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                                                                   Exhibit 10.21

                 SEPARATION AND MUTUAL GENERAL RELEASE AGREEMENT

            This Separation and Mutual General Release Agreement ("Agreement"),
made this 17th day of March 1999, by and between Sheila M. Muldoon, an
individual ("Muldoon"), and ARV Assisted Living, Inc., a corporation ("ARV") is
a separation agreement which includes a mutual general release of claims. Lazard
Freres Real Estate Investors L.L.C. ("Lazard") is a party to this Agreement only
with respect to paragraphs 2, 6, 8, 9, 14, 15, and 18-27.

            In consideration of the covenants undertaken and the releases
contained in this Agreement, Muldoon and ARV agree, and Lazard agrees with
respect to paragraphs 2, 6, 8, 9, 14, 15, and 18-27, as follows:

            1.    Muldoon's position as Senior Vice President and General
                  Counsel of ARV is terminated, such termination to be effective
                  March 17, 1999 (the "Separation Date").

            2.    That certain April 23, 1997 Employment Agreement ("Employment
                  Agreement") and the October 21, 1997 Amendment to that
                  Employment Agreement ("Amended Employment Agreement") between
                  Muldoon and ARV shall terminate, such termination to be
                  effective March 15, 1999.  All payments due to Muldoon from
                  ARV shall be determined under this Agreement and the
                  Consulting Agreement, and no payments shall be made under the
                  Employment Agreement or Amended Employment Agreement.  All
                  payments due to Muldoon under this Agreement shall be the sole
                  responsibility of ARV and not of Lazard or any of Lazard's
                  affiliates.

            3.    Concurrently with the execution of this Agreement, and in
                  consideration of the promises given and payments made
                  hereunder, Muldoon and ARV shall execute the Consulting
                  Agreement attached hereto as Exhibit A. Any breach of the
                  Consulting Agreement shall also constitute a breach of this
                  Agreement.

            4.    ARV shall pay to Muldoon severance in a total amount of
                  $185,000.00, less standard withholding and authorized
                  deductions. One-half of such amount ($92,500.00) shall be paid
                  to Muldoon on or before ten (10) days after Muldoon's
                  execution of this Agreement. The remaining one-half shall be
                  paid to Muldoon on the earlier of (i) May 31, 1999, (ii) the
                  date on which the Company terminates the Consulting Agreement
                  for reasons other than a breach by Muldoon, or (iii) ten (10)
                  days after the date ARV closes its pending financing
                  transaction with Bank One. In addition, Muldoon acknowledges
                  that she has already received through direct deposit her
                  accrued but unpaid salary through March 15, 1999. On March


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                  17, 1999, ARV shall pay to Muldoon accrued but unused vacation
                  in the amount of $21,346.18, and unpaid salary in the amount
                  of $1,422.88, each less standard withholding and authorized
                  deductions.

            5.    During the term of the Consulting Agreement, ARV shall
                  reimburse Muldoon for the amount of her premiums for COBRA
                  continuation coverage under ARV's welfare benefit plans.

            6.    Muldoon on the one hand, and ARV and Lazard collectively on
                  the other, agree that each shall not (1) directly or
                  indirectly, make or ratify any statement, public or private,
                  oral or written, that disparages, either professionally or
                  personally, the other party or parties, the other party or
                  parties' subsidiaries and affiliates, past and present, and
                  each of them, as well as its and their trustees, directors,
                  officers, agents, attorneys, insurers, employees,
                  stockholders, representatives, assigns, and successors, past
                  and present, and each of them, or (2) make any statement or
                  engage in any conduct that has the purpose or effect of
                  disrupting the business of the other party or parties.  The
                  parties hereby agree that any statement made in violation of
                  the foregoing shall constitute and be treated as a material
                  breach of this Agreement.  This Section 6 shall not apply to
                  or in any way limit (i) statements made by a party in any
                  court, arbitral or governmental proceeding or (ii) a party's
                  private consultation with its attorneys or other professional
                  advisors.

            7.    ARV expressly denies any violation of any of its policies,
                  procedures, state or federal laws or regulations.
                  Accordingly, while this Agreement resolves all issues between
                  Muldoon and ARV relating to any alleged violation of ARV's
                  policies or procedures or any state or federal law or
                  regulation, this Agreement does not constitute an adjudication
                  or finding on the merits and it is not, and shall not be
                  construed as, an admission by ARV of any violation of its
                  policies, procedures, state or federal laws or regulations.
                  Moreover, neither this Agreement nor anything in this
                  Agreement shall be construed to be or shall be admissible in
                  any proceeding as evidence of or an admission by ARV of any
                  violation of its policies, procedures, state or federal laws
                  or regulations.  This Agreement may be introduced, however, in
                  any proceeding to enforce the Agreement.  Such introduction
                  shall be pursuant to a stipulation agreeing to an order
                  protecting its confidentiality.

                  8. Except for those obligations created by or arising out of
                  this Agreement or the Consulting Agreement, Muldoon on behalf
                  of herself, her descendants, dependents, heirs, executors,
                  administrators, assigns, and successors, and each of them,
                  hereby covenants not to sue and fully releases and discharges
                  ARV, Lazard, LF Strategic Realty Investors II L.P., LFSRI II
                  Alternative Partnership LP, LFSRI II-CADIM Alternative
                  Partnership L.P., Atria Communities, Inc., Kapson Senior
                  Quarters Corp., Prometheus


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                  Assisted Living LLC, their respective predecessors, successors
                  and assigns, and their respective past, present and future
                  parents, subsidiaries, affiliates, trustees, executors,
                  administrators, officers, directors, owners, associates,
                  heirs, agents, insurers, stockholders, partners, employees,
                  licensees, representatives, lawyers, consultants, investment
                  bankers, accountants or any of them and including, without
                  limitation, Robert P. Freeman, Murry N. Gunty and Kenneth M.
                  Jacobs, and each of them, hereinafter together and
                  collectively referred to as "Releasees," with respect to and
                  from any and all manner of action or actions, cause or causes
                  of action, in law or equity, and any suits, debts, liens,
                  liabilities, claims, counter-claims, cross-claims, demands,
                  rights, obligations, damages, losses, costs, expenses,
                  attorneys' fees, judgments, orders or indemnities, of all and
                  any nature whatsoever, whether individual or derivative, state
                  or federal, known or unknown, fixed or contingent, suspected
                  or unsuspected, and whether or not concealed or hidden, that
                  against said Releasees, or any of them, Muldoon: (i) may have
                  or may now have up to the date of this Agreement; or (ii) may
                  hereafter have based upon, arising out of, related to or in
                  any way connected with her service as an officer or employee
                  of ARV, her separation from her position as Senior Vice
                  President and General Counsel of ARV or her employment by, or
                  status as an officer of, any ARV affiliate, or any other
                  transactions, occurrences, acts or omissions or any loss,
                  damage or injury whatever, known or unknown, suspected or
                  unsuspected, resulting from any act or omission by or on the
                  part of said Releasees, or any of them, committed or omitted
                  prior to the date of this Agreement including, without
                  limiting the generality of the foregoing, any claim that was
                  or could have been alleged in, or any of the facts giving rise
                  to or allegedly giving rise to, those certain actions entitled
                  ARV Assisted Living, Inc. v. Lazard Freres Real Estate
                  Investors LLC et al., Case No. 794211, Superior Court for the
                  State of California for the County of Orange and related
                  cross-actions ("ARV v. LFREI") and/or Prometheus Assisted
                  Living LLC v. Howard G. Phanstiel et al., Civil Action No.
                  16846 In the Court of Chancery of the State of Delaware in and
                  for New Castle County ("Prometheus v. Phanstiel"), any claim
                  under Title VII of the Civil Rights Act of 1964, the Age
                  Discrimination in Employment Act, the Americans with
                  Disabilities Act, the Family and Medical Leave Act of 1993,
                  the California Fair Employment and Housing Act, the California
                  Family Rights Act, or any claim for severance pay, bonus, sick
                  leave, holiday pay, vacation pay, life insurance, health or
                  medical insurance or any other fringe benefit, workers'
                  compensation or disability. Notwithstanding anything to the
                  contrary herein, the releases given herein do not include any
                  claim Muldoon now has or may hereafter have for
                  indemnification under that certain Indemnification Agreement
                  between Muldoon and ARV dated August 13, 1996 (the "Indemnity
                  Agreement") or under ARV's Articles of Incorporation or By
                  Laws.


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                  Except for those obligations created by or arising out of this
Agreement, the Consulting Agreement, or the Indemnity Agreement, ARV and Lazard
hereby acknowledge full and complete satisfaction of and release and discharge,
and covenant not to sue, Muldoon from and with respect to any and all claims,
agreements, obligations, losses, damages, injuries, demands and causes of
action, known or unknown, suspected or unsuspected, arising out of or in any way
connected with Muldoon's service as Senior Vice President and General Counsel of
ARV or as any officer or director of any ARV subsidiaries, or the separation
from such positions, or any other transactions, occurrences, acts or omissions
or any loss, damage or injury whatever, known or unknown, suspected or
unsuspected, resulting from any act or omission by or on the part of Muldoon
committed or omitted prior to the date of this Agreement which ARV and/or Lazard
now owns or holds or has at any time heretofore owned or held as against Muldoon
including, without limiting the generality of the foregoing, any claim that was
or could have been alleged against Muldoon in ARV v. LFREI and/or Prometheus v.
Phanstiel.

            9.    Muldoon, ARV, and Lazard, and each of them, hereby represent,
                  warrant, and acknowledge to each other, that they have
                  received independent legal advice from their respective
                  attorneys regarding the advisability of executing this
                  Agreement and giving the releases provided for herein, and
                  hereby acknowledge the provisions of Section 1542 of the
                  California Civil Code, 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."

Muldoon, ARV and Lazard, and each of them, being aware of Section 1542, hereby
expressly waive and relinquish any rights or benefits they have or may have
thereunder in connection with the releases provided herein, as well as under any
other California or any Federal or state statute or common law principle of
similar effect. Each of Muldoon, ARV and Lazard acknowledges that it is aware
that it or its attorney may hereafter discover facts different from or in
addition to the facts which it or its attorney now knows or believes to be true
with respect to the subject matter of this Agreement but that it is their
intention hereby to settle and release fully, finally, absolutely and forever
any and all claims, disputes and differences, known or unknown, suspected or
unsuspected, which now exist, may hereafter exist, or heretofore have existed
arising from, related to or in any way connected with the released matters set
forth in paragraph 8 of this Agreement, and without regard to the subsequent
discovery or existence of such different or additional facts except as expressly
set forth herein, which do now exist or heretofore have existed between the
parties. In furtherance of this intention, the releases herein given shall be
and remain in effect as full and complete releases, except as expressly set
forth herein, notwithstanding the discovery of any such additional facts.
Muldoon, ARV and Lazard acknowledge that they understand the significance and
consequence of such release and such specific waiver of SECTION 1542. The
parties, and each of them, hereby further represent, warrant, and acknowledge to
the other parties, and each of them, that there is a risk that,


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subsequent to the date of this Agreement, they will incur damage or loss that
they deem in some way attributable to the subject matter of this Agreement, or
to the actions prior to the date of this Agreement of Muldoon, ARV, Lazard, LF
Strategic Realty Investors II L.P., LFSRI II Alternative Partnership LP, LFSRI
II-CADIM Alternative Partnership L.P., Atria Communities, Inc., Kapson Senior
Quarters Corp., Prometheus Assisted Living LLC, Robert P. Freeman, Murry N.
Gunty, or Kenneth M. Jacobs, as the case may be, but which are unknown and
unanticipated as of the date of this Agreement, or that damages presently known
may become progressive, greater or more serious than is now known, expected or
anticipated, or that facts alleged in the subject matter of this Agreement are
found to be different from the facts now believed by them to be true. The
parties hereby expressly accept such risks and agree that this Agreement is and
will remain effective notwithstanding such risks, if they occur.

            10.   Muldoon expressly acknowledges and agrees that, by entering
                  into this Agreement, she is waiving any and all rights or
                  claims that she may have arising under the Age Discrimination
                  in Employment Act of 1967, as amended, which have arisen on or
                  before the date of execution of this Agreement. Muldoon
                  further expressly acknowledges and agrees that:

            a. In return for this Agreement, she will receive consideration (the
            releases given herein) beyond that which she was already entitled to
            receive before entering into this Agreement;

            b. She was orally advised by ARV and is hereby advised in writing by
            this Agreement to consult with an attorney before signing this
            Agreement;

            c. She was given a copy of this Agreement on March 17, 1999, and
            informed that she had 21 days within which to consider the
            Agreement; and

            d. She was informed that she has seven (7) days following the date
            of execution of the Agreement in which to revoke the Agreement.

            11.   Muldoon acknowledges that by reason of her position with ARV
                  she has been given access to, received, and been entrusted
                  with confidential information, including but in no way limited
                  to development, marketing, organizational, financial,
                  management, administrative, production, distribution and sales
                  information, data, specifications and processes owned by ARV
                  or its agents or consultants, or used in the course of its
                  business that is not otherwise part of the public domain
                  (collectively, the "Confidential Material"). Muldoon
                  represents that she has held all Confidential Material
                  confidential and will continue to do so, and that she will not
                  use Confidential Material for any business (which term herein
                  includes a partnership, firm, corporation or any other entity)
                  without the prior written consent of ARV. Muldoon hereby
                  acknowledges that the sale or unauthorized use or disclosure
                  of any of ARV's Confidential Material by any means whatsoever
                  shall constitute unfair competition.


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                  Muldoon agrees that she shall not engage in unfair competition
                  at any time on or after the date of this Agreement.

            12.   Muldoon promises and agrees that she will not, during her
                  engagement pursuant to the Consulting Agreement attached
                  hereto as Exhibit A and for a period of one year following
                  termination of such engagement or the expiration of the
                  Consulting Agreement, influence or attempt to influence
                  customers of ARV or any of its present or future subsidiaries
                  or affiliates, either directly or indirectly, to divert their
                  business to any individual, partnership, firm, corporation or
                  other entity then in competition with the business of ARV, or
                  any subsidiary or affiliate of ARV.  The performance of legal
                  services for an ARV competitor after the termination of the
                  Consulting Agreement shall not itself constitute a violation
                  of this Section 12, provided, however, that such legal
                  services provided by Muldoon in no way relate to any
                  proceeding or transaction in which ARV is a subject, party, or
                  participant.

            13.   Muldoon promises and agrees that she will not, during her
                  engagement pursuant to the Consulting Agreement attached
                  hereto as Exhibit A and for a period of one year following the
                  earlier of termination of such engagement or the expiration of
                  the Consulting Agreement, directly or indirectly solicit any
                  ARV employees who earned annually $25,000 or more as an ARV
                  employee during the last six months of his or her own
                  employment to work for any business, individual, partnership,
                  firm, corporation, or other entity then in competition with
                  the business of ARV or any subsidiary or affiliate of ARV.

            14.   Muldoon, ARV and Lazard agree that the terms and conditions of
                  this Agreement shall remain confidential as between the
                  parties and they shall not (except as required by law,
                  including disclosures required to shareholders or regulators,
                  and in a press release provided for herein) disclose them to
                  any other person. The parties shall mutually agree upon the
                  text of a press release announcing the separation of Muldoon
                  from her position as Senior Vice President and General Counsel
                  at ARV and the substance of any other comments (including any
                  announcement to ARV employees) regarding the fact of Muldoon's
                  separation from such position and the reasons therefor. Except
                  as provided for in the mutually agreed disclosures, the
                  parties will not respond to or in any way participate in or
                  contribute to any public discussion, notice or other publicity
                  concerning, or in any way relating to, execution of this
                  Agreement or the events (including any negotiations) which led
                  to its execution. Without limiting the generality of the
                  foregoing, the parties specifically agree that they shall not
                  disclose information regarding this Agreement to any current
                  or former employee of ARV or any of its subsidiaries. The
                  parties hereby agree that disclosure by them of any of the
                  terms and conditions of the Agreement in violation of the
                  foregoing shall constitute and be treated as a


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                  material breach of this Agreement. This Section 14 shall not
                  apply to or in any way limit (i) statements made by a party in
                  any court, arbitral or governmental proceeding or (ii) a
                  party's private consultation with its attorneys or other
                  professional advisors.

            15.   Muldoon, ARV and Lazard each warrant and represent that there
                  has been no assignment or other transfer of any interest in
                  the released matters set forth in Sections 8 or 9 of this
                  Agreement, any claims, counterclaims, cross-claims, demands,
                  causes of action, or any part or portion thereof, that, but
                  for such assignment or transfer, would be subject to the
                  releases set forth in Sections 8 or 9 of this Agreement and
                  each agrees to indemnify, defend and hold harmless the others
                  from any liabilities, action or actions, cause or causes of
                  action in law or equity, suits, debts, liens, and from any
                  claims made upon, demands upon, damages asserted against, and
                  costs, expenses and attorneys' fees incurred (whether or not
                  litigation is actually commenced) by the other parties, or any
                  of them, based on or in connection with or arising out of any
                  such assignment or transfer made, purported or claimed.

            16.   Muldoon and ARV acknowledge that they have no further
                  employment or contractual relationship except as arises out of
                  this Agreement and as set forth in (i) the Consulting
                  Agreement attached hereto as Exhibit A and (ii) the Indemnity
                  Agreement, and that Muldoon waives any right or claim to
                  reinstatement as an employee of ARV.

            17.   This instrument, the Consulting Agreement attached hereto as
                  Exhibit A, and the Indemnity Agreement constitute and contain
                  the entire agreement and understanding concerning Muldoon's
                  relationship with ARV and the other subject matters addressed
                  herein between the parties, and supersedes and replaces all
                  prior negotiations and all agreements proposed or otherwise,
                  whether written or oral, concerning the subject matters
                  hereof. This is an integrated document.

            18.   Muldoon may revoke this Agreement in its entirety during the
                  seven (7) days following execution of the Agreement by
                  Muldoon. Any revocation of the Agreement must be in writing
                  and hand delivered during the revocation period. This
                  Agreement and the Consulting Agreement will become effective
                  and enforceable seven (7) days following execution by Muldoon,
                  unless this Agreement is revoked during the seven-day period.

            19.   If any provision of this Agreement or the application thereof
                  is held invalid, the invalidity shall not affect other
                  provisions or applications of the Agreement which can be given
                  effect without the invalid provisions or applications and to
                  this end the provisions of this Agreement are declared to be
                  severable.


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            20.   This Agreement shall be deemed to have been executed and
                  delivered within the State of California, and the rights and
                  obligations of the parties hereunder shall be construed and
                  enforced in accordance with, and governed by, the laws of the
                  State of California without regard to principles of conflict
                  of laws.

            21.   Each party has cooperated in the drafting and preparation of
                  this Agreement. Hence, in any construction to be made of this
                  Agreement, the same shall not be construed against any party
                  on the basis that the party was the drafter.

            22.   This Agreement may be executed in counterparts, and each
                  counterpart, when executed, shall have the efficacy of a
                  signed original. Photographic copies of such signed
                  counterparts may be used in lieu of the originals for any
                  purpose.

            23.   Any controversy arising out of or relating to this Agreement,
                  its enforcement or interpretation, or because of an alleged
                  breach, default, or misrepresentation in connection with any
                  of its provisions, shall be submitted to arbitration in Orange
                  County, California, before a sole arbitrator selected from
                  Judicial Arbitration and Mediation Services, Inc., Orange
                  County, California, or its successor ("JAMS"), or if JAMS is
                  no longer able to supply the arbitrator, such arbitrator shall
                  be selected from the American Arbitration Association, and
                  shall be conducted in accordance with the provisions of
                  California Civil Procedure Code Sections 1280 et seq. as the
                  exclusive remedy of such dispute; provided, however, that
                  provisional injunctive relief may, but need not, be sought in
                  a court of law while arbitration proceedings are pending, and
                  any provisional injunctive relief granted by such court shall
                  remain effective until the matter is finally determined by the
                  Arbitrator. Final resolution of any dispute through
                  arbitration may include any remedy or relief which the
                  Arbitrator deems just and equitable, including permanent
                  injunctive relief or specific performance, or both, and the
                  Arbitrator is hereby empowered to award such relief. Any award
                  or relief granted by the Arbitrator hereunder shall be final
                  and binding on the parties hereto and may be enforced by any
                  court of competent jurisdiction. Muldoon and ARV understand
                  and agree that they are hereby waiving any rights to trial by
                  jury in any action, proceeding or counterclaim brought by
                  either of the parties against the other in connection with any
                  matter whatsoever arising out of or in any way connected with
                  this Agreement.

            24.   In the event of litigation or arbitration in connection with
                  or concerning the subject matter of this Agreement, the
                  prevailing party (as determined by the tribunal or arbitrator)
                  shall be entitled to recover all costs and expenses incurred
                  by such party in connection therewith, including reasonable
                  attorneys' fees.


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            25.   No waiver of any breach of any term or provision of this
                  Agreement shall be construed to be, or shall be, a waiver of
                  any other breach of this Agreement. No waiver shall be binding
                  unless in writing and signed by the party waiving the breach.

            26.   In entering this Agreement, the parties represent that they
                  have relied upon the advice of their attorneys, who are
                  attorneys of their own choice, and that the terms of this
                  Agreement have been completely read and explained to them by
                  their attorneys, and that those terms are fully understood and
                  voluntarily accepted by them.

            27.   All parties agree to cooperate fully and to execute any and
                  all supplementary documents and to take all additional actions
                  that may be necessary or appropriate to give full force to the
                  basic terms and intent of this Agreement and which are not
                  inconsistent with its terms.

            I have read the foregoing Agreement and I accept and agree to the
provisions it contains and hereby execute it voluntarily with full understanding
of its consequences.

            EXECUTED this 17th day of March 1999, at Orange County, California.

                                       /s/ Sheila M. Muldoon
                                       -----------------------------------------
                                           Sheila M. Muldoon

Approved as to form:

PAUL, HASTINGS, JANOFSKY & WALKER LLP

By /s/ Peter J. Tennyson
   ----------------------------------
       Peter J. Tennyson

Attorneys for Sheila M. Muldoon

EXECUTED this 17th day of March 1999, at Orange County, California.

                                    ARV Assisted Living, Inc.

                                    By /s/ Douglas M. Pasquale 
                                       -----------------------------------------
                                       Its President and Chief Operations
                                           Officer


Approved as to form:


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O'MELVENY & MYERS LLP

By /s/ Larry A. Walraven
   ------------------------------------
       Larry A. Walraven

Attorneys for ARV Assisted Living, Inc.


            EXECUTED this _____ day of March 1999, at ________________ County,
_____________.

                                    Lazard Freres Real Estate Investors L.L.C.,
                                    with respect to paragraphs 2, 6, 8, 9, 14,
                                    15, 18-27 only

                                    By /s/ Robert P. Freeman
                                       -----------------------------------------
                                       Its Principal

Approved as to form:

QUINN, EMANUEL, URQUHART,
OLIVER & HEDGES, LLP

By /s/ John B. Quinn
   ---------------------------------

Attorneys for Lazard Freres 
Real Estate Investors L.L.C.
    John B. Quinn


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                                   ENDORSEMENT

            I, Sheila M. Muldoon, hereby acknowledge that I was given 21 days to
consider the foregoing Agreement and voluntarily chose to sign the Agreement
prior to the expiration of the 21-day period.

            I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.

            EXECUTED this 17th day of March 1999, at Orange County, California.

                                           /s/ Sheila M. Muldoon
                                           -------------------------------------
                                               Sheila M. Muldoon


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