Exhibit 10.4

PURCHASE AND SALE AGREEMENT

for

MEMBERSHIP INTERESTS

in

AL US DEVELOPMENT VENTURE, LLC

between

SUNRISE SENIOR LIVING INVESTMENTS, INC.

a Virginia corporation,

as Purchaser,

SUNRISE SENIOR LIVING MANAGEMENT, INC.

a Virginia corporation,

as Manager,

and

MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-F (U.S.), L.P.,

a Delaware limited partnership;

MORGAN STANLEY REAL ESTATE FUND VII SPECIAL GLOBAL (U.S.), L.P.,

a Delaware limited partnership;

MSREF VII GLOBAL-T HOLDING II, L.P.,

a Delaware limited partnership;

and

MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE (U.S.), L.P.,

a Delaware limited partnership

collectively, as Seller

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TABLE OF CONTENTS

 

          Page  

1.

  

Purchase and Sale

     2   

2.

  

Purchase Price and Manner of Payment

     2   

3.

  

Deliveries on Behalf of Seller

     2   

4.

  

Deliveries on Behalf of Purchaser

     3   

5.

  

Representations and Warranties of Purchaser

     5   

6.

  

Representations and Warranties of Seller

     7   

7.

  

Covenants

     8   

8.

  

Indemnity

     10   

9.

  

Casualty; Condemnation

     11   

10.

  

Conditions to Closing

     11   

11.

  

Defaults and Remedies

     12   

12.

  

Costs and Expenses

     13   

13.

  

Brokers and Advisors

     14   

14.

  

Notices

     14   

15.

  

Further Assurances

     15   

16.

  

Successors and Assigns

     15   

17.

  

Tax Matters and Financial Reports

     16   

18.

  

Gender and Number

     17   

19.

  

Applicable Law

     17   

20.

  

Intentionally Omitted

     17   

21.

  

Construction

     17   

22.

  

Miscellaneous

     17   

23.

  

Defined Terms

     19   

 

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List of Exhibits

 

Exhibit A –   Facilities and Facility Owners Exhibit B –   Assignment and
Assumption Agreement of MS Interest Exhibit C –   Mutual Release Exhibit D –  
Election to Treat Modification of Debt as Occurring After Transfer of Property
Securing the Debt Pursuant to Treas. Reg. § 1.1274-5(b)(2)(i)

 

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PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), made as of the 19th day of
April, 2011 (the “Effective Date”), by and among MORGAN STANLEY REAL ESTATE FUND
VII GLOBAL-F (U.S.), L.P., a Delaware limited partnership, MORGAN STANLEY REAL
ESTATE FUND VII SPECIAL GLOBAL (U.S.), L.P., a Delaware limited partnership,
MSREF VII GLOBAL-T HOLDING II, L.P., a Delaware limited partnership, and MORGAN
STANLEY REAL ESTATE FUND VII GLOBAL-TE (U.S.), L.P., a Delaware limited
partnership (collectively, “Seller”), each having an office at c/o Morgan
Stanley, 1585 Broadway, 37th Floor, New York, New York 10036, and SUNRISE SENIOR
LIVING INVESTMENTS, INC. (“Purchaser”), a Virginia corporation, having an office
at 7900 Westpark Drive, Suite T-900, McLean, Virginia 22101, and for the limited
purposes stated herein, SUNRISE SENIOR LIVING MANAGEMENT, INC. (“Manager”), a
Virginia corporation, having an office at 7900 Westpark Drive, Suite T-900,
McLean, Virginia 22101.

W I T N E S S E T H :

WHEREAS, Seller and Purchaser are parties to that certain Amended and Restated
Limited Liability Company Agreement of AL US DEVELOPMENT VENTURE, LLC (the
“Company”) dated as of June 14, 2007, as amended by that certain First Amendment
to Amended and Restated Limited Liability Company Agreement dated as of
August 15, 2008, and that certain Second Amendment to Amended and Restated
Limited Liability Company Agreement dated as of October 28, 2008 (collectively,
the “Operating Agreement”);

WHEREAS, the Company, indirectly through various subsidiaries, (each, a
“Facility Owner” and, collectively, the “Facility Owners”) owns the fifteen
(15) retirement or senior living facilities described on Exhibit A attached
hereto (each, a “Facility” and, collectively, the “Facilities”);

WHEREAS, pursuant to the Operating Agreement, Seller currently holds an eighty
percent (80%) membership interest in the Company, and the ownership interests in
the Company of Seller are evidenced by Certificates No. 7, 8, 9 and 10 (the
“Certificates”), and such Certificates are pledged to and are in the possession
of the Lender to secure the Loan (the “Pledge”); and

WHEREAS, Purchaser desires to acquire Seller’s interest in the Company, and
Seller has agreed to sell to Purchaser all of Seller’s interest in the Company
for the consideration and upon the terms, covenants and conditions hereinafter
set forth.

 

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NOW, THEREFORE, for and in consideration of the premises, the mutual agreements,
provisions and covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
expressly acknowledged by the parties hereto, the parties hereto do hereby agree
and covenant as follows:

1. Purchase and Sale.

Seller hereby agrees to sell to Purchaser and Purchaser hereby agrees to
purchase from Seller, Seller’s entire eighty percent (80%) membership interest
in the Company, together with all economic, voting and other rights and
interests appurtenant to such membership interest (collectively, the “MS
Interest”).

1.1 Closing. The closing (the “Closing”) of the Transaction (as defined below)
contemplated by this Agreement shall take place on the date that is thirty
(30) days following the Effective Date (the “Closing Date”) at the offices of
Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York, at 10:00
A.M. Eastern standard time or as may be otherwise agreed upon in writing by
Seller and Purchaser. Provided Purchaser has satisfied all other conditions to
Closing, Purchaser may, by written notice to the Seller on or before the
original Closing Date, extend the original Closing Date by up to fifteen
(15) days solely for the purpose of obtaining (i) necessary Licenses as set
forth in Section 7.3 or (ii) the consent of Lender and associated releases as
provided in Section 10.2.5.

2. Purchase Price and Manner of Payment.

2.1 Purchaser shall acquire the MS Interest (the “Transaction”) for a purchase
price (“Purchase Price”) that is an amount equal to Forty-Two Million Dollars
($42,000,000.00), subject to adjustments and prorations as provided herein
including, without limitation, Sections 7.1 and 12.2.

2.2 The Purchase Price, subject to prorations and adjustments, shall be payable
at the Closing by wire transfer of immediately available federal funds (to an
account designated by the Seller at or prior to Closing) as directed by Seller.

2.3 Not less than one (1) Business Day prior to the Closing Date, Seller shall
give Purchaser written instructions (“Wiring Instruction Letter”) directing
delivery of the Purchase Price.

3. Deliveries on Behalf of Seller.

3.1 At the Closing, each Seller will (and cause MSREI to, where appropriate)
duly execute, acknowledge (where appropriate) and/or deliver the following:

3.1.1 Assignment and Assumption Agreement of MS Interest in the form attached
hereto as Exhibit B, whereby each Seller shall transfer and assign the portion
of the MS Interest owned by such Seller to Purchaser;

3.1.2 Subject to the provisions of Section 4.2, the Certificates duly endorsed
by Seller to Purchaser;

3.1.3 The written resignation of Andrew Bauman, John Klopp and Mark Hudspeth
from the Executive Committee of the Company.

 

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3.1.4 A certificate of each Seller dated as of the Closing Date certifying that
all representations made by such Seller in this Agreement are in all material
respects true, correct and complete as of the Closing Date as if made on and as
of the Closing Date;

3.1.5 An affidavit duly executed by each Seller stating that each such Seller is
not a “foreign person” as defined in the Federal Foreign Investment in Real
Property Tax Act of 1980 and the 1984 Tax Reform Act;

3.1.6 Executed closing statement, approved by Purchaser, for the Transaction
consistent with this Agreement;

3.1.7 An unconditional release duly executed by Seller in the form attached
hereto as Exhibit C (the “Mutual Release”); provided, however, such release
shall not be deemed delivered and effective until the occurrence of the Closing,
and the Seller and Purchaser shall not be deemed to have waived any such claims
by virtue of their execution of this Agreement;

3.1.8 If reasonably requested by Purchaser, transfer tax forms, or signature
pages to transfer tax forms, executed by Seller; and

3.1.9 The following documents with respect to each Seller:

(a) A good standing certificate for each Seller from the State of Delaware dated
no earlier than 30 days prior to Closing;

(b) An incumbency certificate for one or more officer(s) of Seller evidencing
that the persons signing the Seller’s Documents on behalf of each Seller are
authorized to do so; and

(c) A certificate of each Seller’s general partner stating that the general
partner of such Seller, and any required limited partners of such Seller, have
approved the Transaction.

4. Deliveries on Behalf of Purchaser.

4.1 At the Closing, Purchaser or Purchaser Assignee will duly execute,
acknowledge (when appropriate) and/or deliver the following:

4.1.1 Payment of the Purchase Price to Seller, all in accordance with the Wiring
Instruction Letter;

4.1.2 Assignment and Assumption Agreement of MS Interest, in the form attached
hereto as Exhibit B, duly executed by Purchaser or Purchaser Assignee;

4.1.3 The Mutual Release, duly executed by Purchaser, Company, Sunrise Senior
Living, Inc., each subsidiary of the Company, Manager and, if applicable,
Purchaser Assignee;

 

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4.1.4 A certificate of Purchaser dated as of the Closing Date certifying that
all representations made by Purchaser in this Agreement are in all material
respects true, correct and complete as of the Closing Date as if made on and as
of the Closing Date;

4.1.5 Executed closing statement, approved by Seller, for the Transaction;

4.1.6 If reasonably requested by Seller, transfer tax forms, or signature pages
to transfer tax forms, executed by Purchaser or Purchaser Assignee; and

4.1.7 The following documents with respect to Purchaser or Purchaser Assignee:

(a) A good standing certificate for Purchaser or Purchaser Assignee from their
respective state of organization dated no earlier than 30 days prior to Closing;

(b) An incumbency certificate for one or more officer(s) of Purchaser or
Purchaser Assignee evidencing that the persons signing the Purchaser’s Documents
on behalf of each Purchaser or Purchaser Assignee are authorized to do so;

(c) A certificate in the form attached hereto as Exhibit D pursuant to which
Purchaser (or Purchaser Assignee, if applicable) elects pursuant to Treasury
regulation section 1.1274-5 to treat any modification of the Loan as occurring
after the transfer of the MS Interest and the Purchaser’s (or Purchaser
Assignee’s, if applicable) assumption of or taking subject to the Loan; and

(d) A certificate of the secretary of Purchaser or applicable officer or member
of Purchaser Assignee stating that (i) the board of directors of Purchaser or
members of Purchaser Assignee, as applicable, have approved the Transaction and
(ii) the actions to be taken by such person in connection with the Transaction
have been duly authorized by all necessary action of its partners, members,
shareholders, directors or other governing bodies or persons.

4.2 In addition, at or prior to Closing, (a) Purchaser shall deliver to Seller
evidence of the Lender’s consent and the BofA consent to the Transaction as
provided in Section 10.2.5, and (b) after having been conditionally delivered by
Lender to Purchaser, Purchaser shall deliver or cause to be delivered to Seller
the Certificates for Seller’s endorsement to Purchaser as provided in
Section 3.1.2.

 

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5. Representations and Warranties of Purchaser.

In order to induce Seller to enter into the transactions provided for in this
Agreement, Purchaser hereby warrants and represents to Seller that (as of the
Effective Date and on the Closing Date, unless otherwise noted) the following
warranties and representations shall be true and correct in all material
respects, which warranties and representations shall survive the Closing
hereunder:

5.1 Purchaser and Manager are each a corporation duly organized and validly
existing under the laws of its jurisdiction of formation. Purchaser and Manager
each have the corporate power and authority to (a) in the case of Purchaser,
acquire the MS Interest, and (b) to enter into the Transaction contemplated by
this Agreement and to execute, deliver and perform this Agreement, and the
assumption and other documents contemplated hereby to be executed and performed
by it (collectively, the “Purchaser’s Documents”). The execution, delivery and
performance by Purchaser and Manager of this Agreement and the other Purchaser’s
Documents has been duly authorized by all necessary organizational action of
Purchaser and Manager and this Agreement is, and at the Closing, the other
Purchaser’s Documents will, when executed and delivered by Purchaser and
Manager, constitute the legal, valid, binding obligations of Purchaser and
Manager enforceable against it in accordance with their respective terms and
provisions, subject to applicable bankruptcy and other like laws affecting the
rights of contractual parties and creditors generally, and the exercise of
judicial or administrative discretion in accordance with general equitable
principles (whether such enforceability is considered in a proceeding in equity
or at law).

5.2 There are no suits, actions or proceedings pending or, to the knowledge of
Purchaser, threatened against or affecting Purchaser, Manager or the Transaction
contemplated hereunder before or by any court or administrative agency or
officer, to prohibit or enjoin the consummation of the Transaction provided for
herein or which could materially and adversely affect the ability of Purchaser
or Manager to perform its obligations under the Purchaser’s Documents.

5.3 Except as provided for in Sections 10.2.5 and 10.2.6, no consent, approval
or other action of, or filing (other than filings in the normal course of
Purchaser’s business) or registration with, any governmental agency or
commission is required in connection with the execution, delivery, observance or
performance by Purchaser or Manager of this Agreement or the Transaction
provided for herein.

5.4 Provided Lender’s and BofA’s consent to the Transaction is obtained as of
Closing, the execution and delivery of this Agreement and the other Purchaser’s
Documents executed and delivered by Purchaser or Manager, the Transaction
provided for herein and therein, respectively, and compliance with or
fulfillment of the terms hereof and thereof, will not (a) result in a breach of
any of the terms and provisions of or constitute a default under or conflict
with, or result in the creation of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of Purchaser or
Manager pursuant to, any agreement, indenture, mortgage, lien, lease, consent,
license, franchise or other instrument to which Purchaser or Manager is bound or
under which Purchaser or Manager’s properties are affected, or (b) violate any
law, rule, regulation, judgment, order, decree, writ or injunction applicable to
Purchaser or Manager.

5.5 Purchaser represents that Purchaser and Manager are not a Prohibited Person.

5.6 There has not been filed by or against any Purchaser a petition in
bankruptcy or insolvency proceedings or for reorganization, or for the
appointment of a receiver

 

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or trustee, nor has any such entity made an assignment for the benefit of
creditors or filed a petition for an arrangement or entered into an arrangement
with creditors or admitted in writing the inability to pay its debts as they
become due.

5.7 Purchaser is acquiring the MS Interest for investment, solely for its own
account, with the intention of holding the MS Interest for investment and not
with a view to, or for resale in connection with, any distribution or public
offering or resale of any portion of such Interest within the meaning of the
Securities Act of 1933, as amended, or such other securities laws.

5.8 Purchaser acknowledges that it is aware that the MS Interest has not been
registered under the Securities Act of 1933, as amended or under any other state
or federal securities law in reliance upon exemptions contained therein.
Purchaser understands and acknowledges that its representations and warranties
contained herein are being relied upon by Seller as the basis for exemption of
the sale of the MS Interest from registration requirements of the Securities Act
of 1933, as amended and such other securities laws. Purchaser acknowledges that
the Partnership will not and has no obligation to register the MS Interest under
the Securities Act of 1933, as amended, or such other securities laws.

5.9 Purchaser acknowledges that it is familiar with the business and affairs of
the Company, and it does not desire any further information or data relating to
the Company, the Facilities or other members of the Company. Purchaser
understands that the acquisition of the MS Interest is a speculative investment
involving a high degree of risk and hereby represents that it has a net worth
sufficient to bear the economic risk of its investment in the Company and to
justify its investing in a highly speculative venture of this type.

5.10 Purchaser hereby acknowledges that, except as expressly set forth in this
Agreement, neither Seller nor any person acting on behalf of Seller, nor any
successor or assign of any of the foregoing parties, has made or shall be deemed
to have made any oral or written representations or warranties, whether
expressed or implied, by operation of law or otherwise (including without
limitation warranties of habitability, merchantability or fitness for a
particular purpose), with respect to the Facilities, or the zoning and other
laws, regulations and rules applicable thereto or the compliance by the
Facilities therewith, the revenues and expenses generated by or associated with
the Facilities, or otherwise relating to the Facilities or the Transaction
contemplated herein. Purchaser is acquiring the MS Interest based solely on its
own independent investigation and inspection of the Facilities and its own
independent review of the Operating Agreement and not in reliance on any
information provided by Seller, except for the representations of Seller
expressly set forth herein.

5.11 Purchaser acknowledges and agrees that it is purchasing the MS Interest,
based upon the condition (physical or otherwise) of the Facilities “as is” and
“with all faults” as of the Effective Date, reasonable wear and tear and,
subject to the provisions of Section 9 hereof, loss by condemnation or fire or
other casualty excepted. Purchaser acknowledges and agrees that its obligations
under this Agreement shall not be subject to any financing contingency or,
except as provided in Section 10.2, other contingencies or satisfaction of
conditions, and Purchaser shall have no right to terminate this Agreement except
as expressly provided in Section 11.1.

 

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6. Representations and Warranties of Seller.

In order to induce Purchaser to enter into the transactions provided for in this
Agreement, Seller hereby warrants and represents to Purchaser that, as of the
Effective Date and as of the Closing Date, the following warranties and
representations shall be true and correct in all material respects, which
warranties and representations shall survive the Closing hereunder:

6.1 Each Seller is a limited partnership duly organized and validly existing
under the laws of the State of Delaware; and each Seller has the limited
partnership power and authority to enter into the Transaction contemplated by
this Agreement and to execute, deliver and perform this Agreement and the
assignment and other documents contemplated hereby to be executed and performed
by such Seller (collectively, “Seller’s Documents”). The execution, delivery and
performance by each Seller of this Agreement and the other Seller’s Documents
have been duly authorized by all necessary organizational action of such Seller
and this Agreement is and, at the Closing, the other Seller’s Documents will,
when executed and delivered by such Seller, constitute the legal, valid and
binding obligations of such Seller, enforceable against such Seller in
accordance with their respective terms and provisions, subject to applicable
bankruptcy and other like laws affecting the rights of contractual parties and
creditors generally, and the exercise of judicial or administrative discretion
in accordance with general equitable principles (whether such enforceability is
considered in a proceeding in equity or at law).

6.2 There are no suits, actions or proceedings pending or, to the knowledge of
any Seller, threatened against or affecting such Seller, the MS Interest or the
Transaction contemplated hereunder before or by any court or administrative
agency or officer, to prohibit or enjoin the consummation of the Transaction
provided for herein or which could materially and adversely affect the ability
of such Seller to perform its obligations under the Seller’s Documents.

6.3 Except as provided for in this Agreement, no consent, approval or other
action of, or filing (other than filings in the normal course of Seller’s
business) or registration with, any governmental agency or commission is
required in connection with the execution, delivery, observance or performance
by Seller of this Agreement or the Transaction provided for herein that has not
been obtained.

6.4 There has not been filed by or against any Seller a petition in bankruptcy
or insolvency proceedings or for reorganization, or for the appointment of a
receiver or trustee, nor has any such entity made an assignment for the benefit
of creditors or filed a petition for an arrangement or entered into an
arrangement with creditors or admitted in writing the inability to pay its debts
as they become due.

6.5 Provided Lender’s consent to the Transaction is obtained as of Closing, the
execution and delivery of this Agreement and the other Seller’s Documents
executed and

 

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delivered by Seller (together with the consent (the “MSREI Consent”) of Morgan
Stanley Real Estate Investors VII Global (U.S.), L.P. (“MSREI”) to the
Transaction, which shall be obtained by Seller prior to the Closing Date), the
Transaction provided for herein and therein, respectively, and compliance with
or fulfillment of the terms hereof and thereof, will not (a) result in a breach
of any of the terms and provisions of or constitute a default under or conflict
with, or result in the creation of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of any Seller
pursuant to, any agreement, indenture, mortgage, lien, lease, consent, license,
franchise or other instrument to which such Seller is bound or under which such
Seller’s properties are affected, or (b) violate any law, rule, regulation,
judgment, order, decree, writ or injunction applicable to any Seller.

6.6 Each Seller represents that such Seller is not a Prohibited Person.

6.7 Subject to the MSREI Consent and that certain Agreement Regarding Beneficial
Interests, dated as of February 26, 2010, by and between the Sellers and MSREI
(the “MSREI Agreement”), Seller is the sole legal and beneficial owner of the MS
Interest. Except with regard to the Pledge, the MS Interest is free and clear of
all Liens encumbering the MS Interest. The MS Interest is validly issued. There
is no restriction or limitation in Seller’s organizational documents on Seller’s
right to sell the MS Interest as contemplated by this Agreement. At Closing,
Seller will assign to Purchaser the MS Interest, subject to the Pledge, but free
and clear of all other Liens.

6.8 Except for this Agreement, the Operating Agreement and the MSREI Agreement,
there are no commitments, agreements or obligations, including, without
limitation, rights of first refusal or rights of first offer, by any Seller to
issue, sell, or transfer all or any portion of the MS Interest, and no Seller
has assigned, transferred, pledged, or otherwise disposed of, or agreed to
assign, transfer, pledge, or otherwise dispose of, all or any portion of the MS
Interest. No person or entity has any voting or management rights with respect
to the MS Interest except for Seller.

6.9 Seller has made no Priority Additional Capital Contributions, as such term
is defined in the Operating Agreement, which have not been repaid pursuant to
the terms of the Operating Agreement.

6.10 Except with regard to the Pledge, Seller has not consented to or been
requested to consent to any encumbering of, or placement of any Lien on the MS
Interest.

7. Covenants.

7.1 The parties acknowledge that, pursuant to the Loan Documents, the Company is
required to maintain Six Million Dollars ($6,000,000) of working capital in
liquidity reserves (“Restricted Cash”). As of the Closing Date, all available
cash in excess of the Restricted Cash shall be retained by the Company and
Seller shall have no interest therein. At Closing, and in addition to the
Purchase Price, an amount equal to Three Million Dollars ($3,000,000) shall be
paid by Purchaser to Seller, representing 50% of the Restricted Cash.

 

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7.2 Seller shall not enter into any commitments, agreements, or obligations to
issue, sell, or transfer all or any portion of the MS Interest, and Seller shall
not assign, transfer, pledge, or otherwise dispose of, or agree to or negotiate
with any person or entity to assign, transfer, pledge, or otherwise dispose of,
all or any portion of the MS Interest. Seller shall not grant any other person
or entity any voting or management rights with respect to the MS Interest.

7.3 As soon as practical following the Effective Date, Purchaser shall seek to
obtain the conditional delivery of the Certificates to Seller and the required
consent of Lender and BofA and shall apply for, and diligently pursue (and/or
shall cause Manager and/or the Facility Owners to apply for and diligently
pursue), issuance of the Licenses or any necessary approvals from the
Governmental Entities with respect to the Licenses, to the extent required in
connection with the Transaction.

7.4 Prior to the Closing Date, the Facilities shall be operated by the Facility
Owners and/or Manager in the ordinary course of business consistent with past
practices, including, without limitation, expenditures made in connection with
capital improvements in accordance with the Operating Agreement and Management
Agreements.

7.5 Seller hereby consents to and acknowledges that Purchaser, at its sole cost,
shall have the right to enter into discussions and negotiations with Lender
related to obtaining the required Lender consent and a potential Loan
Modification, and in connection therewith Purchaser shall have the right to
deliver information regarding the Company and the Facilities reasonably
requested by Lender or otherwise required to be delivered pursuant to the terms
of the Loan Documents without further consent of Seller.

7.6 Prior to the Closing Date, Purchaser may initiate discussions and
negotiations with Lender in furtherance of obtaining a potential Loan
Modification; provided, however, (i) Purchaser shall keep Seller apprised of
such discussions and negotiations, (ii) Purchaser shall not execute the Loan
Modification (or otherwise cause such Loan Modification to be in effect) prior
to the Closing Date without the prior written consent of Seller, which consent
Seller may withhold in its sole discretion and (iii) a Loan Modification shall
not be a condition to Closing.

7.7 Purchaser shall use commercially reasonable efforts to cause all conditions
in Section 10.2.5 and 10.2.6 to be satisfied prior to Closing.

7.8 Until the Closing Date, members of the Company (including Seller) shall
continue to be entitled to receive distributions from the Company of available
cash in accordance with the Operating Agreement. All provisions of the Operating
Agreement allocating profits, losses, gains, deductions and credits for tax
purposes to the members of the Company (including Seller) shall remain in effect
through 11:59 p.m. on the Closing Date.

7.9 The parties hereto agree that from the Effective Date until the Closing
Date, there shall be no capital calls or requests for capital contributions
without the unanimous consent of the members of the Company.

 

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7.10 The parties hereto agree that at any time after the Closing, Seller and/or
its affiliates, independently or with others, shall have the right to purchase
the Loan (or interests therein) from Lender or its successors and assigns;
provided, however, that Seller and/or its affiliates shall not engage or
participate in any discussions or negotiations with Lender concerning the Loan,
the purchase of the Loan, the Loan Modification, or any other matter relating to
the Company or the Facilities prior to the Closing.

8. Indemnity.

8.1 Each Seller hereby agrees to indemnify and hold Purchaser harmless from and
against any claims of third parties against or incurred by Purchaser, and
demands, damages, liabilities, losses, costs and/or expenses, including, without
limitation, reasonable attorney’s fees and disbursements, incurred or suffered
by Purchaser or Purchaser Assignee or to which Purchaser or Purchaser Assignee
is subjected in connection therewith that arise out of (i) the breach or
inaccuracy of Seller’s representations and warranties set forth in Section 6 or
(ii) failure of Seller to comply with the covenants set forth in Section 7 of
the Agreement or the breach or inaccuracy of any representation or warranties
set forth in Seller’s Documents (collectively, “Losses”). Notwithstanding the
foregoing or anything to the contrary in this Agreement or any documents or
instruments executed pursuant hereto, the maximum aggregate amount of
indemnifiable Losses which may be recovered from Seller shall be an aggregate
amount not to exceed Forty-Two Million Dollars ($42,000,000).

8.2 Purchaser hereby agrees to indemnify and hold Seller harmless from and
against any claims of third parties against or incurred by Seller, and demands,
damages, liabilities, losses, costs and/or expenses, including, without
limitation, reasonable attorney’s fees and disbursements, incurred or suffered
by Seller or to which Seller is subjected in connection therewith that arise out
of (i) the breach or inaccuracy of Purchaser’s representations and warranties
set forth in Section 5 or the breach or inaccuracy of any representation or
warranties set forth in Purchaser’s Documents, (ii) failure of Purchaser to
comply with the covenants set forth in Section 7 of the Agreement,
(iii) ownership of the MS Interest related solely to the period after the
Closing Date, or (iv) the Purchaser’s liabilities for taxes, including any
Transfer Taxes, attributable to the Purchaser’s purchase of the MS Interest.

8.3 The indemnifications provided for hereunder shall apply only from and after
Closing and shall survive Closing indefinitely. No action or inaction on the
part of any indemnitee or any affiliate or agent thereof, including, without
limitation, any failure of such indemnitee to timely forward notice of an actual
or potential claim that could be the subject of the indemnification set forth
herein (but other than settling any such claim without the prior consent of the
indemnitor), shall operate to waive or limit any indemnitor’s liability
hereunder, or release such indemnitor from any liability hereunder unless and to
the extent such action or inaction shall have prejudiced such indemnitor’s
rights with respect to such claim or the ability of the indemnitor to defend or
indemnify against such claim.

8.4 If any claim, action or proceeding is made or brought against either party,
which claim, action or proceeding the other party shall be obligated to
indemnify such indemnitee against pursuant to the terms of this Agreement, then,
upon demand by the

 

10

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indemnitee, the indemnitor, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the indemnitee’s name, if necessary, by such
attorneys as the indemnitee shall approve, which approval shall not be
unreasonably withheld. Indemnitor shall not settle any such claim, action or
proceeding without the consent of indemnitee (which approval shall not be
unreasonably withheld), unless such settlement includes a complete release of
indemnitee from all liability in connection therewith.

9. Casualty; Condemnation.

9.1 In the event that all or any portion of a Facility is damaged or destroyed
by fire or other casualty prior to Closing, Purchaser and Seller shall proceed
to Closing without any extension thereof and with no reduction in the Purchase
Price, in which event all insurance proceeds attributable to such damage or
destruction shall be retained by the Facility Owner at Closing and the amount of
any deductible with respect to such damage or destruction shall be paid by the
Facility Owner or Purchaser. Seller shall not have any obligation, direct or
indirect, to fund any insurance deductible.

9.2 In the event there is any permanent or temporary actual or threatened taking
or condemnation of all or any portion of any Facility, Purchaser and Seller
shall proceed to Closing without any extension thereof and with no reduction in
the Purchase Price, in which event any and all proceeds of such taking or
condemnation shall be delivered or assigned to the Facility Owner at Closing.

10. Conditions to Closing.

10.1 Seller’s obligation to sell the MS Interest is subject to the satisfaction
of the following conditions precedent (or simultaneous conditions, as
applicable), any or all of which may be waived by Seller:

10.1.1 This Agreement shall be in full force and effect and there shall not then
exist any event which would allow Seller to terminate this Agreement pursuant to
the express terms hereof;

10.1.2 Purchaser shall have paid to Seller the Purchase Price as directed by the
Wiring Instruction Letter and shall have complied, in all material respects,
with its obligations under Article 4;

10.1.3 All required consents by Lender and of BofA to the Transactions
contemplated hereby, including, without limitation, the transfer of the MS
Interest to Purchaser and delivery by Lender of the Certificates, shall have
been obtained or completed;

10.1.4 All of Purchaser’s representations in Article 5 shall be true and correct
in all material respects on and as of the Closing Date as if made on and as of
the Closing Date;

10.1.5 Purchaser shall not be in default in any material respect under any
covenant or agreement of Purchaser contained in this Agreement;

 

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10.1.6 Purchaser shall pay, on the Closing Date, all Transfer Taxes due and
owing as of the Closing Date pursuant to Section 12.1; and

10.1.7 All other conditions set forth in this Agreement to Seller’s obligation
to close shall have been satisfied.

10.2 Purchaser’s obligation to purchase the MS Interest and otherwise consummate
Closing hereunder, is subject to the satisfaction of the following conditions
precedent (or simultaneous conditions, if applicable), any or all of which may
be waived by Purchaser:

10.2.1 This Agreement shall be in full force and effect and there shall not then
exist any event which would allow Purchaser to terminate this Agreement pursuant
to the express terms hereof;

10.2.2 Seller shall have complied, in all material respects, with its
obligations under Article 3;

10.2.3 All of Seller’s representations in this Agreement shall be true and
correct in all material respects on and as of the Closing Date;

10.2.4 Seller shall not be in default in any material respect under any covenant
or agreement of Seller contained in this Agreement;

10.2.5 All required consents and the granting of associated releases by Lender
and BofA to the transactions contemplated hereby shall have been obtained
pursuant to documentation reasonably acceptable to Purchaser in both form and
substance, and all conditions to the granting of such consents shall have been
satisfied (for the avoidance of doubt, a Loan Modification shall not be a
condition to Closing);

10.2.6 The Licenses shall have been issued and shall be in full force and
effect, or customary bridging arrangements have been entered with respect to the
preservation of the existing Licenses until the new Licenses or approvals are
obtained, it being understood that this condition shall be deemed satisfied if
any License has been issued, but such license is subject to revocation,
cancellation, suspension or non-renewal in the event that post-licensure
requirements that have not been satisfied as of Closing are not completed
subsequent to Closing; and

10.2.7 All other conditions set forth in this Agreement to Purchaser’s
obligation to close shall have been satisfied.

11. Defaults and Remedies.

11.1 In the event Seller should default hereunder in any material respect (or
breach any of its representations under this Agreement in any material respect),
and such default or breach is not cured or remedied within three (3) days after
receipt of notice thereof given by Purchaser to Seller (but in any event prior
to the Closing Date), Purchaser, if Purchaser is then

 

12

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ready, willing and able to consummate Closing, may (i) terminate this Agreement,
(ii) treat this Agreement as being in full force and effect and pursue the
remedy of specific performance of the Transaction pursuant to the terms hereof
against Seller, or (iii) otherwise pursue any other rights and remedies
available to Purchaser and/or Purchaser Assignee at law, in equity or otherwise.

11.2 In the event Purchaser should default hereunder in any material respect (or
breach any of its representations under this Agreement in any material respect),
and such default or breach is not cured or remedied prior to the Closing Date,
Seller, if Seller is then ready, willing and able to consummate Closing, may
(i) terminate this Agreement, (ii) treat this Agreement as being in full force
and effect and pursue the remedy of specific performance of the Transaction
pursuant to the terms hereof against Purchaser, or (iii) otherwise pursue any
other rights and remedies available to Seller at law, in equity or otherwise.

11.3 If any of the conditions set forth in Section 10 shall not have been
satisfied (or waived by the appropriate party) prior to the Closing, the party
for whose benefit such condition runs may, at anytime thereafter, terminate this
Agreement by written notice to the other; provided, however, that the right to
terminate this Agreement pursuant to this Section 11.3 shall not be available to
any party whose failure to fulfill any obligation under this Agreement was the
cause of the failure of the condition to be satisfied prior to the Closing.

12. Costs and Expenses.

12.1 Purchaser shall be responsible for and shall pay 100% of all Transfer Taxes
required to be paid in connection with the Transaction. Purchaser shall be
required to pay such Transfer Taxes regardless of whether assessed at or after
the Closing. Upon Purchaser’s reasonable request, Seller shall cooperate with
Purchaser (at Purchaser’s cost) in filing any necessary documentation and tax
returns with respect to such Transfer Taxes. In addition, Purchaser shall be
solely responsible for any Transfer Taxes required to be paid in connection with
or as a result of any transfer or other transaction occurring after the Closing
Date. Purchaser shall be solely responsible for all fees, costs and expenses
incurred in connection with or arising from obtaining the consents of Lender and
BofA to the Transaction, and for any Loan Modification or negotiations thereof.
Except as set forth in this Section 12.1, all costs and expenses incident to
this Agreement, the Transaction and the Closing shall be paid by the party
incurring same, including, without limitation, its own attorneys’ fees. The
provisions of this Section 12.1 shall survive the Closing or termination of this
Agreement.

12.2 The parties hereto agree that certain side letter dated June 14, 2007, from
MS Senior Living, L.L.C. to Purchaser and Manager regarding the “Payments
Related to Expedited Delivery of Reports and Tax Returns” (the “Side Letter”)
shall terminate on the Closing Date without any further notice or documentation,
notwithstanding the ninety (90) day advanced written notice of termination
required in the Side Letter. The Reporting and Accounting Fee (as defined in the
Side Letter) shall be prorated on a daily basis through the Closing Date and
thereafter shall be of no further force and effect. The provisions of this
Section 12.2 shall survive the Closing or termination of this Agreement.

 

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13. Brokers and Advisors.

13.1 Each of Seller and Purchaser represents and warrants for itself that it has
not dealt with any broker, finder or advisor in connection with this Agreement
and the Transaction contemplated hereby. Each party hereto agrees to indemnify
and hold the other parties hereto free and harmless from all losses, damages,
costs and expenses (including attorneys’ fees) that the other parties may suffer
as a result of claims made or suits brought by any broker, finder or advisor who
shall claim to have introduced the indemnifying party to this Transaction or who
shall claim to have dealt with or had discussions with the indemnifying party
with respect to this Transaction. The provisions of this Section 13 shall
survive the Closing hereunder or, if the Closing does not occur, notwithstanding
anything to the contrary contained in this Agreement, the termination of this
Agreement.

14. Notices.

14.1 Any notice pursuant to this Agreement shall be given in writing by
(a) personal delivery, or (b) reputable national overnight delivery service with
proof of delivery, or (c) United States Mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth below, or to such address or to the attention of such other
person as the addressee shall have designated by written notice sent in
accordance herewith, and shall be deemed to have been given upon receipt or
refusal to accept delivery. Unless changed in accordance with the preceding
sentence, the addresses for notice given pursuant to this Agreement shall be as
follows:

If to Seller:

c/o Morgan Stanley

1585 Broadway, 37th Floor

New York, NY 10036

Attention: Andrew S. Bauman

Telecopy: (212) 507-4861

And

c/o Morgan Stanley

1585 Broadway, 37th Floor

New York, NY 10036

Attention: Jennifer Ladman

Telecopy: (646) 225-5339

with a copy to:

Jones Day

2727 North Harwood Street

Dallas, Texas 75201

Attention: David J. Lowery, Esq.

Telecopy: (214) 969-5100

 

14

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If to Purchaser or Manager:

c/o Sunrise Senior Living, Inc.

7900 Westpark Drive, Suite T-900

McLean, Virginia 22102

Attention: General Counsel

Telecopy: (703) 744-1628

with a copy to:

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019

Attention: Eugene A. Pinover, Esq.

Telecopy: (212) 728-9750

Notices may be delivered by counsel to either Seller or Purchaser, as
applicable.

15. Further Assurances.

15.1 Each of the parties hereby agrees to execute, acknowledge (if necessary)
and deliver such other documents or instruments as the other may reasonably
require from time to time to carry out the intents and purposes of this
Agreement. This provision shall survive the Closing.

16. Successors and Assigns.

16.1 This Agreement shall be binding upon and inure to the benefit of Seller and
Purchaser and their respective legal representatives, designees, successors and
assigns. Purchaser may assign this Agreement and/or direct Seller to convey all
or a portion of the MS Interest to one or more affiliates or third parties
(collectively, “Purchaser Assignee”) provided (a) Purchaser shall be released
from and Purchaser Assignee shall assume all obligations for the performance of
all covenants, agreements and indemnities and the satisfaction of all conditions
required of Purchaser under this Agreement and all documents and instruments
executed pursuant hereto; (b) all references in this Agreement to “Purchaser”
shall mean Purchaser Assignee provided that Seller shall tender performance
hereunder to such Purchaser Assignee; (c) all representations and warranties
hereunder shall be deemed to be made and apply to Purchaser Assignee (with such
modifications as may need to be made to the extent the structure of Purchaser
Assignee is different than that of Purchaser), and (d) Purchaser gives Seller at
least 10 business days’ prior notice of such assignment together with such
information regarding Purchaser Assignee as Seller may require in order to
complete its background review of Purchaser Assignee under the Patriot Act (H.R.
3162), anti-money laundering, “know your client” and/or other similar federal or
state regulations, and Seller has confirmed in writing that Purchaser Assignee
complies with the foregoing requirements. In the event this Agreement is
assigned in accordance with this Section, the Purchaser need not deliver any of
the organizational documents called for under Section 5 at Closing; rather, such
corresponding documents will be delivered with respect to the Purchaser
Assignee.

 

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17. Tax Matters and Financial Reports.

17.1 All U.S. federal, state, and local tax returns and other filings to be
prepared by Purchaser (or the Administrative Managing Member, as defined in the
Operating Agreement) on behalf of the Company and its subsidiaries that cover
periods of Sellers’ ownership of the MS Interest will be timely prepared in
accordance with applicable laws, consistent with the provisions of the Operating
Agreement and any Management Agreement, and consistent with the manner in which
such tax returns have been prepared for prior periods, and consistent with
elections previously made by the Company and its subsidiaries prior to the
Effective Date. Before filing any of those tax returns or other similar filings
with a taxing authority that covers any period of Sellers’ ownership of the MS
Interest, Purchaser will deliver a draft of the return or other filing to Seller
no later than 30 days before the filing deadline (including extensions), for
Sellers’ reasonable approval prior to filing. Purchaser further agrees to
provide Seller with any information reasonably requested by Seller to enable
Seller to comply with their U.S. federal, state, and local tax return and filing
requirements.

17.2 With respect to any period the Seller has owned the MS Interest (and
thereafter with regard to those periods), the provisions of Section 6.05 of the
Operating Agreement shall continue to apply as if Seller remained a member of
the Company, and MS shall continue as the tax matters partner as provided in
Section 6.06 of the Operating Agreement through the Closing Date and thereafter
(after the Closing Date) shall have the right to approve all matters that would
have been within its power and authority as the tax matters partner with regard
to any of those periods.

17.3 The parties hereto shall adopt the “interim closing of the books” method as
described in applicable United States Treasury Regulations under Section 706 of
the United States Internal Revenue Code of 1986, as amended, for both financial
reporting and U.S. federal income tax purposes and such comparable allowable
method for state, local and non-U.S. tax purposes.

17.4 The Parties hereto agree that Seller shall not be a partner in the Company
for federal income tax purposes, or other state and local purposes, on and after
the Closing Date.

17.5 All financial, accounting and property reporting obligations set forth in
the Operating Agreement or any Management Agreement shall continue to apply with
regard to all periods during which Seller owned the MS Interest, including with
regard to the calendar year 2010, the fiscal quarter ending March 31, 2011,
monthly periods through the Closing Date and any interim or short period from
the most recent annual, quarterly or monthly period through the Closing Date,
and Seller shall continue after the Closing Date to have all rights of access to
and/or audit of the books and records of the Company (and its subsidiaries) with
regard thereto, otherwise in accordance with the Operating Agreement or any
Management Agreement. The provisions of Section 17 shall survive the Closing or
termination of this Agreement.

 

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18. Gender and Number.

18.1 Whenever the context so requires, references herein to the neuter gender
shall include the masculine and/or feminine gender, and the singular number
shall include the plural.

19. Applicable Law.

19.1 THIS AGREEMENT IS PERFORMABLE IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE
FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF SUCH STATE. SUBJECT TO THE
PROVISIONS OF SECTION 20, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE CITY AND STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT
SITTING IN THE CITY AND STATE OF NEW YORK. EACH OF THE PARTIES HERETO AGREES
THAT THE PROVISIONS OF THIS SECTION 19 SHALL SURVIVE THE CLOSING OF THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT.

20. Intentionally Omitted.

21. Construction.

21.1 The parties acknowledge that the parties and their counsel have reviewed
and revised this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any exhibits or
amendments hereto.

22. Miscellaneous.

22.1 Subject to Article 16 hereof, the provisions of this Agreement and of the
documents to be executed and delivered at Closing are and will be for the
benefit of the parties hereto only and are not for the benefit of any third
party, and accordingly, no third party shall have the right to enforce the
provisions of this Agreement or documents to be executed and delivered at
Closing.

22.2 This Agreement and the instruments referred to herein may not be amended,
waived or discharged except by an instrument in writing executed by the party
against whom enforcement of such amendment, waiver or discharge is sought.

22.3 This Agreement shall not be binding or effective until Purchaser and Seller
have executed and delivered a counterpart of the same, each of which shall
constitute an original, but all of which taken together shall constitute one
agreement.

 

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22.4 No party hereto shall record this Agreement or any memorandum hereof.

22.5 If any provision of this Agreement shall be held to be illegal,
unenforceable or inapplicable in any respect, each such holding shall not affect
the enforceability of any other provision of this Agreement or the enforcement
of this Agreement under any other circumstances.

22.6 The captions and headings throughout this Agreement are for convenience and
reference only and they shall in no way be held or deemed to define, modify or
alter the meaning, scope or intent of any provision of this Agreement. Words
such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this
Agreement as a whole and not merely to the paragraph, Section or other
subdivision in which such words appear, unless the context otherwise requires.
The singular shall include the plural, and the masculine shall include the
feminine and the neuter, and visa versa, unless the context otherwise requires.
References to “Sections” are to Sections of this Agreement, unless otherwise
specifically provided.

22.7 Except as otherwise expressly provided, no delay or omission by any party
hereto to exercise any right or power occurring upon any noncompliance or
failure of performance by the other party under the provisions of this Agreement
shall impair any such right or power or be construed to be a waiver thereof. A
waiver by any party hereto of any of the terms, covenants, conditions or
agreements hereof to be performed by the other party shall not be construed to
be a waiver of any succeeding breach thereof or of any other term, covenant,
condition or agreement herein contained.

22.8 In the computation of any period of time provided for in this Agreement or
by law, any date falling on a Saturday, Sunday or legal holiday when banks are
not open for business in New York City shall be deemed to refer to the next
business day which is not a Saturday, Sunday, or legal holiday when banks are
not open for business in New York City (“Business Day”).

22.9 The obligations, covenants, agreements and liabilities of the Sellers in
this Agreement and the other Seller’s Documents shall be joint and several,
including, without limitation, the indemnities provided in Section 8 herein.

22.10 Each party agrees that the information contained herein, and any
information exchanged between the parties in connection with the proposed
transactions described herein (including the terms of the Agreement), is
strictly confidential. Neither party shall disclose the existence of, nor any of
the terms contained in, this Agreement, nor the substance of any other
discussions between the parties (including any press release or other manner of
publicizing the same), to any other person or entity, without the consent of the
other, except to the extent required by any applicable securities or other laws
(provided if any such disclosure is proposed to be made, the parties will
mutually agree on the text of the disclosure before it is made); provided,
however, that each party may share any and all information it deems pertinent
with regulators, lenders, prospective lenders, investors, prospective investors,
counsel, consultants, accountants and advisors but shall require that such
persons and entities shall keep such information confidential and shall be
responsible for any breach of such confidentiality by such persons or entities.
This Section shall not inhibit any disclosure to any governmental authority,
whether domestic or foreign, to assure compliance with any applicable Laws.

 

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22.11 All exhibits and schedules attached to this Agreement shall be hereby
incorporated herein.

23. Defined Terms.

As used herein, the following terms shall have the meanings indicated:

“Agreement” shall have the meaning set forth in the Preamble.

“BofA” shall mean Bank of America, N.A., a national banking association, in its
capacity as Administrative Agent and Swingline Lender and L/C Issuer, and each
of its successors and assigns under that certain Credit Agreement dated
December 2, 2005, by and among Bank of America, N.A., each of the lenders a
party thereto, Sunrise Senior Living, Inc. and certain of its subsidiaries as
borrowers thereunder and each of the guarantors thereunder, as the same has been
amended from time to time.

“Business Day” shall have the meaning set forth in Section 22.8.

“Certificates” shall have the meaning set forth in the Recitals.

“Closing” shall have the meaning set forth in Section 1.1.

“Closing Date” shall have the meaning set forth in Section 1.1.

“Company” shall have the meaning set forth in the Recitals.

“Executive Order” shall mean Executive Order No. 13224 on Terrorist Financing
(effective September 24, 2001).

“Facilities” shall have the meaning set forth in the Recitals.

“Facility Owners” shall have the meaning set forth in the Recitals.

“Governmental Entity” shall mean any governmental authority, agency, commission,
board or public authority.

“Healthcare Permits” shall mean all licenses, permits, certifications or
approvals issued by Governmental Entities necessary for Facility Owners and
Manager to provide healthcare and other assisted living services to residents of
the Facilities as are provided or offered by Facility Owners or Manager as of
the Effective Date.

“Lender” shall mean HSH Nordbank AG, acting through its New York Branch, as
Administrative Agent.

 

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“Licenses” shall mean all certificates, licenses, and permits issued by
Governmental Entities in connection with the ownership, leasing, use, occupancy,
operation, and maintenance of the Facilities, including the Healthcare Permits.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, title
defect, right of first refusal, security or other adverse interest, voting trust
agreement, community property interest, encumbrance, claim, option, lien, lease
or charge of any kind, whether voluntarily incurred or arising by operation of
law or otherwise, affecting any assets or property, including any agreement to
give or grant any of the foregoing, any conditional sale or other title
retention agreement, and the filing of or agreement to give any financing
statement with respect to any assets or property under the Uniform Commercial
Code or comparable law of any jurisdiction.

“Loan” shall mean that certain financing in an amount of up to $370,500,000
issued by Lender on June 14, 2007 in connection with recapitalization of the
Company.

“Loan Documents” shall mean collectively, the promissory notes, mortgages,
indemnities, loan agreements, guaranties, pledges, security agreements,
assignments of management agreements and any other documents, instruments and
agreements executed in connection with the Loan, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Loan Modification” shall mean the execution and delivery of definitive Loan
modification documents with Lender, modifying the Loan Documents on terms
satisfactory to Purchaser in its sole discretion.

“Losses” shall have the meaning set forth in Section 8.1.

“Management Agreements” shall mean those certain management agreements and other
related agreements for the operation and management of each Facility by and
between each Facility Owner, the Company and Manager, as applicable.

“Manager” shall have the meaning set forth in the Preamble.

“MS Interest” shall have the meaning set forth in Section 1.

“MSREI” shall have the meaning set forth in Section 6.5.

“MSREI Agreement” shall have the meaning set forth in Section 6.7.

“MSREI Consent” shall have the meaning set forth in Section 6.5.

“Operating Agreement” shall have the meaning set forth in the Recitals.

“Pledge” shall have the meaning set forth in the Recitals.

“Prohibited Person” shall mean any of the following. (a) a person or entity that
is listed in the Annex to, or otherwise subject to the provisions of the
Executive Order; (b) a person or entity

 

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owned or controlled by, or acting for or on behalf of any person or entity that
is listed in the Annex to, or is otherwise subject to the provisions of, the
Executive Order; (c) a person or entity that is named as a “specially designated
national” or “blocked person” or persons or entities with whom a citizen of the
United States is restricted from doing business with by any trade embargo,
economic sanction, or other prohibition of United States law, regulation, or
Executive Order of the President of the United States including those listed on
the most current list published by the U.S. Treasury Department’s Office of
Foreign Assets Control; or (d) a person or entity that is affiliated with any
person or entity identified in clause (a), (b) and/or (c) above.

“Purchase Price” shall have the meaning set forth in Section 2.1.

“Purchaser” shall have the meaning set forth in the Preamble.

“Purchaser Assignee” shall have the meaning set forth in Section 16.1.

“Purchaser’s Documents” shall have the meaning set forth in Section 5.1.

“Restricted Cash” shall have the meaning set forth in Section 7.1.

“Seller” shall have the meaning set forth in the Preamble.

“Seller’s Documents” shall have the meaning set forth in Section 6.1.

“Side Letter” shall have the meaning set forth in Section 12.2.

“Transfer Taxes” shall mean all sales (including bulk sales), use, transfer
(including real property transfers or gains, controlling interest transfers and
beneficial interest transfers), filing, recording, ad valorem, privilege,
documentary gains, gross receipts, registration, conveyance, excise, license,
stamp, duties or similar taxes or fees, together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties incurred, but not including any income, franchise or similar taxes (or
withholding taxes with respect thereto).

“Transaction” shall have the meaning set forth in Section 2.1.

“Wiring Instruction Letter” shall have the meaning set forth in Section 2.3.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

SELLER: MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-F (U.S.), L.P., a Delaware
limited partnership By:  

MSREF VII Global-GP (U.S.), L.L.C.,

a Delaware limited liability company,

its general partner

  By:  

/s/ Andrew S. Bauman

  Name:   Andrew S. Bauman   Title:   Vice President MORGAN STANLEY REAL ESTATE
FUND VII SPECIAL GLOBAL (U.S.), L.P., a Delaware limited partnership By:   MSREF
VII Global-GP (U.S.), L.L.C.,   a Delaware limited liability company,   its
general partner   By:  

/s/ Andrew S. Bauman

  Name:   Andrew S. Bauman   Title:   Vice President

[Signatures continue on following page]

 

22

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MSREF VII GLOBAL-T HOLDING II, L.P., a Delaware limited partnership By:  

MSREF VII Global-GP, L.P.,

an Alberta limited partnership,

its general partner

  By:  

MSREF VII Global, L.P.,

an Alberta limited partnership,

its general partner

    By:  

MSREF VII, Inc.,

a Delaware corporation,

its general partner

      By:  

/s/ Andrew S. Bauman

      Name:   Andrew S. Bauman       Title:   Vice President

 

MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE (U.S.), L.P., a Delaware limited
partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,   a Delaware limited
liability company,   its general partner   By:  

/s/ Andrew S. Bauman

  Name:   Andrew S. Bauman   Title:   Vice President

 

23

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PURCHASER: SUNRISE SENIOR LIVING INVESTMENTS, INC., a Virginia corporation By:  

/s/ Edward Burnett

Name:   Edward Burnett Title:   Vice President

The undersigned joins in the execution of this Agreement for the limited
purposes of agreeing to and acknowledging (i) the termination of the Side Letter
at Closing in accordance with Section 12.2 and (ii) the obligations in
Section 17 which shall survive the Closing of this Agreement:

 

SUNRISE SENIOR LIVING MANAGEMENT INC., a Virginia corporation By:  

/s/ Edward Burnett

Name:   Edward Burnett Title:   Vice President

 

24

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EXHIBIT A

FACILITIES AND FACILITY OWNERS

 

FACILITIES

  

FACILITY OWNERS

Bonita, CA    AL U.S./Bonita Senior Housing, L.P. Boulder, CO    Boulder
Assisted Living, LLC Grosse Pointe II, MI    AL U.S./GP Woods II Beach Senior
Housing, LLC Grosse Pointe Woods, MI    G.P. Woods Assisted Living, LLC
Huntington Beach, CA    AL U.S./Huntington Beach Senior Housing, L.P. La Jolla,
CA    AL U.S./LaJolla Senior Housing, L.P. La Palma, CA    AL U.S./LaPalma
Senior Housing, L.P. Newtown Square, PA    Newton Square Assisted Living, L.L.C.
Playa Vista, CA    AL U.S./Playa Vista Senior Housing, L.P. Sacramento, CA    AL
U.S./Sacramento Senior Housing, L.P. San Marino, CA    AL U.S./San Gabriel
Senior Housing, L.P. Seal Beach, CA    AL U.S./Seal Beach Senior Housing, L.P.
Studio City, CA    AL U.S./Studio City Senior Housing, L.P. Wilmington, DE   
Wilmington Assisted Living, L.L.C. Woodland Hills, CA    AL U.S./Woodland Hills
Senior Housing, L.P.

 

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EXHIBIT B

ASSIGNMENT AND ASSUMPTION AGREEMENT OF MS INTEREST

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT OF MS INTEREST (this “Assignment”) is
made and entered into as of                  , 2011, by and between MORGAN
STANLEY REAL ESTATE FUND VII GLOBAL-F (U.S.), L.P., a Delaware limited
partnership, MORGAN STANLEY REAL ESTATE FUND VII SPECIAL GLOBAL (U.S.), L.P., a
Delaware limited partnership, MSREF VII GLOBAL-T HOLDING II, L.P., a Delaware
limited partnership, and MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE (U.S.),
L.P., a Delaware limited partnership (collectively “Assignor”), and [SUNRISE
SENIOR LIVING INVESTMENTS, INC.],1 a Virginia corporation (“Assignee”).

W I T N E S S E T H :

WHEREAS, Assignor owns an eighty percent (80%) membership interest (together
with all economic, voting and other rights and interests appurtenant thereto,
the “MS Interest”) in AL US DEVELOPMENT VENTURE, LLC, a Delaware limited
liability company (the “Company”), such MS Interest being evidenced by
Certificates No. 7, 8, 9 and 10 (the “Certificates”);

WHEREAS, pursuant to that certain Purchase and Sale Agreement dated April 19,
2011 (as the same may be amended, modified and/or supplemented from time to
time, the “Purchase Agreement”) between Assignor and Assignee’s [predecessor in
interest], and certain other parties, Assignee has agreed to purchase from
Assignor, and Assignor has agreed to sell, transfer and convey to Assignee, in
consideration for the payment of the Purchase Price (as defined in the Purchase
Agreement), all right, title and interest in and to the MS Interest, whereupon
following such sale, transfer and conveyance Assignor will retain no interest in
the Company; and

WHEREAS, the parties desire to enter into this Assignment solely for the purpose
of evidencing the sale, transfer and conveyance of the MS Interest from Assignor
to Assignee.

NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

1. Defined Terms. All capitalized terms used but not otherwise defined in this
Assignment shall have the meaning given to such terms in the Purchase Agreement.

2. Assignment. Assignor unconditionally and irrevocably transfers and assigns to
Assignee all of Assignor’s right, title and interest in and to the MS Interest
and simultaneously herewith delivers the Certificates duly endorsed by Assignor
to and for the benefit of Assignee, in each case, subject to the Pledge.

 

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To be inserted by Sunrise at Closing.

 

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3. Acceptance. Assignee hereby accepts the MS Interest subject to the Pledge and
hereby assumes and agrees to be bound, from and after the date hereof, by all of
the liabilities, obligations, terms and conditions of the Amended and Restated
Limited Liability Company Agreement for the Company dated as of June 14, 2007,
as amended by that certain First Amendment to Amended and Restated Limited
Liability Company Agreement dated as of August 15, 2008, and that certain Second
Amendment to Amended and Restated Limited Liability Company Agreement dated as
of October 28, 2008.

4. Successors and Assigns. This Assignment shall inure to the benefit of and be
binding upon Assignor and Assignee and their respective heirs, successors and
assigns.

5. Counterparts; Facsimile Signatures. This Assignment may be executed in one or
more counterparts (whether original, facsimile, portable document format or
otherwise), each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.

6. Governing Law. This Assignment shall be governed by, construed in accordance
with and enforced under the laws of the State of New York, without regard to its
principles of conflicts of law.

7. Conflicts. The parties agree that the sole purpose of this Assignment is to
evidence the sale, transfer and conveyance of the MS Interest from Assignor to
Assignee as provided in the Purchase Agreement. This Assignment does not, and
shall not be interpreted or otherwise construed, to alter, increase or diminish
in any respects the parties’ rights, obligations and liabilities set forth in
the Purchase Agreement. In the event of any conflict between the terms and
conditions of this Assignment and the Purchase Agreement, the terms and
conditions of the Purchase Agreement shall govern.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first written above.

 

ASSIGNOR: MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-F (U.S.), L.P., a Delaware
limited partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,   a Delaware
limited liability company,   its general partner   By:  

 

  Name:     Title:   MORGAN STANLEY REAL ESTATE FUND VII SPECIAL GLOBAL (U.S.),
L.P., a Delaware limited partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,  
a Delaware limited liability company,   its general partner   By:  

 

  Name:     Title:  

[Signatures continue on following page]

 

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MSREF VII GLOBAL-T HOLDING II, L.P., a Delaware limited partnership By:   MSREF
VII Global-GP, L.P.,   an Alberta limited partnership,   its general partner  
By:   MSREF VII Global, L.P.,     an Alberta limited partnership,     its
general partner     By:   MSREF VII, Inc.,       a Delaware corporation,      
its general partner       By:  

 

      Name:         Title:   MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE
(U.S.), L.P., a Delaware limited partnership By:   MSREF VII Global-GP (U.S.),
L.L.C.,   a Delaware limited liability company,   its general partner   By:  

 

  Name:     Title:  

 

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ASSIGNEE: [SUNRISE SENIOR LIVING INVESTMENTS, INC., a Virginia corporation] By:
 

 

Name:   Title:  

 

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JOINDER AND CONSENT BY

MORGAN STANLEY REAL ESTATE INVESTORS VII GLOBAL (U.S.), L.P

The undersigned, Morgan Stanley Real Estate Investors VII Global (U.S.), L.P, a
Delaware limited partnership (“MSREI”), owner of a beneficial interest in the MS
Interest described in the Assignment and Assumption Agreement to which this
Joinder is attached (the “Assignment”; capitalized terms used but not defined
herein shall have the meaning set forth in the Assignment), hereby consents to
the Transaction and the execution and delivery by the Sellers of the Assignment,
and represents and warrants to Assignee the following:

 

  1. MSREI has a beneficial interest in the MS Interest (the “Beneficial
Interest”) pursuant to that certain Agreement Regarding Beneficial Interests
dated as of February 26, 2010 by and among Assignor and MSREI (the “Beneficial
Interests Agreement”).

 

  2. MSREI is the sole legal and beneficial owner of the Beneficial Interest;
except with regard to the Pledge such Beneficial Interest is free and clear of
all Liens; MSREI has not assigned, transferred, pledged, or otherwise disposed
of, or agreed to assign, transfer, pledge, or otherwise dispose of, all or any
portion of the Beneficial Interest; and upon the closing of the Transaction and
execution and delivery of the Assignment and Assumption Agreement, MSREI
acknowledges and agrees that it shall have no further right, title or interest
in the MS Interest or the Company.

 

MORGAN STANLEY REAL ESTATE INVESTORS VII GLOBAL (U.S.), L.P., a Delaware limited
partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,   a Delaware limited
liability company,   its general partner   By:  

 

  Name:     Title:  

 

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EXHIBIT C

FORM OF MUTUAL RELEASE

 

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MUTUAL RELEASE AGREEMENT

THIS MUTUAL RELEASE AGREEMENT (this “Agreement”), is made as of the [    ] day
of             , 2011 (this “Effective Date”), by and among MORGAN STANLEY REAL
ESTATE FUND VII GLOBAL-F (U.S.), L.P., a Delaware limited partnership, MORGAN
STANLEY REAL ESTATE FUND VII SPECIAL GLOBAL (U.S.), L.P., a Delaware limited
partnership, MSREF VII GLOBAL-T HOLDING II, L.P., a Delaware limited
partnership, and MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE (U.S.), L.P., a
Delaware limited partnership (collectively, “Seller”), each having an office at
c/o Morgan Stanley, 1585 Broadway, 37th Floor, New York, New York 10036, and
SUNRISE SENIOR LIVING INVESTMENTS, INC. (“Purchaser”), a Virginia corporation,
having an office at 7900 Westpark Drive, Suite T-900, McLean, Virginia 22101,
SUNRISE SENIOR LIVING, INC. (“Guarantor”), a Delaware corporation, having an
office at 7900 Westpark Drive, Suite T-900, McLean, Virginia 22101, SUNRISE
SENIOR LIVING MANAGEMENT, INC. (“Manager”), a Virginia corporation, having an
office at 7900 Westpark Drive, Suite T-900, McLean, Virginia 22101, and AL US
DEVELOPMENT VENTURE, LLC, a Delaware limited liability company (the “Company”).
Purchaser, Guarantor, Manager, the Company and the Subsidiaries (as defined
below) are herein sometimes referred to collectively as the “Purchaser Parties”.
Capitalized terms not defined herein shall have the meanings assigned to them in
that certain Purchase and Sale Agreement, dated effective as of April __, 2011,
by and among certain of the parties to this Agreement (the “Purchase
Agreement”).

W I T N E S S E T H :

WHEREAS, Seller and Purchaser are parties to that certain Amended and Restated
Limited Liability Company Agreement of the Company, dated as of June 14, 2007,
as amended by that certain First Amendment to Amended and Restated Limited
Liability Company Agreement dated as of August 15, 2008, and that certain Second
Amendment to Amended and Restated Limited Liability Company Agreement dated as
of October 28, 2008 (collectively, the “Operating Agreement”);

WHEREAS, pursuant the Purchase Agreement and that certain Assignment and
Assumption Agreement of MS Interest dated as of the date of this Agreement,
Seller has agreed to and has sold its eighty percent (80%) membership interest
in the Company to Purchaser; and

WHEREAS, the Purchase Agreement requires the unconditional mutual release of the
parties to this Agreement, as set forth in Sections 3.1.7 and 4.1.3 thereof.

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NOW, THEREFORE, for and in consideration of the premises, the mutual agreements,
provisions and covenants contained herein, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
expressly acknowledged by the parties hereto, Seller and the Purchaser Parties
do hereby agree as follows:

1. Release by Seller.

1.1 Each Seller, for and on behalf of itself and those claiming by, through or
under it (collectively, the “Seller Releasors”), does hereby unconditionally and
fully release and forever discharge the Purchaser Parties and their respective
affiliates, subsidiaries, parents, direct or indirect owners, managers,
officers, appointees to the executive committee of the Company, shareholders,
directors, employees, agents and representatives, past, present and future, and
their respective heirs, successors and assigns (collectively, the “Purchaser
Released Parties”) from any and all past, present and future claims, cross
claims, counterclaims, controversies, disputes, liabilities, obligations,
demands, damages, debts, liens, actions and causes of action, of any and every
nature whatsoever, whether known or unknown, suspected or unsuspected,
contingent or matured, accrued or unaccrued, concealed, hidden, latent or
patent, direct or indirect, whether at law, by statute or in equity, in contract
or in tort, under state or federal jurisdiction (including, without limitation,
to the extent arising under any law, rule, regulation or common-law doctrine of
the State of New York or any other federal or state jurisdiction) and whether or
not the economic effects of such alleged matters arise or are discovered in the
future (all of the foregoing are herein collectively referred to as the “Seller
Claims”), that each of the Seller Releasors has, had, or may have (or claim to
have) against any of the Purchaser Released Parties, singly or in any
combination, on account of, arising out of, or resulting from or in any manner
incidental or related to or with respect to (a) the Company and any
Subsidiaries, the Facilities, management of the Facilities, and/or pursuant to
the Operating Agreement or any other document, instrument or agreement between
or among any one or more of the Seller Released Parties (as defined below) and
the Purchaser Released Parties, and related to the foregoing, (b) any act or
omission by Purchaser in its capacity as a member or managing member of the
Company, (c) any act or omission of any of the Purchaser’s appointees to the
executive committee of the Company and officers appointed by Purchaser in
connection with the Company, and (d) any obligation or duty under the Delaware
Limited Liability Company Act (the “Act”) related to the Company, in each case
that arose or accrued during, or otherwise relate to, the period ending at the
Closing. The foregoing release is intended to be, and is, a full and complete
unconditional release in favor of the Purchaser Released Parties with respect to
all the Seller Claims (as described above), including, specifically, without
limitation, any claims based upon allegations of negligence, gross negligence,
breach of fiduciary duty, breach of any alleged duty of fair dealing in good
faith, economic coercion, usury, tortious interference or any other theory,
cause of action, occurrence, matter or thing which might result in liability
upon the Purchaser Released Parties arising or occurring on or before the date
hereof.

2. Release by Purchaser Parties.

2.1 Each of the Purchaser Parties, including the Company, for itself and on
behalf of each direct and indirect subsidiary of the Company (the
“Subsidiaries”), for and on behalf of itself and those claiming by, through or
under it (collectively, the “Purchaser Releasors”), does hereby unconditionally
and fully release and forever discharge the Seller and their respective
affiliates, subsidiaries, parents, direct or indirect owners, managers,
officers,

 

2

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appointees to the executive committee of the Company, shareholders, directors,
employees, agents and representatives, past, present, and future, and their
respective heirs, successors and assigns (collectively, the “Seller Released
Parties”) from any and all past, present and future claims, cross claims,
counterclaims, controversies, disputes, liabilities, obligations, demands,
damages, debts, liens, actions and causes of action, of any and every nature
whatsoever, whether known or unknown, suspected or unsuspected, contingent or
matured, accrued or unaccrued, concealed, hidden, latent or patent, direct or
indirect, whether at law, by statute or in equity, in contract or in tort, under
state or federal jurisdiction (including, without limitation, to the extent
arising under any law, rule, regulation or common-law doctrine of the State of
New York or any other federal or state jurisdiction), and whether or not the
economic effects of such alleged matters arise or are discovered in the future
(all of the foregoing are herein collectively referred to as the “Purchaser
Claims”), that each of the Purchaser Releasors has, had, or may have (or claim
to have) against any of the Seller Released Parties, singly or in any
combination, on account of, arising out of, or resulting from or in any manner
incidental or related to or with respect to (a) the Company and any
Subsidiaries, the Facilities, management of the Facilities, and/or pursuant to
the Operating Agreement or any other document, instrument or agreement between
or among any one or more of the Seller Released Parties and the Purchaser
Released Parties, and related to the foregoing, (b) any act or omissions of each
Seller in its capacity as a member or managing member of the Company, (c) any
act or omission of any appointee of Seller to the executive committee of the
Company or as an officer in connection with the Company, and (d) any obligation
or duty under the Act related to the Company, in each case that arose or accrued
during, or otherwise relate to, the period ending at the Closing, including,
without limitation, a full and unconditional release of the Seller Released
Parties from any covenants or obligations to be performed after the Closing Date
as a member of the Company. The foregoing release is intended to be, and is, a
full and complete unconditional release in favor of the Seller Released Parties
with respect to all the Purchaser Claims (as described above), including,
specifically, without limitation, any claims based upon allegations of
negligence, gross negligence, breach of fiduciary duty, breach of any alleged
duty of fair dealing in good faith, economic coercion, usury, tortious
interference or any other theory, cause of action, occurrence, matter or thing
which might result in liability upon the Seller Released Parties arising or
occurring on or before the date hereof.

3. Exclusions.

3.1 Notwithstanding anything to the contrary in this Agreement, this Agreement
and the foregoing releases shall not apply to and shall not constitute a release
of any Seller Claims or Purchaser Claims arising from or related to a breach of
the Purchase Agreement and the transactions contemplated thereby.

4. Successors and Assigns.

4.1 This Agreement shall be binding upon and inure to the benefit of Seller and
the Purchaser Parties and their respective legal representatives, designees,
successors and

 

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assigns. Each of the Seller Released Parties and the Purchaser Released Parties
is an intended beneficiary of this Agreement and is and shall be expressly
entitled to enforce this Agreement in so far as it operates in his, her or its
favor, including by injunctive or other equitable relief or other means, as
appropriate.

5. Gender and Number.

5.1 Whenever the context so requires, references herein to the neuter gender
shall include the masculine and/or feminine gender, and the singular number
shall include the plural.

6. Applicable Law.

6.1 THIS AGREEMENT IS PERFORMABLE IN THE STATE OF NEW YORK AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE
FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF SUCH STATE. SELLER AND
PURCHASER PARTIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT SITTING IN THE CITY AND STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND HEREBY IRREVOCABLY
AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND
DETERMINED IN A STATE OR FEDERAL COURT SITTING IN THE CITY AND STATE OF NEW
YORK.

7. Construction.

7.1 The parties acknowledge that the parties and their counsel have reviewed
this Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any exhibits or amendments hereto.

8. Representation of Counsel.

8.1 Each of the parties hereto hereby acknowledges and agrees that such party
has read this Agreement, has consulted with independent legal counsel before
executing this Agreement and has had such independent legal counsel explain the
meaning and effect of this Agreement, and has relied upon its own judgment in
executing this Agreement with full knowledge of the meaning and effect of this
Agreement.

9. Severability.

9.1 In the event that any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect,

 

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then (x) to the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, (y) in
lieu of any such invalid, illegal or unenforceable provision, the parties hereto
intend that there shall be added as a part of this Agreement a provision as
similar to such invalid, illegal or unenforceable provision as may be valid,
legal and enforceable and (z) if the deletion or modification of the invalid,
illegal or unenforceable provision as aforesaid shall disproportionately burden
and/or benefit the Seller, on the one hand, or the Purchaser Parties, on the
other hand, the parties hereto intend that this Agreement shall be further
modified to mutually burden and/or benefit the Seller, on the one hand, and the
Purchaser Parties, on the other hand.

10. Miscellaneous.

10.1 This Agreement may not be amended, waived or discharged except by an
instrument in writing executed by the party against whom enforcement of such
amendment, waiver or discharge is sought.

10.2 This Agreement shall not be binding or effective until the Purchaser
Parties and Seller have each executed and delivered a counterpart of the same,
each of which shall constitute an original, but all of which taken together
shall constitute one agreement. This Agreement may be executed by facsimile or
electronic signature, each of which when delivered shall be deemed an original.

10.3 Neither Seller nor any Purchaser Party shall record this Agreement or any
memorandum hereof.

10.4 The captions and headings throughout this Agreement are for convenience and
reference only and they shall in no way be held or deemed to define, modify or
alter the meaning, scope or intent of any provision of this Agreement. Words
such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this
Agreement as a whole and not merely to the paragraph, Section or other
subdivision in which such words appear, unless the context otherwise requires.
The singular shall include the plural, and the masculine shall include the
feminine and the neuter, and visa versa, unless the context otherwise requires.
References to “Sections” are to Sections of this Agreement, unless otherwise
specifically provided.

11. Specific Waivers with Respect to Any Unknown Claims in California.

11.1 Each of the Purchaser Parties and each Seller has read Section 1542 of the
Civil Code of the State of California, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

5

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11.2 To the extent applicable in this Agreement, each of the Purchaser Parties
and each Seller understands that such Section 1542 gives it the right not to
release existing claims of which it is presently unaware, unless it voluntarily
chooses to waive this right. Having been so apprised, each of the Purchaser
Parties and each Seller nevertheless hereby voluntarily elects to, and does,
waive the rights described in such Section 1542, and elects to assume all risks
for claims that now exist in its favor, known or unknown, from the subject of
this Agreement.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

SELLER: MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-F (U.S.), L.P. a Delaware
limited partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,  

a Delaware limited liability company,

its general partner

  By:  

 

  Name:     Title: MORGAN STANLEY REAL ESTATE FUND VII SPECIAL GLOBAL (U.S.),
L.P. a Delaware limited partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,  
a Delaware limited liability company,   its general partner   By:  

 

  Name:     Title:

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MSREF VII GLOBAL-T HOLDING II, L.P. a Delaware limited partnership By:  

MSREF VII Global-GP, L.P,

an Alberta limited partnership,

its general partner

  By:  

MSREF VII Global, L.P.,

an Alberta limited partnership,

its general partner

    By:  

MSREF VII, Inc.,

a Delaware corporation,

its general partner

      By:  

 

      Name:       Title: MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE (U.S.),
L.P. a Delaware limited partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,  
a Delaware limited liability company,   its general partner   By:  

 

  Name:   Title:

[Signatures continue on following page]

 

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PURCHASER PARTIES: SUNRISE SENIOR LIVING INVESTMENTS, INC., a Virginia
corporation By:  

 

Name:     Title:     SUNRISE SENIOR LIVING INC., a Delaware corporation By:  

 

Name:     Title:     SUNRISE SENIOR LIVING MANAGEMENT INC., a Virginia
corporation By:  

 

Name:     Title:     AL US DEVELOPMENT VENTURE, LLC, a Delaware limited
liability company, individually and on behalf of each of the Subsidiaries By:  
Sunrise Senior Living Investments, Inc., a Virginia corporation   By:  

 

  Name:     Title:  

 

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EXHIBIT D

Election to Treat Modification of Debt as Occurring After

Transfer of Property Securing the Debt Pursuant to Treas.

Reg. § 1.1274-5(b)(2)(i)

Sellers:

Morgan Stanley Real Estate Fund VII Global-F (U.S.), L.P.

c/o Morgan Stanley

1585 Broadway, 37th Floor

New York, New York 10036 Federal

Tax Identification Number: 26-1947938

Morgan Stanley Real Estate Fund VII Special Global (U.S.), L.P.

c/o Morgan Stanley

1585 Broadway, 37th Floor

New York, New York 10036

Federal Tax Identification Number: 26-1947727

MSREF VII Global-T Holding II, L.P.

c/o Morgan Stanley

1585 Broadway, 37th Floor

New York, New York 10036

Federal Tax Identification Number: 26-2981483

Morgan Stanley Real Estate Fund VII Global-TE (U.S.), L.P.

c/o Morgan Stanley

1585 Broadway, 37th Floor

New York, New York 10036

Federal Tax Identification Number: 26-1947863

 

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Purchaser:

[Sunrise Senior Living Investments, Inc.]

[7900 Westpark Drive, Suite T-900]

[McLean, VA 22101]

Identification Number: [Fed. ID]

Pursuant to Reg. §1.1274-5(b)(2)(i), [Sunrise Senior Living Investments, Inc.]
and Morgan Stanley Real Estate Fund VII Global-F (U.S.), L.P., Morgan Stanley
Real Estate Fund VII Special Global (U.S.), L.P., MSREF VII Global-T Holding II,
L.P., and Morgan Stanley Real Estate Fund VII Global-TE (U.S.), L.P. elect to
treat any modification of indebtedness of the Company or any direct or indirect
subsidiaries of the Company (including the Loan as defined in that certain
Purchase and Sale Agreement to which this Election is attached (the “PSA”) as a
separate transaction occurring after the full completion of the sale or exchange
described below.

Description of Transaction:

The acquisition by [Sunrise Senior Living Investments, Inc.] of interests in AL
US Development Venture, LLC from Morgan Stanley Real Estate Fund VII Global-F
(U.S.), L.P., Morgan Stanley Real Estate Fund VII Special Global (U.S.), L.P.,
MSREF VII Global-T Holding II, L.P., and Morgan Stanley Real Estate Fund VII
Global-TE (U.S.), L.P. pursuant to the PSA.

[Signatures on following page]

 

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[SUNRISE SENIOR LIVING INVESTMENTS, INC., a Virginia corporation] By:  

 

Name:   Title:  

[Signatures continue on following page]

 

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MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-F (U.S.), L.P., a Delaware limited
partnership By:  

MSREF VII Global-GP (U.S.), L.L.C.,

a Delaware limited liability company,

its general partner

  By:  

 

  Name:     Title:   MORGAN STANLEY REAL ESTATE FUND VII SPECIAL GLOBAL (U.S.),
L.P., a Delaware limited partnership By:   MSREF VII Global-GP (U.S.), L.L.C.,  
a Delaware limited liability company,   its general partner   By:  

 

  Name:     Title:  

[Signatures continue on following page]

 

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MSREF VII GLOBAL-T HOLDING II, L.P., a Delaware limited partnership By:  

MSREF VII Global-GP, L.P.,

an Alberta limited partnership,

its general partner

  By:  

MSREF VII Global, L.P.,

an Alberta limited partnership,

its general partner

    By:  

MSREF VII, Inc.,

a Delaware corporation,

its general partner

      By:  

 

      Name:         Title:   MORGAN STANLEY REAL ESTATE FUND VII GLOBAL-TE
(U.S.), L.P., a Delaware limited partnership By:   MSREF VII Global-GP (U.S.),
L.L.C.,   a Delaware limited liability company,   its general partner   By:  

 

  Name:     Title:  

 

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