 (Degree) 19'21" East, 71.50 feet along the east easement line
of 98th Way North (a 60 foot ingress/egress easement); thence South
89 (Degree) 25'17" East, 20.00 feet; thence South 62 (Degree) 55'17" East, 61.63
feet; thence South 89 (Degree) 25'17" East, 84.16 feet; thence North
00 (Degree) 34'43" East, 5.01 feet; thence North 25 (Degree) 21'05" East, 71.59
feet; thence North 00 (Degree) 34'43" East, 181.88 feet; thence South
88 (Degree) 55'59" East, 185.83 feet; thence North 01 (Degree) 04'01" East,
135.01 feet; thence South 88 (Degree) 55'59" East, 233.09 feet; thence South
00 (Degree) 32'16" West, 427.32 feet to the North right-of-way of U.S. Alt. No.
19; thence North 89 (Degree) 25'17" West, 609.36 feet along said right-of-way
line to the point of beginning.

Containing 165,899.0997 square feet or 3.8085 acres more or less.
Pinellas County, Florida.

                                 Exhibit A-11
<PAGE>

                               LEGAL DESCRIPTION

                                    PEARLAND

                            2121 Scarsdale Boulevard
                     Pearland (Harris County), Texas 77581

Being 4.602 acres (200,481 square feet) of land in the W.D.C. Hall Survey,
A-23, Harris County, Texas and being out of a 38.360 acre tract of land
conveyed to Ayrshire Corporation by deed filed under Harris County Clerk's File
No(s). K436255 of the Official Public Records of Real Property of Harris
County, Texas, said 4.602 acres being more particularly described by metes and
bounds as follows:

BEGINNING at a point marked by a 5/8" iron rod, said point being the West
corner of Green Tee Terrace, Section 6 according to the plat thereof recorded
at Film Code No. 378073 of the Map Records of Harris County, Texas;

THENCE South 44 deg. 44 min. 59 sec. East, along the Southeast line of said
Green Tee Terrace, Section 6, a distance of 637.79 feet to a point for corner
marked by a 5/8" iron rod on the Southeast line of said 38.360 acre tract, same
being a Northwest line of a 376.5 acre tract as described in deed recorded in
Volume 3209, Page 106 of the Deed Records of Harris County, Texas, said point
being the South corner of said Green Tea Terrace, Section 6;

THENCE South 45 deg. 14 min. 48 sec. West, along the Southeast line of said
38.360 acre tract, same being a Northwest line of said 376.5 acre tract , a
distance of 341.58 feet to a point for corner marked by a 1-1/4 iron pipe, said
point being the South corner of said 38.360 acre tract, same being a re-entrant
corner for said 376.5 acre tract;

THENCE North 45 deg. 05 min. 43 sec. West, along the Southwest line of said
38.360 acre tract, same being a Northeast line of said 376.5 acre tract, a
distance of 539.47 feet to a point for corner marked by a 5/8" iron rod;

THENCE in a Northeasterly, direction with a curve to the left whose radius is
2379.18 feet, central angle is 8 deg. 38 min. 37 sec. and whose chord bears
North 29 deg. 19 min. 59 sec. East, a distance, measured along the arc of said
curve of 358.92 feet to the POINT OF BEGINNING and containing 4.602 acres
(200,481 square feet) of land.

                                 Exhibit A-12
<PAGE>

                               LEGAL DESCRIPTION

                                    PINEGATE

                              2121 Pinegate Drive
                      Houston (Harris County), Texas 77008

All that certain 5.63 acres of land, being that same tract referred to as Tract
2, described in the Trustee's deed to Bangkok Bank Limited-Los Angeles Branch,
recorded under County Clerk's File No(s). M310840, of the Official Public
Records of Real Property of Harris County, Texas, being all of Unrestricted
Reserve "D" and part of Unrestricted Reserve "C", Citadel, Section 4, according
the plat thereof recorded in Volume 297, Page 15 of the Map Records of Harris
County, Texas, out of the Henry Reinerman Survey, A-644, Harris County, Texas,
and being more particularly described by metes and bounds as follows: (All
bearings based on the record bearings of the aforesaid plat)

BEGINNING at a 5/8" iron rod found for the west corner of the southwest
right-of-way cutback line at the intersection of Pinegate Drive (60 foot
R.O.W.) and Hackett Drive (60 foot R.O.W.);

THENCE South 53 deg. 00 min. 11 sec. East - 12.92 feet along said right-of-way
cutback line to a capped 5/8" iron rod set for the most easterly northeast
corner of the herein described tract in the west right-of-way line of said
Hackett Drive;

THENCE South 03 deg. 13 min. 37 sec. East - 338.68 feet along said right-of-way
line to a capped 5/8" iron rod set for the Point of Curvature of a curve to the
right having a central angle of 84 deg. 49 min. 30 sec. and a radius of 225.00
feet;

THENCE along said curve to the right and continuing along said west
right-of-way line, in a southwest direction, an arc distance of 333.11 feet to
a capped 5/8" iron rod set for the Point of Tangency;

THENCE South 81 deg. 35 min. 53 sec. West - 50.00 feet to a 5/8" iron rod found
for the Point of Curvature of a curve to the left having a central angle of 17
deg. 16 min. 19 sec. and a radius of 330.00 feet;

THENCE along said curve to the left and continuing along said west right-of-way
line, in a southwest direction, an arc distance of 99.48 feet to a capped 5/8"
iron rod set for the south corner of the herein described tract, common to the
east corner of the 2.6841 acre tract of land described in the deed from
Houston/Chicago Jupiter Realty Partners to FRM West Loop Associates No. 6,
Ltd., recorded under County Clerk's File No(s). P573658, of the Official Public
Records of Real Property of Harris County, Texas;

THENCE North 25 deg. 45 min. 06 sec. West - 41.42 feet along the northeast line
of said 2.6841 acre tract to a 5/8" iron rod found for an angle corner;

THENCE North 49 deg. 25 min. 59 sec. West - 124.67 feet continuing along said
northeast line to a 5/8" iron rod found for an angle corner;

                                 Exhibit A-13
<PAGE>

THENCE North 64 deg. 22 min. 31 sec. West - 84.31 feet continuing along said
northeast line to a 5/8" iron rod found for an angle corner;

THENCE South 85 deg. 37 min. 29 sec. West - 118.64 feet continuing along said
northeast line to a capped 5/8" iron rod set for an angle corner;

THENCE North 04 deg. 22 min. 31 sec. West - 122.05 feet continuing along said
northeast line of a capped 5/8" iron rod set for a point on a curve to the
right, in the southeast right-of-way line of the aforesaid Pinegate Drive,
having a central angle of 24 deg. 01 min. 17 sec., and a radius of 355.16 feet,
and from which point the center of the circle of said curve bears South 51 deg.
44 min. 54 sec. East;

THENCE along said curve to the right and along said southeast right-of-way
line, in a northeast direction, an arc distance of 148.90 feet to a 5/8" iron
rod found for the Point of Tangency;

THENCE North 62 deg. 16 min. 23 sec. East - 482.95 feet continuing along said
southeast right-of-way line to a 5/8" iron rod found for the Point of Curvature
of a curve to the right having a central angle of 14 deg. 08 min. 25 sec., and
a radius of 355.00 feet;

THENCE along said curve to the right and continuing along said southeast
right-of-way line, in a northeast direction, an arc distance of 87.61 feet to
the POINT OF BEGINNING and containing 5.63 acres of land.

                                 Exhibit A-14
<PAGE>

                               LEGAL DESCRIPTION

                                     AURORA

                               1820 South Potomac
                    Aurora (Arapahoe County), Colorado 80012

A parcel of land located in the SE 1/4 of Section 24, Township 4 South, Range
67 West of the 6th P.M., County of Arapahoe, State of Colorado, more
particularly described as follows:

Commencing at the Southeast corner of said Section 24;

Thence S 89(Degree) 24' 42" W along the South line said SE 1/4 a distance of
270.00 feet to a point which is on the Westerly right-of-way line of Interstate
Highway No. 225;

Thence N 00(Degree) 31' 42" W along said Westerly right-of-way line a distance
of 100.00 feet, to the True Point of Beginning;

Thence S 84(Degree) 08' 18" W a distance of 573.76 feet to a point of curvature;

Thence along the arc of a curve to the right, central angle of 95(Degree) 20'
00", radius of 40.00 feet an arc length of 66.55 feet to a point of tangency,
and which point lies on the East right-of-way line of South Potomac Street, the
chord of said arc bears N 48(Degree) 11' 42" W a distance of 59.14 feet;

Thence N 00(Degree) 31' 42" W along said East right-of-way line a distance of
392.86 feet;

Thence N 89(Degree) 24' 42" E, parallel with the South line of said SE 1/4 of
Section 24 a distance of 512.17 feet to a point;

Thence S 3(Degree) 45' 10" E a distance of 95.91 feet to a point;

Thence S 31(Degree) 10' 11" E a distance of 110.57 feet to a point;

Thence S 62(Degree) 27' 18" E a distance of 46.56 feet to a point on said West
right-of-way line of Interstate Highway No. 225;

Thence S 00(Degree) 31' 42" E along said Westerly right-of-way line a distance
of 167.09 feet, more or less, to the True point of Beginning.

                                 Exhibit A-15
<PAGE>

                               LEGAL DESCRIPTION

                                    LAKEWOOD

                           3151 South Wadsworth Blvd
                  Lakewood (Jefferson County), Colorado 80227

                  LOT 1, BLOCK 1,
                  SCHNELL FARM SUBDIVISION,
                  FILING NO. 1
                  COUNTY OF JEFFERSON, STATE OF COLORADO.

                                 Exhibit A-16
<PAGE>

                               LEGAL DESCRIPTION

                                   SHADOWLAKE

                               2835 Shadow Drive
                      Houston (Harris County), Texas 77072

A 5.3215 acre tract of land, more or less, out of the William Hardin Survey
Abstract No. 24, in Harris County, Texas, and being more particularly described
by metes and bounds as follows:

Description of a 5.3215 acre tract of land (231,804 square feet) being part of
a called 457.8748 acre tract of described under Harris County Clerks' File
No(s). N297727, situated in the William Hardin Survey Abstract No. 24, Harris
County, Texas, said 5.3215 acre tract of land being more particularly described
by metes and bounds as follows with bearings being referenced to the street
dedication plat of Shadowbriar and Oxford Park Drive as recorded under Film
Code No(s) 361107 of the Harris County Map Records;

COMMENCING at a 5/8" iron rod found in the south right-of-way line of
Westheimer Road (F.M. 1093, 120 feet wide) and at the northwest corner of
Unrestricted Reserve "B" of Westheimer Plaza as recorded in Volume 307, Page
147 of the Harris County Map Records, same being the Northeast corner of said
457.8748 acre tract and the herein described tract;

THENCE South 02 deg. 27 min. 22 sec. East, departing said south right-of-way
line of Westheimer Road and along the common west line of said Unrestricted
Reserve "B" Westheimer Plaza and the East line of said 457.8748 acre tract, a
distance of 250.00 feet to an 5/8" iron rod set at the northeast corner and
POINT OF BEGINNING of the herein described tract;

THENCE South 02 deg. 27 min. 22 sec. East, continuing along said common line, a
distance of 613.23 feet to a 5/8" iron rod found at the southwest corner of
said Unrestricted Reserve "B" tract and the southeast corner of the herein
described tract and in the north right-of-way line of Oxford Park Drive (60
feet wide);

THENCE South 87 deg. 32 min. 38 sec. West, departing said common line and along
the north right-of-way line of said Oxford Park Drive, a distance of 28.75 feet
to a 5/8" iron rod set for the beginning of a curve to the right;

THENCE Northwesterly, continuing along said north right-of-way line and the arc
of said curve to the right having a radius of 720.00 feet, a central angle of
19 deg. 51 min. 52 sec., a chord bearing North 82 deg. 31 min. 26 sec. West,
248.38 feet, a total arc distance of 249.62 feet to a 5/8" iron rod set at a
point of tangency;

THENCE North 72 deg. 35 min. 30 sec. West, continuing along said North
right-of-way line a distance of 140.63 feet to a 5/8" iron rod set for the
beginning of a curve to the right;

                                 Exhibit A-17
<PAGE>

THENCE Northwesterly, departing said north right-of-way line and along the arc
of said curve to the right having a radius of 25.00 feet, a central angle of 86
deg. 04 min. 57 sec., a chord bearing North 29 deg. 33 min. 02 sec. West, 34.13
feet, a total arc distance of 37.56 feet to a 5/8" iron rod set at a point of
reverse curve to the left and in the easterly right-of-way line of Shadowbriar
Drive (60 feet wide at this point), said point being the most westerly
southwest corner of the herein described tract;

THENCE Northeasterly, along said Easterly right-of-way line of said Shadowbriar
Drive and the arc of said curve to the left having a radius of 780.00 feet, a
central angle of 16 deg. 08 min. 50 sec., a chord bearing North 05 deg. 25 min.
03 sec. East, 219.10 feet, a total arc distance of 219.82 feet to a 5/8" iron
rod set at a point of tangency;

THENCE North 02 deg. 39 min. 24 sec. West, continuing along said easterly
right-of-way line, a distance of 240.07 feet to a 5/8" iron rod set for the
beginning of a curve to the right;

THENCE Northwesterly, continuing along said Easterly right-of-way line of said
Shadowbriar Drive and the arc of said curve to the right having a radius of
429.36 feet, a central angle of 04 deg. 33 min. 25 sec., a chord bearing North
00 deg. 23 min. 01 sec. West, 34.14 feet, a total arc distance of 34.14 feet to
a 5/8" iron rod set for the Northwest corner of the herein described tract;

THENCE North 87 deg. 23 min. 44 sec. East, departing said easterly right-of-way
line, a distance of 390.80 feet to the POINT OF BEGINNING and containing 5.3215
acres of land. This description is based on a ground survey and plat prepared
by David J. Millard, Registered Professional Land Surveyor dated September 4,
1996.

                                 Exhibit A-18
<PAGE>

                               LEGAL DESCRIPTION

                                  WILLOWBROOK

                             7450 Willowchase Blvd.
                      Houston (Harris County), Texas 77070

Being a 5.000 acre tract of land situated in the Lorenzo de Zavala Survey,
Abstract No. 950 and the George W. Childress Survey, Abstract No. 217, Harris
County, Texas and being part of an 8.368 acre tract of land as described under
Harris County Clerk's File (H.C.C.F.) No. R901214 and being more particularly
described by metes and bounds as follows:

BEGINNING at a found 1" galvanized iron pipe in the north right-of-way line
terminus point of Willowchase Boulevard (R.O.W. Varies), as recorded in 325,
Page 101, Harris County Map Records Volume and the west right-of-way line of
the Fort Worth & Denver Railroad and Chicago Rock Island & Pacific Railroad
(100' width), for a corner of the herein described tract;

Thence with the north right-of-way line of Willowchase Boulevard (R.O.W.
Varies) and the south line of said 8.368 acre tract of land the following
courses and distances:

S 55(Degree) 36' 24" W a distance of 53.41 feet to a found 1" galvanized iron
pipe for a point of curvature in a curve to the left;

Southwesterly 208.43 feet along the arc of said curve to the left having a
radius of 1030.00 feet, a central angle of 11(Degree) 35' 39" and a chord which
bears S 49(Degree) 48' 35" W, a distance of 208.07 feet to a found 5/8" iron
rod;

S 44(Degree) 00' 45" W, a distance of 77.71 feet to a found 5/8" iron rod for a
point of curvature in a curve to the right;

Southwesterly 146.05 feet along the arc of the curve to the right having a
radius of 950.00 feet, a central angle of 08(Degree) 48' 31" and a chord which
bears S 48(Degree) 25' 01" W, a distance of 145.91 feet to a 5/8" iron rod set
for a southwesterly corner of the herein described tract. Said point bears N
59(Degree) 00' 45" E, a distance of 186.78 feet and northeasterly 102.66 feet
along the arc of a curve to the left from a found "X" in concrete.

Thence N 30(Degree) 59' 15" W, a distance of 494.46 feet to a 5/8" iron rod set
in the north line of the 8.368 acre tract and in the south line of a 15.1261
acre tract of land described as "Parcel K" and recorded under Harris County
Clerk's File No. R901214.

Thence N 59(Degree) 00' 45" E, a distance of 496.70 feet with the north line of
said 8.368 acre tract and the south line of said 15.1261 acre tract of land, to
a found 1" galvanized iron pipe in the west right-of-way line of the said Fort
Worth & Denver Railroad and Chicago Rock Island & Pacific Railroad (100'
R.O.W.) and at the southeast corner of the said 15.1261 acre tract;

                                 Exhibit A-19
<PAGE>

Thence S 27(Degree) 59' 32" E, a distance of 411.63 feet along the west
right-of-way line of said Railroad and the east line of said 8.368 acre tract
of land to the POINT OF BEGINNING and containing 5.000 acres of land.

                                 Exhibit A-20
<PAGE>

                                   EXHIBIT C

                              PERMITTED EXCEPTIONS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
           FACILITY                                                PERMITTED EXCEPTIONS
-----------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                    <C>
1.       Spring Shadow          1.    The standard printed exceptions, conditions and exclusions from coverage contained in
                                      the standard coverage owner's title policy then prevailing in use at the title company
                                      which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exceptions 1, 2 (modified to read "Any shortages in area."), 3-6, 11, 12, 14 (with
                                      reference to "east" deleted) and 15-19, and any exceptions created pursuant to the grant
                                      deed from Metro National Corporation to American Retirement Corporation, a Tennessee
                                      corporation, on Schedule B of the Title Commitment issued by Commonwealth Land Title
                                      Insurance Company dated June 16, 1997 under Order Number 9701254885.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
2.       Lakeway
                                1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. Exception Nos. 1 through 4, 5 (modified to add the phrase ", none
                                      of which are due or payable" after the words "usage or ownership"), 6, 10 through
                                      16, and 18 on Schedule B of the title commitment issued by Lawyers Title Insurance
                                      Corporation dated June 4, 1998 under Case Number 98 CO 186651-T.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
3.       Trinity Towers         1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 1, 2 (modified to state "Any discrepancies in area."), 3, 4, 5
                                      (with the year "1996" replaced by "1997"), 9 through 11, 12, 14, 16 through 25 on
                                      the preliminary title report issued by Fidelity National Title Insurance Company
                                      dated November 11, 1996 under Order Number 96-001054.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
4.       Naples                 1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 3, 4 and 7-16 on Schedule B, Section 2 of the title commitment
                                      issued by Lawyers Title Insurance Corporation dated June 10, 1998 under Case
                                      Number 9804209, Customer Number LOS 23690.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                            Exhibit C-1
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
           FACILITY                                                PERMITTED EXCEPTIONS
-----------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                    <C>
5.       Bay Pines              1.    The standard printed exceptions, conditions and exclusions from coverage contained
         (Carriage Inn)               in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Any matters shown as title exceptions in that certain ALTA Owner's Policy of Title
                                      Insurance (Form B-1970, Rev. 10-17-70 and 10-17-84) issued by Chicago Title
                                      Insurance Company in favor of Landlord in connection with Landlord's acquisition
                                      of the Premises.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
6.       Pearland               1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 1, 2 (modified to read "Any shortages in area."), 3, 4, 5 (modified
                                      to read "Standby fees, taxes and assessments by any taxing authority for the year
                                      1997, . . . , none of which are due and payable."), 9a, 9b and 9d on Schedule B of
                                      the Title Commitment issued by Fidelity National Title Insurance Company dated May
                                      2, 1997 under Order Number 97900375.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
7.       Pinegate               1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 1, 2 (modified to read "1997" and "Any shortages in area."), 3, 4,
                                      5 (modified to read "Standby fees, taxes and assessments by any taxing authority
                                      for the year 1997, . . . , none of which are due and payable."), 9a, 9b, 9c, 9d
                                      (modified to reference a 13-foot rather than a 15-foot easement) and 9e (modified
                                      to delete the following phrase: ", the royalties, bonuses, rentals and all other
                                      rights in connection with same are excepted herefrom") on Schedule B of the Title
                                      Commitment issued by Fidelity National Title Insurance Company dated May 2, 1997
                                      under Order Number 97900376.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
8.       Aurora                 1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 7 through 14 on Schedule B of the Proforma Policy of Title
                                      Insurance issued by Lawyers Title Insurance Corporation dated April 10, 1998 under
                                      Case ID: LC48138.

                                4.    Such other matters burdening the Premises which were created with the consent or
                                      knowledge of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                            Exhibit C-2
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
           FACILITY                                                PERMITTED EXCEPTIONS
-----------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                    <C>
9.       Lakewood               1.    The standard printed exceptions, conditions and exclusions from coverage contained
                                      in the standard coverage owner's title policy then prevailing in use at the title
                                      company which consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 6 through 14 on Schedule B-2 of the Title Commitment issued by lawyers Title
                                      Insurance Corporation dated June 17, 1998 under Commitment No: LC48140.

                                4.    Such other matters burdening the Premises which were created with the consent or knowledge
                                      of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
10.      Shadowlake             1.    The standard printed exceptions, conditions and exclusions from coverage contained in the
                                      standard coverage owner's title policy then prevailing in use at the title company which
                                      consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exception Nos. 1 (modified to read "Clerk's File No. R232312, as amended and restated in its
                                      entirety under R301643), 2 (modified to read "1997" and "Any shortages in area."), 3, 4, 5
                                      (modified to read "Standby fees, taxes and assessments by any taxing authority for the year
                                      1997, . . . , none of which are due and payable."), 9a (modified to read "A Harris County
                                      Flood Control District easement, as described in Volume 576, Page 178 of the Deed Records of
                                      Harris County, Texas, as amended by that certain Agreement and the plat recorded under Harris
                                      County Clerk's File No(s). S140288."), 9c, 9d, 9e and 9h (modified to read "...Clerk's File
                                      No. R232312, as amended and restated under Clerk's File No. 301643." and "...all valid first
                                      liens..."), on Schedule B of the Title Commitment issued by Fidelity National Title Insurance
                                      Company dated May 12, 1997 under Order Number 97900410.

                                4.    Such other matters burdening the Premises which were created with the consent or knowledge
                                      of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
11.      Willowbrook            1.    The standard printed exceptions, conditions and exclusions from coverage contained in the
                                      standard coverage owner's title policy then prevailing in use at the title company which
                                      consummates the sale transaction.

                                2.    Any matters which an accurate survey of the Premises may show.

                                3.    Exceptions 1, 2 (modified to read "Any shortages in area."), 3-6, and 11-24, and any
                                      exceptions created pursuant to the grant deed from Metro National Corporation to American
                                      Retirement Corporation, a Tennessee corporation, on Schedule B of the Title Commitment
                                      issued by Commonwealth Land Title Insurance Company dated June 17, 1997 under Order
                                      Number 9701254889.

                                4.    Such other matters burdening the Premises which were created with the consent or knowledge
                                      of Tenant or arising out of Tenant's acts or omissions.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE><PAGE>
                                                                    EXHIBIT 10.5

                                                               [Cleveland, Ohio]
                                                               [Delray, Florida]
                                                         [Jacksonville, Florida]
                                                                [Houston, Texas]
                                                            [San Antonio, Texas]
                                                               [Victoria, Texas]

================================================================================

                            M A S T E R   L E A S E

                                    between

                   HEALTH CARE PROPERTY INVESTORS, INC., and
                            TEXAS HCP HOLDING, L.P.

             collectively, as their interests may appear, as Lessor

                                      AND

                               ARC SHAVANO, L.P.,
                           ARC RICHMOND HEIGHTS, LLC,
                             ARC DELRAY BEACH, LLC,
                               ARC VICTORIA, L.P.,
                  ARC CARRIAGE CLUB OF JACKSONVILLE, INC., and
                               ARC POST OAK, L.P.,

                collectively and jointly and severally, as Lessee

                           Dated as of March 29, 2002

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                      <C>
ARTICLE I ..........................................................................................      1
    1.1 Leased Property; Term ......................................................................      1

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

ARTICLE III ........................................................................................     17
    3.1 Rent .......................................................................................     17

    3.2 Quarterly Calculation and Payment of Victoria Additional Rent; Annual Reconciliation .......     18

    3.3 Confirmation of Victoria Additional Rent ...................................................     19

    3.4 Additional Charges .........................................................................     20

    3.5 Late Payment of Rent .......................................................................     20

    3.6 Net Lease ..................................................................................     21

    3.7 Separate Account ...........................................................................     21

ARTICLE IV .........................................................................................     21
    4.1 Impositions ................................................................................     21

    4.2 Utility Charges ............................................................................     22

    4.3 Insurance Premiums .........................................................................     23

    4.4 Impound Account ............................................................................     23

    4.5 Tax Service ................................................................................     23

ARTICLE V ..........................................................................................     23
    5.1 No Termination, Abatement, etc .............................................................     23

    5.2 Termination with Respect to Fewer than All of the Facilities ...............................     24

ARTICLE VI .........................................................................................     24
    6.1 Ownership of the Leased Property ...........................................................     24

    6.2 Personal Property ..........................................................................     24

    6.3 Transfer of Personal Property and Capital Additions to Lessor ..............................     25

ARTICLE VII ........................................................................................     25
    7.1 Condition of the Leased Property ...........................................................     25

    7.2 Use of the Leased Property .................................................................     25

    7.3 Lessor to Grant Easements, etc .............................................................     26

    7.4 Preservation of Facility Value .............................................................     27

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

ARTICLE IX .........................................................................................     28
    9.1 Maintenance and Repair .....................................................................     28

    9.2 Encroachments, Restrictions, Mineral Leases, etc ...........................................     29

ARTICLE X ..........................................................................................     30
   10.1 Construction of Capital Additions and Other Alterations to the Leased Property .............     30

   10.2 Construction Requirements for all Alterations ..............................................     31

</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                                      <C>
ARTICLE XI .........................................................................................     32
   11.1 Liens ......................................................................................     32

ARTICLE XII ........................................................................................     32
   12.1 Permitted Contests .........................................................................     32

ARTICLE XIII .......................................................................................     33
   13.1 General Insurance Requirements .............................................................     33

   13.2 Replacement Cost ...........................................................................     34

   13.3 Additional Insurance .......................................................................     34

   13.4 Waiver of Subrogation ......................................................................     34

   13.5 Policy Requirements ........................................................................     35

   13.6 Increase in Limits .........................................................................     35

   13.7 Blanket Policies and Policies Covering Multiple Locations ..................................     35

   13.8 No Separate Insurance ......................................................................     35

ARTICLE XIV ........................................................................................     36
   14.1 Insurance Proceeds .........................................................................     36

   14.2 Insured Casualty ...........................................................................     36

   14.3 Uninsured Casualty .........................................................................     37

   14.4 No Abatement of Rent .......................................................................     38

   14.5 Waiver .....................................................................................     38

ARTICLE XV .........................................................................................     38
   15.1 Condemnation ...............................................................................     38

ARTICLE XVI ........................................................................................     39
   16.1 Events of Default ..........................................................................     39

   16.2 Certain Remedies ...........................................................................     42

   16.3 Damages ....................................................................................     42

   16.4 Receiver ...................................................................................     43

   16.5 Lessee's Obligation to Purchase ............................................................     44

   16.6 Waiver .....................................................................................     44

   16.7 Application of Funds .......................................................................     44

   16.8 Facility Operating Deficiencies ............................................................     44

   16.9 [Intentionally Omitted] ....................................................................     45

   16.10 Lessor's Security Interest ................................................................     45

ARTICLE XVII .......................................................................................     46
   17.1 Lessor's Right to Cure Lessee's Default ....................................................     46

ARTICLE XVIII ......................................................................................     47
   18.1 Purchase of the Leased Property ............................................................     47

ARTICLE XIX ........................................................................................     47
   19.1 Renewal Terms ..............................................................................     47

   19.2 Lessor's Rights of Renewal and Early Termination ...........................................     47

ARTICLE XX .........................................................................................     48
   20.1 Holding Over ...............................................................................     48
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                      <C>
ARTICLE XXI ........................................................................................     48
   21.1 Letters of Credit ..........................................................................     48

   21.2 Times for Obtaining Letters of Credit ......................................................     49

   21.3 Uses of Letters of Credit ..................................................................     49

   21.4 Reduction in Letter of Credit Amount .......................................................     50

   21.5 Treatment of Funds Drawn Under Letters of Credit ...........................................     50

ARTICLE XXII .......................................................................................     50
   22.1 Risk of Loss ...............................................................................     50

ARTICLE XXIII ......................................................................................     51
   23.1 General Indemnification ....................................................................     51

ARTICLE XXIV .......................................................................................     51
   24.1 Transfers ..................................................................................     51

ARTICLE XXV ........................................................................................     56
   25.1 Officer's Certificates and Financial Statements ............................................     56

ARTICLE XXVI .......................................................................................     58
   26.1 Lessor's Right to Inspect and Show the Leased Property and Capital Additions ...............     58

ARTICLE XXVII ......................................................................................     58
   27.1 No Waiver ..................................................................................     58

ARTICLE XXVIII .....................................................................................     58
   28.1 Remedies Cumulative ........................................................................     58

ARTICLE XXIX .......................................................................................     58
   29.1 Acceptance of Surrender ....................................................................     58

ARTICLE XXX ........................................................................................     58
   30.1 No Merger ..................................................................................     58

ARTICLE XXXI .......................................................................................     59
   31.1 Conveyance by Lessor .......................................................................     59

   31.2 New Lease ..................................................................................     59

ARTICLE XXXII ......................................................................................     60
   32.1 Quiet Enjoyment ............................................................................     60

ARTICLE XXXIII .....................................................................................     61
   33.1 Notices ....................................................................................     61

ARTICLE XXXIV ......................................................................................     62
   34.1 Appraiser ..................................................................................     62

ARTICLE XXXV .......................................................................................     63
   35.1 Lessee's Option to Purchase the Post Oak Facility ..........................................     63

   35.2 Defaults ...................................................................................     64

   35.3 Escrow Provisions ..........................................................................     65

   35.4 Lessor's Election of 1031 Exchange .........................................................     66
</TABLE>

                                       iii

<PAGE>

<TABLE>
<S>                                                                                                      <C>
ARTICLE XXXVI ......................................................................................     66
   36.1 Lessor May Grant Liens .....................................................................     66

   36.2 Attornment .................................................................................     67

ARTICLE XXXVII .....................................................................................     67
   37.1 Hazardous Substances .......................................................................     67

   37.2 Notices ....................................................................................     67

   37.3 Remediation ................................................................................     68

   37.4 Indemnity ..................................................................................     68

   37.5 Environmental Inspection ...................................................................     69

ARTICLE XXXVIII ....................................................................................     69
   38.1 Memorandum of Lease ........................................................................     69

ARTICLE XXXIX ......................................................................................     69
   39.1 Sale of Assets .............................................................................     69

ARTICLE XL .........................................................................................     70
   40.1 [Intentionally Omitted] ....................................................................     70

ARTICLE XLI ........................................................................................     70
   41.1 Authority ..................................................................................     70

ARTICLE XLII .......................................................................................     70
   42.1 Attorneys' Fees ............................................................................     70

ARTICLE XLIII ......................................................................................     71
   43.1 Brokers ....................................................................................     71

ARTICLE XLIV .......................................................................................     71
   44.1 Submission to Arbitration ..................................................................     71

ARTICLE XLV ........................................................................................     72
   45.1 Miscellaneous ..............................................................................     72

ARTICLE XLVI .......................................................................................     77
   46.1 Provisions Relating to Master Lease ........................................................     77

   46.2 Provisions Relating to Tax Treatment of Lease ..............................................     77

ARTICLE XLVII ......................................................................................     77
   47.1 Replacement Lease and Termination of Old Victoria Lease ....................................     77

ARTICLE XLVIII .....................................................................................     78
   48.1 Covenants with Respect to Operations and Fundamental Changes of Lessee .....................     78

</TABLE>

                                       iv

<PAGE>

Exhibit A-1       Legal Description of the Cleveland Facility
Exhibit A-2       Legal Description of the Delray Facility
Exhibit A-3       Legal Description of the Houston Facility
Exhibit A-4       Legal Description of the Jacksonville Facility
Exhibit A-5       Legal Description of the San Antonio Facility
Exhibit A-6       Legal Description of the Victoria Facility
Exhibit B         List of Facilities, Facility Description and Primary Intended
                  Use, Initial Monthly Allocated Minimum Rent, and Allocated
                  Initial Investment
Exhibit C-1       List of Lessor's Personal Property for Cleveland Facility
Exhibit C-2       List of Lessor's Personal Property for Delray Facility
Exhibit C-3       List of Lessor's Personal Property for Houston Facility
Exhibit C-4       List of Lessor's Personal Property for Jacksonville Facility
Exhibit C-5       List of Lessor's Personal Property for San Antonio Facility
Exhibit C-6       List of Lessor's Personal Property for Victoria Facility
Exhibit D         Form of Letter of Credit
Exhibit E         Schedule of Insurance Deductible Limits
Exhibit F         List of Existing Facilities Within Ten Mile Radius
Exhibit G         List of Commercial Occupancy Arrangements

                                       v

<PAGE>
                                                                    Exhibit 10.5

                                  MASTER LEASE

                  THIS MASTER LEASE ("Lease") is dated as of March 29, 2002, and
is between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland corporation and
TEXAS HCP HOLDING, L.P., a Delaware limited partnership (collectively, as their
interests may appear, "Lessor"), on the one hand, and ARC RICHMOND HEIGHTS, LLC,
a Tennessee limited liability company, ARC SHAVANO, L.P., a Tennessee limited
partnership, ARC DELRAY BEACH, LLC, a Tennessee limited liability company, ARC
VICTORIA , L.P., a Tennessee limited partnership, ARC CARRIAGE CLUB OF
JACKSONVILLE, INC., a Tennessee corporation, and ARC POST OAK, L.P., a Tennessee
limited partnership (collectively and jointly and severally, "Lessee"), on the
other hand.

                                   ARTICLE I.

                  1.1      Leased Property; Term.

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

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

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

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

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

                           (e)      the machinery, equipment, furniture and
other personal property described on Exhibit C attached hereto, together with
all replacements, modifications, alterations and substitutes therefor (whether
or not constituting an upgrade) (collectively, "Lessor's Personal Property");
and

<PAGE>

                           (f)      all other property and interests in property
conveyed or assigned to Lessor pursuant to the Contract of Acquisition (as
hereinafter defined).

                  SUBJECT, HOWEVER, to the easements, encumbrances, covenants,
conditions and restrictions and other matters which affect the Leased Property
as of the date hereof or the Commencement Date or which are created thereafter
as permitted hereunder to have and to hold for (1) the Fixed Term (as defined
below), and (2) the Extended Terms provided for in Article XIX unless this Lease
is earlier terminated as hereinafter provided. Upon any change in the Minimum
Rent in accordance with the provisions of Section 3.1 below or otherwise
pursuant to this Lease, Landlord may prepare and request, and Tenant shall
execute an amendment to this Lease confirming such matters.

                                  ARTICLE II.

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

                  1031 Exchange:  As defined in Section 35.4.

                  Accommodator:  As defined in Section 35.4.

                  Additional Charges:  As defined in Article III.

                  Affiliate: Any Person which, directly or indirectly (including
through one or more intermediaries), controls or is controlled by or is under
common control with any other Person, including any Subsidiary of a Person. For
purposes of this definition, the definition of "Controlling Person" below, and
Article XXIV below, the term "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 (including
through one or more intermediaries), of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
or control of voting securities, partnership interests or other equity interests
or otherwise. Without limiting the generality of the foregoing, when used with
respect to any corporation, the term "Affiliate" shall also include (i) any
Person which owns, directly or indirectly (including through one or more
intermediaries), Fifty Percent (50%) or more of any class of voting security or
equity interests of such corporation, (ii) any Subsidiary of such corporation
and (iii) any Subsidiary of a Person described in clause (i). Notwithstanding
the foregoing, ARC shall not be deemed to have "control" of another non-publicly
traded Person, unless ARC possesses, directly or indirectly (including through
one or more intermediaries), (1) at least thirty percent (30%) of the ownership
or control of voting

                                       2

<PAGE>

securities, partnership interests or other equity interests or otherwise of such
Person, and (2) the power to direct or cause the direction of the management and
policies of such Person; provided, however, that ARC shall at all times be
deemed to "control" (w) any limited partnership in which ARC or any other
Affiliate of ARC is the general partner, (x) any limited liability company in
which ARC or any other Affiliate of ARC is the managing member or has the
ability to elect or appoint a majority the board of managers, (y) any business
trust for which ARC or any other Affiliate of ARC is the trustee, and (z) any
corporation in which ARC or any other Affiliate of ARC has the ability to elect
or appoint a majority of the board of directors, in each case regardless of the
percentage of ownership of such entity.

                  Allocated Initial Investment: With respect to each Facility,
as set forth on Exhibit B.

                  Allocated Minimum Rent: The amount of Minimum Rent allocated
to such Facility as determined by Section 3.1.1 and Exhibit B attached hereto,
as increased, from time to time, pursuant to Section 3.1.2 and 3.1.3.

                  Appraiser:  As defined in Article XXXIV.

                  ARC: American Retirement Corporation, a Tennessee corporation,
and its permitted successors.

                  ARCPI:  ARCPI Holdings, Inc., a Tenneesee corporation.

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

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

                  Base Gross Revenues: For the Fixed Term of the Victoria
Facility, Eight Hundred Thirty Seven Thousand Four Hundred Seventy Two Dollars
($837,472.00). For each Extended Term of the Victoria Facility, if any, the
Gross Revenues for the first Lease Year of such Extended Term. Base Gross
Revenues for any partial Lease Year shall be determined by multiplying the
applicable Base Gross Revenues for a full Lease Year by a fraction, the
numerator of which is the number of days in the partial Lease Year and the
denominator of which is 365.

                  Base Period: The period commencing on that date which is
fifteen (15) months prior to the date any appraisal of any Facility is made
pursuant to the provisions of Article XXXIV and ending on the date which is
three (3) months prior to the date any such appraisal of such Facility is made.

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

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

                                       3

<PAGE>

                  Capital Additions: With respect to any Facility, one or more
new buildings, or one or more additional structures annexed to any portion of
any of the Leased Improvements of such Facility, or the material expansion of
existing improvements, which are constructed on any parcel or portion of the
Land of such Facility during the Term including the construction of a new wing
or new story, or the repair, replacement, restoration, remodeling or rebuilding
of the existing Leased Improvements of such Facility or any portion thereof
where the purpose and effect of such work is to provide a functionally new
facility in order to provide services not previously offered in such Facility.

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

                  Cash Flow: With respect to each Facility, the net income from
such Facility, determined on the basis of GAAP applied on a consistent basis,
plus the sum of (i) interest, taxes, depreciation and amortization expense; and
(ii) the Allocated Minimum Rent for such Facility and, with respect to the
Victoria Facility, if applicable, the Victoria Additional Rent; less a
management fee allowance of Five Percent (5%) of Gross Revenues for such
Facility during the corresponding period.

                  Cash Flow Coverage: With respect to each Facility, for any
period, calculated as of the last day of the period, the ratio of Cash Flow for
such Facility attributable to such period to the total Allocated Minimum Rent
with respect to such Facility and, with respect to the Victoria Facility, if
applicable, the Victoria Additional Rent, payable for such period under this
Lease.

                  Close of Escrow:  As defined in Article XXXV.

                  Closing Date:  As defined in the Contract of Acquisition.

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

                                       4

<PAGE>

                  Collateral:  As defined in Section 16.10.1.

                  Commencement Date:  The Closing Date.

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

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

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

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

                  Consolidated Net Worth: At any time, the sum of the following
for any Person and its consolidated Subsidiaries, on a consolidated basis
determined in accordance with GAAP:

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

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

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

                  Contract of Acquisition: That certain Contract of Acquisition
of even date herewith by and between Lessor, on the one hand, and Lessee and
ARC, on the other hand, relative to the acquisition by Lessor of the Leased
Property of each Facility.

                  Controlling Person: Any (i) Person(s) which, directly or
indirectly (including through one or more intermediaries), controls Lessee and
would be deemed an Affiliate of

                                       5

<PAGE>

Lessee, including any partners, shareholders, principals, members, trustees
and/or beneficiaries of any such Person(s) to the extent the same control Lessee
and would be deemed an Affiliate of Lessee, and (ii) Person(s) which controls,
directly or indirectly (including through one or more intermediaries), any other
Controlling Person(s) and which would be deemed an Affiliate of any such
Controlling Person(s).

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

                  CPI Increase: The percentage increase (rounded to the nearest
basis point), if any, in (i) the Cost of Living Index published for the month
which is two (2) months prior to the commencement of the applicable Lease Year,
over (ii) the Cost of Living Index published for the month which is two (2)
months prior to the commencement of the immediately prior Lease Year.

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

                  Earn-Out Amounts:  As defined in the Contract of Acquisition.

                  Earn-Out Facilities: As defined in the Contract of
Acquisition.

                  Earn-Out Payment Date: The date of payment by Lessor to Lessee
or ARC of an Earn-Out Amount for any Earn-Out Facility in accordance with the
terms of the Contract of Acquisition.

                  Earn-Out Rate: For each Earn-Out Facility, the "Earn-Out Rate"
shall mean, (i) for the first Earn-Out Payment Date (regardless of whether such
first Earn-Out Payment Date relates to an Earn-Out Period ending on June 30,
2003, December 31, 2003, June 30, 2004, or December 31, 2004), Eleven and One
Quarter Percent (11.25%), and (ii) for each subsequent Earn-Out Payment Date, if
any, (A) the Earn-Out Rate in effect for the immediately prior Earn-Out Payment
Date, if the same occurs in the same Lease Year as such immediately prior
Earn-Out Payment Date, or (B) the Earn-Out Rate in effect for the immediately
prior Earn-Out Payment Date, as increased by the greater of (i) Two Percent (2%)
of the Earn-Out Rate in effect for such prior Earn-out Payment Date, or (ii) the
CPI Increase times the Earn-Out Rate in effect for such prior Earn-Out Payment
Date (by way of example only, if the CPI Increase equals three percent (3%) and
the Earn-Out Rate for such prior Earn-Out Payment Date equals 11.25%, then the
new Earn-Out Rate would be 11.59%), if the same occurs in a different Lease Year
from the

                                       6

<PAGE>

Lease Year in which the immediately prior Earn-Out Payment Date occurred;
provided, however, that in no event shall such increase be more than Four
Percent (4%) of the Earn-Out Rate in effect for the immediately prior Earn-Out
Payment Date, notwithstanding the actual CPI Increase.

                  Encumbrance:  As defined in Section 36.1.

                  Environmental Costs:  As defined in Article XXXVII.

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

                  Escrow:  As defined in Article XXXV.

                  Escrow Holder:  As defined in Article XXXV.

                  Event of Default:  As defined in Article XVI.

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

                  Facility: Each facility being (and to be) operated or proposed
to be operated on the Leased Property, together with any Capital Additions, as
described on Exhibit B attached hereto and incorporated herein by this reference
(collectively, the "Facilities"). Each Facility is also individually referred to
herein by the name set forth on Exhibit B attached hereto and incorporated
herein by this reference.

                  Facility Mortgage:  As defined in Article XIII.

                  Facility Mortgagee:  As defined in Article XIII.

                  Facility Operating Deficiency: With respect to any Facility,
(i) a deficiency in the conduct of the operation of such Facility which results
in the imposition of a stop placement order or a notice of the proposed
decertification of such Facility from participation in Medicare, Medicaid or
other governmental reimbursement programs or of the non-renewal or termination
of such Facility's Medicare, Medicaid or other governmental reimbursement
provider agreement, or (ii) receipt of any notice from any governmental agency
terminating or suspending or reflecting a material risk of imminent termination
or suspension, of any material license or certification relating to any
Facility.

                                       7

<PAGE>

                  Fair Market Rental: With respect to each Facility, the fair
market rental value of the Leased Property and all Capital Additions of such
Facility, or applicable portion(s) thereof, (including any appropriate periodic
escalations therein) determined in accordance with the appraisal procedures set
forth in Article XXXIV, assuming the same is exposed on the open market at the
time of the appraisal and taking into account, among other relevant factors, the
income generated from the Leased Property and all Capital Additions of such
Facility, or applicable portion(s) thereof, but specifically excluding brokerage
commissions and other Lessor payments that do not directly inure to the benefit
of lessees.

                  Fair Market Value: With respect to each Facility, the fair
market value of the Leased Property and all Capital Additions of such Facility,
or applicable portion(s) thereof, determined in accordance with the appraisal
procedures set forth in Article XXXIV and this definition. Fair Market Value
shall be obtained by assuming that the Leased Property and all Capital Additions
of such Facility, or applicable portion(s) thereof, is unencumbered by this
Lease. Fair Market Value shall also be the higher value obtained by valuing the
Leased Property and all Capital Additions of such Facility, or applicable
portion(s) thereof, for their highest and best use or as a fully-permitted
Facility operated in accordance with the provisions of this Lease. In addition,
the following specific matters shall be factored in or out, as appropriate, in
determining Fair Market Value:

                           (i)      The negative value of (a) any deferred
         maintenance or other items of repair or replacement of the Leased
         Property or any Capital Additions of such Facility, (b) any then
         current or prior licensure or certification violations and/or
         admissions holds and (c) any other breach or failure of Lessee to
         perform or observe its obligations hereunder shall not be taken into
         account; rather, the Leased Property and all Capital Additions of such
         Facility shall be deemed to be in the condition required by this Lease
         (i.e., reasonably good order and repair) and Lessee shall at all times
         be deemed to have operated the Facility in compliance with and to have
         performed all obligations of the Lessee under this Lease.

                           (ii)     The occupancy level of the applicable
         Facility shall be deemed to be the greatest of (a) the occupancy level
         as of the date any appraisal of such Facility is performed in
         accordance with the provisions of Article XXXIV, (b) the average
         occupancy level during the Base Period, or (c) the average occupancy
         level for facilities similar to such Facility in the same general
         geographic area as of the date any appraisal of such Facility is
         performed in accordance with the provisions of Article XXXIV.

                           (iii)    If the applicable Facility's Primary
         Intended Use includes a mixed use, then whichever of the following
         produces the highest positive value shall be taken into account: (a)
         the resident mix, patient mix, case mix, and/or diagnostic related
         group or acuity mix, as applicable, as of the date any appraisal of
         such Facility is performed in accordance with the provisions of Article
         XXXIV, or (b) the average of such mix during the Base Period.

                  Finally, in determining Fair Market Value in connection with a
sale or transfer of the Leased Property and all Capital Additions of a Facility
pursuant to the terms of this Lease,

                                       8

<PAGE>

the positive or negative effect on the value of the Leased Property and all
Capital Additions or applicable portion(s) thereof attributable to such factors
as the interest rate, amortization schedule, maturity date, prepayment penalty
and other terms and conditions of any Encumbrance placed thereon by Lessor which
will not be removed at or prior to the date of such sale or transfer shall be
taken into account.

                  Fixed Term: For all Facilities other than the Victoria
Facility, the period of time commencing on the Commencement Date and ending at
11:59 p.m. Los Angeles time on the expiration of the fifteenth (15th) Lease
Year. For the Victoria Facility, the period of time commencing on the
Commencement Date and ending at 11:59 p.m. Los Angeles time on July 31, 2011.

                  Fixtures: As defined in Article I, and with respect to each
Facility, the Fixtures relating to such Facility.

                  GAAP:  Generally accepted accounting principles.

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

                           (i)      non-operating revenues such as interest
         income or income from the sale of assets not sold in the ordinary
         course of business;

                           (ii)     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;

                           (iii)    all proper patient billing credits and
         adjustments according to GAAP relating to health care accounting; and

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

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

                                       9

<PAGE>

portion of the Leased Property and all Capital Additions of such Facility shall
be included directly in the Gross Revenues) if all or any portion of the rent
received or receivable by Lessee from or under such Commercial Occupancy
Arrangement is based on net income of such Occupant or would otherwise 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 (in which event the rent
received or receivable by Lessee from or under such Commercial Occupancy
Arrangement shall be excluded from Gross Revenues), or (y) the rent received or
receivable by Lessee from or under such Commercial Occupancy Arrangement, if no
portion of the rent received or receivable by Lessee from or under such
Commercial Occupancy Arrangement is based on net income of such Occupant and
such rent qualifies as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto (in which
event the Gross Revenues of such Occupant shall be excluded from Gross Revenues
herein).

                  Guarantors: Collectively, ARC, ARCPI, and any future guarantor
of Lessee's obligations pursuant to this Lease (each individually, a
"Guarantor").

                  Guaranty: The Guaranties of even date herewith executed by
ARC, as a Guarantor, and ARCPI, as a Guarantor, and any future written guaranty
of Lessee's obligations hereunder executed by a Guarantor.

                  Handling:  As defined in Article XXXVII.

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

                  HCPI: Health Care Property Investors, Inc., a Maryland
corporation, and its successors and assigns.

                  Impositions: Collectively, all taxes, including capital stock,
franchise and other state taxes of Lessor (and, if Lessor is not HCPI (including
Texas HCP's interest herein), of HCPI as a result of its investment in Lessor
(including in Texas HCP)), ad valorem, sales, use, single business, gross
receipts, transaction privilege, rent or similar taxes; assessments including
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term; ground rents; water, sewer and other utility levies and charges; excise
tax levies; fees including license, permit, inspection, authorization and
similar fees; and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property, any Capital Additions and/or the
Rent and all interest and penalties thereon attributable to any failure in
payment by Lessee which at any time prior to, during or in respect of the Term
hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Lessor or Lessor's interest in the Leased Property or any Capital Additions,
(ii) the Leased Property, any Capital Additions or any parts thereof or any rent
therefrom or any estate, right, title or interest therein, or (iii) any
occupancy, operation, use or possession of, or sales from or activity conducted
on or in connection with the Leased Property, any Capital Additions or the
leasing or use of the Leased Property, any Capital Additions or any parts
thereof; provided, however, that nothing contained in this Lease shall be
construed to require Lessee to

                                       10

<PAGE>

pay (a) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Lessor or any other Person (including on
HCPI, if HCPI is not the Lessor hereunder), (b) any transfer, or net revenue tax
of Lessor or any other Person except Lessee and its successors, (c) any tax
imposed with respect to the sale, exchange or other disposition by Lessor of any
Leased Property, any Capital Additions or the proceeds thereof, or (d) except as
expressly provided elsewhere in this Lease, any principal or interest on any
indebtedness on the Leased Property for which Lessor is the obligor, except to
the extent that any tax, assessment, tax levy or charge, of the type described
in any of clauses (a), (b), (c) or (d) above is levied, assessed or imposed in
lieu of or as or as a substitute for any tax, assessment, levy or charge which
is otherwise included in this definition of an "Imposition."

                  Incremental Gross Revenues: With respect to the Victoria
Facility, the positive amount, if any, by which the Gross Revenues for such
Facility during the then current Lease Year or partial Lease Year exceeds the
Base Gross Revenues.

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

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

                  Land: As defined in Article I, and, with respect to each
Facility, the Land (as defined in Article I) relating to such Facility.

                  Lease:  As defined in the preamble.

                  Lease Rate: With respect to each Facility, the percentage per
annum as set forth on Exhibit B attached hereto and made a part hereof.

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

                                       11

<PAGE>

of the Term. With respect to the Victoria Facility, each period beginning August
1 and ending July 31; provided, however, that the period from the Commencement
Date through July 31, 2002 shall be a partial Lease Year.

                  Leased Improvements: As defined in Article I, and, with
respect to each Facility, the Leased Improvements (as defined in Article I) of
such Facility

                  Leased Property: As defined in Article I, and, with respect to
each Facility, the Leased Property (as defined in Article I) of such Facility.

                  Leasehold FMV: With respect to each Facility, the fair market
value of Lessee's leasehold interest relating to such Facility if exposed on the
open market taking into account, among other relevant factors, the income
generated from the Leased Property and Capital Additions for such Facility,
determined by appraisal in accordance with the appraisal procedures set forth in
Article XXXIV.

                  Legal Requirements: (i) All federal, state, county, municipal
and other governmental statutes, laws (including common law and Environmental
Laws), rules, policies, guidance, codes, orders, regulations, ordinances,
permits, licenses, covenants, conditions, restrictions, judgments, decrees and
injunctions, including those affecting the Leased Property, Lessee's Personal
Property and all Capital Additions or the construction, use or alteration
thereof, whether now or hereafter enacted and in force, including any which may
(A) require repairs, modifications or alterations in or to the Leased Property,
Lessee's Personal Property and all Capital Additions, (B) in any way adversely
affect the use and enjoyment thereof, or (C) regulate the transport, handling,
use, storage or disposal or require the cleanup or other treatment of any
Hazardous Substance, and (ii) all covenants, agreements, restrictions, and
encumbrances either now or hereafter of record or known to Lessee (other than
encumbrances created by Lessor without the consent of Lessee except as otherwise
expressly permitted hereunder) affecting the Leased Property.

                  Lessee:  As defined in the preamble.

                  Lessee's Personal Property: With respect to each Facility, the
Personal Property other than Lessor's Personal Property relating to such
Facility.

                  Lessee's Proprietary Software:  As defined in Section 6.3.

                  Lessee's Trademarks:  As defined in Section 6.3.

                  Lessor:  As defined in the preamble.

                  Lessor's Personal Property: As defined in Article I, and, with
respect to each Facility, Lessor's Personal Property (as defined in Article I)
relating to such Facility.

                  Letter of Credit Amount: Four Million Dollars ($4,000,000)
plus the Victoria Letter of Credit Amount.

                  Letter of Credit Date:  As defined in Section 21.2.

                                       12

<PAGE>

                  Master Sublease: With respect to any Facility, a Master
Sublease (as defined in Article XXIV) of such Facility.

                  Minimum Rent: The sum of Allocated Minimum Rent for all
Facilities payable under this Lease.

                  Minimum Repurchase Price: With respect to each Facility other
than the Post Oak Facility at any given time, the sum of (i) the Allocated
Initial Investment with respect to such Facility plus (ii) any Capital Addition
Costs funded by Lessor with respect to such Facility plus (iii) any Earnout
Amounts paid by Lessor with respect to such Facility. With respect to the Post
Oak Facility, the Post Oak Repurchase Price.

                  New Lease:  As defined in Section 31.2.1.

                  New Lease Effective Date:  As defined in Section 31.2.1.

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

                  Occupant: Any Person having rights of use, occupancy or
possession under an Occupancy Arrangement.

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

                  Old Victoria Lease:  As defined in Article XLVII.

                  Opening Deposit:  As defined in Article XXXV.

                  Outside Closing Date:  As defined in Article XXXV.

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

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

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

                  Personal Property: With respect to each Facility, all
machinery, furniture and equipment, including phone systems and computers, trade
fixtures, inventory (including raw materials, work in process and finished
goods), supplies and other personal property used or useful in the use of the
Leased Property and Capital Additions of such Facility for their Primary
Intended Use, other than Fixtures.

                                       13

<PAGE>

                  Post Oak Repurchase Price: The Allocated Initial Investment
with respect to the Post Oak Facility; provided, however, that commencing upon
the expiration of the first (1st) Lease Year and continuing upon the expiration
of each Lease Year thereafter, the Post Oak Repurchase Price shall be increased
to an amount One Hundred Two and One-Half Percent (102.5%) of the Post Oak
Repurchase Price in effect immediately prior to such increase. The Post Oak
Purchase Price shall be calculated as of the date of the Close of Escrow, and
not as of the date Lessee exercises its option to purchase the Post Oak
Facility.

                  Primary Intended Use: With respect to each Facility, the
Primary Intended Use set forth on Exhibit B attached hereto and incorporated
herein by this reference with respect to such Facility and such other uses
necessary or incidental to such use.

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

                  Put Event: With respect to any Facility, an Event of Default
hereunder (i.e., after any applicable notice and cure period provided for in
Section 16.1) arising out of any of the following at any time during the Term:

                  (i)      Lessee's failure to obtain and maintain all licenses,
authorizations, certifications and approvals needed to use and operate the
Leased Property of such Facility and all Capital Additions thereon, for such
Facility's Primary Intended Use in accordance with all Legal Requirements and
all Insurance Requirements including obtaining and maintaining all applicable
health care licenses, certificates of need and Medicare and/or Medicaid
certifications;

                  (ii)     Lessee's failure to use and continuously operate or
cause to be used and continuously operated the entirety of the Leased Property
of such Facility and all improvements thereon for its Primary Intended Use;
and/or

                  (iii)    Lessee's failure to cure any material violation of
any Legal Requirements relating to any Hazardous Substances in, on, under or
about the Leased Property of such Facility or to effect any repair, closure,
detoxification, decontamination or other remediation required by any applicable
Legal Requirements with respect to any Hazardous Substances in, on, under or
about the Leased Property of such Facility.

                  Notwithstanding that Lessor and Lessee have specifically
defined a "Put Event" for the limited purpose of setting forth the circumstances
under which Lessor shall be entitled to the remedy set forth in Section 16.5, in
no event shall this definition derogate the materiality of any other Event of
Default (including any Event of Default which does not constitute a Put Event)
or otherwise limit Lessor's rights and remedies upon the occurrence of any such
Event of Default, including those rights and remedies set forth in Sections
16.2, 16.3, 16.4, 16.8, 16.9 and/or 16.10.

                                       14

<PAGE>

                  Quarter: During each applicable Lease Year, the first three
(3) calendar month period commencing on the first (1st) day of such Lease Year
and each subsequent three (3) calendar month period within such Lease Year;
provided, however, that the last Quarter during the Term may be a period of less
than three (3) calendar months and shall end on the last day of the Term;
provided, further, that if the Commencement Date is a day other than the first
(1st) day of a calendar month, the first Quarter shall be the period commencing
on the Commencement Date and ending on the last day of the second (2nd) month
following the month in which the Commencement Date occurs.

                  Related Rights: As defined in Article I, and, with respect to
each Facility, the Related Rights of such Facility.

                  Rent: Collectively, the Minimum Rent, Victoria Additional
Rent, Additional Charges and all other amounts payable under this Lease.

                  Sale of Business: A Transfer of the type described in any of
clauses (iv), (v) or (vi) of Section 24.1.1 below, unless such Transfer involves
only the stock, memberships, equity interests and/or assets of Lessee and Lessee
has no substantial assets other than (a) its interest in the Leased Property and
any Capital Additions pursuant to this Lease, (b) the business and operations on
the Leased Property and any Capital Additions and (c) Lessee's Personal
Property.

                  SEC:  Securities and Exchange Commission.

                  Separated Property:  As defined in Section 31.2.

                  State: With respect to each Facility, the State or
Commonwealth in which the Leased Property for such Facility is located.

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

                  Successful Refinancing: The date that ARC has, to HCPI's
reasonable satisfaction, (a) raised or received a firm, unconditional
commitment(s) to raise, new funds sufficient to repay in full ARC's 2002 debt
maturities, and/or (b) received a firm, unconditional commitment to extend, or
extended, the maturity date of ARC's 2002 debt maturities.

                  Target Property:  As defined in Section 35.4.

                  Term: With respect to each Facility, the Fixed Term and any
Extended Terms of such Facility unless earlier terminated pursuant to the ----
provisions hereof.

                  Texas HCP: Texas HCP Holding, L.P., a Delaware limited
partnership, and its successors and assigns.

                  Transfer:  As defined in Article XXIV.

                                       15

<PAGE>

                  Transfer Consideration: With respect to any Transfer
constituting a Master Sublease (other than a Master Sublease entered into in
connection with a Sale of Business), "Transfer Consideration" shall mean Fifty
Percent (50%) of the positive remainder, if any, obtained by subtracting (x) the
Allocated Minimum Rent and, if applicable, the Victoria Additional Rent, payable
by Lessee under this Lease with respect to such Facility from (y) the Fair
Market Rental of such Facility, all determined on a monthly basis, prorating
such Fair Market Rental, Allocated Minimum Rent and, if applicable, the Victoria
Additional Rent, as appropriate, if less than all of such Facility is Master
Subleased. Fifty Percent (50%) of such remainder shall be paid by Lessee to
Lessor monthly when the Allocated Minimum Rent of such Facility is due;
provided, however, that in no event shall the total Transfer Consideration to
which Lessor is entitled in connection with any such Master Sublease exceed the
total consideration given directly or indirectly (including through one or more
intermediaries) to Lessee, to any Controlling Person(s) or to any other Person
in exchange for, in connection with, related to or arising out of the
transaction(s) as to which such Master Sublease is a part. With respect to any
other Transfer (i.e., a Transfer other than pursuant to a Master Sublease, but
including a Master Sublease which is part of a Sale of Business) "Transfer
Consideration" shall mean Fifty Percent (50%) of the Leasehold FMV. Lessee
acknowledges and agrees that the terms under which Lessor is entitled to the
payment of Transfer Consideration pursuant to this Lease and the amount thereof
has been freely negotiated and represents a fair and equitable division with
Lessor of the consideration payable in connection with a Transfer taking into
account, among other things, Lessor's investment in the Leased Property, the
terms of this Lease and the inherent risks of owning and leasing real property.
As used herein, the term "consideration" shall mean and include money, services,
property and other things of value, including payment of costs, cancellation or
forgiveness of indebtedness, discounts, rebates, barter and the like.

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

                  Victoria Additional Rent:  As defined in Section 3.1.4.

                  Victoria Letter of Credit Amount: An amount equal to
seventy-five percent (75%) of the sum of the annual Allocated Minimum Rent for
the Victoria Facility plus Lessor's reasonable estimate of the Victoria
Additional Rent to be payable for the applicable Lease Year; provided, however,
that if for any consecutive twelve (12) month period during the applicable Term
the Cash Flow Coverage for the Victoria Facility equals or exceeds 1.4 to 1,
then the Victoria Letter of Credit Amount shall be reduced for the then current
and each subsequent Lease Year to an amount equal to fifty percent (50%) of the
sum of the annual Allocated Minimum Rent for the Victoria Facility plus Lessor's
reasonable estimate of the Victoria Additional Rent payable for the applicable
Lease Year; provided further, however, that if, following any such reduction,
the average Cash Flow Coverage for the Victoria Facility for any four (4)
consecutive month period decreases below 1.4 to 1, then the Victoria Letter of
Credit Amount required immediately prior to such previous adjustment shall be
reinstated and Lessee shall promptly deliver to Lessor a letter of credit in the
readjusted amount.

                                       16

<PAGE>

                                  ARTICLE III.

                  3.1      Rent. Lessee shall pay to Lessor in lawful money of
the United States of America which shall be legal tender for the payment of
public and private debts, without offset or deduction, the amounts set forth
hereinafter as Minimum Rent and Victoria Additional Rent during the Term.
Payments of Minimum Rent and Victoria Additional Rent shall be made by wire
transfer of funds initiated by Lessee to Lessor's account or to such other
Person as Lessor from time to time may designate in writing. Lessee shall pay to
Lessor Minimum Rent monthly, in advance on or before the first (1st) day of each
calendar month. The first monthly payment of Minimum Rent shall be payable on
the Commencement Date (prorated as to any partial calendar month at the
beginning of the Term). The Victoria Additional Rent shall be paid as and when
required pursuant to Section 3.2 below.

                  3.1.1    Initial Allocated Minimum Rent. Subject to upward
adjustments on each Earn-Out Payment Date for Earn-Out Amounts as provided for
in Section 3.1.3 below for the Earn-Out Facilities, and to further increases for
all Facilities (other than the Victoria Facility) as provided in Section 3.1.2,
for the applicable Term (including the applicable Extended Terms, if any),
Lessee shall pay "Allocated Minimum Rent" for all of the Facilities in the
amount as set forth on Exhibit B attached hereto and incorporated herein by this
reference; provided, however, that with respect to the applicable Extended
Terms, if any, for the Victoria Facility, the monthly "Allocated Minimum Rent"
with respect thereto shall be one-twelfth (1/12) of the greater of (a) the then
current annual Fair Market Rental for the Victoria Facility, as calculated at
the commencement of such Extended Term, and (b) the annual Allocated Minimum
Rent for the Victoria Facility and Victoria Additional Rent payable for the last
Lease Year of the immediately preceding term.

                  3.1.2    Minimum Rent Increases. In addition to upward
adjustments on each Earn-Out Payment Date for Earn-Out Amounts as provided for
in Section 3.1.3 below for the Earn-Out Facilities, commencing upon the
expiration of the first (1st) Lease Year of the Fixed Term, and upon the
expiration of each Lease Year thereafter during the applicable Term (including
the Extended Terms, if any), the then current monthly Allocated Minimum Rent for
each Facility other than the Victoria Facility for such Lease Year, shall be
increased by a percentage equal to the greater of Two Percent (2%) or the CPI
Increase; provided, however, that in no event shall the monthly Allocated
Minimum Rent for any such Facility after any such adjustment be more than One
Hundred Four Percent (104%) of the monthly Allocated Minimum Rent for any such
Facility in effect immediately prior to such adjustment, notwithstanding the
actual CPI Increase.

                  3.1.3    Earn-Out Amounts. In addition to the increases in
Allocated Minimum Rent pursuant to Section 3.1.2 above, the monthly Allocated
Minimum Rent with respect to each of the Earn-Out Facilities shall be increased
from time to time on each Earn-Out Payment Date by an amount equal to
one-twelfth (1/12) of the product of (i) the particular Earn-Out Amount paid by
Lessor on such Earn-Out Date for such Earn-Out Facility times (ii) the then
applicable Earn-Out Rate for such Earn-Out Facility. Monthly Allocated Minimum
Rent payable for any months during which an Earn-Out Payment Date occurs shall
be prorated based upon the number of days for which the different rental amounts
apply.

                                       17
<PAGE>

                  3.1.4    Victoria Additional Rent. In addition to Allocated
Minimum Rent for the Victoria Facility, Lessee shall, commencing with the
Commencement Date and continuing throughout the Fixed Term for the Victoria
Facility, pay to Lessor annual "Victoria Additional Rent" in an amount equal to
Twenty Five Percent (25%) of the Incremental Gross Revenues; provided, however,
that in no event shall the sum of the Allocated Minimum Rent for the Victoria
Facility and Victoria Additional Rent paid or payable by any Lessee for any
Lease Year for the Fixed Term be less than One Hundred One Percent (101%) or
more than One Hundred Four Percent (104%) of the sum of Allocated Minimum Rent
for the Victoria Facility and Victoria Additional Rent paid or payable in the
immediately prior Lease Year. No Victoria Additional Rent shall be payable
during the first Lease Year of any Extended Term for the Victoria Facility.
During any Extended Term for the Victoria Facility however, Lessee shall,
commencing with the first (1st) Quarter of the second (2nd) Lease Year of such
Extended Term and continuing through the expiration of the Extended Term, pay to
Lessor annual "Victoria Additional Rent" in the amount of Twenty Five Percent
(25%) of Incremental Gross Revenues; provided, however, that beginning in the
third (3rd) Lease Year of such Extended Term and in each Lease Year thereafter
during such Extended Term, in no event shall the sum of the Allocated Minimum
Rent for the Victoria Facility and Victoria Additional Rent paid or payable by
any Lessee for any Lease Year for any Extended Term be less than One Hundred One
Percent (101%) or more than One Hundred Four Percent (104%) of the sum of
Allocated Minimum Rent for the Victoria Facility and Victoria Additional Rent
paid or payable in the immediately prior Lease Year of such Extended Term.

                  3.2      Quarterly Calculation and Payment of Victoria
Additional Rent; Annual Reconciliation. With respect to the Victoria Facility
only:

                  3.2.1    Lessee shall calculate and pay Victoria Additional
Rent quarterly, in arrears, for the portion of the entire Lease Year, on a
cumulative basis, up to the end of the Quarter then most recently ended, less
the Victoria Additional Rent already paid and attributable to such Lease Year.
If at the time any calculation on account of Victoria Additional Rent is to be
made the applicable Gross Revenues with respect to the Victoria Facility are not
yet available, Lessee shall use its best estimate of the applicable Gross
Revenues. Each quarterly payment of Victoria Additional Rent shall be delivered
to Lessor, together with an Officer's Certificate setting forth the calculation
thereof, on or before the last Business Day of the calendar month immediately
following the end of the corresponding Quarter. Notwithstanding the foregoing,
in no event shall the sum of (i) the Victoria Additional Rent for the partial
Lease Year commencing on the Commencement Date and ending on July 31, 2002 plus
(ii) the "Additional Rent" payable under the Old Victoria Lease from August 1,
2001 until the Commencement Date hereof be in an amount greater or less than
what would have been the amount of "Additional Rent" payable under the Old
Victoria Lease for the period commencing from August 1, 2001 through July 31,
2002 if such Old Victoria Lease had not been terminated and replaced with this
Lease pursuant to Article XLVII below.

                  3.2.2    Within sixty (60) days after the end of each Lease
Year, Lessee shall deliver to Lessor an Officer's Certificate setting forth the
Gross Revenues with respect to the Victoria Facility for such Lease Year. As
soon as practicable following receipt by Lessor of such Certificate, Lessor
shall determine the Victoria Additional Rent for such Lease Year and give Lessee
notice of the same together with the calculations upon which the Victoria
Additional

                                       18
<PAGE>

Rent was based. If such Victoria Additional Rent exceeds the sum of the
quarterly payments of Victoria Additional Rent previously paid by Lessee with
respect to such Lease Year, Lessee shall forthwith pay such deficiency to
Lessor. If such Victoria Additional Rent for such Lease Year is less than the
amount previously paid by Lessee with respect thereto, Lessor shall, at Lessee's
option, either (i) remit to Lessee its check in an amount equal to such
difference, or (ii) credit such difference against the quarterly payments of
Victoria Additional Rent next coming due.

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

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

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

                  3.3      Confirmation of Victoria Additional Rent. Lessee
shall utilize, or cause to be utilized, an accounting system for the Leased
Property and all Capital Additions in accordance with its usual and customary
practices and in accordance with GAAP which will accurately record all Gross
Revenues for the Victoria Facility and Lessee shall retain for at least seven
(7) years after the expiration of each Lease Year reasonably adequate records
conforming to such accounting system showing all Gross Revenues for such Lease
Year for the Victoria Facility. Lessor, at its own expense except as provided
hereinbelow, shall have the right from time to time (upon reasonable notice, and
in no event more than once per year) by its accountants or representatives (so
long as such accountants and representatives are not hired on a contingency
basis), to review and/or audit the information set forth in the Officer's
Certificate referred to in Section 3.2 and in connection with such review and/or
audit to examine Lessee's records with respect thereto (including supporting
data and sales tax returns) subject to any prohibitions or limitations on
disclosure of any such data under applicable law or regulations including any
duly enacted "Patients' Bill of Rights" or similar legislation, or as may be
necessary to preserve the confidentiality of the Facility-patient relationship
and the physician-patient privilege. If any such review and/or audit discloses a
deficiency in the payment of Victoria Additional Rent, Lessee shall forthwith
pay to Lessor the amount of the deficiency together with interest thereon at the
Overdue Rate compounded monthly from the date when said payment should have been
made to the date of payment thereof. If any such review

                                       19
<PAGE>

and/or audit discloses that the Gross Revenues actually received by Lessee for
any Lease Year exceed those reported by Lessee by more than Two Percent (2%),
Lessee shall pay the reasonable costs of such review and/or audit. If any review
and/or audit discloses an overpayment in the payment of Victoria Additional
Rent, Lessor shall credit Lessee such overpayment against payments of Victoria
Additional Rent next coming due. Any proprietary information obtained by Lessor
pursuant to such review and/or audit shall be treated as confidential, except
that such information may be used, subject to appropriate confidentiality
safeguards, in any litigation or arbitration proceedings between the parties and
except further that Lessor may disclose such information to prospective lenders
or purchasers.

                  3.4      Additional Charges. In addition to the Minimum Rent
and Victoria Additional Rent, (i) Lessee shall 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; and (ii) in the event of
any failure on the part of Lessee to pay any of those items referred to in
clause (i) above, Lessee shall also promptly pay and discharge every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items (the items referred to in clauses (i) and (ii) above being referred
to herein collectively as the "Additional Charges"), 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 non-payment of the
Additional Charges as in the case of non-payment of the Minimum Rent.

                  3.5      Late Payment of Rent.

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

                                       20
<PAGE>

ANY DEFAULT UNDER THIS LEASE, NOR PREVENT LESSOR FROM EXERCISING ANY OTHER
RIGHTS AND REMEDIES AVAILABLE TO LESSOR.

                               Lessor's Initials:
                                                 ----------------------

                               Lessee's Initials:
                                                 ----------------------

                           (b)      If Lessee shall, during any six (6) month
period, be more than five (5) Business Days delinquent in the payment of any
Rent due and payable by Lessee to Lessor hereunder on three (3) or more
occasions then, notwithstanding anything herein to the contrary, Lessor may, by
written notice to Lessee, elect to require Lessee to pay all Minimum Rent
payable hereunder quarterly in advance. Such right of Lessor shall be in
addition to and not in lieu of any other right of remedy available to Lessor
hereunder or at law on account of an Event of Default by Lessee hereunder.

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

                  3.7      Separate Account. Lessee shall deposit the gross
receipts of each Facility into a separate, segregated bank account, and Lessee
shall provide copies of all bank statements of such account to Lessor upon
Lessor's request.

                                  ARTICLE IV.

                  4.1      Impositions.

                           4.1.1    Subject to Article XII relating to permitted
contests, Lessee shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost may be added for nonpayment. Lessee shall make
such payments directly to the taxing authorities where feasible, and promptly
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. Lessee's obligation to pay Impositions shall be
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property, any Capital Additions or any part(s) thereof. If any 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, Lessee may pay
the same, and any accrued interest on the unpaid balance of such Imposition, in
installments as the same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto.

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

                           4.1.3    Any refund due from any taxing authority in
respect of any Imposition paid by Lessee shall be paid over to or retained by
Lessee if no Event of Default shall

                                       21
<PAGE>

have occurred hereunder and be continuing. Any other refund shall be paid over
to or retained by Lessor and applied to the payment of Lessee's obligations
under this Lease in such order of priority as Lessor shall determine.

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

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

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

                           4.1.7    Impositions imposed or assessed in respect
of the tax-fiscal period during which the Term terminates with respect to any
Facility shall be adjusted and prorated between Lessor and Lessee with respect
to such Facility, whether or not such Imposition is imposed or assessed before
or after such termination, and Lessee's obligation to pay its prorated share
thereof shall survive such termination with respect to such Facility.

                  4.2      Utility Charges. Lessee shall pay or cause to be paid
all charges for electricity, power, gas, oil, water and other utilities used in
the Leased Property and all Capital Additions. Lessee shall also pay or
reimburse Lessor for all costs and expenses of any kind whatsoever which at any
time with respect to the Term hereof may be imposed against Lessor by reason of
any of the covenants, conditions and/or restrictions affecting the Leased
Property, any Capital Additions and/or any part(s) thereof, or with respect to
easements, licenses or other rights over, across or with respect to any adjacent
or other property which benefits the Leased Property and/or any Capital
Additions, including any and all costs and expenses associated with any utility,
drainage and parking easements; provided, however, that Lessee shall not be
responsible for any such charges arising out of any matters of record which were
voluntarily created or imposed by Lessor after the Commencement Date (as opposed
to being created or imposed after the Commencement Date without the consent or
appeal of Lessor, whether pursuant to

                                       22
<PAGE>

governmental action, or other), unless created or imposed with the approval or
at the written request of Lessee.

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

                  4.4      Impound Account. If Lessee shall fail to timely pay
Impositions relating to real estate taxes more than two (2) times during the
Term (except by reason of a permitted contest of such Imposition pursuant to
Section 12.1 hereof), Lessee shall deposit, at the time of any payment of
Minimum Rent, an amount equal to one-twelfth of Lessee's estimated annual
Impositions relating to real estate taxes, of every kind and nature, required
pursuant to Section 4.1 into an impound account as directed by Lessor. Such
amounts shall be applied to the payment of the obligations in respect of which
said amounts were deposited in such order of priority as Lessor shall determine,
on or before the respective dates on which the same or any of them would become
delinquent. The cost of administering such impound account shall be paid by
Lessee. Nothing in this Section 4.4 shall be deemed to affect any right or
remedy of Lessor hereunder.

                  4.5      Tax Service. If Lessee shall fail to timely pay
Impositions more than two (2) times during the Term, Lessee shall, at its sole
cost and expense, cause to be furnished to Lessor a tax reporting service, to be
designated by Lessor, covering the Leased Property and all Capital Additions.
Notwithstanding the foregoing, for so long as Lessee shall be impounding taxes
with or at the direction of Lessor pursuant to Section 4.4 above, the provision
of this Section 4.5 shall be waived.

                                   ARTICLE V.

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

                                       23
<PAGE>

by Lessee hereunder, except as otherwise specifically provided in this Lease.
The obligations of Lessor and Lessee hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Lessee
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default.

                  5.2      Termination with Respect to Fewer than All of the
Facilities. Wherever in this Lease the action of terminating the Lease with
respect to a Facility (or action of similar import) is discussed, such action
shall mean the termination of Lessee's rights in and to the Leased Property
relating to such Facility. Notwithstanding anything in this Lease to the
contrary, if this Lease shall be terminated by Lessor or Lessee pursuant to
rights granted hereunder with respect to any Facility, or if this Lease shall
otherwise expire or terminate with respect to only one or more Facilities, such
termination or expiration shall not affect the applicable Term of this Lease
with respect to the balance of the Facilities not so terminated by Lessor or
expired, and this Lease shall continue in full force and effect with respect to
each other such Facility, except that the total Minimum Rent payable hereunder
shall be reduced by the amount of Allocated Minimum Rent, and with respect to
the Victoria Facility, if applicable, the Victoria Additional Rent, with respect
to such Facility as to which this Lease has so terminated or expired, subject,
however, to Lessor's right, in the event of a termination because of an Event of
Default, to recover damages with respect to any such Facility as to which this
Lease has been terminated as provided in Article XVI.

                                  ARTICLE VI.

                  6.1      Ownership of the Leased Property. Lessee acknowledges
that the Leased Property is the property of Lessor and that Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease. Upon the expiration or earlier termination of this
Lease with respect to any Facility Lessee shall, at its expense, repair and
restore the Leased Property relating to such Facility to the condition required
by Section 9.1.4.

                  6.2      Personal Property. During the Term, Lessee shall, as
necessary and at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of Lessee's Personal
Property and replacements thereof which shall be the property of and owned by
Lessee. Except as provided in Sections 6.3 and 16.10, Lessor shall have no
rights to Lessee's Personal Property during the Term. With respect to each
Facility, Lessee shall provide and maintain during the entire Term applicable to
such Facility all Personal Property necessary in order to operate such Facility
in compliance with all licensure and certification requirements, all Legal
Requirements and all Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Primary Intended Use. In addition,
Lessee shall be permitted to replace, modify, alter or substitute any of
Lessor's Personal Property that has become obsolete or worn out with personal
property of equal or better quality. Any such replacements, modifications,
alterations or substitutions (whether or not upgrades thereof) shall become
Lessor's Personal Property.

                                       24
<PAGE>

                  6.3      Transfer of Personal Property and Capital Additions
to Lessor. Upon the expiration or earlier termination of this Lease with respect
to a Facility (unless such termination is the result of Lessee's purchase of
such Facility), all Capital Additions not owned by Lessor and Lessee's Personal
Property (including all motor vehicles (if any) owned by Lessee used to
transport residents/patients) relating to such Facility shall become the
property of Lessor, free of any encumbrance, and Lessee shall execute all
documents and take any actions reasonably necessary to evidence such ownership
and discharge any encumbrance. Notwithstanding anything to the contrary in this
Lease, upon the expiration or earlier termination of this Lease with respect to
any Facility, Lessor shall not be obligated to reimburse Lessee for any
replacements, rebuildings, alterations, additions, substitutions, and/or
improvements that are surrendered as part of or with the Leased Property or
Capital Additions of such Facility. For purposes of this Section 6.3 only,
"Lessee's Personal Property" shall not include (i) any of Lessee's rights to the
trademarks in "Homewood," "Homewood Residence," "American Retirement
Corporation," "ARC," or any derivative thereof (collectively, "Lessee's
Trademarks"), (ii) any of Lessee's proprietary software ("Lessee's Proprietary
Software") or (iii) any accounts receivable or cash held by Lessee.

                                  ARTICLE VII.

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

                  7.2      Use of the Leased Property.

                           7.2.1    Lessee covenants that it will obtain and
maintain all authorizations and approvals needed to use and operate the Leased
Property, all Capital Additions and each Facility for such Facility's respective
Primary Intended Use and any other use conducted on the Leased Property and any
Capital Additions as may be permitted from time to time hereunder in accordance
with Legal Requirements including applicable licenses, provider agreements,
permits, and Medicare and/or Medicaid certification.

                                       25
<PAGE>

                           7.2.2    Lessee shall use or cause to be used the
Leased Property, all Capital Additions and the improvements thereon of each
Facility for the Primary Intended Use of such Facility. Lessee shall not use the
Leased Property, any Capital Additions or any part(s) thereof for any other use
without the prior written consent of Lessor, which consent Lessor may withhold
in its sole discretion.

                           7.2.3    Lessee shall operate continuously the entire
Leased Property and all Capital Additions of each Facility in accordance with
the Primary Intended Use of such Facility. Lessee shall devote the entirety of
each Facility and all Capital Additions to the Primary Intended Use, except for
areas reasonably required for office, storage space or ancillary service uses
incidental to the Primary Intended Use. Lessee shall not modify the services
offered or take any other action (e.g., removing patients or residents from a
Facility or directing patients or residents, or prospective patients or
residents, to another facility) if such modification of services or the taking
of such action would materially reduce Gross Revenues or the Fair Market Value
of any Facility. Lessee shall at all times maintain an adequate staff for the
service of its residents and/or patients, in each case assuming an occupancy
and/or use level for each Facility which is not less than the average occupancy
and/or use level for similar facilities in the State. Lessee shall employ its
best judgment, efforts and abilities to operate the entirety of each Facility in
such a manner so as to enhance the reputation and attractiveness of each
Facility.

                           7.2.4    Lessee shall conduct its business at each
Facility in conformity with the highest standards of patient or resident care
practice provided in similar facilities in the State.

                           7.2.5    Lessee shall not commit or suffer to be
committed any waste on the Leased Property and/or on or to any Capital Additions
or cause or permit any nuisance to exist thereon or with respect thereto.

                           7.2.6    Lessee shall neither suffer nor permit the
Leased Property, any Capital Additions, or any part(s) thereof, or Lessee's
Personal Property, to be used in such a manner as (i) might reasonably tend to
impair Lessor's title thereto or to any portion thereof or (ii) may make
possible a claim of adverse use or possession, or an implied dedication of the
Leased Property, any Capital Additions or any part(s) thereof.

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

                  7.3      Lessor to Grant Easements, etc. Lessor shall, from
time to time so long as no Event of Default has occurred and is continuing, at
the request of Lessee and at Lessee's cost and expense, but subject to the
approval of Lessor, which approval shall not be unreasonably withheld or delayed
(i) grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the

                                       26
<PAGE>

Leased Property; (iii) dedicate or transfer unimproved portions of the Leased
Property for road, highway or other public purposes; (iv) execute petitions to
have the Leased Property annexed to any municipal corporation or utility
district; (v) execute amendments to any covenants, conditions and restrictions
affecting the Leased Property; and (vi) execute and deliver to any Person any
instrument appropriate to confirm or effect such grants, releases, dedications
and transfers to the extent of its interest in the Leased Property, but only
upon delivery to Lessor of an Officer's Certificate stating that such grant
release, dedication, transfer, petition or amendment is not detrimental to the
proper conduct of the business of Lessee on the Leased Property and does not
materially reduce the value of the Leased Property. Except as set forth in
Section 36.1 with respect to granting monetary Encumbrances, or unless otherwise
requested by Lessee, Lessor shall not grant any easements or impose any
covenants, conditions or restrictions on the Leased Property without Lessee's
consent, which consent shall not be unreasonably withheld.

                  7.4      Preservation of Facility Value. Lessee acknowledges
that a fair return to Lessor on its investment in the Leased Property of each
Facility is dependent, in part, on the concentration on the Leased Property and
all Capital Additions of such Facility during the Term of the assisted living
facility and the core community business of Lessee and its Affiliates in the
geographical area of such Facility. Lessee further acknowledges that diversion
of residents and/or patients, as applicable, from any Facility to other
facilities or institutions and/or reemployment by Lessee of management or
supervisory personnel working at any Facility following the expiration or
earlier termination of this Lease at other facilities or institutions owned,
operated or managed, whether directly or indirectly, by Lessee or its Affiliates
could have a material adverse impact on the value and utility of the Leased
Property and all Capital Additions. Accordingly, Lessor and Lessee agree as
follows:

                           7.4.1    During the Term and for a period of one (1)
year thereafter, neither Lessee nor any of its Affiliates, directly or
indirectly, shall operate, own, manage or have any interest in or otherwise
participate in or receive revenues from any other facility or institution
providing services or goods similar to those provided in connection with any
Facility and its Primary Intended Use, within a ten (10) mile radius outward
from the outside boundary of such Facility. All distances shall be measured on a
straight line rather than on a driving distance basis. In the event that any
portion of such other facility or institution is located within such restricted
area the entire facility or institution shall be deemed located within such
restricted area. Without limiting Lessor's remedies, if Lessee should violate
the covenant contained in this Section during the Term of the Lease with respect
to the Victoria Facility, Lessor may, at its option, include the Gross Revenues
of such other facility or institution in such restricted area in the Gross
Revenues from the Victoria Facility for the purpose of computing Incremental
Gross Revenues hereunder for the Victoria Facility. If Lessor so elects, all of
the provisions of Article III hereof shall be applicable to all records
pertaining to such facility or institution. Notwithstanding the foregoing, this
Section 7.4.1 shall not apply to any of those facilities currently owned and/or
operated by Lessee or an Affiliate of Lessee located within such ten (10) mile
radius and set forth on Exhibit F hereto.

                           7.4.2    For a period of two (2) years following the
Term, neither Lessee nor any of its Affiliates shall, without the prior written
consent of Lessor, which consent may be

                                       27
<PAGE>

given or withheld in Lessor's sole discretion, hire, engage or otherwise employ
any management or supervisory personnel working solely on or solely in
connection with any Facility.

                           7.4.3    Except as required for medically appropriate
reasons and except as may be necessary in connection with a casualty, prior to
and after the expiration or earlier termination of this Lease with respect to
any or all of the Facilities, Lessee shall not recommend or solicit the removal
or transfer of more than ten (10) residents or patients from any Facility to any
other facility or institution in any Lease Year.

                                 ARTICLE VIII.

                  8.1      Compliance with Legal and Insurance Requirements,
Instruments, etc. Subject to Article XII regarding permitted contests, Lessee,
at its expense, shall promptly (i) comply with all Legal Requirements and
Insurance Requirements regarding the use, operation, maintenance, repair and
restoration of the Leased Property, Lessee's Personal Property and all Capital
Additions whether or not compliance therewith may require structural changes in
any of the Leased Improvements or any Capital Additions or interfere with the
use and enjoyment of the Leased Property and (ii) procure, maintain and comply
with all licenses, certificates of need, provider agreements and other
authorizations required for the use of the Leased Property, Lessee's Personal
Property and all Capital Additions for the applicable Primary Intended Use and
any other use of the Leased Property, Lessee's Personal Property and all Capital
Additions then being made, and for the proper erection, installation, operation
and maintenance of the Leased Property, Lessee's Personal Property and all
Capital Additions. If, after thirty (30) days of receiving notice from Lessor,
Lessee fails to comply with the provisions of this Section 8.1, Lessor may, but
shall not be obligated to, enter upon the Leased Property and all Capital
Additions and take such actions and incur such costs and expenses to effect such
compliance as it deems advisable to protect its interest in the Leased Property
and all Capital Additions, and Lessee shall reimburse Lessor for all costs and
expenses incurred by Lessor in connection with such actions. Lessee covenants
and agrees that the Leased Property, Lessee's Personal Property and all Capital
Additions shall not be used for any unlawful purpose.

                                  ARTICLE IX.

                  9.1      Maintenance and Repair.

                           9.1.1    Lessee, at its expense, shall maintain the
Leased Property, and every portion thereof, Lessee's Personal Property and all
Capital Additions, and all private roadways, sidewalks and curbs appurtenant to
the Leased Property, and which are under Lessee's control in good order and
repair whether or not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements or the age of the Leased Property, Lessee's
Personal Property and all Capital Additions, and, with reasonable promptness,
make all necessary and appropriate repairs thereto of every kind and nature,
including those necessary to comply with changes in any Legal Requirements,
whether interior or exterior, structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the Commencement Date. 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, any Capital

                                       28
<PAGE>

Additions, or any part(s) thereof for the Primary Intended Use. Lessor shall
assign to Lessee the benefit of any warranties relating to the Leased Property
to the extent such benefit may be assigned by Lessor without loss of the benefit
of the same to Lessor, and Lessor shall use reasonable efforts to assist Lessee
in enforcing any such warranties at no out-of-pocket cost to Lessor.

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

                           9.1.3    Nothing contained in this Lease and no
action or inaction by Lessor shall be construed as (i) constituting the consent
or request of Lessor, expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Leased
Property, any Capital Additions or any part(s) 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, any Capital Additions or any part(s)
thereof.

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

                  9.2      Encroachments, Restrictions, Mineral Leases, etc. If
any of the Leased Improvements or Capital Additions shall, at any time, encroach
upon any property, street or right-of-way, or shall violate any restrictive
covenant or other agreement affecting the Leased Property, any Capital Additions
or any parts thereof, or shall impair the rights of others under any easement or
right-of-way to which the Leased Property is subject, or the use of the Leased
Property or any Capital Additions is impaired, limited or interfered with by
reason of the exercise of the right of surface entry or any other provision of a
lease or reservation of any oil, gas, water or other minerals, then promptly
upon the request of Lessor, Lessee, at its sole cost and expense, but subject to
its right to contest the existence of any such encroachment, violation or
impairment, shall protect, indemnify, save harmless and defend Lessor from and
against all losses, liabilities, obligations, claims, damages, penalties, causes
of action, costs and expenses (including reasonable attorneys', consultants' and
experts' fees and expenses) based on or arising

                                       29
<PAGE>

by reason of any such encroachment, violation or impairment. In the event of an
adverse final determination with respect to any such encroachment, violation or
impairment by a court or regulatory authority having jurisdiction with respect
thereto, Lessee shall either (i) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee; or (ii) make such changes in the Leased Improvements and any Capital
Addition, and take such other actions, as Lessee in the good faith exercise of
its judgment deems reasonably practicable, to remove such encroachment or to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements or any Capital Addition, and in any event take all such
actions as may be necessary in order to be able to continue the operation of the
Leased Improvements and any Capital Addition for the Primary Intended Use
substantially in the manner and to the extent the Leased Improvements and
Capital Additions were operated prior to the assertion of such encroachment,
violation or impairment. Lessee's obligations under this Section 9.2 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and, to the extent the
recovery thereof is not necessary to compensate Lessor for any damages incurred
by any such encroachment, violation or impairment, Lessee shall be entitled to a
credit for any sums recovered by Lessor under any such policy of title or other
insurance.

                                   ARTICLE X.

                  10.1     Construction of Capital Additions and Other
Alterations to the Leased Property. Without the prior written consent of Lessor,
which consent may be given or withheld in Lessor's sole and absolute discretion,
Lessee shall not (a) make any Capital Additions on or structural alterations to
the Leased Property, (b) enlarge or reduce the size of any Facility or otherwise
materially alter or affect (other than repair and replacement thereof) any main
Facility systems, including any main plumbing, electrical or heating,
ventilating and air conditioning systems of any Facility and/or (c) make any
Capital Additions or other alterations which would tie in or connect with any
improvements on property adjacent to the Land. Lessee may, without Lessor's
prior written consent, make any alterations, additions, or improvements
(collectively, "alterations") to the Leased Property if such alterations are not
of the type described in either clause (a), (b) or (c) above, so long as in each
case: (i) the same do not (A) decrease the value of the Leased Property, (B)
affect the exterior appearance of the Leased Property, or (C) adversely affect
the structural components of the Leased Improvements or the main electrical,
mechanical, plumbing or ventilating and air conditioning systems for any
Facility, (ii) the same are consistent in terms of style, quality and
workmanship to the original Leased Improvements and Fixtures, (iii) the same are
constructed and performed in accordance with the provisions of Section 10.2
below and (iv) the cost thereof does not exceed, in the aggregate, $200,000.00
for any twelve (12) month period with respect to any single Facility. Any other
alterations (i.e., other than alterations described in clauses (a), (b) or (c)
above, and other than alterations which meet the foregoing requirements of
clauses (i), (ii), (iii) and (iv) above) shall be subject to Lessor's prior
written consent, which consent shall not be unreasonably withheld. To the extent
Lessor's prior written consent shall be required in connection with any
alterations or Capital Additions, Lessor may impose such conditions thereon in
connection with its approval thereof as Lessor in its sole but reasonable
judgment deems appropriate. Notwithstanding the foregoing, Lessor agrees that
painting, landscaping, and replacement of floor, wall and window coverings shall
be deemed

                                       30
<PAGE>

alterations which do not require Lessor's consent, regardless of the cost
thereof, so long as the same meet the requirements of clauses (ii) and (iii)
above.

                  10.2     Construction Requirements for all Alterations.
Whether or not Lessor's review and approval is required, for all Capital
Additions and other alterations of the Leased Property, the following shall
apply (except to the extent Lessor reasonably determines that, because of the
nature or extent of the alteration, any such requirement is not applicable):

                           (a)      Such construction shall not commence until
Lessee shall have procured and paid for all municipal and other governmental
permits and authorizations required therefor, and Lessor shall join in the
application for such permits or authorizations whenever such action is
necessary; provided, however, that (i) any such joinder shall be at no cost or
expense to Lessor; and (ii) any plans required to be filed in connection with
any such application which require the approval of Lessor as hereinabove
provided shall have been so approved by Lessor;

                           (b)      Such construction shall not, and Lessee's
licensed architect or engineer shall certify to Lessor that such construction
shall not, impair the structural strength of any component of the applicable
Facility or overburden the electrical, water, plumbing, HVAC or other building
systems of any such component;

                           (c)      Lessee's licensed architect or engineer
shall certify to Lessor that the detailed plans and specifications conform to
and comply with all Insurance Requirements and all applicable building,
subdivision and zoning codes, laws, ordinances, regulations and other Legal
Requirements imposed by all governmental authorities having jurisdiction over
the Leased Property;

                           (d)      Such construction shall, when completed, be
of such a character as not to decrease the value of the Leased Property as it
was immediately before such Capital Addition;

                           (e)      During and following completion of such
construction, the parking which is located in the applicable Facility or on the
Land relating to such Facility shall remain adequate for the operation of such
Facility for its Primary Intended Use and in no event shall such parking be less
than that which was or is required by law; provided, however, with Lessor's
prior consent and at no additional expense to Lessor, (i) to the extent
additional parking is not already a part of a Capital Addition, Lessee may
construct additional parking on the Land relating to such Facility; or (ii)
Lessee may acquire off-site parking to serve such Facility as long as such
parking shall be dedicated to, or otherwise made available to serve, such
Facility;

                           (f)      All work done in connection with such
construction shall be done promptly and in a good and workmanlike manner using
first-class materials and in conformity with all Legal Requirements;

                           (g)      Promptly following the completion of such
construction, Lessee shall deliver to Lessor "as built" drawings of such
addition, certified as accurate by the licensed architect or engineer selected
by Lessee to supervise such work; and

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<PAGE>

                           (h)      If by reason of the construction thereof, a
new or revised Certificate of Occupancy for any component of such Facility is
required, Lessee shall obtain and furnish a copy of the same to Lessor promptly
upon completion thereof.

                                  ARTICLE XI.

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

                                  ARTICLE XII.

                  12.1     Permitted Contests. Lessee, upon prior written notice
to Lessor, on its own or in Lessor's name, at Lessee's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any licensure or
certification decision, Imposition, Legal Requirement, Insurance Requirement,
lien, attachment, levy, encumbrance, charge or claim; subject, however, to the
further requirement that (i) in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Lessor and from the Leased Property or any Capital Additions; (ii) neither the
Leased Property nor any Capital Additions, the Rent therefrom nor any part or
interest in either thereof would be in any danger of being sold, forfeited,
attached or lost pending the outcome of such proceedings; (iii) in the case of a
Legal Requirement, neither Lessor nor Lessee would be in any danger of civil or
criminal liability for failure to comply therewith pending the outcome of such
proceedings; (iv) if any such contest shall involve a sum of money or potential
loss in excess of Fifty Thousand Dollars ($50,000), upon request of Lessor,
Lessee shall deliver to Lessor and its counsel an opinion of legal counsel
reasonably acceptable to Lessor to the effect set forth in clauses (i), (ii) and
(iii) above, to the extent applicable; (v) in the case of a Legal Requirement,
Imposition, lien, encumbrance or charge, Lessee shall give such reasonable
security as may be required by Lessor to insure ultimate payment of the same and
to prevent any sale or forfeiture of the Leased Property or any Capital
Additions or the Rent by reason of such nonpayment or noncompliance; and (vi) in
the case of an Insurance Requirement, the coverage required by Article XIII
shall be maintained. If any such contest is finally resolved against Lessor or
Lessee, Lessee shall promptly pay the amount required to be paid, together with
all interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or Insurance Requirement. Lessor, at Lessee's expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be

                                       32
<PAGE>

required in any such contest, and, if reasonably requested by Lessee or if
Lessor so desires, Lessor shall join as a party therein. The provisions of this
Article XII shall not be construed to permit Lessee to contest the payment of
Rent or any other amount payable by Lessee to Lessor hereunder. Lessee shall
indemnify, defend, protect and save Lessor harmless from and against any
liability, cost or expense of any kind that may be imposed upon Lessor in
connection with any such contest and any loss resulting therefrom.

                                 ARTICLE XIII.

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

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

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

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

                           13.1.4   Loss of rental value in an amount not less
than twelve (12) months' Rent payable hereunder or business interruption in an
amount not less than twelve (12) months of income and normal operating expenses
including payroll and Rent payable hereunder with an endorsement extending the
period of indemnity by at least ninety (90) days (Building Ordinance

                                       33
<PAGE>

- Increased Period of Restoration Endorsement) necessitated by the occurrence of
any of the hazards described in Sections 13.1.1, 13.1.2 or 13.1.3; and

                           13.1.5   (a) Bodily injury or property damage under a
policy of commercial general liability insurance (including broad form property
damage and broad form contractual liability) and (b) medical professional
liability, with amounts not less than Five Million and No/100 Dollars
($5,000,000.00) per occurrence and Twenty-Five Million and No/100 Dollars
($25,000,000) in the annual aggregate.

With respect to the insurance referenced in Section 13.1.5 (general liability
and medical professional liability), Lessee shall be permitted to use a claims
made policy form rather than an occurrence based policy form; provided, however,
that any such claims made policy must include therein the right to purchase a
"tail" that insures against so-called "incurred but not reported claims" for a
period of not less than two (2) years (or, if available, three (3) years)
following the expiration of such claims made policy. Upon the expiration of any
such claims made policy, Lessee shall either (i) purchase a two (2) year "tail"
policy covering any so-called "incurred but not reported claims" during the
prior policy period (or, if available, a three (3) year "tail" policy covering
any so-called "incurred but not reported claims") during the prior policy
period, or (ii) provide other insurance covering "incurred but not reported
claims" for such prior policy period for a period of not less than two (2) years
(or, if available, three (3) years) thereafter in form satisfactory to Lessor.

                  13.2     Replacement Cost. The term "replacement cost" shall
mean the actual replacement cost of the insured property from time to time with
new materials and workmanship of like kind and quality. If either party believes
that the replacement cost has increased or decreased at any time during the
Term, it shall have the right to have such replacement cost redetermined by an
impartial national insurance company reasonably acceptable to both parties (the
"impartial appraiser"). The party desiring to have the replacement cost so
redetermined shall forthwith, on receipt of such determination by the impartial
appraiser, give written notice thereof to the other party hereto. The
determination of the impartial appraiser shall be final and binding on the
parties hereto, and Lessee shall forthwith increase or decrease the amount of
the insurance carried pursuant to this Article to the amount so determined by
the impartial appraiser. Each party shall pay one-half (1/2) of the fee, if any,
of the impartial appraiser. If Lessee has made improvements to the Leased
Property, including any Capital Additions, Lessor may at Lessee's expense have
the replacement cost redetermined at any time after such improvements are made,
regardless of when the replacement cost was last determined.

                  13.3     Additional Insurance. In addition to the insurance
described above, Lessee shall maintain such additional insurance as may be
reasonably required from time to time by any Lessor and shall further at all
times maintain adequate workers' compensation coverage and any other coverage
required by Legal Requirements for all Persons employed by Lessee on the Leased
Property and any Capital Additions in accordance with Legal Requirements.

                  13.4     Waiver of Subrogation. All insurance policies carried
by either party covering the Leased Property and any Capital Additions and
Lessee's Personal Property including contents, fire and casualty insurance,
shall expressly waive any right of subrogation on

                                       34
<PAGE>

the part of the insurer against the other party. Each party waives any claims it
has against the other party to the extent such claim is covered by insurance.

                  13.5     Policy Requirements. All of the policies of insurance
referred to in this Article shall be written in form satisfactory to Lessor and
by insurance companies with a policyholder rating of "A" and a financial rating
of "X" in the most recent version of Best's Key Rating Guide. Additionally,
except as otherwise provided in this Lease, all of the insurance referred to in
this Article shall be on an occurrence (rather than a claims-made) basis. 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, shall deliver to Lessor's reasonable satisfaction,
evidence of renewal at least five (5) days prior to the expiration of the
existing policy), and in the event of the failure of Lessee either to effect
such insurance in the names herein called for or to pay the premiums therefor,
or to deliver such policies or certificates thereof to Lessor, at the times
required, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, in which event the cost thereof,
together with interest thereon at the Overdue Rate, shall be repayable to Lessor
upon demand therefor. Each insurer shall agree, by endorsement on the policy or
policies issued by it, or by independent instrument furnished to Lessor, that it
will give to Lessor thirty (30) days' written notice before the policy or
policies in question shall be materially altered, allowed to expire or canceled.
Each policy shall have a deductible or deductibles, if any, which are no greater
than those normally maintained for similar facilities in the State of similar
size, financial condition, resident mix and number; provided, however, that in
no event shall the deductibles for any medical professional liability policies
or general liability policies exceed the amounts set forth on Exhibit E attached
hereto and made a part hereof.

                  13.6     Increase in Limits. If either party shall at any time
believe the limits of the insurance required hereunder to be either excessive or
insufficient, the parties shall endeavor to agree in writing on the proper and
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section. If the parties shall be unable to
agree thereon, the proper and reasonable limits for such insurance to be carried
shall be determined by an impartial third party reasonably selected by Lessor
and Lessee. Nothing herein shall permit the amount of insurance to be reduced
below the amount or amounts required by any of the Facility Mortgagees.

                  13.7     Blanket Policies and Policies Covering Multiple
Locations. Notwithstanding anything to the contrary contained in this Article,
Lessee's obligations to carry the casualty insurance provided for herein may be
brought within the coverage of a blanket policy or policies of insurance carried
and maintained by Lessee; 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 for each Facility meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
otherwise satisfied. For any liability policies covering one or more of the
Facilities or any other facilities in addition to the Facilities, Lessor may
require excess limits as Lessor reasonably determines.

                  13.8     No Separate Insurance. Lessee shall not, on Lessee's
own initiative or pursuant to the request or requirement of any third party, (i)
take out separate insurance

                                       35
<PAGE>

concurrent in form or contributing in the event of loss with that required in
this Article to be furnished by, or which may reasonably be required to be
furnished by, Lessee or (ii) increase the amounts of any then existing insurance
by securing an additional policy or additional policies, unless all parties
having an insurable interest in the subject matter of the insurance, including
in all cases Lessor and all Facility Mortgagees, are included therein as
additional insured and the loss is payable under such insurance in the same
manner as losses are payable under this Lease. Lessee shall immediately notify
Lessor of the taking out of any such separate insurance or of the increasing of
any of the amounts of the then existing insurance by securing an additional
policy or additional policies.

                                  ARTICLE XIV.

                  14.1     Insurance Proceeds. All proceeds payable by reason of
any loss or damage to the Leased Property, any Capital Additions or any part(s)
or portion(s) thereof, under any policy of insurance required to be carried
hereunder shall be paid to Lessor and made available by Lessor to Lessee from
time to time for the reasonable costs of reconstruction or repair, as the case
may be, of any damage to or destruction of the Leased Property, any Capital
Additions or any part(s) or portion(s) thereof. Any excess proceeds of such
insurance remaining after the completion of (and payment for) the restoration or
reconstruction of the Leased Property and any Capital Additions (or in the event
neither Lessor nor Lessee is required or elects to repair and restore, all such
insurance proceeds) shall be retained by Lessor except as otherwise specifically
provided below in this Article XIV. All salvage resulting from any risk covered
by insurance shall belong to Lessor. If a Facility Mortgagee requires that any
insurance proceeds be applied towards the repayment of Lessor's debt (rather
than for restoration or reconstruction of the Leased Property and any Capital
Additions), then Lessor shall, furnish Lessee with the amount of funds which
otherwise would have been made available to Lessee but for such actions of such
Facility Mortgagee and such funds shall be used by Lessee for restoration or
reconstruction of the Leased Property and Capital Additions.

                  14.2     Insured Casualty.

                           14.2.1   If the Leased Property and/or any Capital
Additions of a Facility are damaged or destroyed from a risk covered by
insurance carried by Lessee such that such Facility thereby is rendered
Unsuitable for its Primary Intended Use, Lessee shall either (i) restore such
Leased Property and such Capital Additions to substantially the same condition
as existed immediately before such damage or destruction, or (ii) offer to
acquire the Leased Property of such Facility from Lessor for a purchase price
equal to the greater of (y) the Minimum Repurchase Price of such Facility or (z)
the Fair Market Value of such Facility immediately prior to such damage or
destruction. If Lessor does not accept Lessee's offer to so purchase the Leased
Property of such Facility within 45 days, Lessee may either withdraw such offer
and proceed to restore the Leased Property of such Facility to substantially the
same condition as existed immediately before such damage or destruction or
terminate the Lease with respect to such Facility in which event Lessor shall be
entitled to retain the insurance proceeds payable on account of such casualty.

                           14.2.2   If the Leased Property and/or any Capital
Additions of a Facility are damaged from a risk covered by insurance carried by
Lessee, but such Facility is not thereby

                                       36
<PAGE>

rendered Unsuitable for its Primary Intended Use, Lessee shall restore such
Leased Property and such Capital Additions to substantially the same condition
as existed immediately before such damage. Such damage shall not terminate this
Lease; provided, however, that if Lessee cannot within a reasonable time after
diligent efforts obtain the necessary government approvals needed to restore and
operate such Facility for its Primary Intended Use, Lessee may offer to purchase
the Leased Property of such Facility for a purchase price equal to the greater
of the Minimum Repurchase Price of such Facility or the Fair Market Value of
such Facility immediately prior to such damage. If Lessee shall make such offer
and Lessor does not accept the same within 45 days, Lessee may either withdraw
such offer and proceed to restore the Leased Property of such Facility to
substantially the same condition as existed immediately before such damage or
destruction, or terminate the Lease with respect to such Facility, in which
event Lessor shall be entitled to retain the insurance proceeds.

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

                           14.2.4   If Lessor accepts Lessee's offer to purchase
the Leased Property of a Facility, this Lease shall terminate as to such
Facility upon payment of the purchase price and Lessor shall remit to Lessee all
insurance proceeds pertaining to the Leased Property of such Facility received
by Lessor, including any amounts applied by a Facility Mortgagee to Lessor's
debt.

                  14.3     Uninsured Casualty. If the Leased Property and/or any
Capital Additions of a Facility are damaged or destroyed from a risk not covered
by insurance carried by Lessee and not required to be covered by insurance by
Lessee as provided herein, such that such Facility thereby is rendered
Unsuitable for its Primary Intended Use, Lessee shall either (i) restore such
Leased Property and such Capital Additions to substantially the same condition
as existed immediately before such damage or destruction, or (ii) offer to
acquire the Leased Property of such Facility from Lessor for a purchase price
equal to the greater of (y) the Minimum Repurchase Price of such Facility or (z)
the Fair Market Value of such Facility immediately prior to such damage or
destruction. If Lessor does not accept Lessee's offer to so purchase the Leased
Property of such Facility within 45 days, Lessee may either withdraw such offer
and proceed to restore the Leased Property of such Facility to substantially the
same condition as existed immediately before such damage or destruction or
terminate the Lease with respect to such Facility.

                           14.3.2   If the Leased Property and/or any Capital
Additions of a Facility are damaged from a risk not covered by insurance carried
by Lessee and not required to be covered by insurance by Lessee as provided
herein, but such Facility is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore such Leased Property and such Capital
Additions to substantially the same condition as existed immediately before such
damage. Such damage shall not terminate this Lease; provided, however, that if
Lessee cannot within a reasonable time after diligent efforts obtain the
necessary government approvals needed to restore and operate such Facility for
its Primary Intended Use, Lessee may offer to purchase

                                       37
<PAGE>

the Leased Property of such Facility for a purchase price equal to the greater
of the Minimum Repurchase Price of such Facility or the Fair Market Value of
such Facility immediately prior to such damage. If Lessee shall make such offer
and Lessor does not accept the same within 45 days, Lessee may either withdraw
such offer and proceed to restore the Leased Property of such Facility to
substantially the same condition as existed immediately before such damage or
destruction, or terminate the Lease with respect to such Facility.

                           14.3.3   If Lessor accepts Lessee's offer to purchase
the Leased Property of a Facility, this Lease shall terminate as to such
Facility upon payment of the purchase price.

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

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

                                  ARTICLE XV.

                  15.1     Condemnation.

                           15.1.1   Total Taking. If the Leased Property and any
Capital Additions of a Facility are totally and permanently taken by
Condemnation, this Lease shall terminate with respect to such Facility as of the
day before the Date of Taking.

                           15.1.2   Partial Taking. If a portion of the Leased
Property and any Capital Additions is taken by Condemnation, this Lease shall
remain in effect if such Facility is not thereby rendered Unsuitable for Its
Primary Intended Use (except that this Lease shall terminate with respect to the
portion of the Leased Property so taken), but if such Facility is thereby
rendered Unsuitable for its Primary Intended Use, this Lease shall terminate
with respect to such Facility as of the day before the Date of Taking. In the
event of any such partial taking in which the Lease is not so terminated and
such partial taking affects the building of such Facility (as opposed to
components of the Facility such as parking, landscaping, sidewalks, etc.),
Allocated Minimum Rent for such Facility shall be adjusted in a manner that is
fair, just and equitable to both Lessor and Lessee, based upon, among other
relevant factors, the loss of beds or units, if any, in such Facility.

                           15.1.3   Restoration. If there is a partial taking of
the Leased Property and any Capital Additions and this Lease remains in full
force and effect pursuant to Section 15.1.2, Lessor shall make available to
Lessee the portion of the Award necessary and specifically identified or
allocated for restoration of the Leased Property and any such Capital Additions
and Lessee shall accomplish all necessary restoration whether or not the amount
provided or allocated by the Condemnor for restoration is sufficient. If a
Facility Mortgagee requires that the entire Award or any portion thereof be
applied towards the repayment of Lessor's debt (rather than as set forth in this
Section 15.1.3), then Lessor shall furnish Lessee with the amount of

                                       38
<PAGE>

funds which otherwise would have been made available to Lessee pursuant to this
Section 15.1.3.

                           15.1.4   Award-Distribution. Subject to Section
15.1.3 above, the entire Award shall belong to and be paid to Lessor, except
that Lessee shall be entitled to receive from the Award, if and to the extent
such Award specifically includes such item, lost profits value and moving
expenses, provided, that in any event (except in the case of a partial
Condemnation) Lessor shall receive from the Award, subject to the rights of the
Facility Mortgagees, no less than the greater of the Fair Market Value of the
applicable Facility prior to the institution of the Condemnation or the Minimum
Repurchase Price of the applicable Facility. For a partial Condemnation, Lessor
shall receive the entire Award, subject to the rights of the Facility
Mortgagees, and subject to Section 15.1.3 above, and the "Minimum Repurchase
Price" of a Facility shall be reduced by the Award payable to Lessor (less any
portion of such Award made available by Lessor for restoration of such
Facility).

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

                           15.1.6   Sale Under Threat of Condemnation. A sale by
Lessor to any Condemnor, either under threat of Condemnation or while
Condemnation proceedings are pending, shall be deemed a Condemnation for
purposes of this Lease. Subject to Lessee's consent, which shall not be
unreasonably withheld, Lessor may, without any obligation to Lessee, agree to
sell and/or convey to any Condemnor all or any portion of the Leased Property
free from this Lease and the rights of Lessee hereunder without first requiring
that any action or proceeding be instituted or pursued to judgment.

                                  ARTICLE XVI.

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

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

                           (b)      a default shall occur under any New Lease
hereafter with or in favor of Lessor or any Affiliate of Lessor and made by or
with Lessee or any Affiliate of Lessee where the default is not cured within any
applicable grace period set forth therein;

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

                                       39
<PAGE>

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

                           (e)      except as otherwise specifically provided
for in this Section 16.1, if Lessee shall fail to observe or perform any other
term, covenant or condition of this Lease and such failure is not cured by
Lessee within thirty (30) days after notice thereof from Lessor, unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed to be an Event of Default if
Lessee proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof; provided, however, that such notice
shall be in lieu of and not in addition to any notice required under applicable
law;

                           (f)      Lessee or any Guarantor shall:

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

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

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

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

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

                           (g)      Lessee or any Guarantor shall be adjudicated
as bankrupt or a court of competent jurisdiction shall enter an order or decree
appointing, without the consent of Lessee, a receiver of Lessee or of the whole
or substantially all of its property, or approving a petition filed against it
seeking reorganization or arrangement of Lessee under the Federal bankruptcy
laws or any other applicable law or statute of the United States of America or
any state thereof, and such judgment, order or decree shall not be vacated or
set aside or stayed within sixty (60) days from the date of the entry thereof;

                           (h)      Lessee or any Guarantor shall be liquidated
or dissolved, or shall begin proceedings toward such liquidation or dissolution,
or shall, in any manner, permit the sale or divestiture of substantially all its
assets (except to the extent such a sale is expressly permitted hereunder);

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

                                       40
<PAGE>

                           (j)      any Transfer occurs in violation of the
provisions of Article XXIV;

                           (k)      any of the representations or warranties
made by Lessee or any Guarantor in the Contract of Acquisition, the Guaranty or
otherwise proves to be untrue when made in any material respect which materially
and adversely affects Lessor;

                           (l)      any Facility's applicable license or
third-party provider reimbursement agreements material to such Facility's
operation for its Primary Intended Use are at any time terminated or revoked or
suspended for more than twenty (20) consecutive days;

                           (m)      with respect to any Facility containing
skilled nursing beds, (i) any local, state or federal agency having jurisdiction
over the operation of any such Facility removes Ten Percent (10%) or more of the
patients or residents located in such Facility, (ii) any local, state or federal
agency having jurisdiction over any such Facility reduces the number of licensed
beds for such Facility by more than ten percent (10%) in the aggregate from that
number set forth on Exhibit B attached hereto, (iii) Lessee voluntarily reduces
the number of licensed beds for any Facility by more than five percent (5%) from
that number set forth on Exhibit B attached hereto (provided that Lessee shall
be permitted to voluntarily reduce the number of licensed beds for any Facility
by up to ten percent (10%) from that number set forth on Exhibit B attached
hereto if Lessee obtains Lessor's prior written approval, which approval shall
not be unreasonably withheld), or (iv) Lessee voluntarily removes from service
(so-called "bed banking") any licensed beds for any such Facility;

                           (n)      with respect to any Facility containing
assisted living units, any local, state or federal agency having jurisdiction
over the operation of any such Facility removes Ten Percent (10%) or more of the
patients or residents located in such Facility;

                           (o)      Lessee fails to give notice to Lessor not
later than ten (10) days after any notice, claim or demand from any governmental
authority or any officer acting on behalf thereof, of any material violation of
any Legal Requirement with respect to the operation of any Facility. For
purposes of this subsection (o) hereof, a "material violation" shall mean a
violation of any such Legal Requirement that is reasonably likely to (i) have a
material adverse effect on Lessee's operations in such Facility or (ii) impose
any liability on Lessor;

                           (p)      Lessee fails to cure or abate any material
violation (except for violations being contested by Lessee pursuant to Article
XII hereof) occurring during the Term that is claimed by any governmental
authority, or any officer acting on behalf thereof, of any law, order,
ordinance, rule or regulation pertaining to the operation of any Facility, and
within the time permitted by such authority for such cure or abatement. For
purposes of this subsection (p) hereof, a "material violation" shall mean a
violation of any such law, order, ordinance, rule or regulation that is
reasonably likely to (i) have a material adverse effect on Lessee's operations
in such Facility or (ii) impose any liability on Lessor;

                           (q)      Lessee fails to notify Lessor within
twenty-four (24) hours after receipt of any notice from any governmental agency
terminating or suspending or reflecting a material risk of imminent termination
or suspension, of any material license or certification relating to any
Facility;

                                       41
<PAGE>

                           (r)      any proceedings are instituted against
Lessee by any governmental authority which are reasonably likely to result in
(i) the revocation of any license granted to Lessee that is material to the
operation of any Facility, (ii) the decertification of any Facility from
participation in the Medicare or Medicaid reimbursement program if participation
in such programs is material to the operation of such Facility, or (iii) the
issuance of a stop placement order against Lessee;

                           (s)      any default and acceleration of any
indebtedness of borrowed money in excess of $100,000.00 of Lessee, Guarantor or
any Affiliate of Lessee or Guarantor has occurred;

                           (t)      any default shall occur under any Guaranty;
and

                           (u)      Lessee or its Affiliates, as applicable,
shall fail to comply with the provisions of Section 48.1 below.

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

                  16.3     Damages. The (i) termination of this Lease with
respect to any one or more (including all, if so elected by Lessor) of the
Facilities; (ii) repossession of the Leased Property of one or more (including
all, if so elected by Lessor) of the Facilities and Capital Additions of any
Facility; (iii) failure of Lessor, notwithstanding reasonable good faith
efforts, to relet the Leased Property of any Facility; (iv) reletting of all or
any portion of the Leased Property of any Facility; or (v) failure or inability
of Lessor to collect or receive any rentals due upon any such reletting, shall
not relieve Lessee of its liabilities and obligations hereunder, all of which
shall survive any such termination, repossession or reletting. If any such
termination occurs, Lessee shall forthwith pay to Lessor all Rent (including all
monthly Allocated Minimum Rent) due and payable with respect to the Leased
Property of each such Facility as to which this Lease has terminated to and
including the date of such termination. Thereafter, following any such
termination, Lessee shall forthwith pay to Lessor, at Lessor's option, as and
for liquidated

                                       42
<PAGE>

and agreed current damages for an Event of Default by Lessee with respect to
each Facility (including all, if applicable) as to which this Lease has been so
terminated, the sum of:

                           (a)      the worth at the time of award of the unpaid
Rent (including all monthly Allocated Minimum Rent) which had been earned at the
time of termination with respect to the terminated Facility,

                           (b)      the worth at the time of award of the amount
by which the unpaid Rent (including all monthly Allocated Minimum Rent) which
would have been earned after termination with respect to the terminated Facility
until the time of award exceeds the amount of such rental loss that Lessee
proves could have been reasonably avoided,

                           (c)      the worth at the time of award of the amount
by which the unpaid Rent (including all monthly Allocated Minimum Rent) for the
balance of the then current Term (not including any Extended Terms that have not
yet been exercised, but including any Extended Term which has been exercised but
has not yet commenced) after the time of award exceeds the amount of such rental
loss that Lessee proves could be reasonably avoided, plus

                           (d)      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 with respect to such Facility.

As used in clauses (a) and (b) above, the "worth at the time of award" shall be
computed by allowing interest at the Overdue Rate. As used in clause (c) above,
the "worth at the time of award" shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus One Percent (1%). For purposes of determining worth at the time of
the award for the Victoria Facility, the Victoria Additional Rent that would
have been payable for the remainder of the Term shall be deemed to be the
greater of (y) the Victoria Additional Rent for the then current Lease Year or,
if not determinable, the immediately preceding Lease Year; and (z) such other
amount as Lessor shall demonstrate could reasonably have been earned.

                  Alternatively, if Lessor does not elect to terminate this
Lease with respect to any one or more (including all, if applicable) Facilities,
then Lessee shall pay to Lessor, at Lessor's option, as and for agreed damages
for such Event of Default without termination of Lessee's right to possession of
the Leased Property and any Capital Additions or any portion thereof of such
Facility(ies), each installment of said Rent (including the monthly Allocated
Minimum Rent) and other sums payable by Lessee to Lessor under this Lease as the
same becomes due and payable with respect to the Leased Property of each such
Facility, together with interest at the Overdue Rate from the date when due
until paid, and Lessor may enforce, by action or otherwise, any other term or
covenant of this Lease.

                  16.4     Receiver. Upon the occurrence of an Event of Default,
and upon commencement of proceedings to enforce the rights of Lessor hereunder,
Lessor shall be entitled, as a matter of right, to the appointment of a receiver
or receivers acceptable to Lessor of the Leased Property and any Capital
Additions of the revenues, earnings, income, products and

                                       43
<PAGE>

profits thereof, pending the outcome of such proceedings, with such powers as
the court making such appointment shall confer.

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

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

                  16.7     Application of Funds. Any payments received by Lessor
under any of the provisions of this Lease during the existence or continuance of
any Event of Default which are made to Lessor rather than Lessee due to the
existence of an Event of Default (including all rentals received as a result of
any reletting) 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 in which
the applicable Facility is located.

                  16.8     Facility Operating Deficiencies. On notice or request
therefor by Lessor to Lessee, upon the occurrence of a Facility Operating
Deficiency with respect to a Facility specified with particularity in Lessor's
notice, and for a period equal to the greater of six (6) months or the time
necessary fully to remedy the Facility Operating Deficiency, Lessee shall engage
the services of a management company, unaffiliated with Lessee and approved by
Lessor, to assume responsibility for management of such Facility for the purpose
of taking all steps reasonably necessary to remedy the Facility Operating
Deficiency(ies). Pursuant to a written agreement among the management company,
Lessee and Lessor, the management company will have complete responsibility for
operation of such Facility, subject to Lessee's retaining only such power and
authority as shall be required by the State as the minimum level of power and
authority to be possessed by the licensed operator of a facility of the type of
such Facility in the State. The management company shall provide the following
services:

                           (a)      furnish an on-site, full-time licensed
administrator and controller approved by Lessor who shall be an employee of the
management company;

                                       44
<PAGE>

                           (b)      take all steps reasonably necessary to keep
such Facility fully licensed by the State, certified as a provider under
applicable government reimbursement programs and duly accredited by applicable
agencies and bodies;

                           (c)      perform all of Lessee's obligations
hereunder with respect to maintenance and repair of such Facility;

                           (d)      conduct at the onset of the management
company's engagement, and monthly thereafter, reviews and/or audits of
operations at such Facility in at least the following departments and services:
patient and resident care, activities and therapy, dietary, medical records,
drugs and medicines, supplies, housekeeping and maintenance, and report the
results of such reviews and/or audits in writing to Lessor no later than five
(5) days after the end of each calendar month;

                           (e)      immediately upon receipt thereof, deliver to
Lessor by overnight courier copies of all communications received from any
regulatory agency with respect to such Facility; and

                           (f)      with respect to the Facility Operating
Deficiency(ies) which gave rise to the request to Lessee to engage the
management company, prepare and deliver to Lessor within five (5) days after the
commencement of the management company's responsibilities at such Facility a
comprehensive written report of the nature and extent of the Facility Operating
Deficiency(ies) and advise Lessor orally by telephone no later than noon local
time on each Friday thereafter as to steps being taken by the management company
to remedy the same and the status of any threatened or actual governmental
administrative action with respect thereto.

                  The management company shall have complete access to such
Facility, its records, offices and facilities, in order that it may carry out
its duties. If Lessee shall fail to designate a management company acceptable to
Lessor within five (5) days after receipt of the notice of request therefor,
Lessor may designate such management company by further notice to Lessee. Lessee
shall be responsible for payment of all fees and expenses reasonably charged and
incurred by the management company in carrying out its duties, provided that the
management fee chargeable by a management company designated by Lessor, as
hereinabove provided, shall not exceed Seven Percent (7%) of such Facility's
Gross Revenues.

                  16.9     [Intentionally Omitted].

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

                           16.10.1  Lessee, as debtor, hereby grants to Lessor,
as secured party, a security interest and an express contractual lien upon all
of Lessee's right, title and interest in and to Lessee's Personal Property and
in and to the Intangible Property and any and all products,

                                       45
<PAGE>
rents, proceeds and profits thereof in which Lessee now owns or hereafter
acquires an interest or right, including any leased Lessee's Personal Property
(collectively, the "Collateral"); provided, however, that "Collateral" shall
not include Lessee's Trademarks or Lessee's Proprietary Software. This Lease
constitutes a security agreement covering all such Lessee's Personal Property
and the Intangible Property. The security interest granted to Lessor with
respect to Lessee's Personal Property in this Section 16.10 is intended by
Lessor and Lessee to be subordinate to any security interest granted in
connection with the financing or leasing of all or any portion of the Lessee's
Personal Property so long as the lessor or financier of such Lessee's Personal
Property agrees to give Lessor written notice of any default by Lessee under
the terms of such lease or financing arrangement, to give Lessor a reasonable
time following such notice to cure any such default and consents to Lessor's
written assumption of such lease or financing arrangement upon Lessor's curing
of any such defaults.

                  16.10.2  Lessee hereby authorizes Lessor to file such
financing statements, continuation statements and other documents as may be
necessary or desirable to perfect or continue the perfection of Lessor's
security interest in the Collateral. In addition, if required by Lessor at any
time during the Term, Lessee shall execute and deliver to Lessor, in form
reasonably satisfactory to Lessor, additional security agreements, financing
statements, fixture filings and such other documents as Lessor may reasonably
require to perfect or continue the perfection of Lessor's security interest in
the Collateral. In the event Lessee fails to execute any financing statement or
other documents for the perfection or continuation of Lessor's security
interest, Lessee hereby appoints Lessor as its true and lawful attorney-in-fact
to execute any such documents on its behalf, which power of attorney shall be
irrevocable and is deemed to be coupled with an interest.

                  16.10.3  Lessee will give Lessor at least thirty (30) days'
prior written notice of any change in Lessee's name, identity, jurisdiction of
organization or corporate structure. With respect to any such change, Lessee
will promptly execute and deliver such instruments, documents and notices and
take such actions, as Lessor deems necessary or desirable to create, perfect
and protect the security interests of Lessor in the Collateral.

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

                                 ARTICLE XVII.

                  17.1     Lessor's Right to Cure Lessee's Default. If Lessee
shall fail to make any payment or to perform any act required to be made or
performed hereunder within fifteen (15) days after written demand by Lessor
(except in case of emergencies), Lessor, without waiving or releasing any
obligation or default, may, but shall be under no obligation to, make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property and any
Capital Additions for such purpose and take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and

                                      46
<PAGE>

all costs and expenses, including reasonable attorneys' fees and expenses, so
incurred, together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by Lessor, shall be paid by
Lessee to Lessor on demand.

                                ARTICLE XVIII.

                  18.1     Purchase of the Leased Property. If Lessee purchases
the Leased Property of any Facility from Lessor pursuant to any provisions of
this Lease, Lessor shall, upon receipt from Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
Lessee an appropriate special or limited warranty deed conveying the entire
interest of Lessor in and to such Leased Property to Lessee free and clear of
all encumbrances other than (i) those that Lessee has agreed hereunder to pay
or discharge; (ii) those mortgage liens, if any, which Lessee has agreed in
writing to accept and to take title subject to; (iii) those liens and
encumbrances which were in effect on the date of conveyance of such Leased
Property to Lessor; and (iv) any other encumbrances permitted hereunder to be
imposed on such Leased Property. The difference between the applicable purchase
price and the total of the encumbrances assumed or taken subject to shall be
paid to Lessor or as Lessor may direct in immediately available funds. All
expenses of such conveyance, including the cost of title insurance, attorneys'
fees incurred by Lessor in connection with such conveyance and release,
transfer taxes and recording and escrow fees, shall be paid by Lessee.

                                 ARTICLE XIX.

                  19.1     Renewal Terms. Provided that no Event of Default has
occurred and is continuing, either at the date of exercise or upon the
commencement of an Extended Term (as hereunder defined), then Lessee shall have
the right to renew this Lease with respect to (a) the Leased Property of all
(but not less than all) of the Facilities other than the Victoria Facility,
and/or (b) the Leased Property of the Victoria Facility, for two (2) ten year
renewal terms (each an "Extended Term"), upon (i) giving written notice to
Lessor of such renewal not less than fifteen (15) months and not more than
eighteen (18) months prior to the expiration of the then applicable current
Term and (ii) delivering to Lessor concurrent with such notice a reaffirmation
of the Guaranty executed by Guarantor stating, in substance, that Guarantor's
obligations under the Guaranty shall extend to this Lease, as extended by the
applicable Extended Term. During each Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect except that
the annual Minimum Rent for and during such Extended Term shall be as set forth
in Article III above.

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

                  19.2     Lessor's Rights of Renewal and Early Termination. In
order to facilitate the transfer of the operations of the Facilities to a third
party and/or to locate a replacement lessee, Lessor shall have the one time
right with respect to each Facility to either (i) terminate this Lease with
respect to any Facility up to four (4) months early or (ii) extend the Term of
this

                                      47
<PAGE>

Lease with respect to such Facility for up to one (1) year. Such right of early
termination shall be exercised by Lessor, if at all, by written notice from
Lessor to Lessee given not less than sixty (60) days prior to the date Lessor
desires to terminate this Lease with respect to such Facility and stating the
date of such termination (which date shall not be earlier than four (4) months
prior to the expiration of the Term). In the event that Lessor shall exercise
such right of early termination within the time and in the manner herein
provided, this Lease shall terminate with respect to the specified Facility on
the date of termination specified in Lessor's notice. Such right of extension
shall be exercised by Lessor, if at all, by written notice from Lessor to
Lessee given not less than four (4) months prior to the expiration of the Term
and stating the date through which Lessor is extending the Term of this Lease
for such Facility (which date shall not be later than one (1) year after the
originally scheduled expiration date). In the event that Lessor shall exercise
such right of extension, all of the terms and conditions of this Lease shall
continue in full force and effect with respect to each Facility as to which
Lessor has elected to so extend the applicable Term pursuant to this Section
19.2, and Lessee shall continue to pay Rent applicable to such Facility for and
during such extension period at the same Allocated Minimum Rent and, if
applicable, Victoria Additional Rent, rates as were in effect upon the
expiration of the originally scheduled Term for such Facility; provided,
however, that Lessor shall have the right to terminate this Lease with respect
to such Facility during any such extension period upon not less than sixty (60)
days prior written notice to Lessee. In such event, this Lease, as previously
extended, shall terminate with respect to such Facility upon the date specified
in Lessor's notice of termination.

                                  ARTICLE XX.

                  20.1     Holding Over. Except as provided in Section 19.2, if
Lessee shall for any reason remain in possession of the Leased Property and/or
any Capital Additions of a Facility after the expiration or earlier termination
of the Term, such possession shall be as a month-to-month tenant during which
time Lessee shall pay as Rent for such Facility each month One Hundred Fifty
Percent (150%) of the sum of (i) monthly Allocated Minimum Rent applicable to
the prior Lease Year for such Facility, plus (ii) if such Facility is the
Victoria Facility, one-twelfth of the aggregate Victoria Additional Rent
payable applicable to the prior Lease Year with respect to such Facility,
together with all Additional Charges and all other sums payable by Lessee
pursuant to this Lease with respect to such Facility. During such period of
month-to-month tenancy, Lessee shall be obligated to perform and observe all of
the terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Leased Property and/or any
Capital Additions of such Facility. 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 XXI.

                  21.1     Letters of Credit. During the entire Term and for
sixty (60) days after the expiration or earlier termination of this Lease,
Lessee shall obtain one or more letters of credit totaling, in the aggregate,
the Letter of Credit Amount from one or more financial institution(s)
reasonably satisfactory to Lessor but in any event with (a) not less than $100
Million in net current assets, (b) a financial rating of not less than 60 as
rated by Sheshunoff Information

                                      48
<PAGE>

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

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

                  21.3     Uses of Letters of Credit. Lessor shall have the
right to draw upon a letter of credit up to its full amount whenever (a) an
Event of Default hereunder has occurred, (b) an event of default beyond
applicable notice and cure periods under any other lease or agreement between
Lessor or an Affiliate of Lessor and Lessee or an Affiliate of Lessee or under
any other letter of credit, guaranty, mortgage, deed of trust, or other
instrument now or hereafter executed by Lessee or an Affiliate of Lessee in
favor of Lessor or an Affiliate of Lessor has occurred or (c) an event or
circumstance has occurred which with notice or passage of time, or both, would
constitute an Event of Default hereunder or an event of default under any such
other lease, agreement, letter of credit, guaranty, mortgage, deed of trust or
other instrument, but for the fact that transmittal of such notice is barred by
applicable debtor relief law. In addition, if Lessee

                                      49
<PAGE>

fails to obtain a satisfactory letter of credit (or renewal of an existing
letter of credit) prior to the applicable Letter of Credit Date, Lessor may
draw upon the full amount of the then existing letter of credit without giving
any notice or time to cure to Lessee. No such draw shall (i) cure or constitute
a waiver of an Event of Default, (ii) be deemed to fix or determine the amounts
to which Lessor is entitled to recover under this Lease or otherwise, or (iii)
be deemed to limit or waive Lessor's right to pursue any remedies provided for
in this Lease. If all or any portion of a letter of credit is drawn against by
Lessor, Lessee shall, within two (2) business days after demand by Lessor,
cause the issuer of such letter of credit to issue Lessor, at Lessee's expense,
a replacement or supplementary letter of credit in substantially the form
attached hereto as Exhibit D such that at all times during the Term, Lessor
shall have the ability to draw on one or more letters of credit totaling, in
the aggregate, the amount required pursuant to Section 21.1.

                  21.4     Reduction in Letter of Credit Amount. If Lessee
purchases any Facility, or if this Lease is terminated or expires with respect
to any Facility (other than by reason of an Event of Default), the Letter of
Credit Amount shall be reduced by an amount equal to the product of (a) the
then existing Letter of Credit Amount, times (b) a fraction, the numerator of
which is the then existing Allocated Minimum Rent for the Facility being
purchased by Lessee or for which this Lease has been terminated or expired, as
applicable, and if applicable, the Victoria Additional Rent, and the
denominator of which is the then existing total Minimum Rent payable for all
Facilities (including the Facility being purchased by Lessee, or the Facility
with respect to which this Lease has been terminated or expired) and, if
applicable, the Victoria Additional Rent.

                  21.5     Treatment of Funds Drawn Under Letters of Credit. If
Lessor draws upon a letter of credit and the amount drawn exceeds the damages
or losses that Lessor has suffered or reasonably expects to suffer by reason of
the Event of Default or other reason, then Lessor shall remit such excess to
Lessee upon the first to occur (i) the date the amount of damages to which
Lessor is entitled to recover on account of such Event of Default or otherwise
is determined, whether by a final, non-appealable judgment of a court or
arbitrator of competent jurisdiction or by a written settlement executed Lessor
and Lessee or (ii) the receipt by Lessor of the replacement or supplementary
letter of credit provided for in Section 21.3 above. Upon written request from
Lessee, Lessor shall certify in writing to the issuer of the replacement or
supplementary letter of credit provided for in Section 21.3 to the effect that,
upon receipt by Lessor of such replacement or supplementary letter of credit,
Lessor shall deliver to such issuer any such excess drawing under the letter of
credit(s) for which such replacement or supplementary letter of credit is being
delivered.

                                 ARTICLE XXII.

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

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<PAGE>

                                ARTICLE XXIII.

                  23.1     General Indemnification. In addition to the other
indemnities contained herein, and notwithstanding the existence of any
insurance carried by or for the benefit of Lessor or Lessee, and without regard
to the policy limits of any such insurance, Lessee shall protect, indemnify,
save harmless and defend Lessor from and against all liabilities, obligations,
claims, damages penalties, causes of action, costs and expenses, including
reasonable attorneys', consultants' and experts' fees and expenses, imposed
upon or incurred by or asserted against Lessor by reason of: (i) any accident,
injury to or death of Persons or loss of or damage to property occurring on or
about the Leased Property, or any Capital Additions or adjoining sidewalks
thereto; (ii) any use, misuse, non-use, condition, maintenance or repair by
Lessee of the Leased Property or any Capital Additions; (iii) any failure on
the part of Lessee to perform or comply with any of the terms of this Lease;
(iv) the non-performance of any of the terms and provisions of any and all
existing and future subleases of the Leased Property or any Capital Additions
to be performed by any party thereunder; (v) any claim for malpractice,
negligence or misconduct committed by any Person on or working from the Leased
Property or any Capital Additions; and (vi) the violation of any Legal
Requirement. Any amounts which become payable by Lessee under this Article
shall be paid within ten (10) days after liability therefor is determined by
litigation or otherwise, and if not timely paid shall bear interest at the
Overdue Rate from the date of such determination to the date of payment.
Lessee, at its sole cost and expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against Lessor or may
compromise or otherwise dispose of the same as Lessee sees fit; provided,
however, that any legal counsel selected by Lessee to defend Lessor shall be
reasonably satisfactory to Lessor. All indemnification covenants are intended
to apply to losses, damages, injuries, claims, etc. incurred directly by the
indemnified parties and their property, as well as by the indemnifying party or
third party, and their property. For purposes of this Article XXIII, any acts
or omissions of Lessee, or by employees, agents, assignees, contractors,
subcontractors or others acting for or on behalf of Lessee (whether or not they
are negligent, intentional, willful or unlawful), shall be strictly
attributable to Lessee. It is understood and agreed that payment shall not be a
condition precedent to enforcement of the foregoing indemnification
obligations.

                                 ARTICLE XXIV.

         24.1     Transfers.

                  24.1.1   Prohibition. Lessee shall not, without Lessor's prior
written consent, which may be withheld in Lessor's sole and absolute discretion,
either directly or indirectly or through one or more step transactions or tiered
transactions, voluntarily or by operation of law, (i) assign, convey, sell,
pledge, mortgage, hypothecate or otherwise encumber, transfer or dispose of all
or any part of this Lease or Lessee's leasehold estate hereunder, (ii) Master
Sublease all or any part of the Leased Property and/or any Capital Additions of
such Facility, (iii) engage the services of any Person for the management or
operation of all or any part of the Leased Property and/or any Capital Additions
of such Facility, (iv) convey, sell, assign, transfer or dispose of any stock or
partnership, membership or other interests (whether equity or otherwise) in
Lessee (which shall include any conveyance, sale, assignment, transfer or
disposition of any stock or partnership, membership or other interests (whether
equity or

                                      51
<PAGE>
otherwise) in any Controlling Person(s)), if such conveyance, sale, assignment,
transfer or disposition results, directly or indirectly, in a change in control
of Lessee (or in any Controlling Person(s)), (v) dissolve, merge or consolidate
Lessee (which shall include any dissolution, merger or consolidation of any
Controlling Person) with any other Person, if such dissolution, merger or
consolidation, directly or indirectly, results in a change in control of Lessee
or in any Controlling Person(s), (vi) sell, convey, assign, or otherwise
transfer all or substantially all of the assets of Lessee (which shall include
any sale, conveyance, assignment, or other transfer of all or substantially all
of the assets of any Controlling Person(s)), (vii) sell, convey, assign, or
otherwise transfer any of the assets of Lessee (which shall include any sale,
conveyance, assignment, or other transfer of any of the assets of any
Controlling Person) if the Consolidated Net Worth of Lessee (or such Controlling
Person, as the case may be) immediately following such transaction is not at
least equal to seventy-five percent (75%) of the Consolidated Net Worth of
Lessee (or such Controlling Person) immediately prior to such transaction, or
(viii) enter into or permit to be entered into any agreement or arrangement to
do any of the foregoing or to grant any option or other right to any Person to
do any of the foregoing (each of the aforesaid acts referred to in clauses (i)
through (viii) being referred to herein as a "Transfer"). Any Commercial
Occupancy Arrangement with respect to more than Ten Percent (10%) of any
Facility in the aggregate to any Person and/or its Affiliates, directly or
indirectly, or through one or more step transactions or tiered transactions,
shall be deemed to be a "Master Sublease" hereunder. Notwithstanding anything
herein to the contrary, Lessee may enter into (a) non-Commercial Occupancy
Arrangements with residents or patients of any facility, and (b) any Commercial
Occupancy Arrangement that does not constitute a Master Sublease with respect to
any Facility (provided that all such Commercial Occupancy Arrangements comply
with Sections 24.1.3 and 24.1.7 herein), all without Lessor's consent, and such
actions shall not be considered a "Transfer" hereunder (but shall constitute a
"Transfer" for purposes of Section 24.1.7). For any Commercial Occupancy
Arrangement transaction not requiring the consent of Lessor hereunder (i.e., a
Commercial Occupancy Arrangement not constituting a Master Sublease), Lessee
shall, within ten (10) days of entering into any such Commercial Occupancy
Arrangement, notify Lessor of the existence of such Commercial Occupancy
Arrangement and the identity of the Occupant and supply Lessor with a copy of
the agreement relating to such Commercial Occupancy Arrangement and any other
related documentation, materials or information reasonably requested by Lessor.

         24.1.2   Consent and Transfer Consideration.

                  24.1.2.1 Prior to any Transfer, Lessee shall first notify
Lessor of its desire to do so and shall submit in writing to Lessor: (i) the
name of the proposed Occupant, assignee, manager or other transferee; (ii) the
terms and provisions of the Transfer, including any agreements in connection
therewith; and (iii) such financial information as Lessor reasonably may
request concerning the proposed Occupant, assignee, manager or other
transferee. Lessor may, as a condition to granting such consent, which consent
may be given or withheld in the sole and absolute discretion of Lessor, and in
addition to any other conditions imposed by Lessor, require that the
obligations of any Occupant, assignee, manager or other transferee which is an
Affiliate of another Person be guaranteed by its parent or Controlling Person
and that any Guaranty of this Lease be reaffirmed by any Guarantor
notwithstanding such Transfer.

                                      52
<PAGE>

                  24.1.2.2 In connection with any Transfer, Lessor shall be
entitled to receive the applicable Transfer Consideration.

                  24.1.2.3 The consent by Lessor to any Transfer shall not
constitute a consent to any subsequent Transfer or to any subsequent or
successive Transfer. Any purported or attempted Transfer contrary to the
provisions of this Article shall be void and, at the option of Lessor, shall
terminate this Lease.

                  24.1.3   Attornment and Related Matters. Any Commercial
Occupancy Arrangement (whether or not the same constitutes a Master Sublease)
shall be expressly subject and subordinate to all applicable terms and
conditions of this Lease and provide that upon the expiration or earlier
termination of this Lease Lessor, at its option and without any obligation to
do so, may require any Occupant to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee, as sublessor, licensor or otherwise
under such Commercial Occupancy Arrangement from the time of the exercise of
such option to the termination of such Commercial Occupancy Arrangement;
provided, however, that in such case Lessor shall not be liable for any prepaid
rents, fees or other charges or for any prepaid security deposits paid by such
Occupant to Lessee or for any other prior defaults of Lessee under such
Commercial Occupancy Arrangement. In the event that Lessor shall not require
such attornment with respect to any Commercial Occupancy Arrangement, then such
Occupancy Arrangement shall automatically terminate upon the expiration or
earlier termination of this Lease, including any early termination by mutual
agreement of Lessor and Lessee. In addition, any such Commercial Occupancy
Arrangement shall provide that in the event that the Occupant or other
transferee receives a written notice from Lessor stating that an Event of
Default has occurred, or that an event or circumstance has occurred which with
notice or passage of time, or both, would constitute an Event of Default
hereunder, but for the fact that the transmittal of such notice is barred by
applicable debtor relief law, such Occupant or other transferee thereafter
shall without further consent or instruction of Lessee pay all rentals accruing
under such Commercial Occupancy Arrangement directly to Lessor or as Lessor may
direct; provided however that (i) as and to the extent that the amounts so paid
to Lessor, together with other amounts paid to or received by Lessor on account
of this Lease, exceed the amounts then due Lessor from Lessee under this Lease,
the excess shall be promptly remitted to Lessee, and (ii) at such time as the
Event of Default has been cured and this Lease reinstated (if ever), Lessor
shall notify and direct the Occupant(s) in writing to resume making payments of
rentals under their Commercial Occupancy Arrangement(s) directly to Lessee or
as Lessee may direct. Any such rentals collected from such Occupant or other
transferee by Lessor shall be credited against the amounts owing by Lessee
under this Lease in such order of priority as Lessor shall reasonably
determine. Furthermore, any Commercial Occupancy Arrangement or other agreement
regarding a Transfer shall expressly provide that the Occupant, assignee,
manager or other transferee shall furnish Lessor with such financial,
operational and other information about the physical condition of the
applicable Facility, including the information required by Section 25.1.2
herein, as Lessor may request from time to time. Notwithstanding the foregoing,
Lessor acknowledges that the Commercial Occupancy Arrangements set forth on
Exhibit G currently exist and do not include the provisions required by this
Section 24.1.3; provided, however, that if any such Commercial Occupancy
Arrangements are modified or amended, then the provisions required by this
Section 24.1.3 shall be included in such modification or amendment; and
provided further that nothing herein shall be construed to relieve Lessee of
its obligation under the Contract of Acquisition to

                                      53
<PAGE>

use best efforts to obtain a subordination agreement, in form and substance
satisfactory to Lessor, for the First Union License (as defined in the Contract
of Acquisition), all as more particularly set forth therein.

                  24.1.4   Assignment of Lessee's Rights Against Occupant Under
a Master Sublease. If Lessor shall consent to a Master Sublease, then the
written instrument of consent, executed and acknowledged by Lessor, Lessee and
the Occupant thereunder, shall contain a provision substantially similar to the
following:

                           (i)      Lessee and such Occupant hereby agree that,
         if such Occupant shall be in default of any of its obligations under
         the Master Sublease, which default also constitutes an Event of
         Default by Lessee under this Lease, then Lessor shall be permitted to
         avail itself of all of the rights and remedies available to Lessee
         against such Occupant in connection therewith.

                           (ii)     Without limiting the generality of the
         foregoing, Lessor shall be permitted (by assignment of a cause of
         action or otherwise) to institute an action or proceeding against such
         Occupant in the name of Lessee in order to enforce Lessee's rights
         under the Master Sublease, and also shall be permitted to take all
         ancillary actions (e.g., serve default notices and demands) in the
         name of Lessee as Lessor reasonably shall determine to be necessary.

                           (iii)    Lessee agrees to cooperate with Lessor, and
         to execute such documents as shall be reasonably necessary, in
         connection with the implementation of the foregoing rights of Lessor.

                           (iv)     Lessee expressly acknowledges and agrees
         that the exercise by Lessor of any of the foregoing rights and
         remedies shall not constitute an election of remedies, and shall not
         in any way impair Lessor's entitlement to pursue other rights and
         remedies directly against Lessee.

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

                  24.1.6   No Release of Lessee's Obligations. No Transfer
shall relieve Lessee of its obligation to pay the Rent and to perform all of
the other obligations to be performed by Lessee hereunder. The liability of
Lessee named herein and any immediate and remote successor in interest of
Lessee (i.e., by means of any Transfer), and the due performance of the
obligations of this Lease on Lessee's part to be performed or observed, shall
not in any way be discharged, released or impaired by any (i) agreement which
modifies any of the rights or obligations of the parties under this Lease, (ii)
stipulation which extends the time within which an obligation under this Lease
is to be performed, (iii) waiver of the performance of an obligation required
under this Lease, or (iv) failure to enforce any of the obligations set forth
in this Lease. If any Occupant, assignee, manager or other transferee defaults
in any performance due hereunder, Lessor may proceed directly against the
Lessee named herein and/or any

                                      54
<PAGE>

immediate and remote successor in interest of Lessee without exhausting its
remedies against such Occupant, assignee, manager or other transferee.

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

                  24.1.8   Transfers In Bankruptcy. In the event of a Transfer
pursuant to the provisions of the Bankruptcy Code, all consideration payable or
otherwise to be delivered in connection with such Transfer shall be paid or
delivered to Lessor, shall be and remain the exclusive property of Lessor and
shall not constitute property of Lessee or of the estate of Lessee within the
meaning of the Bankruptcy Code. Any consideration constituting Lessor's
property pursuant to the immediately preceding sentence and not paid or
delivered to Lessor shall be held in trust for the benefit of Lessor and be
promptly paid or delivered to Lessor. For purposes of this Section 24.1.8, the
term "consideration" shall mean and include money, services, property and any
other thing of value such as payment of costs, cancellation or forgiveness of
indebtedness, discounts, rebates, barter and the like. If any such
consideration is in a form other than cash (such as in kind, equity interests,
indebtedness earn-outs, or other deferred payments, consulting or management
fees, etc.), Lessor shall be entitled to receive in cash the then present fair
market value of such consideration.

                  24.1.9   Public Trading of ARC Stock. So long as the common
stock of ARC is listed for trading on the American Stock Exchange or the New
York Stock Exchange or authorized for quotation on the NASDAQ National Market,
the transfer or exchange of such stock over such exchange or market shall not
be deemed a Transfer hereunder unless the same (whether in one transaction or
in any step or series of transactions) results, directly or indirectly, in a
change in control of Lessee or such Controlling Person(s) (including pursuant
to a tender or similar offer to acquire the outstanding and issued securities
of Lessee or such Controlling Person(s)).

                                      55
<PAGE>

                                 ARTICLE XXV.

         25.1     Officer's Certificates and Financial Statements.

                  25.1.1   Officer's Certificate. At any time and from time to
time upon Lessee's receipt of not less than ten (10) days' prior written
request by Lessor, Lessee shall furnish to Lessor an Officer's Certificate
certifying (i) that this Lease is unmodified and in full force and effect, or
that this Lease is in full force and effect as modified and setting forth the
modifications; (ii) the dates to which the Rent has been paid; (iii) whether or
not, to the best knowledge of Lessee, Lessor is in default in the performance
of any covenant, agreement or condition contained in this Lease and, if so,
specifying each such default of which Lessee may have knowledge; and (iv)
responses to such other questions or statements of fact as Lessor, any ground
or underlying lessor, any purchaser or any current or prospective Facility
Mortgagee shall reasonably request. Lessee's failure to deliver such statement
within such time shall constitute an acknowledgment by Lessee that (x) this
Lease is unmodified and in full force and effect except as may be represented
to the contrary by Lessor; (y) Lessor is not in default in the performance of
any covenant, agreement or condition contained in this Lease; and (z) the other
matters set forth in such request, if any, are true and correct. Any such
certificate furnished pursuant to this Article may be relied upon by Lessor and
any current or prospective Facility Mortgagee, ground or underlying lessor or
purchaser of the Leased Property or any portion thereof.

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

                  (a)      within 120 days after the end of Lessee's and ARC's
fiscal years, (i) a copy of the unaudited balance sheets of Lessee and ARCPI
and audited consolidated balance sheets of ARC and its consolidated
Subsidiaries as of the end of such fiscal year, (ii) related audited
consolidated statements of income, changes in common stock and other
stockholders' equity and changes in the financial position of ARC and its
consolidated Subsidiaries for such fiscal year, and (iii) related unaudited
statements of income, changes in common stock and other stock holders' equity
and changes in the financial position of Lessee and ARCPI (if any), prepared in
accordance with GAAP applied on a basis consistently maintained throughout the
period involved (such consolidated financial statements of ARC to be certified
by nationally recognized certified public accountants);

                  (b)      within 120 days after the end of each of Lessee's
and Guarantor's fiscal years, and together with the annual audit report
furnished in accordance with clause (a) above, an Officer's Certificate stating
that to the best of the signer's knowledge and belief after making due inquiry,
Lessee is not in default in the performance or observance of any of the terms
of this Lease, or if Lessee shall be in default, specifying all such defaults,
the nature thereof, and the steps being taken to remedy the same;

                  (c)      within thirty (30) days after the end of each of the
first twelve (12) months of the Term and the last eighteen (18) months of the
Term, all consolidated financial reports that Lessor may reasonably request
containing, among other things, detailed statements of income and detailed
operational statistics regarding occupancy rates, patient and resident mix

                                      56
<PAGE>

and patient and resident rates by type for each Facility; and otherwise within
thirty (30) days after the end of each of Lessee's quarters, all quarterly
consolidated financial reports Lessee may reasonably request containing, among
other things, detailed statements of income and detailed operational statistics
regarding occupancy rates, patient and resident mix and patient and resident
rates by type for each Facility;

                  (d)      within thirty (30) days after filing, a copy of each
cost report filed with the appropriate governmental agency for each Facility;

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

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

                  (g)      [intentionally omitted];

                  (h)      immediately upon Lessee's receipt thereof, copies of
all claims, reports, complaints, notices, warnings or asserted violations
relating in any way to the Leased Property or any Capital Additions or Lessee's
use thereof; and

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

                  25.1.3   Charges. Lessee acknowledges that the failure to
furnish Lessor with any of the certificates or statements required by this
Article XXV will cause Lessor to incur costs and expenses not contemplated
hereunder, the exact amount of which is presently anticipated to be extremely
difficult to ascertain. Accordingly, if Lessee fails to furnish Lessor with any
of the certificates or statements required by this Article XXV more than two
(2) times in any given Lease Year, Lessee shall pay to Lessor, as an Additional
Charge, upon demand $1,000 for each subsequent failure to provide any of such
certificates or statements occurring in such Lease Year. The parties agree that
this charge represents a fair and reasonable estimate of

                                      57
<PAGE>

the costs that Lessor will incur by reason of Lessee's failure to furnish
Lessor with such certificates and statements.

                                 ARTICLE XXVI.

         26.1     Lessor's Right to Inspect and Show the Leased Property and
Capital Additions. Lessee shall permit Lessor and its authorized
representatives, upon reasonable prior notice, to (i) inspect the Leased
Property and any Capital Additions and (ii) exhibit the same to prospective
purchasers and lenders, and during the last twelve (12) months of the Term
applicable to each portion of the Leased Property and Capital Additions, to
prospective lessees or managers, in each instance during usual business hours
and subject to any reasonable security, health, safety or confidentiality
requirements of Lessee or any Legal Requirement or Insurance Requirement.
Lessee shall cooperate with Lessor in exhibiting the Leased Property and any
Capital Additions to prospective purchasers, lenders, lessees and managers.

                                ARTICLE XXVII.

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

                                ARTICLE XXVIII.

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

                                 ARTICLE XXIX.

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

                                 ARTICLE XXX.

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

                                      58
<PAGE>

                                 ARTICLE XXXI.

         31.1     Conveyance by Lessor. Lessor may, without the consent or
approval of Lessee, sell, transfer, assign, convey or otherwise dispose of any
or all of the Leased Property, subject, however, to this Lease. If Lessor or
any successor owner of the Leased Property shall sell, transfer, assign, convey
or otherwise dispose of the Leased Property other than as security for a debt
and if Lessor delivers all letters of credit to such transferee, Lessor or such
successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Lessor with respect to such Leased
Property under this Lease arising or accruing from and after the date of such
sale, transfer, assignment or other disposition and all such future liabilities
and obligations with respect to such Leased Property shall thereupon be binding
upon such purchaser, grantee, assignee or transferee. In the event of any such
sale, transfer, assignment, conveyance or other disposition (other than as
security for a debt) of less than all of the Leased Property then subject to
this Lease, the provisions of Section 31.2 hereof shall apply.

         31.2     New Lease. Lessor shall have the right, at any time and from
time to time during the Term for any purpose, by written notice to Lessee, to
require Lessee to execute an amendment to this Lease whereby the Leased
Property of one or more Facilities (individually, a "Separated Property" or
collectively, the "Separated Properties") is separated and removed from this
Lease, and to simultaneously execute a substitute lease with respect to such
Separated Property(ies), in which case:

                  31.2.1   Lessor and Lessee shall execute a new lease (the
"New Lease") for such Separated Property(ies), effective as of the date
specified in Section 31.2.3 below (the "New Lease Effective Date"), in the same
form and substance as this Lease, but with such changes thereto as necessary to
reflect the separation of the Separated Property(ies) from the balance of the
Leased Property, including specifically the following:

                  (a)      The total monthly Minimum Rent payable under such
New Lease shall be the total applicable monthly Allocated Minimum Rent with
respect to such Separated Property(ies);

                  (b)      All Minimum Rent rental escalations under the New
Lease shall be at the times and in the amounts set forth in this Lease for
Minimum Rent increases;

                  (c)      If such Separated Property(ies) includes the
Victoria Facility, the "Additional Rent" payable under such New Lease shall be
the Victoria Additional Rent; and

                  (d)      The New Lease shall provide that the lessee
thereunder shall be responsible for the payment, performance and satisfaction
of all duties, obligations and liabilities arising under this Lease, insofar as
they relate to the Separated Property(ies), that were not paid, performed and
satisfied in full prior to the effective date of the New Lease (and Lessee
under this Lease shall also be responsible for the payment, performance and
satisfaction of the aforesaid duties, obligations and liabilities not paid,
performed and satisfied in full prior to the effective date of such New Lease).

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                  31.2.2   Lessor and Lessee shall also execute an amendment to
this Lease effective as of the New Lease Effective Date reflecting the
separation of the Separated Property(ies) from the balance of the Leased
Property and making such modifications to this Lease as are necessitated
thereby.

                  31.2.3   In the case of any New Lease that is entered into in
accordance with this Section 31.2 such New Lease shall be effective on the date
which is the earlier of (i) the date the New Lease is fully executed and
delivered by the parties thereto and (ii) the date specified in the written
notice from Lessor to Lessee requiring a New Lease as described above, which
date shall be no sooner than ten (10) days after the date such notice is
issued.

                  31.2.4   The amendment contemplated in Section 31.2.2 above
and the New Lease shall be such that the obligations of the lessees under this
Lease (as amended) and the New Lease shall not be greater or less than the
obligations of Lessee under this Lease (prior to such amendment) and the rights
and entitlements of such lessees under this Lease (as amended) and the New
Lease shall not be less than the rights and entitlements of Lessee under this
Lease (prior to such amendment).

                  31.2.5   Lessee's obligation to provide letters of credit in
accordance with Article 21 of this Lease shall be segregated so that (a) the
applicable Lessee shall be required to provide a letter of credit pursuant to
the New Lease, on the same terms and conditions as set forth in this Lease,
except that "Letter of Credit Amount" under the New Lease shall mean an amount
equal to the then existing Letter of Credit Amount under this Lease (prior to
the amendment contemplated in Section 31.2.2 above), times a fraction, the
numerator of which is the then existing annual Allocated Minimum Rent for the
Separated Propert(ies), and the denominator of which is the then existing total
annual Minimum Rent payable for all Facilities (including the Separated
Propert(ies)), and (b) the "Letter of Credit Amount" under this Lease (as
amended) shall be reduced by the "Letter of Credit Amount" for the New Lease
determined in accordance with subsection (a) above.

                  31.2.6   Lessee and Lessor shall take such actions and
execute and deliver such documents, including without limitation the New Lease
and an amendment to this Lease, as are reasonably necessary and appropriate to
effectuate the provisions and intent of this Section 31.2.

                  31.2.7   Each party shall bear its own costs and expenses in
connection with any New Lease entered into in accordance with this Section
31.2.

                                ARTICLE XXXII.

         32.1     Quiet Enjoyment. So long as Lessee shall pay the Rent as the
same becomes due and shall fully comply with all of the terms of this Lease and
fully perform its obligations hereunder, Lessee shall peaceably and quietly
have, hold and enjoy the Leased Property for the Term, free of any claim or
other action by Lessor or anyone claiming by, through or under Lessor, but
subject to all liens and encumbrances of record as of the date hereof, or the
Commencement Date or created thereafter as permitted hereunder or thereafter
consented to by Lessee.

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                                ARTICLE XXXIII.

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

          If to Lessor:             Health Care Property Investors, Inc.
                                             4675 MacArthur Court, Suite 900
                                             Newport Beach, California 92660
                                             Attn:  Legal Department
                                             Fax:  (949) 221-0607

          with a copy to:           Latham & Watkins
                                             650 Town Center Drive, Suite 2000
                                             Costa Mesa, California 92626
                                             Attn:  David C. Meckler, Esq.
                                             Fax:  (714) 755-8290

          If to Lessee:             American Retirement Corporation
                                             111 Westwood Place, Suite 200
                                             Brentwood, Tennessee  37027
                                             Attn:  W.E. Sheriff
                                             Fax:  (615) 221-2272

          with a copy to:           Bass, Berry & Sims PLC
                                             AmSouth Center
                                             315 Deaderick Street, Suite 2700
                                             Nashville, Tennessee 37238-0002
                                             Attn:  D. Mark Sheets, Esq.
                                             Fax:   (615) 742-2757

Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return
receipt requested, postage prepaid and addressed as provided above, on the date
of receipt, refusal or non-delivery indicated on the return receipt. In lieu of
notice by U.S. Mail, either party may send notices by facsimile or by a
nationally recognized overnight courier service which provides written proof of
delivery (such as U.P.S. or Federal Express). Any notice sent by facsimile
shall be effective upon confirmation of receipt in legible form, provided that
an original of such facsimile is also sent to the intended addressee by another
method approved in this Section 33.1, and any notice sent by a nationally
recognized overnight courier shall be effective on the date of delivery to the
party at its address specified above as set forth in the courier's delivery
receipt. Either party may, by notice to the other from time to time in the
manner herein provided, specify a different address for notice purposes.

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                                ARTICLE XXXIV.

         34.1     Appraiser. If it becomes necessary to determine the Fair
Market Value, or Fair Market Rental of any Facility for any purpose of this
Lease or the Leasehold FMV for purposes of determining any Transfer
Consideration payable to Lessor in connection with a Sale of Business pursuant
to this Lease, the same shall be determined by an independent appraisal firm,
in which one or more of the members, officers or principals of such firm are
Members of the Appraisal Institute (or any successor organization thereto), as
may be reasonably selected by Lessor and approved by Lessee (the "Appraiser").
Lessor shall cause such Appraiser to determine the Fair Market Value, Fair
Market Rental, or Leasehold FMV of such Facility as of the relevant date
(giving effect to the impact, if any, of inflation from the date of the
Appraiser's decision to the relevant date) and the determination of such
Appraiser shall be final and binding upon the parties. A written report of such
Appraiser shall be delivered and addressed to each of Lessor and Lessee. To the
extent consistent with sound appraisal practice as then existing at the time of
any such appraisal, an appraisal of Fair Market Value for purposes of this
Lease shall take into account and shall give appropriate consideration to all
three customary methods of appraisal (i.e., the cost approach, the sales
comparison approach and the income approach), and no one method or approach
shall be deemed conclusive simply by reason of the nature of Lessor's business
or because such approach may have been used for purposes of determining the
fair market value of the applicable Facility at the time of acquisition thereof
by Lessor. This provision for determination by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and
any determination hereunder shall be final and binding upon the parties except
as otherwise provided by applicable law. Lessor and Lessee shall each pay
one-half (1/2) of the fees and expenses of the Appraiser and one-half (1/2) of
all other costs and expenses incurred in connection with such appraisal. If
Lessor and Lessee are unable to agree upon the Appraiser within fifteen (15)
days after Lessor notifies Lessee of the identity of Lessor's selected
Appraiser, then the following shall apply:

                  34.1.1   Within fifteen (15) days after Lessee's receipt of
Lessor's selected Appraiser, Lessee shall by notice to Lessor appoint a second
Appraiser meeting the requirements set forth above to act on its behalf. In
such event, the Appraisers thus appointed shall, within sixty (60) days after
the date of Lessor's notice of its originally selected Appraiser, proceed to
determine the Fair Market Value, Fair Market Rental, or Leasehold FMV of such
Facility as of the relevant date (giving effect to the impact, if any, of
inflation from the date of their decision to the relevant date); provided,
however, that if Lessee fails to appoint its Appraiser within the time
permitted, or if two Appraisers shall have been so appointed but only one such
Appraiser shall have made such determination within such sixty (60) day period,
then the determination of such sole Appraiser shall be final and binding upon
the parties.

                  34.1.2   If the two Appraisers shall have been appointed and
shall have made their determinations within the respective requisite periods
set forth above and if the difference between the amounts so determined shall
not exceed ten percent (10%) of the lesser of such amounts then the Fair Market
Value, Fair Market Rental, or Leasehold FMV of such Facility shall be an amount
equal to fifty percent (50%) of the sum of the amounts so determined. If the
difference between the amounts so determined shall exceed ten percent (10%) of
the lesser of such amounts, then such two Appraisers shall have twenty (20)
days to appoint a third Appraiser meeting the above requirements, but if such
Appraisers fail to do so, then either party

                                      62
<PAGE>

may request the CPR or AAA (as such terms are defined in Article XLIV) or any
successor organization(s) thereto to appoint an Appraiser meeting the above
requirements within twenty (20) days of such request, and both parties shall be
bound by any appointment so made within such twenty (20) day period. If no such
Appraiser shall have been appointed within such twenty (20) days or within one
hundred five (105) days of the original request for a determination of Fair
Market Value, Fair Market Rental, or Leasehold FMV of such Facility, whichever
is earlier, either Lessor or Lessee may apply to any court having jurisdiction
to have such appointment made by such court. Any Appraiser appointed by the
original Appraisers, by the CPR or AAA or by such court shall be instructed to
determine the Fair Market Value, Fair Market Rental, or Leasehold FMV of such
Facility within thirty (30) days after appointment of such Appraiser.

                  34.1.3   The determination of the Appraiser which differs
most in terms of dollar amount from the determinations of the other two
Appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two determinations shall be final and binding upon Lessor and Lessee
as the Fair Market Value, Fair Market Rental, or Leasehold FMV of such
Facility. This provision for determination by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and
any determination hereunder shall be final and binding upon the parties except
as otherwise provided by applicable law.

If the foregoing two (2) or three (3) Appraiser system is utilized, then Lessor
and Lessee shall each pay the fees and expenses of the Appraiser appointed by
it and each shall pay one-half (1/2) of the fees and expenses of any third
Appraiser.

                                 ARTICLE XXXV.

         35.1     Lessee's Option to Purchase the Post Oak Facility. Provided
(i) no Event of Default, or event which, with notice or lapse of time or both,
would constitute an Event of Default, has occurred and is continuing hereunder,
(ii) ARC has completed a Successful Refinancing, and (iii) the aggregate Cash
Flow Coverage for the Richmond Heights Facility, the Delray Beach Facility, and
the Shavano Park Facility for the three month period immediately preceding
Lessee's exercise of the option equals or exceeds 1.2., then at any time after
the fourth (4th) Lease Year and prior to the expiration of the Term, Lessee
shall have the option to purchase the Post Oak Facility for a purchase price
equal to the Post Oak Repurchase Price. Such option shall be exercised, if at
all, upon ninety (90) days written notice to Lessor and concurrently with such
notice to Lessor, (i) opening an escrow (the "Escrow") with and by depositing
five percent (5%) of the Post Oak Repurchase Price (the "Opening Deposit) and a
copy of this Lease with a national title company reasonably acceptable to
Lessor ("Escrow Holder") and (ii) delivering to Lessor a reaffirmation of any
Guaranty executed by a Guarantor stating, in substance, that such Guarantor's
obligations under the Guaranty shall extend to the purchase contract formed by
Lessor and Lessee upon proper and timely exercise of such option. If Lessee
shall not be entitled to exercise such option (e.g., by reason of an Event of
Default) or shall be entitled to exercise the same but shall fail to do so
within the time and in the manner herein provided, such option shall lapse and
thereafter not be exercisable by Lessee. Without limiting the foregoing, if
Lessee shall not be entitled to exercise such option or shall be entitled to
exercise the same but shall fail to do so within the time and in the manner
herein provided, such option shall automatically terminate without further
action by either party. No failure by Lessor to notify Lessee of any defect in
any attempted exercise of the foregoing option shall be deemed a waiver by
Lessor of the right to

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<PAGE>

insist upon Lessee's exercise of such option in strict accordance with the
provisions hereof. In the event that Lessee shall properly and timely exercise
such option, then such transaction shall be consummated on or within thirty
(30) days following the expiration of the foregoing ninety (90) day period (the
"Outside Closing Date").

         35.2     Defaults.

                  35.2.1   Liquidated Damages. IF, FOLLOWING A VALID AND PROPER
EXERCISE OF THE FOREGOING OPTION, LESSEE FAILS TO COMPLETE THE PURCHASE OF THE
POST OAK FACILITY AND SUCH FAILURE CONSTITUTES A BREACH HEREOF, THEN LESSOR, AT
ITS OPTION, MAY TERMINATE THE PURCHASE CONTRACT FORMED BY LESSEE'S EXERCISE OF
SUCH OPTION AND THE ESCROW BY GIVING WRITTEN NOTICE TO LESSEE AND ESCROW HOLDER
AND, THEREUPON, THE ESCROW SHALL BE CANCELLED, ALL DOCUMENTS SHALL BE RETURNED
TO THE RESPECTIVE PARTIES WHO DEPOSITED THE SAME, AND LESSEE SHALL PAY ALL
TITLE AND ESCROW CANCELLATION CHARGES AND ALL OF LESSOR'S LEGAL FEES AND COSTS.
IN ADDITION, LESSOR AND LESSEE AGREE THAT, BASED ON THE CIRCUMSTANCES NOW
EXISTING, KNOWN OR UNKNOWN, IT WOULD BE EXCESSIVELY COSTLY AND IMPRACTICABLE TO
ESTABLISH LESSOR'S DAMAGES BY REASON OF LESSEE'S DEFAULT RESULTING IN A FAILURE
OF THE ESCROW TO CLOSE, AND, THEREFORE, LESSOR AND LESSEE AGREE THAT IT WOULD
BE REASONABLE TO AWARD LESSOR LIQUIDATED DAMAGES IN THE AMOUNT OF THE OPENING
DEPOSIT PLUS ANY ACCRUED INTEREST ON THE OPENING DEPOSIT. BY THEIR RESPECTIVE
INITIALS SET FORTH BELOW, LESSOR AND LESSEE ACKNOWLEDGE AND AGREE THAT THE
OPENING DEPOSIT, PLUS ANY INTEREST ACCRUED ON THE OPENING DEPOSIT, TOGETHER
WITH PAYMENT OF LESSOR'S LEGAL FEES AND COSTS, IS REASONABLE AS LIQUIDATED
DAMAGES FOR A DEFAULT OF LESSEE UNDER THE PURCHASE CONTRACT FORMED BY LESSEE'S
EXERCISE OF SUCH OPTION THAT RESULTS IN A FAILURE OF THE ESCROW TO CLOSE AND
SHALL BE IN LIEU OF ANY OTHER RELIEF, RIGHT OR REMEDY, AT LAW OR IN EQUITY, TO
WHICH LESSOR MIGHT OTHERWISE BE ENTITLED BY REASON OF A LESSEE'S DEFAULT THAT
RESULTS IN A FAILURE OF THE ESCROW TO CLOSE, BUT NOTHING CONTAINED HEREIN SHALL
LIMIT LESSOR'S RIGHTS AND REMEDIES FOR LESSEE'S DEFAULT OCCURRING AFTER THE
CLOSE OF ESCROW OR FOR LESSEE'S DEFAULT UNDER THIS LEASE. ESCROW HOLDER IS
HEREBY AUTHORIZED AND INSTRUCTED TO RELEASE THE OPENING DEPOSIT PLUS ACCRUED
INTEREST THEREON TO LESSOR UPON THE DELIVERY OF UNILATERAL WRITTEN INSTRUCTIONS
THEREOF TO ESCROW HOLDER BY LESSOR, AND ESCROW HOLDER IS HEREBY RELIEVED OF ALL
LIABILITY THEREFOR. IF LESSEE WRONGFULLY ATTEMPTS TO INTERFERE WITH THE RELEASE
OF ANY SUCH SUMS BY ESCROW HOLDER TO LESSOR, OR WRONGFULLY COMMENCES ANY ACTION
AGAINST LESSOR OR THE LEASED PROPERTY ARISING OUT OF THIS ARTICLE, THEN LESSOR
SHALL NOT BE LIMITED IN THE AMOUNT OF DAMAGES IT MAY RECOVER FROM LESSEE.

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                                    Lessor's Initials:
                                                          ----------------------

                                    Lessee's Initials:
                                                          ----------------------

                  35.2.2   Other Defaults. A default under any other lease or
other agreement or instrument, including any purchase contract formed upon
exercise of any other option, with or in favor of Lessor or any Affiliate of
Lessor and made by or with Lessee or any Affiliate of Lessee where such default
is not cured within the applicable time period, if any, shall be deemed a
default under this Article XXXV and the purchase contract formed upon proper
exercise by Lessee of the option herein provided, entitling Lessor, as seller,
at its option, to terminate such purchase contract and the Escrow and upon any
such termination the Opening Deposit plus all accrued interest thereon shall be
paid over to Lessor as provided in Section 35.3.1 above.

         35.3     Escrow Provisions.

                  35.3.1   Opening of Escrow. Escrow shall be deemed open when
the Opening Deposit and a copy of this Lease are delivered to Escrow Holder.

                  35.3.2   General and Supplemental Instructions. Lessee and
Lessor each shall execute, deliver and be bound by such further escrow
instructions or other instruments as may be reasonably requested by the other
party or by Escrow Holder from time to time, so long as the same are consistent
with the provisions of this Lease.

                  35.3.3   Disposition of Opening Deposit. Escrow Holder shall
hold the Opening Deposit in interest-bearing accounts. All interest earned on
the Opening Deposit shall accrue to Lessee's benefit unless Lessor is entitled
thereto under Section 35.3.1. With full knowledge that Escrow shall not have
closed, Lessee nevertheless agrees to relieve Escrow Holder of all liabilities
in making such payment and for any failure to recover said sum in the event
that Escrow does not close at anytime thereafter. The Opening Deposit plus
interest thereon shall be (i) applied against the purchase price (as herein
determined) if Escrow closes, (ii) returned to Lessee in full if Escrow does
not close for any reason other than Lessee's default, or (iii) be paid to
Lessor as nonrefundable liquidated damages under Section 35.2.1, if Escrow
fails to close under the provisions of hereof as a result of Lessee's default.

                  35.3.4   Closing Funds. At least one (1) business day before
the Close of Escrow (as hereinafter defined), Escrow Holder shall calculate and
Lessee shall wire cash into Escrow (using wiring instructions reasonably
satisfactory to Escrow Holder) in an amount which, when added to the Opening
Deposit and all accrued interest shall equal the purchase price for the Post
Oak Facility plus any other sums payable by Lessee pursuant to the provisions
hereof.

                  35.3.5   Close of Escrow. Escrow shall close on the Outside
Closing Date. The term "Close of Escrow" as used in this Article shall mean the
time and date that an appropriate deed or other conveyance document conveying
Lessor's entire interest in the Post Oak Facility, subject to the permitted
liens and encumbrances described in Article XVIII hereof, is recorded in
appropriate records of the county in which the Post Oak Facility is located.
The Outside Closing Date shall not be extended for any reason.

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<PAGE>

                  35.3.6   Closing Costs. The closing costs of consummating the
purchase of the Post Oak Facility shall be paid by Lessee as provided in
Article XVIII.

                  35.3.7   [Intentionally Omitted]

                  35.3.8   Termination of Lease with Respect to Post Oak
Facility. Upon the Close of Escrow, this Lease shall be terminated with respect
to the Post Oak Facility (only) in accordance with Section 5.2 above.

         35.4     Lessor's Election of 1031 Exchange.

                  35.4.1   In the event that Lessee exercises its option to
purchase as provided in this Article XXXV, Lessor may elect to sell the Post
Oak Facility to Lessee in the form of a tax-deferred exchange pursuant to
Section 1031 of the Internal Revenue Code of 1986, as amended ("1031
Exchange"). In the event that Lessor shall so elect, Lessor shall give written
notice to Lessee and Escrow Holder of such election and the following shall
apply:

                  35.4.1.1 Simultaneous Exchange. Lessor may attempt to
identify before the Close of Escrow other property which qualifies as
"like-kind" property for a 1031 Exchange (the "Target Property") by giving
written notice to Lessee and Escrow Holder and identifying to Escrow Holder the
Target Property prior to the Close of Escrow.

                  35.4.1.2 Non-simultaneous Exchange. If Lessor has not so
identified the Target Property before the Close of Escrow, then Lessor shall
proceed with the Close of Escrow and Lessor at its option may enter into an
exchange agreement with an accommodation party ("Accommodator") in order to
facilitate a non-simultaneous or so-called "Starker deferred" exchange. If an
Accommodator is so designated, Lessor shall cause the Accommodator (i) to
acquire title to the Post Oak Facility from Lessor at or before the Close of
Escrow and, (ii) to transfer title in the Post Oak Facility to Lessee on the
Close of Escrow for the Post Oak Repurchase Price.

                  35.4.1.3 Expenses and Documents. Lessee shall fully cooperate
with any such 1031 Exchange, including but not limited to executing and
delivering additional documents reasonably requested or approved by Lessor;
provided, that Lessee shall not be required to incur any additional costs or
liabilities or financial obligation as a consequence of any of the foregoing
exchange transactions.

                                ARTICLE XXXVI.

         36.1     Lessor May Grant Liens. Without the consent of Lessee, Lessor
may, from time to time, directly or indirectly, create or otherwise cause to
exist any ground lease, mortgage, trust deed, lien, encumbrance or title
retention agreement (collectively, an "Encumbrance") upon the Leased Property
and any Capital Additions or any part(s) or portion(s) thereof or interests
therein. This Lease is and at all times shall be subject and subordinate to any
such Encumbrance which may now or hereafter affect the Leased Property and/or
any such Capital Additions and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that the subjection and
subordination of this Lease and Lessee's leasehold interest hereunder to any
Encumbrance shall be conditioned upon the

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execution by the holder of such Encumbrance and delivery to Lessee of a
non-disturbance and attornment agreement which provides that so long as no
Event of Default has occurred and is continuing, the holder of such Encumbrance
shall not disturb Lessee's leasehold interest or possession of the Leased
Property in accordance with the terms hereof, or any of Lessee's rights,
privileges and options hereunder. This clause shall be self-operative and no
further instrument of subordination shall be required; provided, however, that
in confirmation of such subordination, Lessee shall execute promptly any
certificate or document that Lessor or any ground or underlying lessor,
mortgagee or beneficiary may reasonably request for such purposes. If, in
connection with obtaining financing or refinancing for the Leased Property
and/or any such Capital Additions, a Facility Mortgagee or prospective Facility
Mortgagee shall request reasonable modifications to this Lease as a condition
to such financing or refinancing, Lessee shall not unreasonably withhold or
delay its consent thereto.

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

                                ARTICLE XXXVII.

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

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

                                      67
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on, under or removed from the Leased Property or any Capital Additions,
including any complaints, notices, warnings or asserted violations in
connection therewith.

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

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

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

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

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

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

         If any claim is made hereunder, Lessee agrees to pay such claim
promptly, and in any event to pay such claim within thirty (30) calendar days
after receipt by Lessee of notice thereof. If any such claim is not so paid and
Lessor is ultimately found or agrees to be responsible therefore, Lessee agrees
also to pay interest on the amount paid from the date of the first notice of
such claim, at the Overdue Rate.

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

                               ARTICLE XXXVIII.

         38.1     Memorandum of Lease. Lessor and Lessee shall, promptly upon
the request of either, enter into one or more short form memoranda of this
Lease, each in form suitable for recording under the laws of the applicable
State. Lessee shall pay all costs and expenses of recording any such memoranda
and shall fully cooperate with Lessor in removing from record any such
memoranda upon the expiration or earlier termination of the Term with respect
to the applicable Facility.

                                ARTICLE XXXIX.

         39.1     Sale of Assets. Notwithstanding any other provision of this
Lease, Lessor shall not be required to (i) sell or transfer the Leased
Property, or any portion thereof, which is a real estate asset as defined in
Section 856(c)(5)(B), or functionally equivalent successor provision, of the
Code, to Lessee if Lessor's counsel advises Lessor that such sale or transfer
may not be a sale of property described in Section 857(b)(6)(C), or
functionally equivalent

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successor provision, of the Code or (ii) sell or transfer the Leased Property,
or any portion thereof, to Lessee if Lessor's counsel advises Lessor that such
sale or transfer could result in an unacceptable amount of gross income for
purposes of the Ninety-Five percent (95%) gross income test contained in
Section 856(c)(2), or functionally equivalent successor provision, of the Code.
If Lessee has the right or obligation to purchase the property pursuant to the
terms herein, and if Lessor determines not to sell such property pursuant to
the above sentence, then Lessee shall purchase such property, upon and subject
to all applicable terms and conditions set forth in this Lease, including the
provisions of Article XXXV, at such time as the transaction, upon the advice of
Lessor's counsel, would be a sale of property (to the extent the Leased
Property is a real estate asset) described in Section 857(b)(6)(C), or
functionally equivalent successor provision, of the Code, and would not result
in an unacceptable amount of gross income for purposes of the Ninety-Five
Percent (95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision of the Code and until such time Lessee shall
lease the Leased Property and all Capital Additions from Lessor at the lesser
of (i) Fair Market Rental or (ii) the then current Allocated Minimum Rent and
any Victoria Additional Rent, if applicable, for such Leased Property under
this Lease.

                                  ARTICLE XL.

         40.1     [Intentionally Omitted].

                                 ARTICLE XLI.

         41.1     Authority. If Lessee is a corporation, limited liability
company, trust, or partnership, Lessee, and each individual executing this
Lease on behalf of Lessee, represent and warrant that each is duly authorized
to execute and deliver this Lease on behalf of Lessee and shall concurrently
with the execution and delivery of this Lease to Lessor deliver to Lessor
evidence of such authority satisfactory to Lessor.

                                 ARTICLE XLII.

         42.1     Attorneys' Fees. If Lessor or Lessee brings an action or
other proceeding (including an arbitration pursuant to Article XLIV) against
the other to enforce any of the terms, covenants or conditions hereof or any
instrument executed pursuant to this Lease, or by reason of any breach or
default hereunder or thereunder, the party prevailing in any such action or
proceeding and any appeal thereupon shall be paid all of its costs and
reasonable attorneys' fees incurred therein. In addition to the foregoing and
other provisions of this Lease that specifically require Lessee to reimburse,
pay or indemnify against Lessor's attorneys' fees, Lessee shall pay, as
Additional Charges, all of Lessor's reasonable attorneys' fees incurred in
connection with the administration or enforcement of this Lease, including
attorneys' fees incurred in connection with Lessee's exercise of its option to
purchase the Leased Property or the renewal of this Lease for any Extended
Term, the review of any letters of credit, the review, negotiation or
documentation of any subletting, assignment, or management arrangement or any
consent requested in connection therewith, and the collection of past due Rent.

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                                ARTICLE XLIII.

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

                                 ARTICLE XLIV.

         44.1     Submission to Arbitration.

         44.1.1   Except as provided in Section 44.1.2 below, any controversy,
dispute or claim of whatsoever nature arising out of, in connection with, or in
relation to the interpretation, performance or breach of this Lease, including
any claim based on contract, tort or statute, shall be determined by final and
binding, confidential arbitration in accordance with the then current CPR
Institute for Dispute Resolution Rules for Non-Administered Arbitration of
Business Disputes ("CPR"), by a sole arbitrator mutually selected by Lessor and
Lessee from among the CPR Panel of Distinguished Neutrals; provided, however,
that if the CPR (or any successor organization thereto) no longer exists, then
such arbitration shall be administered by the American Arbitration Association
("AAA") in accordance with its then-existing Commercial Arbitration Rules, and
the sole arbitrator shall be selected in accordance with such AAA rules. Any
arbitration hereunder shall be governed by the United States Arbitration Act, 9
U.S.C. 1-16 (or any successor legislation thereto), and judgment upon the award
rendered by the arbitrator may be entered by any state or federal court having
jurisdiction thereof. If Lessor and Lessee are not able to agree on an
arbitrator, then an arbitrator shall be appointed by the CPR or AAA upon
application by either party. Neither Lessor, Lessee nor the arbitrator shall
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of all parties; provided, however, that either party
may disclose the existence, content or results of any such arbitration to its
partners, officers, directors, employees, agents, attorneys and accountants and
to any other Person to whom disclosure is required by applicable Legal
Requirements, including pursuant to an order of a court of competent
jurisdiction, or as may be necessary to enforce the same. Unless otherwise
agreed by the parties, any arbitration hereunder shall be held at a neutral
location selected by the arbitrator in the major metropolitan area in the State
closest in proximity to the Leased Property. The cost of the arbitrator and the
expenses relating to the arbitration (exclusive of legal fees) shall be borne
equally by Lessor and Lessee unless otherwise specified in the award of the
arbitrator. Such fees and costs paid or payable to the arbitrator shall be
included in "costs and reasonable attorneys' fees" for purposes of Article XLII
and the arbitrator shall specifically have the power to award to the prevailing
party pursuant to such Article XLII such party's costs and expenses incurred in
such arbitration, including fees and costs paid to the arbitrator.

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                  44.1.2   The provisions of this Article XLIV shall not apply
to:

                  (a)      Any unlawful detainer or other similar summary or
expedited proceeding for ejectment or recovery of possession of the Leased
Property and Capital Additions of any Facility instituted by Lessor in
accordance with applicable Legal Requirements as the result of an Event of
Default or alleged Event of Default by Lessee pursuant to this Lease, and any
compulsory counterclaim of Lessee with respect thereto. In addition, if
permitted by applicable Legal Requirements, Lessor shall be entitled in
connection with any such proceeding to seek any damages to which it is entitled
at law, including those set forth in Article XVI.

                  (b)      Any specific controversy, dispute, question or issue
as to which this Lease specifically provides another method of determining such
controversy, dispute, question or issue and provides that a determination
pursuant to such method is final and binding, unless both Lessor and Lessee
agree in writing to waive such procedure and proceed instead pursuant to this
Article XLIV.

                  (c)      Any request or application for an order or decree
granting any provisional or ancillary remedy (such as a temporary restraining
order or injunction) with respect to any right or obligation of either party to
this Lease, and any preliminary determination of the underlying controversy,
dispute, question or issue as is required to determine whether or not to grant
such relief. A final and binding determination of such underlying controversy,
dispute, question or issue shall be made by an arbitration conducted pursuant
to this Article XLIV after an appropriate transfer or reference to the
arbitrator selected pursuant to this Article XLIV upon motion or application of
either party hereto. Any ancillary or provisional relief which is granted
pursuant to this clause (c) shall continue in effect pending an arbitration
determination and entry of judgment thereon pursuant to this Article XLIV.

                                 ARTICLE XLV.

         45.1     Miscellaneous.

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

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

                  45.1.3   Non-Recourse. Lessee specifically agrees to look
solely to the Leased Property (and any proceeds thereof) for recovery of any
judgment from Lessor. It is specifically agreed that no constituent partner in
Lessor or officer, director or employee of Lessor shall ever be personally
liable for any such judgment or for the payment of any monetary obligation to
Lessee. The provision contained in the foregoing sentence is not intended to,
and

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shall not, limit any right that Lessee might otherwise have to obtain
injunctive relief against Lessor, or any action not involving the personal
liability of Lessor. Furthermore, except as otherwise expressly provided herein,
in no event shall Lessor ever be liable to Lessee for any indirect or
consequential damages suffered by Lessee from whatever cause.

                  45.1.4   Licenses and Operation Transfer Agreements. Upon the
expiration or earlier termination of the Term applicable to any Facility
(unless such Facility has been purchased by Lessee), Lessee shall use its best
efforts to transfer to Lessor or Lessor's nominee such Facility in a fully
operational condition and shall cooperate with Lessor or Lessor's designee or
nominee in connection with the processing by Lessor or Lessor's designee or
nominee of any applications for all licenses, operating permits and other
governmental authorization, all contracts, including contracts with
governmental or quasi-governmental entities, business records, data, patient
and resident records, and patient and resident trust accounts, which may be
necessary or useful for the operation of such Facility; provided that the costs
and expenses of any such transfer or the processing of any such application
shall be paid by Lessor or Lessor's designee or nominee. Lessee shall not
commit any act or be remiss in the undertaking of any act that would jeopardize
the licensure or certification of such Facility, and Lessee shall comply with
all reasonable requests for an orderly transfer of the same upon the expiration
or early termination of the Term applicable to such Facility. Without limiting
the generality of the foregoing, if requested by Lessor or a proposed
replacement operator for such Facility, Lessee hereby agrees to enter into a
reasonable operations transfer agreement with such replacement operator as is
customary in the transfer to a new operator of the operations of a facility
similar to such Facility. Lessee shall not unreasonably withhold, condition or
delay its consent to entering into any interim subleases or management
agreements as may be necessary to effectuate an early transfer of the
operations of such Facility prior to the time that such replacement operator
holds all licenses and permits from all applicable governmental authorities
with jurisdiction necessary to operate such Facility for its Primary Intended
Use. In addition, upon request, Lessee shall promptly deliver copies of all
books and records relating to the Leased Property and all Capital Additions of
such Facility and operations thereon to Lessor or Lessor's designee or nominee.
Lessee shall indemnify, defend, protect and hold harmless Lessor from and
against any loss, damage, cost or expense incurred by Lessor or Lessor's
designee or nominee in connection with the correction of any and all
deficiencies of a physical nature identified by any governmental authority
responsible for licensing the Leased Property and all Capital Additions in the
course of any change of ownership inspection and audit.

                  45.1.5   Successors and Assigns. This Lease shall be binding
upon Lessor and its successors and assigns and, subject to the provisions of
Article XXIV, upon Lessee and its successors and assigns.

                  45.1.6   Termination Date. If this Lease is terminated by
Lessor or Lessee under any provision hereof with respect to any one or more
(including all, if applicable) of the Facilities, and upon the expiration of
the Term applicable to a Facility (collectively, the "termination date"), the
following shall pertain:

                  (a)      Lessee shall vacate and surrender the Leased
Property, Lessee's Personal Property and all Capital Additions relating to the
applicable Facility to Lessor in the condition required by Section 9.1.4. Prior
to such vacation and surrender, Lessee shall remove

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any items which Lessee is permitted or required to remove hereunder. Lessee
shall, at Lessee's cost, repair any damage to such Leased Property, any
Lessee's Personal Property, and any Capital Additions caused by such vacation
and/or removal of any items which Lessee is required or permitted hereunder to
remove. Any items which Lessee is permitted to remove but fails to remove prior
to the surrender to Lessor of such Leased Property, Lessee's Personal Property
and Capital Additions shall be deemed abandoned by Lessee, and Lessor may
retain or dispose of the same as Lessor sees fit without claim by Lessee
thereto or to any proceeds thereof. If Lessor elects to remove and dispose of
any such items abandoned by Lessee, the cost of such removal and disposal shall
be an Additional Charge payable by Lessee to Lessor upon demand.

                  (b)      Without limiting the provisions of Section 45.1.1
above, upon any such termination or expiration of this Lease with respect to a
Facility, the following shall pertain:

                           (i)      Lessee agrees to defend, protect,
         indemnify, defend and hold harmless Lessor from and against any and
         all claims, costs, losses, expenses, damages, actions, and causes of
         action for which Lessee is responsible under this Lease (including
         Lessee's indemnification obligations under Articles XXIII and XXXVII)
         and which accrue or have accrued on or before the termination date.

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

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

                           (iv)     Lessee shall (y) execute all documents and
         take any actions reasonably necessary to (1) cause the transfer to
         Lessor of all of Lessee's Personal Property and any Capital Additions
         not owned by Lessor, as provided in Section 6.3, in

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         each case free of any encumbrance, as provided in Section 6.3 and (2)
         remove this Lease and/or any memorandum hereof as a matter affecting
         title to the Leased Property as provided in Article XXXVIII and (z)
         comply with its covenants set forth in Section 45.1.4.

                           (v)      Lessee shall observe any covenant or
         agreement of Lessee in this Lease which is intended to or expressly
         provides that it shall survive the expiration or sooner termination of
         this Lease.

                  45.1.7   Governing Law. THIS LEASE WAS NEGOTIATED IN THE
STATE OF CALIFORNIA, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY.
ACCORDINGLY, IN ALL RESPECTS THIS LEASE (AND ANY AGREEMENT FORMED PURSUANT TO
THE TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD
OF PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA, EXCEPT THAT ALL PROVISIONS HEREOF RELATING TO THE CREATION OF THE
LEASEHOLD ESTATE AND ALL REMEDIES SET FORTH IN ARTICLE XVI RELATING TO RECOVERY
OF POSSESSION OF THE LEASED PROPERTY OF ANY FACILITY (SUCH AS AN ACTION FOR
UNLAWFUL DETAINER OR OTHER SIMILAR ACTION) SHALL BE CONSTRUED AND ENFORCED
ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE IN WHICH THE LEASED
PROPERTY OF SUCH FACILITY IS LOCATED.

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

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                             LESSOR'S INITIALS:
                                                           ------------------

                             LESSEE'S INITIALS:
                                                           ------------------

                  45.1.9   Lessee Counterclaim and Equitable Remedies. Lessee
hereby waives the right to interpose counterclaim (other than compulsory
counterclaims) in any summary proceeding instituted by Lessor against Lessee in
any court or in any action instituted by Lessor in any court for unpaid Rent
under this Lease. In the event that Lessee claims or asserts that Lessor has
violated or failed to perform a covenant of Lessor not to unreasonably withhold
or delay Lessor's consent or approval hereunder, or in any case where Lessor's
reasonableness in exercising its judgment is in issue, Lessee's sole remedy
shall be an action for specific performance, declaratory judgment or
injunction, and in no event shall Lessee be entitled to any monetary damages
for a breach of such covenant, and in no event shall Lessee claim or assert any
claims for monetary damages in any action or by way of set-off defense or
counterclaim, and Lessee hereby specifically waives the right to any monetary
damages or other remedies in connection with any such claim or assertion.

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

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

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

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

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

                  45.1.15  Time of Essence. Time is of the essence of this
Lease and each provision hereof in which time of performance is established.

                  45.1.16  Force Majeure. In the event that either Lessor or
Lessee is delayed in performing its respective obligations pursuant to this
Lease by any cause beyond the

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reasonable control of the party required to perform such obligation, the time
period for performing such obligation shall be extended by a period of time
equal to the period of the delay. For purposes of this Lease:

                  (a)      A cause shall be beyond the reasonable control of a
party to this Lease when such cause would affect any person similarly situated
(such as power outage, labor strike, Act of God or trucker's strike) but shall
not be beyond the reasonable control of such party when peculiar to such party
(such as financial inability or failure to order long lead time material
sufficiently in advance).

                  (b)      This Section shall not apply to any obligation to
pay money or otherwise perform any financial obligation hereunder.

                  (c)      In the event of any occurrence which a party
believes constitutes a cause beyond the reasonable control of such party and
which will delay any performance by such party, such party shall promptly in
writing notify the other party of the occurrence and nature of such cause, the
anticipated period of delay and the steps being taken by such party to mitigate
the effects of such delay. Failure to give such notice promptly, shall deem
such occurrence or event not to be a cause beyond the reasonable control of
such party.

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

                                 ARTICLE XLVI.

         46.1     Provisions Relating to Master Lease. Lessor and Lessee hereby
acknowledge and agree that, except as otherwise expressly provided herein to
the contrary, this Lease is and the parties intend the same for all purposes to
be treated as a single, integrated and indivisible agreement. Lessee
acknowledges that in order to induce Lessor to lease the Leased Property of
each Facility to Lessee and as a condition thereto, Lessor insisted that the
parties execute this Lease covering all of the Facilities in a single,
integrated and indivisible agreement.

         46.2     Provisions Relating to Tax Treatment of Lease. Lessor and
Lessee hereby acknowledge and agree that this Lease shall be treated as an
operating lease for all purposes and not as a synthetic lease, financing lease
or loan, and that Lessor shall be entitled to all the benefits of ownership of
the Leased Property, including depreciation for all federal, state and local
tax purposes.

                                ARTICLE XLVII.

         47.1     Replacement Lease and Termination of Old Victoria Lease. In
addition to covering the other Facilities, this Lease is a replacement for that
certain Lease dated December 20, 1995 currently in effect between Texas HCP, as
"Lessor," and American Retirement Corporation II, a Tennessee corporation, as
the last and current assignee of Remmington Retirement Community - One, Ltd., a
Texas limited partnership, as the original "Lessee," covering the Victoria
Facility (as the same may have been amended in accordance with the terms
thereof, the "Old Victoria Lease"). Lessor and Lessee acknowledge and agree
that: (i) the tenancy created by the Old Victoria Lease shall terminate as of
the Commencement Date, and (ii)

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from and after such Commencement Date, Lessee shall continue to occupy the
Leased Property of the Victoria Facility pursuant to this Lease.
Notwithstanding the termination of the Old Victoria Lease, the following
obligations of Lessee under the Old Victoria Lease shall be preserved and
continue subsequent to such termination:

                  (a)      Lessee shall remain responsible for and shall
protect, defend, indemnify and hold Lessor harmless from and against any and
all claims, liabilities, damages, actions and causes of action, costs and
expenses, including attorneys' fees, for which Lessee is responsible pursuant
to the Old Victoria Lease and which accrue or have accrued on or before the
date of termination of the Old Victoria Lease.

                  (b)      Lessee shall remain responsible for all obligations
of the Lessee under the Old Victoria Lease which have accrued on or before the
date of termination until full and complete payment and/or performance of the
same.

                                ARTICLE XLVIII.

         48.1     Covenants with Respect to Operations and Fundamental Changes
of Lessee. Each Lessee hereby represents, warrants and covenants as of the date
hereof and until the expiration or earlier termination of this Lease, that such
Lessee:

                  (a)      will not amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of incorporation,
bylaws, certificate of formation, limited liability company agreement,
operating agreement, articles of organization, or other formation agreement or
document, as applicable, in any material term or manner, or in a manner which
adversely affects Lessee's existence as a single purpose entity;

                  (b)      will not permit any partner, limited or general,
member or shareholder of Lessee, as applicable, amend, modify or otherwise
change such Lessee's partnership certificate, partnership agreement, articles
of incorporation, bylaws, certificate of formation, limited liability company
agreement, operating agreement, articles of organization, or other formation
agreement or document, as applicable, in any material term or manner, or in a
manner which adversely affects Lessee's existence as a single purpose entity;

                  (c)      to the full extent permitted by law, will not
liquidate or dissolve (or suffer any liquidation or dissolution), or enter into
any transaction of merger or consolidation, or acquire by purchase or otherwise
all or substantially all the business or assets of, or any stock or other
evidence of beneficial ownership of, any entity;

                  (d)      has not and will not guarantee, pledge its assets
for the benefit of, or otherwise become liable, on or in connection with, any
obligation of any other Person;

                  (e)      does not own and will not own any asset other than
(i) its leasehold interest in the applicable Leased Property and (ii)
incidental personal property necessary for the operation of the applicable
Leased Property;

                                      78
<PAGE>

                  (f)      is not engaged and will not engage, either directly
or indirectly, in any business other than the ownership, management and
operation of the applicable Leased Property;

                  (g)      has maintained and will maintain an arm's length
relationship with its Affiliates and its shareholders and any other parties
furnishing services to it;

                  (h)      has not incurred and will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation) (other than accounts payable incurred in the ordinary course of
business and equipment and motor vehicle leases not exceeding One Hundred
Thousand Dollars ($100,000) per Facility;

                  (i)      has not made and will not make any loans or advances
to any third party (including any Affiliate);

                  (j)      is and will be solvent and pay its own liabilities,
indebtedness and obligations of any kind, including administrative expenses,
from its assets as the same shall become due;

                  (k)      has done or caused to be done and will do all things
necessary to preserve its existence, and will observe all formalities
applicable to it and necessary to maintain its identity as an entity separate
and distinct from its Affiliates;

                  (l)      will conduct and operate its business in its own
name and as presently conducted and operated;

                  (m)      will maintain financial statements, books and
records and bank accounts separate from those of its Affiliates, including,
without limitation, its general partners, shareholders or members, as
applicable; provided, however, that Lessee may be included in consolidated
financial statements of another person, provided that such consolidated
financial statements contain a note indicating that Lessee is a separate legal
entity and Lessee's assets and liabilities are neither available to pay the
debts of the consolidated entity nor constitute obligations of the consolidated
entity and that the consolidated entity is not liable for any of the
liabilities of such Lessee;

                  (n)      will be, and at all times will hold itself out to
the public as, a legal entity separate and distinct from any other entity
(including, without limitation, any Affiliate or any partner, member or
shareholder of Lessee);

                  (o)      will file its own tax returns and pay any taxes so
required to be paid under applicable law; provided, however, that so long as
Lessee's tax liability and its income and expenses are readily determinable
based on a review of Lessee's books and records, it may file consolidated tax
returns (provided that Lessee shall maintain sufficient books and records to
determine its separate tax obligations for any particular reporting periods);

                  (p)      will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;

                                      79
<PAGE>

                  (q)      will not commingle the funds and other assets of
Lessee with those of any general partner, shareholder, member, Affiliate,
principal or any other Person;

                  (r)      has and will maintain its assets in such a manner
that it is not costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or any other Person;

                  (s)      does not and will not hold itself out to be
responsible for the debts or obligations of any other Person;

                  (t)      will pay any liabilities out of its own funds,
including salaries of its employees, not funds of any Affiliate;

                  (u)      will use stationery, invoices, and checks separate
from its Affiliates;

                  (v)      will not do any act which would make it impossible
to carry on the ordinary business of Lessee;

                  (w)      will not hold title to Lessee's assets other than in
Lessee's name;

                  (x)      will deposit all of its funds in checking accounts,
savings accounts, time deposits or certificates of deposit in its own name or
invest such funds in its own name;

                  (y)      will correct any known misunderstanding regarding
its separate identity;

                  (z)      will participate in the fair and reasonable
allocation of any and all overhead expenses and other common expenses for
facilities, goods or services provided to multiple entities;

                  (aa)     will establish and maintain an office through which
its business is conducted separate and apart from that of its Affiliates
(including the other Lessees); provided, however, that nothing herein shall be
construed so as to prevent Lessee from having office space at the same address
as any of Affiliate, so long as the costs and expenses associated with such
office space are allocated as set forth in paragraph (aa) above;

                  (bb)     will maintain a separate telephone number from that
of its Affiliates or any other entity (provided, however, that any Lessee that
is a limited partnership shall be permitted to have the same telephone number
as its general partner);

                  (cc)     has not and will not institute proceedings to be
adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy
or insolvency proceedings against it; or file a petition seeking, or consent
to, reorganization or relief under any applicable federal or state law relating
to bankruptcy; or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Lessee or a
substantial part of Lessee's property; or make any assignment for the benefit
of creditors; or admit in writing

                                      80
<PAGE>

its inability to pay its debts generally as they become due; or take any action
in furtherance of any such action;

                  (dd)     shall at all times cause there to be at least one
duly appointed member of the board of directors or board of managers of Lessee
reasonably satisfactory to Lessor who shall not have been at the time of such
individual's appointment, and may not have been at any time during the
preceding five years (i) a shareholder of, or an officer, director, other than
as an independent director, or manager for other special purpose entities which
may be Affiliates of Lessee, attorney, counsel, partner, employee or member of,
Lessee or any of its members, shareholders, subsidiaries or Affiliates, (ii) a
customer of, supplier to, Lessee or any of its shareholders, subsidiaries or
Affiliates, (iii) a Person or other entity controlling or under common control
with any such member, shareholder, partner, supplier or customer, or (iv) a
member of the immediate family of any such member, shareholder, officer,
director, partner, employee, supplier or customer of any other director of
Lessee. As used herein, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise;

                  (ee)     Lessee shall not cause or permit the board of
directors or the members of Lessee to take any action which, under the terms of
any articles of organization, operating agreement, limited liability company
agreement, certificate of incorporation, bylaws or any voting trust agreement
with respect to any common stock or limited liability company interest,
requires a vote of the board of directors or the members of Lessee unless at
the time of such action there shall be at least one member who is an
independent directors.

                  Notwithstanding anything herein to the contrary, Lessee may,
from time to time, (i) make lawful distributions in accordance with applicable
corporate law or loans on an arm's length basis to its affiliates subject to
the provisions of paragraph (p) above, or (ii) obtain loans on an arm's length
basis or lawful capital contributions in accordance with applicable corporate
law from its affiliates to the extent necessary to satisfy its obligations as
they become due; provided, however, that all such transactions are accurately
reflected in the books and records of the corporation and each of its
applicable affiliates.

                            [Signature pages follow]

                                      81
<PAGE>

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

                                          "Lessor"

                           HEALTH CARE PROPERTY INVESTORS, INC.,
                           a Maryland corporation

                           By:
                                 ----------------------------------------------
                                 Edward J. Henning
                                 Senior Vice President,
                                 General Counsel and Corporate Secretary

                           TEXAS HCP HOLDING, L.P., a Delaware limited
                           partnership

                           By:   Texas HCP G.P., INC., a Delaware
                                 corporation, its sole General Partner

                                 By:
                                      -----------------------------------------
                                      Edward J. Henning
                                      Senior Vice President

                           [Signature pages continue]
<PAGE>

                           "Lessee"

                           ARC RICHMOND HEIGHTS, LLC, a Tennessee
                           limited liability company

                           By:
                                -----------------------------------------------
                                Ross C. Roadman, Senior Vice President--
                                Strategic Planning and Investor Relations

                           ARC SHAVANO, L.P., a Tennessee limited
                           partnership

                           By:   ARC Shavano Park, Inc., a Tennessee
                                 corporation, its general partner

                                By:
                                     ------------------------------------------
                                     Ross C. Roadman, Senior Vice President--
                                     Strategic Planning and Investor Relations

                           ARC DELRAY BEACH, LLC, a Tennessee limited
                           liability company

                           By:
                                     ------------------------------------------
                                     Ross C. Roadman, Senior Vice President--
                                     Strategic Planning and Investor Relations

                           ARC VICTORIA, L.P., a Tennessee limited
                           partnership

                           By:   ARC Homewood Victoria, Inc., a Tennessee
                                 corporation, its general partner

                                 By:
                                      -----------------------------------------
                                      Ross C. Roadman, Senior Vice President--
                                      Strategic Planning and Investor Relations

                           [Signature pages continue]
<PAGE>

                           ARC CARRIAGE  CLUB OF JACKSONVILLE,
                           INC., a Tennessee corporation

                           By:
                                  ---------------------------------------------
                                  Ross C. Roadman, Senior Vice President--
                                  Strategic Planning and Investor Relations

                           ARC POST OAK, L.P., a Tennessee limited
                           partnership

                           By:   ARC Hampton Post Oak, Inc.,
                                 a Tennessee corporation, its general partner

                                 By:
                                      -----------------------------------------
                                      Ross C. Roadman, Senior Vice President--
                                      Strategic Planning and Investor Relations
<PAGE>

STATE OF                              )
         ------------------------
                                      )  SS:
COUNTY OF                             )
          -----------------------

         I, _____________________, a Notary Public in and for the county and
state aforesaid, DO HEREBY CERTIFY that _____________________________, as
____________________ of _________________________, an ___________________
corporation who is personally known to me to be the same person whose name is
subscribed to the foregoing instrument as such ________________________
appeared before me this day in person and acknowledged that he signed, sealed
and delivered the said instrument as his free and voluntary act as such
__________________ and as the free and voluntary act of said corporation for
the uses and purposes therein set forth.

         Given under my hand and notarial seal, this _____ day of March, 2002.

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

STATE OF                              )
         ------------------------
                                      )  SS:
COUNTY OF                             )
          -----------------------

         I, _____________________, a Notary Public in and for the county and
state aforesaid, DO HEREBY CERTIFY that _____________________________, as
____________________ of _________________________, an ___________________
corporation who is personally known to me to be the same person whose name is
subscribed to the foregoing instrument as such ________________________
appeared before me this day in person and acknowledged that he signed, sealed
and delivered the said instrument as his free and voluntary act as such
__________________ and as the free and voluntary act of said corporation for
the uses and purposes therein set forth.

         Given under my hand and notarial seal, this _____ day of March, 2002.

                                                    ---------------------------
                                                    Notary Public
<PAGE>
                                   EXHIBIT A-1

                     LEGAL DESCRIPTION OF CLEVELAND FACILITY

Situated in the City of Richmond Heights, County of Cuyahoga and State of Ohio:

And know as being part of Original Euclid Township Lot No. 35, Tract No. 5 and
being further bounded and described as follows:

Beginning at an iron monument found on the centerline of Richmond Road, 60 feet
wide, at the northeast corner of said Original Lot No. 35, Tract No. 5;

Thence South 00(Degree) 18' 56" East along said centerline of Richmond Road also
being the easterly line of said Original Lot No. 35, a distance of 180.18 feet
to the southeasterly corner of Parcel No. 1 of land conveyed to Elmer F. Vitek
and Shirley A. Vitek as Trustees in a deed dated July 23, 1992 and recorded in
Volume 92-06367, Page 44, of Cuyahoga County Deed Records;

Thence South 89(Degree) 55' 18" West along the said southerly line of Vitek, a
distance of 30.00 feet to a point on the westerly line of said Richmond Road and
the Principal Place of Beginning of the parcel of land herein intended to be
described;

Course No. 1:
Thence South 89(Degree) 55' 18" West continuing along said southerly line of
Vitek, a distance of 314.98 feet to the southwesterly corner thereof;

Course No. 2:
Thence North 00(Degree) 18' 56" West along the westerly line of said Vitek, a
distance of 77.34 feet to the northeasterly corner of land conveyed to The
Forest City Development Co. by deed recorded in Volume 12748, Page 569 of
Cuyahoga county Deed Records;

Course No. 3:
Thence North 89(Degree) 41' 25" West along the northerly line of said Forest
City Development Co., a distance of 236.70 feet to the easterly line of Block
"G" in Richmond Run Subdivision recorded in Volume 215 of Maps, Pages 19 and 20
of Cuyahoga County Records;

Course No. 4:
Thence South 48(Degree) 41' 29" West along the southeasterly line of said Block
"G" a distance of 291.91 feet to an interior corner of said Block "G";

Course No. 5.:
Thence South 00(Degree) 18' 56" East along the easterly line of said Block "G" a
distance of 257.55 feet to an interior corner of said Block "G";

Course No. 6:
Thence North 89(Degree) 55' 18" East along the northerly line of said Block "G"
a distance of 125.90 feet to an interior corner of said Block "G";

                                      A-1
<PAGE>

Course No. 7:
Thence South 00(Degree) 18' 56" East along the easterly line of said Block "G",
a distance of 60.11 feet to a point on the northerly line of Hillary Lane, 55.11
feet wide, as shown in the Dedication Plat recorded in Volume 231 of Maps, Page
66 and 67 of Cuyahoga County Records;

Course No. 8:
Thence North 89(Degree) 55' 18' East along the northerly line of said Hillary
Lane, a distance of 626.02 feet to a point of curvature of a turnout to said
Richmond Road;

Course No. 9:
Thence Northeasterly along said turnout, on a curve deflecting to the left and
having a radius of 20.00 feet, a delta of 90(Degree) 14' 14", an arc distance of
31.50 feet, and a chord distance of 28.34 feet which bears North 44(Degree) 48'
11" East to a point of tangency on the westerly line of said Richmond Road;

Course No. 10:
Thence North 00(Degree) 18' 56" West along the westerly line of said Richmond
Road, a distance of 411.03 feet to the Place of Beginning and containing 7.8019
acres (339,853 sq. ft.) of land according to a survey prepared by Mc Steen &
Associated, Inc. in February of 1998, be the same more or less, but subject to
all legal highways and easements.

Permanent Parcel Number 662-27-003, 004, 010 and 011

                                      A-2
<PAGE>

                                   EXHIBIT A-2

                      LEGAL DESCRIPTION OF DELRAY FACILITY

PARCEL 1:

All of Parcel "A" and all of Parcel "B", ARC AT DELRAY WEST, P.U.D. according to
the plat thereof as recorded in Plat Book 84, Pages 42 through 43, inclusive of
the Public Records of Palm Beach County, Florida.

PARCEL 2:

TOGETHER with a Non-Exclusive Easement of Ingress, Egress and Utilities for the
benefit of Parcel 1 set forth in Cross Access Easement Agreement recorded in
Official Records Book 5866, Page 1085, as affected by instrument recorded in
Official Records Book 6544, Page 1909 and Official Records Book 6544, page 1915,
as further affected by Second Amendment to Cross Access and Utility Easement
Agreement recorded in Official Records Book 11469, Page 1835, of the Public
Records of Palm Beach County, Florida.

Said lands situate, lying and being in Palm Beach County, Florida.

Tax Assessor's No. PCN 00-42-46-20-10-001-0000

                                      A-3
<PAGE>

                                   EXHIBIT A-3

                   LEGAL DESCRIPTION OF JACKSONVILLE FACILITY
Parcel "A"

A portion of Section 14, Township 3 South, Range 27 East, Duval County, Florida,
being more particularly described as follows:

For Point of Reference, commence at the Southeast corner of Section 14, and run
North 00(degree) 37' 00" West, along the East line of said Section 14, a
distance of 675.00 feet to a point; run thence North 89(degree) 42' 50" West, a
distance of 120.00 feet to the Point of Beginning.

From the Point of Beginning thus described, run North 89(degree) 42' 50" West, a
distance of 795.00 feet to a point; run thence North 00(degree) 02' 10" West a
distance of 1920.24 feet to a point; run thence South 89(degree) 45' 00" East, a
distance of 801.46 feet to a point; run thence South 00(degree) 02' 10" East, a
distance of 1823.07 feet to the Point of Beginning.

Parcel "B"

Together with a non-exclusive easement for ingress and egress as described in
Amended and Restated Declaration of Easement recorded in Official Records Volume
6163, page 2383, of the current public records of Duval County, Florida, over
and across the following described lands:

A portion of Section 13 and 14, Township 3 South, Range 27 East, Jacksonville,
Duval County, Florida, being more particularly described as follows:

For point of beginning, commence at the Northeast corner of that property
described in Official Records Volume 5141, Page 126, Public Records of said
County, said point lying on the Westerly right of way line of Southside
Boulevard, State Road No. 115, U.S. Alternate No. 1 (a 200 foot right of way as
now established) at a point 100 feet Northerly of the intersection of said right
of way line with the line dividing Sections 13 and 24, Township and Range
aforementioned, and run North 89(degree) 45' 47" West, along the Northerly
boundary line of said Official Records Volume 5141, Page 126, a distance of
1,534.86 feet; run thence North 0(degree) 14' 06" East, a distance of 150.00
feet to the Northerly line of a 150 foot power line easement as recorded in
Official Records Volume 3040, page 983, of said County; run thence North
89(degree) 45' 47" West, a distance of 462.85 feet to a point lying on the
Westerly line of said Section 13; run thence North 37(degree) 32' 14" West, a
distance of 460.31 feet to a point of tangent intersection, with a curve,
concave to the Northeast and having a radius of 100.00 feet; run thence
Northerly, along said curve an arc distance of 66.01 feet through a central
angle of 37(degree) 49' 23", a chord bearing and distance of North 18(degree)
37' 30" West, a distance of 64.82 feet to a point of intersection with a
non-tangent line, said point being on the Northerly line of a 150-foot power
line easement, as recorded in Official Records Volume 3040, Page 963; run thence
South 89(degree) 42' 50" East, along the Northerly line of said power line
easement, a distance of 176.59 feet to the Southerly and most Westerly corner of
that land described in Official Records Volume 5809, Page 1938, of said County;
run thence South 37(degree) 45' 02" East, a distance of 245.40 feet to a point
of tangent intersection with a curve, concave to the Northeast and having a
radius of 342.30 feet; run thence

                                      A-4
<PAGE>

along said curve, an arc distance of 310.74 feet, through a central angle of
52(degree) 00' 45", a chord bearing and distance of South 63(degree) 45' 24"
East, 300.18 feet to a point of tangency, run thence South 89(degree) 45' 47"
East, a distance of 1,666.86 feet; run thence North 45(degree) 06' 01" East, a
distance of 49.62 feet to the Westerly right of way line of said Southside
Boulevard; run thence South 0(degree) 02' 10" East; along said Westerly line, a
distance of 285.17 feet to the point of beginning, excepting therefrom that
portion lying within the right of way of State Road No. 115 (Southside
Boulevard) as now established and as described in instrument recorded in
Official Records Volume 6333, page 2257, public records of said County.

Parcel "C"

Together with a non-exclusive easement for ingress and egress as described in
Easement recorded in Official Records Volume 6164, page 6 of the current public
records of Duval County, Florida, over and across the following described lands:

A parcel of land, lying in Section 14, Township 3 South, Range 27 East, Duval
County, Florida, being more particularly described as follows: For point of
reference, commence at the Southeast corner of Section 14, and run North
00(degree) 37' 00" West, along the East line of said Section 14, a distance of
675.00 feet to the North line of a 150 foot power line easement, as described in
Official Records Volume 3040, Page 963, of the current public records of said
County; run thence North 89(degree) 42' 50" West, along said easement line, a
distance of 296.58 feet to the point of beginning; thence continue North
89(degree) 42' 50" West, along said easement line, a distance of 149.01 feet to
the intersection of a tangent curve, and having a radius of 250.00 feet, concave
to the Southwest; run thence Southeasterly, along the arc of a curve, curving to
the right through a central angle of 52(degree) 10' 36", a distance of 227.66
feet, the chord bearing and distance being South 63(degree) 37' 32" East, 219.88
feet, to the point of tangency; run thence North 37(degree) 32' 14" West, a
distance of 44.78 feet to the beginning of a tangent curve, with a radius of
100.00 feet, concave to the East; run thence Northerly, along the arc of said
curve, curving to the right, through a central angle of 37(degree) 49' 23", a
distance of 66.01 feet, the chord bearing and distance being North 18(degree)
37' 30" West, 64.82 feet, to the point of beginning.

Parcel "D"

Together with the rights and easement, in common with others, for sign purposes
as described in Sign and Landscaping Agreement recorded in Official Records
Volume 5987, page 669 of the current public records of Duval County, Florida, as
partially assigned by Partial Assignment recorded in Official Records Volume
5987, page 675, of the current public records of Duval County, Florida, upon
across, over and under the following described lands:

A portion of Section 13, Township 3 South, Range 27 East, Jacksonville, Duval
County, Florida, being more particularly described as follows:

For point of beginning, commence at the Northeast corner of that property
described in Official Records Volume 5141, Page 126, Public Records of said
County, said point lying on the Westerly right of way line of Southside
Boulevard, State Road No. 115, U.S. Alternate No. 1 (a 200 foot right of way, as
now established) at a point 100 feet Northerly of the intersection of said

                                      A-5
<PAGE>

right of way line with the line dividing Sections 13 and 24, Township and Range
aforementioned. From the point of beginning thus described, run North 89(degree)
45' 47" West, along the Northerly boundary line of the aforementioned property
described in Official Records Volume 5141, page 126, said point lying on the
line dividing Sections 13 and 14, Township and Range aforementioned; run thence
North 00(degree) 37' 00" West, along said dividing line, a distance of 150.02
feet to a point; run thence North 37(degree) 32' 14" West a distance of 460.30
feet to a point of curvature; run thence 328.99 feet along the arc of a curve,
concave Southeasterly and having a radius of 100.00 feet; a chord distance of
199.45 feet to the point of tangency, the bearing of the aforementioned chord
being North 56(degree) 42' 42" East, run thence South 29(degree) 02' 11" East, a
distance of 228.22 feet to a point of curvature; run thence 362.80 feet, along
the arc of a curve, concave Northeasterly and having a radius of 342.303 feet, a
chord distance of 346.06 feet to the point of tangency, the bearing of the
aforementioned chord being South 59(degree) 23' 59" East; run thence South
89(degree) 45' 47" East, a distance of 1666.86 feet to a point; run thence North
45(degree) 06' 01" East, a distance of 49.62 feet to a point; run thence South
00(degree) 02' 10" East, along the Westerly right of way line of said Southside
Boulevard, a distance of 285.17 feet to the point of beginning. Said Parcel
being subject to a 150-foot power line easement along the Southerly and Westerly
sides, as recorded in Official Records Volume 3040, page 963, of the public
records of said county.

LESS AND EXCEPT the following described land:

A portion of Section 14, Township 3 South, Range 27 East, Jacksonville, Duval
County, Florida, being more particularly described as follows: For point of
reference, commence at the Northeast corner of that property described in
Official Records Volume 5141, page 126, public records of said county, said
point lying on the Westerly right of way line of Southside Boulevard, State Road
No. 115, U.S. Alternate No. 1 (a 200 foot right of way, as now established) at a
point 100 feet Northerly of the intersection of said right of way line with the
line dividing Sections 13 and 24, Township and Range aforementioned; run thence
North 89(degree) 45' 47" West, along the Northerly boundary line of the
aforementioned property described in Official Records Volume 5141, page 126, a
distance of 1995.48 feet to the Northwest corner of the aforementioned property
described in Official Records Volume 5141, page 126, said point lying on the
line dividing Sections 13 and 14, Township and Range aforementioned; run thence
North 00(degree) 37' 00" West, along said dividing line, a distance of 574.99
feet to a point; run thence North 89(degree) 42' 50" West, a distance of 120.00
feet to a point for point of beginning; thence continue North 89(degree) 42' 50"
West, a distance of 176.59 feet to a point on a curve; run thence 243.75 feet
along the arc of a curve, concave Southeasterly and having a radius of 100.00
feet, a chord distance of 187.74 feet to a point on a curve, the bearing of the
aforementioned chord being North 70(degree) 06' 58" East; run thence South
00(degree) 02' 10" East, a distance of 64.73 feet to the point of beginning,
also excepting therefrom that portion lying within the right of way of State
Road No. 115 (Southside Boulevard) as now established and a described in
instrument recorded in Official Records Volume 6333, page 2257, public records
of said county.

                                      A-6
<PAGE>

Parcel "E"

Together with a non-exclusive easement for drainage purposes as described in
Drainage and Storm Water Easement recorded in Official Records Volume 5987 page
677, of the current public records of Duval County, Florida, on, over, across,
under and through the following described lands:

A portion of that certain parcel of land lying within the power line easement
recorded in Official Records Volume 1192, page 261, and also described in
Official Records Volume 3040, page 963, current public records of Duval County,
Florida, which lies in the Westerly six hundred thirty feet (630') of the most
Easterly one thousand forty feet (1040') thereof.

APN:  147983-0100

                                      A-7
<PAGE>

                                   EXHIBIT A-4

                      LEGAL DESCRIPTION OF HOUSTON FACILITY

All that certain 1.8892 acre (82,292 square foot) tract of land located in the
William White League, Abstract Number 836, Harris County, Texas, being all of a
called 1.8892 acre tract of land described by special warranty deed recorded
under Harris County Clerk's File Number U960067, said 1.8892 acre tract being
more particularly described by metes and bounds as follows: (All bearings are
referenced to the deed of record of subject as described by special warranty
deed recorded under Harris County Clerk's File Number U960067 and originate from
monuments found along the south line of said tract):

BEGINNING at a 1-inch iron pipe found at the northwest corner of a called 40,455
square feet tract of land described by deed recorded under Harris County Clerk's
File Number N129530 lying in the east right-of-way line of South Post Oak
Boulevard, (100-foot wide right-of-way) for the southwest corner of the herein
described tract;

THENCE, North 02(degree) 43' 01" West, along said east right-of-way line and
along the west line of said 1.8892 acre tract, a distance of 246.96 feet to an
"X" cut in concrete found at the southwest corner of a called 2.427 acre tract
of land described by deed recorded under Harris County Clerk's File Number
K208035 from which a PK nail In concrete found bears North 13(degree) 11' 47"
West, a distance of 0.42 feet and a 60d nail In concrete found bears North
33(degree) 36' 30" East, a distance of 0.40 feet for the northwest corner of the
herein described tract;

THENCE, North 87(degree) 16' 55" East, along the south line of said 2.427 acre
tract and the north line of said 1.8892 acre tract, a distance of 359.99 feet to
an "X" cut in concrete found at the southeast corner of said 2.427 acre tract
from which an "X" cut in concrete found bears North 87(degree) 16' 55" East, a
distance of 0.47 feet and a 60d nail in concrete found bears South 83(degree)
38' 35" East, a distance of 0.59 feet lying in the west right-of-way line of
West Loop South (Interstate Highway 610, 300-foot wide right-of-way) for the
northeast corner of the herein described tract;

THENCE, South 09(degree) 22' 30" West, along said west right-of-way line and
along the east line of said 1.8892 acre tract, a distance of 252.04 feet to a
1-inch iron pipe found at the northeast of a called 5,963 square feet tract of
land described by deed recorded under Harris County Clerk's File Number N129530
and being the southeast corner of the herein described tract;

THENCE, South 87(degree) 11' 14" West, along the north line of said 5,963 square
feet tract and the south line of said 1.8892 acre tract, at a distance of 284.31
feet pass an angle point in the northerly line of said 40,455 square feet tract
and being the northwest corner of said 5,963 square feet tract, continuing along
said course, for a total distance of 307.19 feet to the POINT OF BEGINNING and
containing a computed area of 1.8892 acres (82,292 square feet) of land.

APN:  0451400040269, 0451400040103, 0451400040099

                                      A-8
<PAGE>

                                   EXHIBIT A-5

                    LEGAL DESCRIPTION OF SAN ANTONIO FACILITY

Lot 1650, SHAVANO PARK, UNIT 16F, Bexar County, Texas, according to the Plat
recorded in Volume 9538, Pages 66-69, Deed and Plat Records, Bexar County,
Texas.

APN:  04773-100-1650

                                      A-9
<PAGE>

                                   EXHIBIT A-6

                     LEGAL DESCRIPTION OF VICTORIA FACILITY

Being Lot One (1), in Block No. One (1) of VICTORIA RETIREMENT COMMUNITY, LTD.
SUBDIVISION, a Subdivision to the City of Victoria, Victoria County, Texas,
according to the established map and plat of said Subdivision of record in
Volume 7, Page 168A of Plat Records of Victoria County, Texas, to which
reference is here made for description purposes.

                                      A-10
<PAGE>

                                    EXHIBIT B

List of Facilities, Facility Description, Allocated Minimum Rent, Allocated
Initial Investment and Lease Rate

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------------
                                                                                                              INITIAL
                                                       FACILITY DESCRIPTION                              MONTHLY ALLOCATED
          FACILITY                                   AND PRIMARY INTENDED USE                              MINIMUM RENT
-------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                                                                       <C>
JACKSONVILLE FACILITY          Core community located at 9601 Southbrook Drive in Jacksonville,              $262,500.00
                               Florida, consisting of 60 assisted living facility units and 238
                               independent living beds commonly known as "Carriage Club of
                               Jacksonville"
-------------------------------------------------------------------------------------------------------------------------------
POST OAK FACILITY              Core community located at 2929 Post Oak Boulevard in Houston,                 $218,750.00
                               Texas, consisting of 39 assisted living facility units, 149
                               independent living beds and 56 skilled nursing beds commonly known
                               as "Hampton at Post Oak"
-------------------------------------------------------------------------------------------------------------------------------
RICHMOND HEIGHTS FACILITY      Assisted living facility located at Richmond Road and Hillary Land             $66,562.50
                               in Cleveland, Ohio, consisting of 78 assisted living units and 17
                               memory enhanced (Alzheimer's) units commonly known as "Homewood at
                               Richmond Heights"
-------------------------------------------------------------------------------------------------------------------------------
DELRAY BEACH FACILITY          Assisted living facility located at 8020 W. Atlantic Avenue in                 $57,187.50
                               Delray, Florida, consisting of 54 assisted living units and 32
                               memory enhanced (Alzheimer's) units commonly known as "Homewood at
                               Delray Beach"
-------------------------------------------------------------------------------------------------------------------------------
SHAVANO PARK FACILITY          Assisted living facility located at 4096 De Zavala Road in San                 $46,875.00
                               Antonio, Texas, consisting of 62 assisted living units and 17
                               memory enhanced (Alzheimer's) units commonly known as "Homewood at
                               Shavano Park"
-------------------------------------------------------------------------------------------------------------------------------

<CAPTION>

------------------------------------------------------------------

                                 ALLOCATED INITIAL
          FACILITY                   INVESTMENT       LEASE RATE
------------------------------------------------------------------
<S>                              <C>                  <C>
JACKSONVILLE FACILITY                $30,000,000.00      10.5%

------------------------------------------------------------------
POST OAK FACILITY                    $25,000,000.00      10.5%

------------------------------------------------------------------
RICHMOND HEIGHTS FACILITY             $7,100,000.00     11.25%

------------------------------------------------------------------
DELRAY BEACH FACILITY                 $6,100,000.00     11.25%

------------------------------------------------------------------
SHAVANO PARK FACILITY                 $5,000,000.00     11.25%

------------------------------------------------------------------
</TABLE>

                                      B-1

<PAGE>

<TABLE>
<CAPTION>
                                                                                                                  INITIAL
                                                  FACILITY DESCRIPTION                                       MONTHLY ALLOCATED
    FACILITY                                    AND PRIMARY INTENDED USE                                        MINIMUM RENT
-------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>                                                                            <C>
VICTORIA FACILITY              Mixed congregate care and assisted living facility located at 9806             $53,635.41
                               N.E. Zac Lentz Parkway in Victoria, Texas, of 60 and 30 units,
                               respectively, commonly known as "Homewood Residence at Victoria"
-------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                        ALLOCATED
                                         INITIAL           LEASE
                                       INVESTMENT          RATE
------------------------------------------------------------------
<S>                                   <C>                 <C>
VICTORIA FACILITY                     $4,584,284.00       N/A

------------------------------------------------------------------

</TABLE>

                                       2

<PAGE>

                                    EXHIBIT C

                       List of Lessor's Personal Property

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

                                      C-1

<PAGE>

                                   Schedule 1

                    Itemization of Lessor's Personal Property

[To be mutually agreed upon by Lessor and Lessee prior to the Commencement Date.
When agreed upon, the same shall be initialed by each of Lessor and Lessee and
attached to Exhibit C as Schedule 1, and will thereafter form a part of this
Lease. Failure of either Lessor or Lessee to prepare and/or initial such
Schedule 1 shall not affect the definition of or what personal property
constitutes Lessor's Personal Property in accordance with Exhibit C.]

                             Schedule 1 to Exhibit C

<PAGE>

                                    EXHIBIT D

                                     Form Of
                      Irrevocable Standby Letter Of Credit

Health Care Property Investors, Inc.
Texas HCP Holdings, L.P.
4675 MacArthur Boulevard, Suite 900
Newport Beach, California 92660

Date:                                       Letter of Credit No.:
     ------------------                                          ---------------
                                            Expiration Date:
                                                            --------------------

GENTLEMEN:

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

1)       A certificate purported to be executed by a representative of Health
         Care Property Investors, Inc. or Texas HCP Holdings, L.P. ("Lessor")
         stating the amount for which a draw under this letter of credit is made
         and that: (a) _____________________________ ("Lessee") has committed an
         Event of Default under the lease dated ________________, between Lessor
         and Lessee; or (b) that Lessee or an Affiliate of Lessee has committed
         an event of default (beyond applicable periods of notice and cure)
         under any other lease or agreement or other instrument now or hereafter
         made with or in favor of Lessor or an Affiliate of Lessor]; or (c) an
         event or circumstance has occurred which with notice or passage of
         time, or both, would constitute an Event of Default or an event of
         default under any such other lease or agreement or instrument, but for
         the fact that transmittal of any such notice is barred by applicable
         debtor relief law; or (d) a certificate purported to be executed by a
         representative of Lessor stating that a replacement letter of credit
         for this instrument has not been supplied prior to thirty (30) days in
         advance of the expiration of this instrument for the account of Lessor.

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

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

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

This letter of credit may be transferred or assigned by the beneficiary hereof
to any successor or assign of such beneficiary's interest in any such lease or
other agreement or to any lender obtaining a lien or security interest in the
property covered by any such lease. Each draft

                                      D-1

<PAGE>

hereunder by any assignee or successor shall be accompanied by a copy of the
fully executed documents or judicial orders evidencing such encumbrance,
assignment or transfer.

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

Very truly yours,

By
     ------------------------------------------------

Its
     ------------------------------------------------

                                      D-2

<PAGE>

                                    EXHIBIT E

                     Schedule of Insurance Deductible Limits

<TABLE>
<S>                                                                      <C>
Independent Living (all states except Florida and Texas):                $  200,000
Independent Living (Florida and Texas):                                  $1,000,000

Assisted Living (all states except Florida and Texas):                   $  250,000
Assisted Living (Florida and Texas):                                     $1,000,000

Memory Enhanced (Alzheimers) (all states):                               $1,000,000

Skilled Nursing Facility (all states except Florida and Texas):          $1,000,000
Skilled Nursing Facility (Florida and Texas)                             $3,000,000

</TABLE>

                                      E-1

<PAGE>

                                    EXHIBIT F

               List of Existing Facilities Within Ten Mile Radius

<TABLE>
<CAPTION>

Leased Property                     Facilities Within Ten Mile Radius
---------------                     ---------------------------------
<S>                                 <C>
1.  Jacksonville Facility           None

2.  Houston Facility                The Hampton Assisted Living Residences at Shadowlake
                                    The Hampton Assisted Living Residences at Pinegate
                                    The Hampton Assisted Living Residences at Shadow
                                        Springs (approximately 10.88 miles from Houston
                                        Facility)

3.  San Antonio Facility            Homewood Residence at Castle Hills

4.  Richmond Facility               Homewood Residence at Rockefeller Gardens

5.  Delray Facility                 Homewood Residence at Boynton Beach
                                    Homewood Residence at Boca Raton

</TABLE>

                                      F-1

<PAGE>

                                    EXHIBIT G

               List of Existing Commercial Occupancy Arrangements

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
          FACILITY                   OCCUPANT                       TERMS
----------------------------------------------------------------------------------------------------
<S>                           <C>                     <C>
JACKSONVILLE FACILITY         Eckerd                  Occupant does not pay owner any
                                                      amounts

----------------------------------------------------------------------------------------------------
                              First Union             Occupant pays owner
                              National Bank           $7,000/year in equal
                                                      monthly payments,
                                                      inclusive of all sales tax
----------------------------------------------------------------------------------------------------
                              Beauty Shop             Occupant pays owner weekly rent
                                                      of 15% of gross receipts (plus
                                                      sales tax if applicable)

----------------------------------------------------------------------------------------------------
POST OAK FACILITY             Beauty Shop             Occupant pays owner $1,200/month

----------------------------------------------------------------------------------------------------
SAN ANTONIO FACILITY          Beauty Shop             Occupant pays owner a station
                                                      fee of $12/half day or $24/day
----------------------------------------------------------------------------------------------------
RICHMOND HEIGHTS FACILITY     Beauty Shop             Pursuant to oral license

----------------------------------------------------------------------------------------------------
DELRAY BEACH FACILITY         Beauty Shop             Occupant pays owner 10% of gross
                                                      revenues, excluding tips
----------------------------------------------------------------------------------------------------

<CAPTION>

----------------------------------------------------------------------------------------------------
          FACILITY                               RENEWAL AND TERMINATION RIGHTS
----------------------------------------------------------------------------------------------------
<S>                           <C>
JACKSONVILLE FACILITY         Automatically renewed each year; may be terminated by either party
                              upon 90 days' notice

---------------------------------------------------------------------------------------------------
                              Occupant has option to renew for 20 consecutive terms of one year
                              each upon 60 days' notice

----------------------------------------------------------------------------------------------------
                              Automatically renewed each year; may be terminated by either party
                              upon 30 days' notice

----------------------------------------------------------------------------------------------------
POST OAK FACILITY             Automatically renews for one year; expires 5/31/02; may be
                              terminated by either party upon 90 days' notice

----------------------------------------------------------------------------------------------------
SAN ANTONIO FACILITY          Automatically renews each year; may be terminated by either party
                              upon 30 days' notice

----------------------------------------------------------------------------------------------------
RICHMOND HEIGHTS FACILITY     Pursuant to oral license

----------------------------------------------------------------------------------------------------
DELRAY BEACH FACILITY         Expires 10/1/02; may be terminated by either party upon 30 days'
                              notice
----------------------------------------------------------------------------------------------------
</TABLE>

                                      F-1

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