CAPITAL SENIOR LIVING CORP
MANAGEMENT SERVICES AGREEMENT
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<TYPE>EX-10.10
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<DESCRIPTION>MANAGEMENT SERVICES AGREEMENT
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<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;10.10</B>



<P align="center" style="font-size: 10pt"><B>MANAGEMENT SERVICES AGREEMENT</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS AGREEMENT, made and entered into as of the 1st day of December, 2000
(the &#147;Contract Date&#148;), between CGI Management, Inc., a corporation organized
under the laws of the State of Delaware, (hereinafter referred to as
&#147;Management Company&#148;), and GF/Arlington, Inc., a Texas nonprofit corporation,
organized under the laws of the State of Texas (hereinafter referred to as
&#147;Owner&#148;).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Owner intends to construct and operate a 176 unit home for the
aged community located in Arlington, Texas, known as the Arlington Retirement
Community Project (hereafter referred to as the &#147;Facility&#148;); and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Owner intends to finance its development of the Facility through
(a)&nbsp;the issuance of a $12,625,000 Tarrant County Housing Finance Corporation
Senior Housing Revenue Bonds (Arlington Retirement Community Project) Series
2000 (the &#147;Bonds&#148;) issued by Tarrant County Housing Finance Corporation, Texas
(the &#147;Issuer&#148;), and related documents including a Trust Indenture between the
Issuer and Bank One, Texas, N.A. (the &#147;Trustee&#148;), a Loan And Financing
Agreement between the Issuer and Owner (the &#147;Loan and Financing Agreement&#148;), a
Promissory Note from the Owner to the Issuer in the amount of $12,625,000, a
Deed Of Trust, Security Agreement and Assignment Of Rents and Leases and
Financing Statement from the Owner to Shelley Mefford for the benefit of the
Issuer, a Replacement Reserve and Security Agreement among the Owner, MuniMae
Portfolio Services, LLC (the &#147;Servicing Agent&#148;) and the Trustee, a Regulatory
Agreement and Declaration of Restrictive Covenants between the Issuer, Owner
and the Trustee, and UCC Financing Statement from the Owner to the Issuer
and/or the Trustee (collectively, the &#147;Bond Documents&#148;) and (b)&nbsp;a loan from
Municipal Mortgage &#038; Equity, LLC (&#147;MuniMae&#148;) in the amount of $783,500 (the
&#147;Taxable Loan&#148;), and related documents including a Loan Agreement between Owner
and MuniMae, a Promissory Note from Owner to MuniMae in the amount of $783,500,
a Second Deed of Trust, Security Agreement and Assignment of Rents and Leases,
and Financing Statement from the Owner to Sidney H. Swearingen for the benefit
of MuniMae and UCC Financing Statements from Owner-to MuniMae (collectively,
the &#147;Taxable Loan Documents&#148;, and together with the Bond Documents, the
&#147;Financing Documents&#148;); and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Owner desires to have Management Company provide management
services to the Facility; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Management Company possesses the expertise to furnish management
services and his indicated a willingness to provide management services with
respect to the Facility on the terms and conditions hereinafter set forth.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the foregoing, and the terms and
conditions hereafter set forth, Management, Company and Owner agree as follows:


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<P align="center" style="font-size: 10pt"><B>ARTICLE 1.</B>



<P align="center" style="font-size: 10pt"><B>OPERATING TERMS AND APPOINTMENT AND EMPLOYMENT OF<BR>
MANAGEMENT COMPANY AS AGENT AND GENERAL MANAGER OF THE<BR>
FACILITY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 Term. The term of this Agreement shall commence on the first day that
a &#147;certificate of occupancy&#148; is issued with respect to the Facility (the
&#147;Commencement Date&#148;), and shall continue until the fifth anniversary of such
commencement date, subject to earlier termination as set forth in Article&nbsp;5
hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 Employment of Management Company. Owner hereby appoints and employs
Management Company to serve as operating manager of the Facility; and
Management Company agrees to act as operating manager of the Facility, to
supervise, direct and control the day-to-day business activities and management
of the Facility and all phases of its operations in the name of and on behalf
Owner upon the terms and conditions hereinafter stated. Management Company
shall be responsible for managing the Facility and all of its assets and
services with the same degree of diligence and skill as is employed by a
reasonably prudent management company in the management of similar facilities,
in compliance with all obligations imposed on Owner which are known to
Management Company, including, without limitation, the obligations contained in
the Financing Documents. Management Company shall, subject to compliance of
Owner with its obligations; hereunder, do all things as may be reasonably
required to maintain and preserve all necessary licenses, permits and approvals
to operate the Facility so as to comply with all applicable law, rules and
regulations provided, however, and notwithstanding any other provisions of this
Agreement to the contrary, Management Company shall not be required to expend
its own funds in performing any of its obligations herein. Management Company
shall not be deemed to be in violation of this Agreement if it is prevented
from performing any of its obligations hereunder for any reason beyond its
control including, without limitations, strikes, lockouts, or unforeseen
changes in statutes, regulations or rules of appropriate governmental or,
regulatory authorities. Except as provided for herein, Management Company makes
no warranties, express or implied, and except as provided herein shall not
assume any financial or other responsibilities in connection with its
obligations hereunder and shall not be obligated to contribute its own funds in
connection with the management of the Facility.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 Retention of Legal Ownership by Owner. Owner shall at all times
continue to exercise legal ownership over the assets and operations of the
Facility, and Management Company shall perform it responsibilities as described
in this Agreement as agent to Owner in accordance with written policies and
directives adopted by Owner. Management Company will propose written policies
and directives from time to time for adoption by the Owner. By entering into
this Agreement, Owner does not delegate to Management Company any of the
powers, duties, and responsibilities vested in the Owner by law, or by its
Articles of Incorporation or Bylaws. Owner may, according to the terms of this
Agreement (i)&nbsp;direct Management Company to implement appropriate policies and
procedures at the Facility, (ii)&nbsp;adopt as policies and procedures of the
Facility recommendations and proposals made by Management Company, or (iii)
adopt as the policies and procedures of the Facility the Owner&#146;s own proposals,
subject to any limitations stated herein. the policies and procedures for the
Facility shall be reduced to a written Policies and Procedures Manual (the
&#147;Policies and Procedures Manual&#148;), and any and all


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<P align="left" style="font-size: 10pt">changes in the standard policies and procedures of Management Company will
be documented and clearly expressed in the Policies and Procedures Manual as
&#147;Owners Exceptions&#148;. Manager shall maintain a copy of the Policies and
Procedures Manual at the Facility. Prior to the Contract Date, the Management
Company shall have presented to Owner for its approval, which approval shall
not be unreasonably withheld, a Marketing Plan for the following 12&nbsp;month
period.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whenever this Agreement calls for the approval of Owner, such approval
shall be expressed in writing executed by a duly authorized officer of Owner
and such approval shall not be unreasonably withheld or delayed. In the absence
of any requirement for Owner consent, Management Company shall be entitled to
rely upon its business judgment and act accordingly.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 Management Services to be Provided by Management Company. During the
term of this Agreement, Management Company shall, as agent and on behalf of
Owner, manage all aspects of the day-to-day operation of the Facility,
including, but not limited to, staffing, hiring, supervising and firing of all
personnel, accounting as is customary and appropriate for a retirement facility
similar to the Facility (but not audit), billing, collections, setting of rates
and charges (which rates and charges, shall, however, be approved in advance by
Owner), and general on-site administration. In connection therewith, Management
Company (either directly or through supervision of employees of the Owner at
the Facility), shall use its best efforts to:



<P align="left" style="margin-left:3%; font-size: 10pt">A. Select, employ, supervise and train an adequate staff of housekeepers,
maintenance, food service, activities, marketing, office and other
employees, including but not limited, to an Executive Director (the
&#147;Executive Director&#148;) and Assistant Executive Director (the &#147;Assistant
Executive Director&#148;) for the Facility, and promote, direct, assign and
discharge all such employees, all in accordance with such policies as may
be established by Owner. Owner has agreed that as a matter of
administrative convenience, such personnel shall in every instance be
deemed employees of Management Company and not of Owner; provided that
Owner reserves the right to direct Management Company to transfer all of
such employees to the payroll of Owner if it deems that desirable. All
reasonable salaries, wages and other compensation of Facility-based
personnel employed by Management Company hereunder, including so-called
fringe benefits (including employer&#146;s FICA taxes, medical and health
insurance, pension plans, payroll taxes, worker&#146; compensation insurance,
bonuses, holiday, vacation, personal leave and sick leave and the like)
shall be deemed reimbursable expenses of Management Company and
reimbursed by Owner within three (3)&nbsp;days after payment of payroll. As
described above, payment of amounts due to Management Company as
reimbursement for the cost of employing Facility-based personnel will be
made as Operating Expenses of the Facility not subject to any limitations
provided in the Financing Documents for payment of Management Fees.
Management Company shall use its best efforts to assure compliance with
all applicable employment, wrongful discharge, anti-discrimination,
occupational safety, and health and other similar laws and regulations
applicable to the employment of Facility-based personnel, and with any
applicable private employment or union contracts: Management Company
hereby indemnifies and holds harmless Owner from any losses, damage,
claims, expenses or other liabilities, including reasonable legal fees
and court costs, arising out of or in connection with a breach or alleged
breach of such laws, regulations, or contracts wherein Management Company
is proven (or alleged by a third party) to be negligent in


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<P align="left" style="margin-left:3%; font-size: 10pt">the performance of its duties and responsibilities. Management Company
shall maintain its own insurance coverage for employer&#146;s liability.
Management Company shall provide for and maintain an employee training
and testing program with objective standards for all categories of
employees which meets or exceeds all governmental and industry
requirements for minimum levels of training and degrees of experience,
all as specified in the Policies and Procedures Manual, and will provide
an adequate level of staffing for all categories of employees.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Management Company shall establish general salary scales, personnel
policies and appropriate employee benefits for all Facility staff that
shall be consistent with the Approved Budget. Owner shall have the right
to approve or disapprove all hirings, terminations, raises and bonuses
with respect to Facility-based personnel, whether such personnel are
technically employed by Owner or by Management Company. Owner may require
Management Company to notify Owner at least two days prior to hiring or
terminating any Executive Director of the Facility, and Management
Company shall be entitled to take any such proposed action, if within the
confines of the general salary scales, personnel policies and employee
benefits approved by Owner, unless Owner has notified Management Company
that it objects to the proposed action within two business days after
such notice is given;



<P align="left" style="margin-left:3%; font-size: 10pt">C. Issue appropriate bills for services and materials furnished by the
Facility and use its best efforts to collect accounts receivable and
monies owed to the Facility; design and maintain, customary accounting,
billing, resident and collection records; and prepare and file insurance,
and any and all other necessary or desirable applications, reports and
claims related to revenue production. All rates for services provided by
Owner and for the use of the Facility, and any changes therein, shall be
subject to the prior approval of Owner. Owner expressly assigns, to the
extent permitted by applicable law, to Management Company the full right,
power and authority as its agent to administer, process and collect on
Owner&#146;s behalf and in its name, all receivables. Owner hereby grants
Management Company the right to enforce Owner&#146;s rights as creditor under
any contract relating to the rendering of any services at the Facility
for purposes of collecting accounts receivable and monies owed the
Facility, and Management Company shall use its best reasonable efforts to
collect all such receivables and monies. Any and all refunds, volume
discounts, rebates, reduced rates for timely payment, or other benefits
derived from business done at, on or through the Facility shall be
credited to Owner and not to Management Company. In cases where such
refunds, volume discounts, rebates, reduced rates for timely payment, or
other benefits are derived not only from business done at, on or through
the Facility but also at business done at other facilities managed by
Management Company or its affiliates, the amount properly allocable to
the Facility shall be determined by reference to the actual unit volume
purchased, if possible, and otherwise by reference to the ratio of
residential units at he time in the applicable subject to this Agreement
as compared to the number of units in such other applicable facilities;



<P align="left" style="margin-left:3%; font-size: 10pt">D. Plan, supervise and conduct a program of regular maintenance and repair
of the Facility. Management Company shall not make any additions to the
Facility increasing the square foot area thereof, without the prior
written approval of Owner, and all such expenditures shall conform to the
requirements of the Financing Documents.


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<P align="left" style="margin-left:3%; font-size: 10pt">Management Company shall maintain a maintenance log of all repairs,
replacements or improvements made to the Facility which exceed $1,000 in
total cost;



<P align="left" style="margin-left:3%; font-size: 10pt">E. Purchase all necessary food, beverages, cleaning and other supplies,
equipment, and furnishings for the operation and maintenance of the
Facility and contract for all necessary services (other than services
required to be provided by Management Company hereunder) for the account
of Owner. Unless the consent of Owner is otherwise obtained, all
contracts or agreements entered into by Management Company for the
account of the Owner shall be for a term of one (1)&nbsp;year or less, and
shall provide for payments within the then current Approved Budget, as
defined in Section&nbsp;1.5 hereof. To the extent permitted by law and the
terms offered by vendors, Management Company will offer to the Facility
the opportunity to participate in any group or volume purchasing
contracts in which the Management Company may from time to time
participate wherein such participation by the Facility, in the sole
opinion of Management Company, is deemed to be appropriate and practical.
The Owner recognizes herein that certain of such services, supplies,
equipment, furniture and other items such as group advertising may be
available through Management Company at less cost and/or better quality
and that it may be in the advantage of Owner to purchase such services
and materials, if needed by the Facility, pursuant to an arrangement
whereby the total cost to Management Company will be allocated to the
Facility based on direct use or, in situations where it is impractical to
measure direct use, a pro-ration of the cost based on the relationship
that the number of resident units in the Facility benefiting from such
services bears to the total number of resident units in all facilities
benefiting from such material or service. The Owner further recognizes
that due to the significant attrition rates experienced by homes for the
aged and the &#147;need driven&#148; nature of the business, that public awareness
created through advertising and promotions, is necessary to maintain high
occupancy. Consequently, the cost of any group advertising and group
related promotions, including yellow page advertising, which will benefit
the Facility and one or more other facilities managed by Management
Company will be paid by the Facility based on the relationship the number
of living units in the Facility benefiting from such advertising or
promotion bears to the total number of living units benefiting from such
advertising or promotions. Any such expenditures not allowed for in the
&#147;Approved Budget&#148; will be subject to the approval of the Owner. The
parties contemplate that the costs of marketing campaigns and advertising
targeted at the initial fill up of one or more new constructed facilities
or additions thereto that are not owned by Owner will not be charged to
Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">F. Administer, supervise and schedule all customary resident and other
customary services of the Facility, including the provision of food, and
other ancillary services;



<P align="left" style="margin-left:3%; font-size: 10pt">G. Prepare and make orderly and timely payment, from Facility funds, of
accounts payable, employee payroll and withholding, taxes, insurance
premiums and all other customary obligations of the Facility;



<P align="left" style="margin-left:3%; font-size: 10pt">H. Institute standards and procedures for moving in and moving out of
residents, for charge residents for services and for collecting the
charges from the residents or third parties, if any;


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<P align="left" style="margin-left:3%; font-size: 10pt">I. Furnish to the Facility any and all policy manuals needed with
reference to the operation of the Facility and propose revisions to said
policy manuals as is needed from time to time to assure, to the best of
Management Company&#146;s ability, that the Facility complies with all
applicable local, state and federal laws, regulations and requirements,
provided that the foregoing does not constitute a guaranty of such
compliance by Management Company;



<P align="left" style="margin-left:3%; font-size: 10pt">J. Assist the Owner in obtaining and maintaining insurance coverage for
the Facility in amounts and types of coverage as specified in the
Financing Documents and such other insurance as is normally carried by
properties similar in the type, services provided and location as the
Facility, naming Owner, Management Company, the Servicing Agent, the
Trustee (in the case of the Bond Documents) and MuniMae (in the case of
the Taxable Loan Documents), and such other persons reasonably requested
by Owner as additional insureds. Management Company shall obtain and
maintain at its own cost its own insurance coverage for employer&#146;s
liability insurance. Management Company will provide all professional
liability insurance for the Facility (in the amounts required by
Financing Documents) naming Owner, Servicing Agent, MuniMae and Trustee
as additional insureds. The costs of such insurance will be in accordance
with the Approved Budget and considered an Operating Expense of the
Facility not subject to any limitations provided in the Financing
Documents for payment of Management Fees. Such amounts will be reimbursed
by Owner to Management Company on an annual basis and shall not exceed
the cost of such coverage which Owner would have incurred in the event it
obtained such insurance through its own insurance policies.



<P align="left" style="margin-left:3%; font-size: 10pt">K. Negotiate and enter into, in the name of and on behalf of Owner, such
agreements, contracts and orders on a competitive price basis as it may
deem necessary or advisable for the furnishing of services, concessions
and supplies for the operation and maintenance of the Facility;



<P align="left" style="margin-left:3%; font-size: 10pt">L. Handle and settle all employee relations matters, union and non-union,
and negotiate on behalf of Owner (and in conjunction with Owner&#146;s
counsel) with any labor union lawfully entitled to represent employees of
Owner who work at the Facility, but any collective bargaining agreement
or labor contract must be submitted to Owner for its prior written
approval and execution; provided that the institution of any litigation
and any settlement in excess of the sum of $5,000 must be approved by
Owner;



<P align="left" style="margin-left:3%; font-size: 10pt">M. Assist in maintaining all licenses, certifications and permits in the
name of Owner, all as required by law for the operation of the Facility;.



<P align="left" style="margin-left:3%; font-size: 10pt">N. Make periodic evaluations of the performance of all departments of the
Facility and provide written notification to Owner in the event of any
substandard performances in the quarterly narrative reports as required
in Section&nbsp;1 .6(B) of this Agreement;



<P align="left" style="margin-left:3%; font-size: 10pt">O. Provide direct marketing service and personnel benefiting the Facility
in accordance with the Approved Budget including a system for identifying
and tracking inquiries and leads and the responses thereto;


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<P align="left" style="margin-left:3%; font-size: 10pt">P. Maintain an accounting and internal control system using accounts and
classifications consistent with those used in similar facilities,
including suitable books and records of control and accounts as are
necessary or required in order to comply with all state and federal
standards, rules and regulations, and with Owner&#146;s policies,



<P align="left" style="margin-left:3%; font-size: 10pt">Q. Coordinate the provision of home health care and other ancillary
services to residents of the Facility as Management Company may deem
reasonable, necessary or desirable in connection with the, operation of
the Facility; and Management Company shall contract on behalf of Owner
with such consultants or other professionals in connection with the
providing and delivery of such services on a competitive price basis as
Management Company shall elect in its reasonable business judgment, upon
prior written approval of the Owner;



<P align="left" style="margin-left:3%; font-size: 10pt">R. Within thirty (30)&nbsp;days after the commencement of the term hereof and
annually thereafter, if required by Owner, Management Company shall
prepare and present to Owner written emergency and evacuation procedures
for the protection, warning, and safe and timely evacuation of all
residents, guests, invitees, and staff from the Facility (the &#147;Emergency
and Evacuation Procedures&#148;). Management Company agrees to consult with
insurance carrier(s) loss prevention consultants if so required by Owner,
and to change such Emergency and Evacuation Procedures if recommended by
them provided, that the Emergency and Evacuation Procedures shall at all
times comply with applicable governmental requirements. Management
Company shall take such steps as it deems appropriate to assure the
proper training of the Facility&#146;s staff, and shall assure that all
residents receive and are knowledgeable about such Emergency and
Evacuation Procedures;



<P align="left" style="margin-left:3%; font-size: 10pt">S. Management Company shall take such action as shall be necessary to
ensure that the Facility and the operation thereof by Management Company
comply with all federal, state, aid local laws, rules, regulations, and
ordinances applicable to the Facility or the operation thereof by
Management Company, including Revenue Procedure 97-13, and including any
particular laws and regulations applicable to home for the aged
facilities owned by nonprofit organizations and/or financed with
tax-exempt bond financing of which Management Company is notified in
writing by Owner. In the event the terms of this Agreement or the actions
taken hereunder by Management Company or Owner, at any time, shall fail
to comply with any federal, state or local law, rule, regulation or
ordinance, including any regulation of the Internal Revenue Service
relating to the management or operation of home for the aged facilities
owned by a nonprofit organization and/or finance with tax-exempt bond
financing (but in this case only to the extent Management Company has
received prior written notice thereof from Owner), such failure
immediately shall be cured by Management Company and/or Owner and, to the
extent such failure requires the modification of this Agreement,
Management Company and Owner agree to make such modification to cause
this Agreement to comply with all applicable rules, laws, regulations and
ordinances. Management Company shall promptly provide to Owner as and
when received by Management Company, all notices, reports or
correspondence from governmental and regulatory agencies that assert
deficiencies or charges against the Facility or that otherwise relate to
the suspension, revocation, or any other action adverse to any approval,
authorization,


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<P align="left" style="margin-left:3%; font-size: 10pt">certificate, determination, license or permit required or necessary to
own or operate the Facility. Management Company may, subject to the
provisions of the Financing Documents, at its sole discretion appeal any
action taken by any governmental or regulatory agency against the
Facility; provided, however, that Management Company shall adequately
secure and protect Owner from loss, cost, damage or expense by bond or
other means reasonably satisfactory to Owner in order to contest by
proper legal proceedings the validity of any such statute, ordinance,
law, regulation or order, provided that such contest shall not result in
the suspension of operations of the Facility and provided, further, that
Management Company shall have no obligation to secure and protect Owner
from any loss, cost, damage or expense that arises directly out of Owner
is breach of any of its covenants under this Agreement. Management
Company shall take such action as may be necessary to comply promptly
with any and all orders, evaluations, reports, or other requirements of
any federal, state, regional, county, or municipal authority affecting
the Facility or the operation thereof, and orders of the Board of Fire
Underwriters or other similar bodies. Management Company, however, shall
not take any action under this Section so long as Management Company has
been informed that Owner is contesting, or has affirmed its intention to
contest any such order or requirement, unless a failure to comply
promptly with any such order or requirement would expose Management
Company to civil or criminal liability. Management Company and Owner
shall promptly, and in no event more than four business days after
receipt, notify each other of any and all governmental or other orders,
notices, evaluations, reports or other requirements from any source which
could directly or indirectly impact on the operation of the Facility.
Management Company shall immediately deliver to Owner copies of all
notices received by it or received at the Facility from any trustee,
mortgagee, ground landlord, or other party relating or pertaining to any
of the Financing Documents.



<P align="left" style="margin-left:3%; font-size: 10pt">It is the intent of the parties that the cost of Facility-based staff
described in clause (A)&nbsp;and (B)&nbsp;above, the fees and expenses of any
collection agency or collection attorney engaged pursuant to clause (C),
the actual third party cost of the maintenance and repairs described in
clause (D), the cost of food and supplies described in clause (E)&nbsp;and
such other services described in clause (E)&nbsp;which, in the home for the
aged industry, are not normally provided by a management company, the
food and ancillary services described in clause (F), the actual payment
of obligations pursuant to clause (G), the cost of actually complying
with applicable law and other requirements pursuant to clause (I)&nbsp;and
(S), the cost of insurance described in clause (J), the cost of any labor
attorney engaged pursuant to clause (L), the wages, salaries,
commissions, and benefits of any full-time or part-time marketing
personnel who work on-site exclusively for the Owner and exclusively for
the Facility, and the cost of ancillary services provided pursuant to
clause (Q), shall not be borne by, Management Company, and that all such
costs shall instead be paid by Owner, except to the extent that home
health care and other ancillary services may be billed directly to the
residents to whom such services were provided. Except and to the extent
approved as a part of an Approved Budget, or otherwise approved by Owner,
the following expenses shall be paid by Management Company, without
reimbursement by Owner:


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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any expenses for Management Company&#146;s home office, equipment or
supplies, excluding direct charges for overnight postage as
allowed in the Approved Budget;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any overhead expense of Management Company
incurred in its general offices; salaries of any executive or
supervisory personnel of Management Company, including travel
expenses associated-with, on-site Facility visits as allowed
in the Approved Budget;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>salaries, ,wages, data transmission charges,
Internet fees and charges, and expenses allocable to any
personnel for activities with regard &#145;to providing in-house
accounting services (other than full-time personnel employed
by Owner at the Facility);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any salaries, wages, and expenses for any central
office personnel located at the Facility;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>wages, salaries, or other expenses for any
services provided by or on behalf of Management Company,
except as specifically provided herein and authorized in
advance by Owner or allowed for in the Approved Budget; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any computer time, equipment, communication toll
charges, outside payroll processing service or other expense
used or incurred in processing payroll as such expense relates
to Facility-based personnel , employed by the Management
Company or Owner, the books and records of the Facility or in
preparing any statements or reports (other than the annual
audit of the Facility).</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:3%; font-size: 10pt">Notwithstanding any of the above provisions to the contrary, all capital
expenditures shall be made only in accordance with an Approved Capital
Budget and in compliance with and subject to the terms and provisions of
the Loan and Financing Agreement and the Replacement Reserve and
Security&#146; Agreement, provided, however, that Management Company may make
capital expenditures not contemplated by the Approve Capital Budget
aggregating not more than $5,000 in any one year without prior approval
of Owner or the Servicing Agent, except in the event of any emergency
requiring prompt . action for the protection and safety of the Facility
or the residents and staff therein. In such event, when it is not
practicable to obtain prior approval from the Owner, Management Company
shall be entitled to take any required or necessary action without
Owner&#146;s prior approval, following which a report of the occasion for such
action and the action taken shall be made to Owner and Servicing Agent as
soon as practicable. Approval by the Owner may be evidenced by a board
resolution or a written or oral communication from an officer or
authorized representative of the board of the Owner pursuant to policies
established from time to time by the board of directors of the Owner.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 Budget. For each Fiscal Year of the Facility, Management Company
shall submit to Owner concurrently with the execution hereof and annually
thereafter, at least 60&nbsp;days prior to the beginning of each Fiscal Year
beginning after the Contract Date, an annual budget (the


<P align="center" style="font-size: 10pt">9
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&#147;Budget&#148;) covering the operations of and proposed capital expenditures to
be made with respect to the Facility containing the following items:



<P align="left" style="margin-left:3%; font-size: 10pt">A. A capital expenditure budget (the &#147;Capital Budget&#148;) setting forth an
estimate of the capital expenditures to be incurred for the Facility, on
a monthly basis for the next Fiscal Year and for the next three Fiscal
Years when and as required pursuant to Sections&nbsp;5.2(dd) and 5 2(ee) of
the Loan and Financing Agreement. Owner may approve or reject each
proposed capital expenditure, except those&#146; required by law or indicated
as mandatory, which shall be approved by Owner, and those in Management
Company&#146;s best reasonable business judgment as being highly recommended
and necessary or appropriate, to which Owner shall not unreasonably
withhold or delay its consent;



<P align="left" style="margin-left:3%; font-size: 10pt">B. operating budget (the &#147;Operating Budget&#148;) setting forth an estimate of
the following items for the Facility, on a monthly basis for the next
Fiscal Year:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operating revenue;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operating expenses, including the costs for repairs and
maintenance.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expenditures for non-capitalized maintenance expense of the Facility;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iv.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expenditures for advertising, promotion, and
personnel training programs to be undertaken by Management Company;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">v.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>management fees; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">vi.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all other matters required by the Bond Documents.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Capital Budget and the Operating Budget shall include input from
and be reviewed by the Executive Director of the Facility, be prepared on
an accrual basis, but shall also contain schedules which set forth the
actual cash expenditures projected to be made during each month during
the Fiscal Year for (x)&nbsp;capital expenditures, and (y)&nbsp;the item described
in clauses (ii)&nbsp;through (vi)&nbsp;of subparagraph (B). The latter schedule
shall comply with the requirements for the &#147;Annual Operating and Capital
Budgets&#148; as set forth in Section&nbsp;5.2(dd) of the Loan and Financing
Agreement.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Owner shall approve or disapprove of the proposed Budget in writing
to Management Company, detailing the basis for disapproval, within thirty
(30)&nbsp;days after receipt. If Owner does not approve or disapprove of the
proposed Budget within such thirty (3 ) day period then Owner shall be
deemed to have approved the Budget. If Owner disapproves the Budget,
Management Company will resubmit a Budget within fifteen (15)&nbsp;days after
initial rejection. Owner shall approve or disapprove any such resubmitted
Budget within fifteen (15)&nbsp;days of its receipt thereof The Owner shall
not unreasonably withhold its approval of any budget submitted by
Management Company. The Bud et and the Capital Budget and the Operating
Budget components thereof as so finally approved by Owner shall
constitute the &#147;Approved Budget&#148;, the &#147;Approved Capital Budget&#148; and the
&#147;Approved Operating Budget respectively, for purposes hereof and the
schedule set forth in clause (y)&nbsp;of the preceding paragraph shall
constitute the Operating Budget for such fiscal year for purposes of the
Financing Documents. Owner will not unreasonably withhold or delay
approval of a proposed Budget or revision.


<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An Approved Operating Budget shall constitute authorization for
Management to expend funds to operate and manage the Facility pursuant to
such Approved Budget, and Management Company may do so without further
approval except further governed by the Financing Documents. Management
Company shall use its best efforts to adhere to the Approved Budget,
provided, however, that Management may exceed the Operating Budget for
any given month provided the excess expenditure does not reflect the need
to revise and amend the Approved Operating Budget for the current fiscal
year. Any revision or amendment to the Approved Operating Budget shall
conform to the provisions of Section&nbsp;1.5 of this Agreement. Management
Company shall us its best efforts to keep monthly cash expenditures for
Operating Expenses, as defined in the Loan and Financing Agreement,
within the estimated monthly level of expenditures shown in the schedule
set forth in such clause (y), as so finally approved by Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If at any time circumstances indicate that the Approved Operating
Budget does not properly take into account the projected needs of the
Facility, Management Company shall notify Owner of the same and shall
submit to Owner a proposed revision to the Approved Operating Budget
which Owner shall approve or disapprove within thirty (30)&nbsp;days after
submission. If the proposed revision is disapproved by Owner, Owner and
Management Company shall endeavor to agree on a revised Operating Budget.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once approved, Management Company&#146;s authority as to any revised
Operating Budget shall be the same as that authorized for the original
Approved Operating Budget.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Approved Capital Budget shall constitute authorization for
Management Company to make the capital expenditures contemplated thereby,
but unless otherwise approve, by Owner, such capital expenditures will be
paid only from monies withdrawn from the Replacement Fund or the
Construction Fund created under the Indenture and such draws shall be
subject to the terms and procedures of the Indenture, the Loan and
Financing Agreement and the Replacement Reserve And Security Agreement.
If Management Company believes the purchase or installation of new or,
replacement equipment or other capital items not contemplated by the
Approved Capital Budget is or will be necessary or desirable, Management
Company shall advise Owner thereof, but shall cause such items to be
purchased and installed only after obtaining the prior written
authorization of Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any major capital improvement, addition, or replacement wherein the
estimated exceeds $5,000 and involves more than one contractor with whom
Owner directly will require construction planning and supervision. The
Owner may identify and contract with an independent consultant to provide
such construction planning and on or the Owner may authorize the
Management Company to provide these pursuant to an arrangement wherein
such authorization will provide for a fee to be paid to the Management
Company equal to three percent (3.0%) of the total costs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 Reports to Owner



<P align="left" style="margin-left:3%; font-size: 10pt">A. During the term of this Agreement, Management Company shall (i)&nbsp;meet
with Owner quarterly and (ii)&nbsp;shall deliver to Owner (and upon written
request to the Servicing


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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">the following statements for the Facility prepared in accordance with
sounding principles applied consistently from period to period on the
accrual basis by the h (20th) of the month:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>balance sheet dated as of the last day of the preceding month;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>comparative profit-and-loss statement presenting
the results of operations of the Facility for such preceding
month and for year-to-date as compared with the Approved
Operating Budget for that month and for the year-to-date and
showing the variances in dollars and per resident day and/or
living unit per day;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>supporting reports, including copies of any
adjustments to journal entries and a schedule showing the
calculations of the Management Fee payable for the previous
month;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iv.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>monthly aged accounts receivable report,
accompanied by a narrative regarding any default or
termination notices or legal action instituted;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">v.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other statements, reports or information
required to be given by the Owner to the Servicing Agent,
Issuer or the Trustee by the Bond Documents, including without
limitation those required by Section&nbsp;5.2(a) of the Loan and
Financing Agreement; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">vi.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other information relating to the Facility
reasonably requested by Owner or the Servicing Agent.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:3%; font-size: 10pt">B. During the term of this Agreement, Management Company shall deliver to
Owner the following statements for the Facility prepared in accordance
with sound accounting principles applied consistently from period to
period on the accrual basis by the last day of the month following the
end of each fiscal quarter of Owner:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a narrative analysis of the results of operations
for such fiscal quarter and year-to-date fiscal quarters,
including an explanation of all material variances from the
Approved Budget;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital improvement analysis, setting forth
expenses for capital improvements incurred to date and
estimated amounts to be incurred during the remainder of the
calendar year, with a narrative explanation of any anticipated
material variances from the Approved Budget; any other
information which is material to the operation of the
Facility, including, but not limited to, real estate taxation,
changes in local laws affecting the Facility, and pending or
threatened litigation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other statements, reports, books or
information required to be given by the Owner to the Issuer,
Servicing Agent or the Trustee by the Bond Documents in the
form and at the times as required therein.</TD>
</TR>

</TABLE>

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<P align="left" style="margin-left:3%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. To insure the reliability and reasonableness of all statements
required by this subsection, Management Company shall regularly perform
the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>either pay, on or before the respective invoice
due dates, all monthly charges, fees, bills, invoices, etc.,
normally and customarily incurred for such&#146; month in
connection with the operation of the Facility, or if any such
charges, fees, bills, or invoices were incurred but are not
paid by the last day of such month, accrue such amounts; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accrue proportionally to each applicable month,
any charges payable for a period greater than a month,
including but not limited to real estate taxes, assessments
and insurance premiums.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:3%; font-size: 10pt">If due to extraordinary circumstances, Management Company identifies
material expenditures after the last day of the month which are in fact
properly chargeable to that month but which are not reflected on
statements submitted pursuant to this Section, Management Company shall
promptly notify Owner of said expenditures. All statements required by
this Section shall be prepared in accordance with generally accepted
accounting principles.



<P align="left" style="margin-left:3%; font-size: 10pt">D. Management Company shall also provide any required assistance to the
independent accountants for the Facility, who shall be selected by Owner,
in the preparation of audited financial statements for the operation of
the Facility. Such audited financial statements shall be prepared at
Owner&#146;s expense in accordance with generally accepted accounting
principles consistently applied and delivered to Management Company and
Owner within 120&nbsp;days after the end of each Fiscal Year of the Facility
and copies of such audit and work papers shall be provided to Management
Company.



<P align="left" style="margin-left:3%; font-size: 10pt">E. Management Company shall make available to Owner, Trustee, and
Servicing Agent, for inspection and/or copying by Owner upon request, all
books, records and financial data relating to the Facility in Management
Company&#146;s possession. The Owner shall notify the Management Company at
least one business day in advance of such inspection and shall conduct
such inspection during mutually agreeable business hours.



<P align="left" style="margin-left:3%; font-size: 10pt">F. Management Company shall promptly provide Owner with copies of all
findings and reports made pursuant to all licensure and/or certification
surveys conducted at the Facility, and all plans of correction submitted
in response thereto and all correspondence relating to any deficiencies
noted pursuant to such surveys.



<P align="left" style="margin-left:3%; font-size: 10pt">G. Management Company shall assist the Owner and its accountants in
preparing and delivering to the Trustee and to the Servicing Agent any
required monthly and annual reports.



<P align="left" style="margin-left:3%; font-size: 10pt">H. Management Company shall provide Owner with a market analysis as
required pursuant to Section&nbsp;5.2(a)(vi) and Exhibit&nbsp;A of the Loan and
Financing Agreement (&#147;Market Survey&#148;), setting forth basic information on
competing facilities in the market


<P align="center" style="font-size: 10pt">13
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">area of the Facility, including any revisions to the Marketing Plan and
competitive analysis showing the Facility&#146;s position in the market.



<P align="left" style="margin-left:3%; font-size: 10pt">I. If any reports required under the Bond Document require substantially
the same information as any reports listed above, the Management Company,
at its sole discretion may substitute such reports for those required
herein.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 Bank Accounts and Working Capital.



<P align="left" style="margin-left:3%; font-size: 10pt">A. Management Company, in the Facility names and on behalf of Owner,
shall transfer all Gross Revenues (as defined in the Bond Documents) of
the Facility daily, upon receipt, for deposit into one or more separate,
segregated bank account or accounts of the Facility established in
Owner&#146;s name at a bank selected by Owner (the &#147;Operating Accounts&#148;),
provided that upon notice from the Servicing Agent that a Cash Flow Trap
Event has occurred under Section&nbsp;5.8 of the Loan and Financing Agreement,
the Management Company shall transfer to the Trustee all Gross Revenues
and rental receipts for application as provided in Section&nbsp;5.8 of the
Loan and Financing Agreement.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Upon receipt from the Trustee or the Servicing Agent of any transfer
of monies with respect to Operating Expenses, as defined in the Loan and
Financing Agreement, Management Company shall deposit all such monies in
the Operating Accounts. Management Company shall supervise the
disbursements from the Operating Accounts on behalf of Owner of such
amounts and at such times as the same are required in Management
Company&#146;s reasonable business judgment. Management Company shall
discharge such supervisory responsibilities in accordance with reasonable
and customary business standards and practices. All costs and expenses
incurred in the operation of the Facility shall be paid out of the
Operating Accounts. Management Company&#146;s management fee shall be paid out
of the Operating Account, provided, however, that Management Company&#146;s
management fees during the lease up of the Project shall also be payable
from the Working Capital Fund established under the Indenture, to the
extent permitted by the terms of the Indenture. Owner and Management
Company shall specify the signatory or signatories of Management Company
required on all checks or other documents of withdrawal submitted by
Management Company on the Operating Accounts. All checks drawn on the
Operating Accounts in the amount of Ten Thousand and No/100 Dollars
($10,000) or greater shall, unless for items contained in an Approved
Budget and not in excess of the estimated cost thereof as specified
therein, require the signature of both a designated officer or employee
of Management Company and Owner. Funds in the Operating Accounts shall
not be commingled with any other funds controlled by Management Company,
and will be disbursed only in accordance with this Agreement and, from
time to time, upon the specific instructions of Owner, provided that such
instructions are not in violation of any of the Bond Documents.
Management Company shall not withdraw any monies from the Operating
Accounts to pay any item other than normal and customary expenses and
costs of operation of the Facility, all capital items as budgeted or as
approved by Owner or any emergency expenses pursuant to Section&nbsp;1.4
hereof.


<P align="center" style="font-size: 10pt">14
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 Licenses Permits and Certification.



<P align="left" style="margin-left:3%; font-size: 10pt">A. Management Company, as agent of Owner, shall assist Owner in its
application for, in the name of Owner, and to obtain and maintain, on
behalf of Owner, all necessary licenses, permits, consents, approvals and
certifications from all governmental and regulatory agencies which have
jurisdiction over the ownership and operation of the Facility.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Neither Owner nor Management Company shall knowingly take any action
or fail to take any action which may cause any governmental authority
having jurisdiction over the operation of the Facility to institute any
proceeding for the suspension, recession or revocation of any necessary
license, permit, consent or approval.



<P align="left" style="margin-left:3%; font-size: 10pt">C. Management Company shall, with the prior written approval of and at
the cost of the Owner, have the right, on behalf of Owner, to contest by
appropriate legal proceedings, diligently conducted in good faith in the
name of Owner, the validity or application of any law, ordinance, rule,
ruling, regulation, order or requirement of any governmental or
regulatory agency having jurisdiction over the operation of the Facility.
Owner, after having given its written approval, shall cooperate with
Management Company with regard to the contest, and Owner shall pay all
reasonable attorneys&#146; fees incurred with regard to the contest from the
Operating Accounts. Counsel for any such contest shall be selected by
Management Company and approved by Owner. Management Company shall, with
the consent of Owner and at Owner&#146;s cost and expense, process all third
party payment claims for the services provided at the Facility,
including, without limitation, consent to the exhaustion of all
applicable administrative proceedings or procedures, adjustments and
denials by governmental agencies or their fiscal intermediaries as third
party payors.



<P align="left" style="margin-left:3%; font-size: 10pt">D. Owner shall comply with all federal, state and local laws, rules,
regulations and requirements which are applicable to Owner provided that
Owner, at its sole expense and without cost to Management Company, shall
have the right to contest by proper legal proceedings the validity, so
far as applicable to it, of any such law, rule, regulation or
requirement, provided that such contest shall not result in a suspension
of operations of the Facility. Notwithstanding the foregoing, however,
Owner shall not be deemed to be in breach of the covenant contained in
this clause (D)&nbsp;if Owner&#146;s failure to so comply is the result of a
failure by Management Company to comply with any of its obligations under
this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 Executive Director and Assistant Executive Director. Management
Company shall, on an ongoing basis and subject to replacement in Management
Company&#146;s discretion, subject to Section&nbsp;1.4B hereof, provide the Facility with
adequate staff and a qualified Executive Director and, at the discretion of
Management Company, an Assistant Executive Director. The compensation,
including fringe benefits, payable to the Executive Director and/or Assistant
Executive Director shall be reasonable and in line with compensation payable by
other operators to Executive Directors of like facilities in the Facility&#146;s
general market area, and subject in any event to Owner&#146;s approval.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 Quality Controls. Management Company shall activate and maintain on a
continuing basis, a Quality Assurance Program in order to provide objective
measurements of the


<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">quality of services provided at the Facility and in connection therewith
shall utilize such techniques (e.g. resident interviews, physician interviews,
periodic training and inspections) as Management Company may reasonably deem
necessary to maintain the quality of the Facility.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 Use of Management Company&#146;s Personnel. Representatives of Management
Company shall visit the Facility as often as Management Company deems
necessary. All out-of-pocket expenses arising from travel and lodging connected
with such visitations shall be borne by Management Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 Taxes. Any applicable income taxes of Owner, any federal, state or
local taxes, assessments or other governmental charges imposed on the Facility
and arising from Owner&#146;s period of ownership are the obligations of Owner, not
of Management Company, and all of the foregoing shall be paid out of the
Operating Account of the Facility. With the Owner&#146;s prior written consent,
Management Company may, and at Owner&#146;s direction shall, contest the validity or
amount of any such tax or imposition on the Facility in the same manner as
described in Section&nbsp;1.8(C) hereof. Management Company, on behalf of Owner,
shall cause all Social Security and federal and state income tax withholding
and other employee taxes which may be due and payable to be paid promptly from
the revenues of the Facility before the payment of any other operating expenses
therefrom.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 Information Re: Facility. Management Company, within thirty (30)&nbsp;days
after commencement of the term of this Agreement, shall prepare and submit to
Owner a complete list of:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>books and records of the Facility held by Management Company;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>personal property relating to the Facility;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">C.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>service contracts relating to the Facility;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">D.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all necessary records relating to the operation of the
Facility and the personal property located at the Facility belonging
to Owner; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">E.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all licenses, permits, operating or occupancy certificates,
employment contracts, service contracts, cooperation agreements,
transfer or transportation agreements, and insurance certificates
relating to the maintenance and operation of the Facility.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management Company shall be responsible for the due and proper maintenance
of all items on the foregoing lists at the expense of Owner.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management Company, upon request by the Owner, will make available to the
Owner all facility operational management materials for review at the corporate
offices of Management Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 Good Faith Effort by Management Company. Management Company shall act
in good faith and use its best reasonable efforts to perform its obligations
hereunder, but shall have no liability to Owner for any decisions made with
respect to or any actions taken or in the omission of any actions in connection
with the Facility operations, so long as such decisions, actions or omissions
were made or taken in good faith and met the standard of care set forth in
Section&nbsp;1.2 hereof. Provided, further, that the liability of Management Company
to Owner is


<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">limited to actual damages suffered by Owner as a direct and proximate
result of Management Company&#146;s negligence pursuant to the standard of care in
section 1.2 herein or willful breach hereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15. Compliance Program. Each party shall maintain an effective corporate
compliance and ethics program and shall share such program with the other party
along with any modifications and revisions thereto. Each party agrees to charge
its affected employees and agents with the responsibility of reviewing and
becoming knowledgeable about such programs.


<P align="center" style="font-size: 10pt"><B>ARTICLE 2.<BR>
MANAGEMENT FEE</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 Management Fee. On or before the 4th business day following the end of
each calendar month, Owner shall pay to Management Company, as the amount
regularly due for the services being provided pursuant to this Agreement, a
Regular Management Fee equal to the monthly Base Management Fee for that month
set forth in the table below for the Facility then owned by Owner, plus an
additional monthly fee (the &#147;Incentive Fee&#148;) for that month equal to the excess
of five percent (5%) of the operating revenues as defined in the Financing
Documents (determined in accordance with generally accepted accounting
principles after adequate provision for allowances, bad debts and uncollectible
accounts, and excluding investment income) of the Facility for that month over
such monthly Base Management Fee, provided that the total amount of such
Regular Management Fee (i.e. such monthly Base Management Fee plus such
additional Incentive Fee) earned in any month shall in no event exceed 200% of
the Base Management fee for that month.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Monthly</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Ending June 30</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base Fee $</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,500</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 Following the release of the annual audit for each fiscal year during
the term of this Agreement, the amount of the Regular Management Fee earned by
Management Company for that fiscal year shall be recomputed as being equal to
the Base Annual Fee (as hereinafter defined) for that fiscal year, plus an
Incentive Fee for that fiscal year equal to the excess of five percent (5.0%)
of the collected operating revenues of the Owner from the Facility for that
fiscal year over such Base Annual Fee, but such Incentive Fee shall not exceed
100% of the Base Annual Fee for the fiscal year. Following the preparation of
such annual audit for any fiscal year during the term of this Agreement and
recomputation of the Regular Management Fee for that fiscal year, the parties
shall account to each other for any overpayment or underpayment of the Regular
Management Fee found to have been made with respect to that fiscal year. As
used herein, the Base Annual Fee for any fiscal year shall mean the base
monthly fee for the Facility for that fiscal year times the number of months
during that fiscal year that this Agreement was in effect.


<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 Payment of Management Fees. Owner shall be obligated to pay Management
Company the Management Fees as stated above only from the funds made available
from the Operating Account, or from any other funds established with the
proceeds of the Bonds or of the Taxable Loan to cover operating expenses during
the lease-up of the Facility to the extent such payment can be made in
accordance with the applicable provisions of the Financing Documents and only
at the times such Minds are made available thereunder. If for any. month, the
Management Fee is not paid because of the terms of the Financing Documents or
insufficient funds, then, such amount will not be forgiven but shall remain an
obligation of Owner and be deferred until such time as such amount is capable
of being paid in compliance with this Agreement. In addition, if there should
occur any event of default under any of the Financing Documents which results
from acts under the control of Management Company, then during such period of
suspension the Management Fee shall be equal to the Base Management Fee only.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 Other Fees. The Management Fee shall be in addition to any and all
reimbursements due Management Company hereunder, and any revenues due
Management Company or Affiliates of Management Company under other contracts
between Owner and Management Company or such Affiliates (collectively, Manager
Reimbursements and Contract Payments). The Manager Reimbursements and Contract
Payments are not limited to the sources of payment set forth in Section&nbsp;2.3,
are not subordinated to any other obligations of the Owner, and are backed by
the full faith and credit of the Owner. Owner agrees that in the event that it
should fail to pay any Manager Reimbursements and Contract Payments when due,
then, provided that such failure has continued for a period of five days after
Manager has notified Owner thereof in writing, interest shall accrue on the
same at the rate of one percent (1.00%) per month until paid, and in the event
it should be determined that Owner had, at the end of the month in which such
five day notice period has. elapsed, sufficient unrestricted funds such overdue
Manager Reimbursements and Contract Payments after finding all required
obligations then due under the Financing Documents and after reserving
sufficient funds to pay its next month&#146;s obligations under the Financing
Documents and other operating expenses payable during that month, then Owner
agrees to pay to Manager a late charge equal to ten percent of the amount of
such overdue Manager Reimbursements and Contract Payments.


<P align="center" style="font-size: 10pt"><B>ARTICLE 3.</B>



<P align="center" style="font-size: 10pt"><B>OTHER TRANSACTIONS WITH<BR>
MANAGEMENT COMPANY OR ITS AFFILIATES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 Transactions with Management Company and Its Affiliates.
Notwithstanding anything else herein contained, Management Company shall not,
without the prior written consent of Owner after full disclosure by Management
Company of such affiliation and interest, cause Owner to enter into any
contract with Management Company or any affiliate thereof for services required
to be provided by Management Company under this Agreement, or pay any amount to
Management Company or its Affiliates, other than Management Fees described in
Article&nbsp;2 hereof, reimbursement of the costs of Management Company&#146;s Facility
staff, or reimbursement of bona fide expenses to unrelated third parties.


<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>ARTICLE 4.</B>



<P align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 Representations and Warranties of Owner. Owner makes the following
representations and warranties which are material representations and
warranties upon which Management Company relied as an inducement to enter into
this Agreement:



<P align="left" style="margin-left:3%; font-size: 10pt">A. Status of Owner. Owner is a non-profit corporation duly organized and
validly existing in good standing under the laws of the State of Texas,
and is qualified in all other jurisdictions where necessary in order to
conduct its business and has all necessary power to carry on its business
as now being conducted, to operate its properties as now being operated,
to carry , on its contemplated business, to enter into this Agreement and
to observe and perform its terms.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Authority of Due Execution. Owner has full power and authority to
execute and deliver this Agreement and all related documents and to carry
out the transactions contemplated herein; which actions will not with the
passing of time, the giving of notice, or both, result in a default under
or a breach or violation of (i)&nbsp;the Owner&#146;s Articles of Incorporation or
Bylaws; or (ii)&nbsp;any law, regulation, court order, injunction or decree of
any court, administrative agency or governmental body, or any mortgage,
note, bond, indenture, agreement, lease, license, permit or other
instrument or obligation to which Owner is now a party or by which Owner
or any of its assets may be bound or affected. This Agreement constitutes
a valid and binding obligation of Owner, enforceable in accordance with
its terms, except to the extent that its enforceability is limited by
applicable bankruptcy, reorganization, insolvency, receivership or other
laws of general application or equitable principals to or affecting the
enforcement of creditor&#146;s rights.



<P align="left" style="margin-left:3%; font-size: 10pt">C. Litigation. There is no litigation, claim, investigation, challenge or
other proceeding pending or, to the knowledge of Owner, threatened
against Owner, its properties or business which seeks to enjoin or
prohibit it from entering into this Agreement.



<P align="left" style="margin-left:3%; font-size: 10pt">D.
Section&nbsp;50I(c)(3) Status. Owner represents, warrants and covenants
that it is and will use its reasonable best efforts to remain a
corporation described in Section&nbsp;501(c)(3) of the Internal Revenue Code
of 1986, as amended, (the &#147;Code&#148;) and which is not a private foundation
and shall not knowingly use the Facility in any unrelated trade or
business.



<P align="left" style="margin-left:3%; font-size: 10pt">E. Financing Documents. Owner acknowledges receipt of copies of each
Financing Documents.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 Representations and Warranties of Management Company. Management
Company makes the following representations and warranties which are material
representations and warranties upon which Owner relied as an inducement to
enter this Agreement:


<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">A. Status of Management Company. Management Company is a corporation duly
organized and validly existing in good standing under the laws of the
State of Delaware, and has all necessary power to carry on its business
as now being conducted, to carry on its contemplated business, to enter
into this Agreement and to observe and perform its terms. Management
Company is qualified to do business in the State of Texas.



<P align="left" style="margin-left:3%; font-size: 10pt">B Authority and Due Execution. Management Company has full power and
authority to execute and to deliver this Agreement and all related
documents and to carry out the transactions contemplated herein; which
actions will not with the passing of time, the giving of notice, or both,
result in a default under or a breach or violation of (i)&nbsp;Management
Company&#146;s Articles of Incorporation or Bylaws, or (ii)&nbsp;any law,
regulation, court order, injunction or decree of any court,
administrative agency or governmental body, or any mortgage, note, bond
indenture, agreement, lease, license, permit or other instrument or
obligation to which Management Company is now a party or by which
Management Company or any of its assets may be bound or affected. This
Agreement constitutes a valid and binding obligation of Management
Company, enforceable in accordance with its terms, except to the extent
that its enforceability is limited by applicable bankruptcy,
reorganization, insolvency, receivership or other laws of general
application or equitable principals related to or affecting the
enforcement of creditor&#146;s rights.



<P align="left" style="margin-left:3%; font-size: 10pt">C. Litigation. There is no litigation, claim, investigation, challenge or
other proceeding pending or, to the knowledge of Management Company,
threatened against Management Company, its properties or business which
seeks to enjoin or prohibit it from entering into this Agreement.



<P align="left" style="margin-left:3%; font-size: 10pt">D. Maintenance of Owner&#146;s 501(c)(3) Status. Management Company
represents, warrants and covenants that it will use its reasonable best
efforts to assist Owner as contemplated herein in remaining a corporation
described in Section&nbsp;501(c)(3) of the Code and which is not a private
foundation. By way of illustration, Management Company shall promptly
provide to Owner any information or other special types of reports which
may be required to be maintained or filed by Owner. Management Company
shall not evict any patient from the Facility on account of inability to
pay the full amount of monthly service charges (as opposed to willful
failure to pay) without the prior written consent of Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">E. Performance of Owner&#146;s Obligations Under. Bond Documents. Management
Company acknowledges receipt of copies of all Bond Documents. Management
Company covenants and agrees that, to the extent it may legally and
practically do so, it will use its best efforts as contemplated herein to
assure compliance by Owner with its obligations under the Financing
Documents including, but not limited to, the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Preparing and submitting to Owner for its
approval any required or recommended change in the Approved
Budget; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recommending to Owner an Architect, Consulting
Engineer, General Contractor, Insurance Consultant and other
professional or skilled persons necessary to fulfill the
obligations of the Owner under the Financing
Documents, based upon high professional qualifications.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>ARTICLE 5.</B>



<P align="center" style="font-size: 10pt"><B>TERMINATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 Termination for Cause



<P align="left" style="margin-left:3%; font-size: 10pt">A. If either party is dissolved or liquidated, or shall apply for or
consent to the appointment of a receiver, trustee or liquidator of it or
all or of a substantial part of its assets, file a voluntary petition in
a bankruptcy, make a general assignment for the benefit of creditors,
file a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order,
judgment or decree shall be entered by a court of competent jurisdiction,
on the application of a creditor, adjudicating said party bankrupt or
insolvent or approving a petition seeking reorganization of said party or
appointing a receiver, trustee or liquidator for said party or all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 90 consecutive days,
then in case of any such event, the term of this Agreement shall expire,
at the other party&#146;s option, on thirty (30)&nbsp;days&#146; written notice to the
other party and the Servicing Agent. Such termination shall be without
prejudice to Management Company&#146;s right to receive Management Fees under
Article&nbsp;2 hereof and amounts due to reimburse Management Company for all
Manager Reimbursements and Contract Payments (including without
limitation payroll and burdens under Section&nbsp;1.4(A) hereof), through the
date on which such termination becomes effective.



<P align="left" style="margin-left:3%; font-size: 10pt">B. If Owner shall fail to pay to Manager any Manager Reimbursements and
Contract Payments which are then due and payable hereunder or under any
other agreement between Owner and Manager, and such failure has continued
for a period of ten (10)&nbsp;days after Manager has notified Owner and the
Servicing Agent thereof in writing,



<P align="left" style="margin-left:3%; font-size: 10pt">C. If Owner or Management Company shall fail to keep, observe or perform
any material covenant, term or provision of this Agreement to be kept,
observed or performed by it, and such default shall continue for a period
of 60&nbsp;days (three (3)&nbsp;days in the event of failure of Owner to reimburse
Management Company for payroll and burdens under Section&nbsp;1.4(A)) after
written notice by the non-defaulting party to the other specifying the
default in question and requesting that the default be cured, then in
case of any such event and upon the expiration of any period of grace
applicable thereto, the term of this Agreement shall expire, at the
option of the non-defaulting party on thirty (30)&nbsp;days further written
notice to the other party and the Servicing Agent, provided that, except
with respect to monetary defaults of Owner (if the Owner is the
defaulting party) or periods during which an event of default under the
Bond Documents has occurred and remains uncured (if the Management
Company is the defaulting party), if the defaulting party has commenced
cure within such 60&nbsp;day period, and diligently pursues such cure after
the 60&nbsp;day period, then the right to give such five day. notice of
termination shall be


<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">suspended for the time necessary to effect such cure. Notwithstanding
anything to the contrary herein, in the event that Owner fails to
reimburse Management Company, for payroll and burdens under Section&nbsp;1.4
(A)&nbsp;hereof, within three (3)&nbsp;days after payment of payroll, Management
Company at its option may terminate this Agreement upon three (3)&nbsp;days
prior written notice to Owner and the Servicing Agent.



<P align="left" style="margin-left:3%; font-size: 10pt">C. If accrued but unpaid Regular Management Fees remain unpaid for a
period of sixty (60)&nbsp;days or more, the term of this Agreement shall
expire at the option of Management Company upon thirty days&#146; written
notice to the Owner and the Servicing Agent.



<P align="left" style="margin-left:3%; font-size: 10pt">D. Owner shall have the right, after 30&nbsp;days&#146; prior written notice to
Management Company and the Servicing Agent, to terminate this Agreement
if because of Management Company&#146;s acts or omissions. (i)&nbsp;an action or
failure to act on the part of Management Company shall have resulted in
an Event of Default under any of the Bond Documents which is not cured
within 30&nbsp;days after Management Company&#146;s receipt of written notice of
said Event; (ii)&nbsp;if the Servicing Agent is entitled to terminate this
Agreement under any of the Financing Documents and does so, or if the
Owner is required to terminate this Agreement under any of the Financing
Documents; (iii)&nbsp;after the second anniversary of the Contract Date the
average occupancy of the Facility subsequently drops below 90% for any
two consecutive calendar months; or (iv)&nbsp;Management Company fails to
correct (or to obtain waivers of) any material deficiencies found by any
regulatory body to exist in meeting the standards for licensure or for
participating in any third party payor program, if any, upon which the
profitability of the Facility is at the time dependent, in sufficient
time to avoid any delicensure of the Facility or decertification of the
Facility under any such third party payor program or under state
licensure regulations; provided, however, that this Agreement cannot be
terminated by the Owner pursuant to this clause (iv)&nbsp;if the Owner is not
providing adequate funds to cure or correct such deficiencies on a timely
basis.



<P align="left" style="margin-left:3%; font-size: 10pt">E. The Management Agreement shall immediately be terminated and the
Manager shall be deemed to have immediately resigned from its duties
hereunder, at the request of the Owner acting at the direction of the
Servicing Agent, upon the occurrence of a Trigger Event under the Loan
and Financing Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything else herein contained, neither party shall have
the right to terminate this Agreement as a result of any of the reasons set
forth in clauses (B)&nbsp;and (C)&nbsp;above, if (i)&nbsp;the acts or omissions of the party
seeking the termination materially contribute to the reason for termination; or
(ii)&nbsp;the event is caused by strikes, other labor disturbances, fires,
windstorm, earthquake, arbitrary and capricious action by third party payors,
war or other state of national emergency, terrorism, or other events not the
fault of either party, in which the negligence of either party hereto is not a
materially contributing factor to the occurrence of such event.


<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 Termination Without Cause.



<P align="left" style="margin-left:3%; font-size: 10pt">A. Either party has the option to terminate this Agreement upon 30&nbsp;days&#146;
prior written notice to the other and the Servicing Agent upon the
occurrence of either of the following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Facility or any material portion thereof is
damaged or destroyed to the extent that in the written opinion
of an independent architect or engineer reasonably acceptable
to both parties: (1)&nbsp;it is not practicable or desirable to
rebuild, repair or restore the Facility to its condition
immediately preceding such damage within a period of six
months; or (2)&nbsp;the conduct of normal operations of the
Facility is interrupted for a period of six months or more; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Title to the temporary use of all or
substantially all of the Facility is taken under the exercise
of the power of eminent domain by the government authority or
person, firm or corporation acting under governmental
authority which in the opinion of an independent architect or
engineer reasonably acceptable to both parties, prevents or is
likely to prevent the conduct of normal operations at the
Facility for a period of at least six months.</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:3%; font-size: 10pt">Provided, however, if the termination occurs as a result of any of the
events described in clause (A)&nbsp;of this Section&nbsp;5.2, and if Owner or any
Affiliate thereof rebuilds, restores or otherwise rearranges the Facility
and recommences operations thereof, Owner shall give Management Company
the first option to manage the Facility under the same terms, conditions
and fees as provided herein.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Owner shall have the right to terminate this Agreement on or after the
third anniversary of the Commencement Date without cause, exercisable by
delivery of written notice to the Management Company and the Servicing
Agent no later than 90&nbsp;days prior to the effective date of termination.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 Management Company&#146;s Obligations After Termination or Expiration of
Agreement. Upon the expiration or termination of this Agreement, or the
termination of Management Company&#146;s services hereunder, as provided above,
Management Company shall:



<P align="left" style="margin-left:3%; font-size: 10pt">A. deliver to Owner, or such other person or persons designated by Owner,
copies of all books and records of the Facility and all funds in the
possession of Management Company belonging to Owner or received by
Management Company pursuant to the terms of this Agreement or of any of
the Financing Documents for or on behalf of Owner;



<P align="left" style="margin-left:3%; font-size: 10pt">B. assign, transfer, or convey to such person or persons all service
contracts and personal property relating to or used in the operation and
maintenance of the Facility, except any personal property which was paid
for and is owned by Management Company;


<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">C. remove, at its cost and expense, all signs that it may have placed at
the Facility indicating that it is the manager of same and replace and
restore the damage resulting therefrom; and



<P align="left" style="margin-left:3%; font-size: 10pt">D. make itself available at reasonable times, for a period of forty-five
(45)&nbsp;days after such expiration or termination, to consult with and
advise Owner or such other person or persons regarding the operation and
maintenance of the Facility. Such consultation shall not exceed two hours
per week unless otherwise agreed to by the Management Company. Owner
shall pay Management Company on an hourly basis at fair market rates
charged by the consultants for similar services.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon any termination or the expiration pursuant to this Article&nbsp;5, the
obligations of the parties hereto (except those specified as surviving) shall
cease as of the date specified in the notice of termination, except that
Management Company shall comply with the applicable provisions of this Section
and unless specifically stated otherwise, shall be entitled to receive any and
all Management Fees, reimbursements of payroll and burdens, and other expense
reimbursements, which may be due Management Company hereunder through the
effective date of such termination or expiration.


<P align="center" style="font-size: 10pt"><B>ARTICLE 6.</B>



<P align="center" style="font-size: 10pt"><B>MISCELLANEOUS COVENANTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 Additional Covenants of Management Company. Management Company hereby
makes the additional covenants set forth in this Section, which are material
covenants and upon which Owner relies as an inducement to enter into this
Agreement:



<P align="left" style="margin-left:3%; font-size: 10pt">A. Assignment. Management Company may not assign its rights and
obligations hereunder without Owner&#146;s prior written approval, not to be
unreasonably withheld. Owner shall not assign its rights and obligations
under this Agreement without the prior written consent of Management
Company and Servicing Agent, except that Owner may assign its rights
under the Agreement to the Issuer and/or the Trustee as security for the
Bonds and to MuniMae as security for the Taxable Loan, and to any
receiver appointed by the appropriate court or commission pursuant to
receivership proceedings or to any party taking possession of the
Facility as a result of any foreclosure of such Trustee&#146;s mortgage
against the Facility or other action taken by such Trustee.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Transfer of Executive Directors or Assistant Executive Directors.
Management Company agrees that it will not transfer any Executive
Director or Assistant Executive Director from the Facility to another
facility or business which is not owned by Owner, unless such Executive
Director or Assistant Executive Director is promptly replaced with a
fully trained and qualified new Executive Director or Assistant Executive
Director, as the case may be, who is reasonably satisfactory to Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">C. Transfer of Residents. Management Company agrees that it will not,
without the prior written consent of the Owner, encourage or solicit the
transfer of any resident of the Facility to another similar facility in
which Management Company has an interest which


<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">is not owned by Owner, unless the physical or medical condition of the
resident indicates that such a transfer would be appropriate and Owner is
informed in advance thereof. The Management Company may, however, freely
discuss and not inhibit such a transfer when the original basis for the
subject resident to be admitted to any of the Owner&#146;s Facility was to
acquire temporary accommodations until a room became available in another
facility where the resident prefers to live.



<P align="left" style="margin-left:3%; font-size: 10pt">D. Management Company shall not enter into any construction contract or
other agreement which could result in the creation of a lien on the
Facility, without the prior written consent of Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">E. Management Company shall establish and maintain records and procedures
to account for any resident funds deposited with the Facility. One or
more &#147;Resident Trust Accounts&#148; shall be established in accordance with
the terms hereof and all disbursements therefrom and records and
procedures relating thereto shall conform with the requirements of
applicable governmental regulations, licensure and all other applicable
requirements and the terms hereof.



<P align="left" style="margin-left:3%; font-size: 10pt">F. Management Company shall maintain adequate systems and procedures
governed by written policies and procedures covering all aspects of its
operational and fiscal processes and sufficient to ensure that the
Facility&#146;s assets and business are safeguarded in all material respects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 Additional Covenants of Owner. Owner hereby makes the additional
covenants set forth in this Section, which are material covenants and upon
which Management Company relies as an inducement to enter into this Agreement:



<P align="left" style="margin-left:3%; font-size: 10pt">A. Owner will cooperate with Management Company in every reasonable
respect and will furnish Management Company with all information required
by it for the performance of its services hereunder and will permit
Management Company to examine and copy any data in the possession or
control of Owner affecting Management Company and/or operation of the
Facility and will in every way cooperate with Management Company to
enable Management Company to perform its services hereunder.



<P align="left" style="margin-left:3%; font-size: 10pt">B. Owner will examine documents submitted by Management Company and
render decisions pertaining thereto, when required, promptly to avoid
unreasonable delay in the progress of Management Company&#146;s work. Owner
agrees that it will not unreasonably fail to execute and deliver all
applications and other documents that may be deemed by Management Company
to be necessary or proper to be executed by Owner in connection with the
Facility, subject to the limitations in this Agreement with respect to
the budget and other rights of Owner.



<P align="left" style="margin-left:3%; font-size: 10pt">C. Owner acknowledges that Management Company retains all ownership and
other rights in all proprietary systems, manuals, materials and other
information, in whatever form, developed by Management Company in the
performance of its services hereunder, and nothing contained in this
Agreement shall be construed as a license or transfer of such information
either during the term of this Agreement or thereafter. Upon termination


<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">of this Agreement all such proprietary systems, manuals, materials and
other information in whatever form shall be removed from the Facility.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 Binding Agreement. The terms, covenants, conditions, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto, their successors and assigns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 Relationship of Parties. Nothing contained in this Agreement shall
constitute or be construed to be or to create a partnership, joint venture or
lease between Owner and Management Company with respect to the Facility.
Management Company shall have no right or authority, express or implied, to
commit or otherwise obligate Owner in any manner whatsoever except to the
extent specifically provided in this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 Notices.



<P align="left" style="margin-left:3%; font-size: 10pt">A. If Management Company shall desire the approval of Owner to any
matter, Management Company will give written notice by mail and by
facsimile transmission to Owner that it requests such approval,
specifying in the notice the matter as to which approval is requested and
reasonable detail respecting the matter. If Owner shall not respond
negatively in writing by mail and by facsimile transmission to the notice
within 10&nbsp;days after the sending thereof (unless some other period for
response is specified in this Agreement), Management Company may send a
second such notice in such fashion to Owner. If Owner shall not respond
negatively in writing by mail and facsimile transmission to the second
notice within five days after the sending thereof (unless some other
period for response is specified in this Agreement), Owner shall be
deemed to have approved the matter referred to in the notice. Any
provisions hereto to the contrary notwithstanding in emergency situations
(as determined by Management Company), Management Company shall not be
required to seek or obtain Owner&#146;s approval for any actions or omissions
which Management Company, in its sole judgment, deems necessary or
appropriate to respond to such situations, provided Management Company
promptly thereafter reports such action or omission to Owner in writing,
by mail and by facsimile transmission.



<P align="left" style="margin-left:3%; font-size: 10pt">B. All notices, demands and requests contemplated hereunder by either
party to the other shall be in writing and shall be delivered by hand,
transmitted by overnight courier or mailed, postage prepaid, registered
or certified mail, return receipt requested:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To Owner, by addressing the same to:</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:8%; font-size: 10pt">GF/Arlington, Inc.<BR>
3575 Piedmont Road, N.E.,<BR>
Suite&nbsp;930, Fifteen Piedmont Center<BR>
Atlanta, GA 30305


<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">With a copy to:



<P align="left" style="margin-left:8%; font-size: 10pt">Alston &#038; Bird<BR>
One Atlantic Center<BR>
1201 West Peachtree Street<BR>
Atlanta, GA 30309-3424<BR>
Attn: Peter M. Wright


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To Management Company, by addressing the same to:</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:8%; font-size: 10pt">The Covenant Group<br>
5601 Bridge Street Suite&nbsp;504<br>
Fort Worth, TX 76112<br>
Attn: Gary Staats


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To the Servicing Agent, by addressing the same to:</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:8%; font-size: 10pt">MuniMae Portfolio Services, LLC<BR>
218 N. Charles Street<BR>
Baltimore, Maryland 21201<BR>
Attention: Asset Management


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iv.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>or to such other address or to such other person as may be
designated by notice given from time to time during the term hereof
by one party to the other. Any notice hereunder shall be deemed
given three (3)&nbsp;days after mailing, if given by mailing in the
manner provided above, or on the next business day following the
date delivered or transmitted if given by hand, overnight courier or
facsimile.</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Copies of all notices given by either party giving notice of any default
hereunder or any exercise of any remedy in consequence of any such default
shall also be sent to the Servicing Agent and Trustee at the address set forth
in the Loan and Financing Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 Arbitration of Disputes. The parties hereto agree that any controversy
or claim arising out of or relating to this Agreement, or the breach thereof,
shall be settled by arbitration pursuant to the Federal Arbitration Act. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association; a single arbitrator shall be
selected under those Rules; the arbitration shall be initiated in Atlanta,
Georgia; and except for. the filing fee, all cost of the arbitrator shall be
allocated by the arbitrator and judgment on the award rendered by the
arbitrator shall be entered in any court having jurisdiction thereof. . The
parties are hereby authorized to bring actions to compel arbitration or for
equitable relief in aid of arbitration. The parties hereto specifically consent
to the jurisdiction and venue of any state or federal court lying within Fulton
County, Georgia for the purposes of any proceeding contemplated by the
preceding sentence. If any part of this Agreement is held void, voidable or
otherwise unenforceable by any arbitrator, nothing contained herein shall limit
the enforceability of any other part.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 Entire Agreement: Amendments. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter, and no
prior oral or written, and no contemporaneous oral representations or
agreements between the parties with respect to the subject matter of this
Agreement shall be of force and effect. Any additions, amendments or


<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">modifications to this Agreement shall be of no force and effect unless in
writing and signed by both Owner and Management Company with notice to the
Servicing Agent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 Governing Law. This Agreement has been executed and delivered in the
State of Georgia and all of the terms and provisions hereof and the rights and
obligations of the parties hereto shall be construed and enforced in accordance
with the laws thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9 Captions and Headings. The captions and headings throughout this
Agreement are for convenience and reference only, and the words contained
therein shall in no way be held or deemed to define, limit, describe, explain,
modify, amplify or add to the interpretation, construction or meaning of any
provision of or the scope or intent of this Agreement nor in any way affect
this Agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10 Costs and Expenses; Indemnity. Except as otherwise expressly provided
herein, all fees, costs, expenses and purchases arising out of, relating to or.
incurred in the operation of the Facility, including, without limitation, the
fees, costs and expenses of outside consultants and professionals, shall be the
sole responsibility of Owner. Management Company, by reason of the execution of
this Agreement or the performance of its services hereunder, shall not be
liable for or be deemed to have assumed any liability for such fees, costs and
expenses, or any other liability or debt of Owner whatsoever, arising out of or
relating to the Facility or incurred in its operation, except the salaries of
Management Company&#146;s employees and the expenses and costs incurred at its
central administrative offices in the performance of its obligations hereunder.
Management Company shall have no obligations hereunder to advance any sums
required to maintain necessary licenses and permits and to otherwise keep the
Facility operating as an home for the aged community.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11 Non-Recourse Nature of Owner&#146;s Obligation. Notwithstanding anything
else herein contained, the obligations of Owner hereunder shall be limited to
its interest in the Facility and the revenues thereof and receivables and
accounts related thereto, and Management Company shall have no right to proceed
against any other assets of Owner to satisfy any obligation of Owner. No
officer, director, or member of Owner shall have any personal liability
hereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12 Revenue Procedure 97-13. To the extent any provisions of this
Agreement violates the restrictions in Revenue Procedure 97-13, then the
Agreement shall be deemed to be automatically amended so as to comply with the
restrictions contained in Revenue Procedure 97-13.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;613.&nbsp;Financing Documents Shall Govern. If and to the extent any provision
of this Agreement is inconsistent with or does not include any provisions of
the Financing Documents, it is agreed by the Owner and Manager that the terms
of the Financing Documents shall control.


<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have executed, sealed and,
delivered this Agreement through their duly authorized representatives, as of
the day and year first above written.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">OWNER:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MANAGEMENT COMPANY:</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GF/Arlin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CGI Management, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Gregory K Grove
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Robert Bullock</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><HR size="1" noshade><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gregory K. Grove, President
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robert Bullock, Secretary/Treasurer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">29
</DIV>


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