<PAGE>

                                                                   EXHIBIT 10.33

                        AGREEMENT FOR MANAGEMENT SERVICES

         THIS AGREEMENT FOR MANAGEMENT SERVICES (this "Agreement") is dated July
13, 2004, but effective as of August 1, 2004 (such latter date being the
"Effective Date"), by and between CYPRESS SENIOR MANAGEMENT SERVICES LIMITED
PARTNERSHIP, a Delaware limited partnership, with its principal business address
at 1717 St. James Place, Suite 220, Houston, Texas 77056 (hereinafter referred
to as "Cypress"), and BROOKDALE CYPRESS MANAGEMENT, LLC, a Delaware limited
liability company with its principal business address at c/o Brookdale Living
Communities, Inc., 330 North Wabash Avenue, Suite 1400, Chicago, Illinois 60611,
or a subsidiary as designated by Manager and approved by Cypress in its
reasonable discretion (hereinafter collectively referred to as "Manager").

                                    RECITALS:

         Each of the entities identified on Exhibit A attached hereto (each an
"Owner" and collectively the "Owners") owns an independent senior living
community facility or facilities designed to meet the needs of senior citizens,
including such amenities as food service, social activities and transportation
services, also being identified on Exhibit A attached hereto (each a "Facility"
and collectively the "Facilities").

         Each Owner has engaged Cypress to provide certain property management
services for its Facility pursuant to a property management agreement by and
between such Owner and Cypress (as each of the same may be amended from time to
time, collectively, the "Master Agreement").

         Under the terms of the Master Agreement, Cypress has the right to
subcontract out a portion of such services. Cypress hereby represents and
warrants that the services that Cypress has subcontracted to Manager hereunder
do not create a default, or conflict with, the Master Agreement.

         Manager is a manager of independent and assisted living facilities for
the elderly and has expertise and experience in marketing, management and
operation of such facilities and related services for the elderly and has the
personnel fully trained and experienced to duly and timely perform the
responsibilities and obligations hereunder.

         Cypress desires to contract with Manager to provide certain services
for the Facilities and Manager is willing to provide such services on the terms
and conditions and for and in consideration of the mutual covenants and promises
stated herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto.

                                   AGREEMENTS:

                                    ARTICLE I
                    Appointment of Management Agent and Term

         1.1 Appointment of Management Agent.

                  (a) Cypress hereby appoints Manager as manager of the
Facilities with the responsibilities and upon the terms and conditions set forth
herein, and Manager by its execution hereof hereby accepts said appointment.

                                      -1-
<PAGE>

                  (b) Cypress is and shall continue to be the governing body of
the Facilities and shall be responsible for the development of general policies
with respect to the Facilities. Accordingly, Manager and Cypress agree that
Cypress shall establish, in its reasonable discretion after consultation with
Manager, policies, programs and directives from time to time to be carried out
by Manager under this Agreement; provided however, in the event of any conflict
between this Agreement and such policies, programs and directives established
after the date of this Agreement, this Agreement shall govern.

         1.2 No Partnerships. Nothing in this Agreement shall be construed as
creating a partnership, joint venture or employment arrangement by and between
Cypress and Manager, the parties hereunder acting as separate and independent
contractors.

         1.3 Independent Contractor Status. The parties to this Agreement agree
that Manager has no status under this Agreement other than as independent
contractor to Cypress. Employees or agents of Manager are not by this Agreement
or any actions of Cypress or Manager hereunder made employees of Cypress, and
are not entitled to the benefits provided by Cypress to its employees,
including, but not limited to, group insurance, leave and pension plan.

         1.4 Term. This Agreement shall expire, unless renewed under Section 1.5
or sooner terminated pursuant to Article X, on the last day of the thirty-sixth
(36th) full calendar month following the execution hereof.

         1.5 Renewals. This Agreement may be renewed for three (3) successive
periods of twelve (12) months each, if Cypress notifies Manager not less than
sixty (60) days prior to the expiration of the initial term of this Agreement,
or sixty (60) days prior to the expiration of any renewal term, of its election
to renew as authorized under this Section 1.5. In the event of such renewal,
Manager shall be entitled to compensation during such renewal period as set
forth in Article VIII. All other provisions of this Agreement shall remain in
full force and effect during any such renewal period, unless the parties hereto
shall agree to any modification of, or addition to, this Agreement.

                                   ARTICLE II
                                   Definitions

         2.1 Definitions. The following terms shall have the following meanings
when used in this Agreement:

                  (a) "Annualized NOI" shall mean the NOI for the twelve (12)
full calendar months immediately preceding the date in question.

                  (b) "Approved Budget" shall mean the approved combined Budget
for the Facilities as defined and set forth in Article IV.

                  (c) "Facility Expense" shall mean an expense directly related
to the operating costs and staffing of a Facility, which expenses and payment of
expenses shall be made directly by Manager from the Operating Account and shall
not include Manager's affiliates' general corporate overhead.

                  (d) "Fiscal Year" means January 1 through December 31 unless
another twelve (12) month period is established by Cypress.

                                      -2-
<PAGE>

                  (e) "Incentive Fee" shall mean the fee provided for in Section
8.2 hereof.

                  (f) "Management Fee" shall mean the fee provided for in
Section 8.1 hereof.

                  (g) "Mortgage" shall mean any mortgage, deed of trust,
regulatory agreement or other instrument securing the interest of a Mortgagee in
a Facility.

                  (h) "Mortgagee" shall mean any public or private lending
institution, agency or other entity that has lent money to Owner and holds a
mortgage secured against all or part of a Facility.

                  (i) "NOI" shall mean for any period, the positive or negative
dollar amount of (i) Operating Income for such period less (ii) Operating
Expenses (less real property taxes) for such period.

                  (j) "Operating Account" shall mean, collectively, the combined
accounts for payroll and accounts payable for the Facilities established by
Manager in the name of Manager and Cypress at LaSalle Bank National Association,
which account shall be segregated from all other accounts maintained by Manager
with signature authority for Cypress and Manager.

                  (k) "Operating Expenses" shall mean for any period the actual,
total costs and expenses incurred by Owner in owning and operating the
Facilities for such period, including without limitation, employee salaries,
wages and benefits, management fees and deposit forfeitures and expenses,
marketing expenses, repairs and maintenance expenses, costs of utilities, real
and personal property taxes, insurance, and reserves for capital replacements,
but excluding interest and debt service for any applicable loan and depreciation
and amortization (except as provided below). Operating Expenses do not include
Owner's or Manager's affiliates' general corporate overhead. In determining
Operating Expenses, the following adjustments shall be taken into account:

                           (i) Reserves for capital replacement shall be fixed
         and evenly amortized (month by month) at an annual amount of $300 per
         unit.

                           (ii) Real estate and property taxes shall be the
         greater of (1) the actual amount of such taxes if tax statements are
         available, or (2) an amount reasonably estimated by an independent tax
         consultant selected by Cypress; and in either case, adjusted for fully
         assessed and fully improved Facilities, and evenly amortized over the
         period for which they are assessed.

                           (iii) Insurance costs shall be those actually
         incurred to insure a Facility on a fully improved and operational basis
         and evenly amortized over the period covered by such insurance.

                           (iv) Property management fees shall be the actual
         fees but not greater than four percent (4%) or less than three percent
         (3%) of Operating Income for such period.

                  (l) "Operating Income" shall mean for any period the total
rent actually received by Cypress and paid by tenants of the Facilities under
Qualifying Tenant Leases of during such period including cancellation fees and
deposit forfeitures paid by tenants during such period but excluding advance or
delinquent rents applicable to subsequent or prior periods, together with
typical incidental income items for similar projects. Operating Income does not
include security deposits (other than deposit forfeitures), any

                                      -3-
<PAGE>

insurance (other than loss of rent insurance), condemnation, or other type of
proceeds. Rental concessions shall be evenly allocated over the entire scheduled
term of the applicable tenant lease.

                  (m) "Owner's Capital" shall mean the aggregate of the funds of
the Owners actually expended for the direct costs of acquiring real property,
constructing and equipping the buildings and other improvements on real
property, leasing of the tenant spaces in the Facilities and operating,
financing and selling the Facilities.

                  (n) "Qualifying Tenant Leases" shall mean leases for
residential apartment units in a Facility, and for space for service providers
typically leasing space in similarly-situated high quality senior living
facilities in the geographic area in which each particular Facility is located,
for initial terms of not less than six (6) months evidenced by written
agreements on the standard lease form approved by Cypress and consistent with
the written leasing guidelines in effect from time to time which govern the
leasing policies of Manager. The leasing guidelines shall be consistent with
local practice and market rates for similar properties. At its reasonable
discretion, Manager may increase rental rates without the prior approval of
Owner. Manager will provide Cypress with written notice at least seven (7) days
prior to increasing such rental rates. Cypress and Manager agree that at times
it may be necessary to offer concessions to remain competitive, to generate
traffic or to improve closing ratios, including the form of rent reductions
("Rent Concessions"), promotional item giveaways or permanent improvements to an
apartment such as wallpaper, a mirrored wall, replacement of carpeting, etc.
("Promotional Concessions" or "Tool Box Concessions") (collectively, Rent
Concessions, Promotional Concessions and Tool Box Concessions are referred to as
"Concessions"). If market conditions dictate, as determined by Manager in its
reasonable discretion, Manager may offer Concessions to new tenants, as well as
renewal tenants. Concessions which exceed one month's rent and ancillary fees
will require Cypress' approval.

                  (o) "Revenues" shall mean gross revenues generated by the
operation of Facilities including but not limited to rents, service fees and
vending fees payable monthly, but specifically excluding:

                           (i) Fees collected by Manager, which were earned by
         retained consultants to the Facilities (but payments made by outside
         vendors as consideration for the right to provide services on a
         recurring basis as a convenience to the residents or the Facilities
         shall be included as Revenues).

                           (ii) Interest earned on any bank account into which
         is deposited any income or escrow payments derived from the ownership
         or operation of the Facilities, and interest earned in the management
         of surplus cash generated by the Facilities.

                           (iii) Insurance reimbursement funds.

                           (iv) Any payments received as security deposits until
         such funds are applied to rent.

                           (v) Prepaid rents.

                           (vi) Real estate tax refunds.

                           (vii) Proceeds from casualty losses.

                           (viii) Amortized tenant work over the approved
         allowance.

                           (ix) Any condemnation, insurance, warranty or
         indemnity claim proceeds.

                           (x) Any proceeds from awards, settlements or other
         disposition of lawsuits or legal proceedings except to the extent of
         net amounts after all costs and expenses, including legal costs, in
         obtaining such proceeds.

                           (xi) Proceeds of any sale or financing of any
         Facility.

                                      -4-
<PAGE>

                           (xii) Any other extraordinary receipts or revenues
         arising outside the ordinary course of business of the Facilities.

                  (p) "Sale Event" shall mean any sale, transfer or conveyance
of a Facility by Owner to an unaffiliated third party purchaser.

                  (q) "Sales Proceeds" shall mean the gross proceeds, after
deducting customary closing costs such as title insurance, survey costs, escrow
and recording fees and documentary stamps, from the Sales Event of a Facility or
Facilities (the "Sales Proceeds").

                  (r) "Secured Debt" shall mean the total amount of any debt of
Owner owed to any unaffiliated third party, which debt is secured by a lien on
the real property upon which a Facility is located.

                  (s) "State", with respect to a Facility, shall mean the State
where the Facility is located, and any of its regulatory agencies having
overview authority or other authority over such Facility, unless otherwise
specifically indicated elsewhere herein.

                                   ARTICLE III
                                Scope of Services

         3.1 Standard of Quality. Manager shall consistently devote its
commercially reasonable efforts consistent with professional management of
similarly-situated, high-quality senior living facilities to manage, operate,
secure and maintain the Facilities and perform its duties hereunder in a
reasonable, diligent, and careful manner. The services of Manager hereunder are
to be of a scope and quality not less than those generally performed by
professional property managers of other similarly-situated, high-quality senior
living facilities. Manager shall make available to Cypress the full benefit of
the judgment, experience, and advice of the members of Manager's organization
and staff with respect to the policies to be pursued by Cypress in operating the
Facilities, and will perform such services as may be requested by Cypress in
operating, maintaining, servicing, and improving the Facilities. Manager shall
act in a fiduciary capacity with respect to the proper protection of and
accounting for Cypress and Owner's assets. Notwithstanding the foregoing,
Manager does not guarantee that operation of the Facility will be profitable,
but Manager shall use its commercially reasonable efforts to operate the
Facility in as cost effective and profitable a manner as reasonably possible
consistent with similarly-situated, high-quality senior living facilities in the
geographic area in which the Facility is located.

         3.2 REIT Matters. Manager acknowledges that the Owners are subject to
certain laws, rules and regulations governing a "real estate investment trusts"
(a "REIT"). Manager and Cypress agree that they will conduct the affairs and
operations of the Facilities in such a manner that the Owners will qualify as a
REIT; provided, however, (a) Cypress shall give Manager written notice of the
actions necessary for the Owners' qualification and a reasonable time to
implement such action, (b) Manager shall not be required to incur any cost or
expense not presently provided for herein, and (c) Owner shall indemnify and
hold Manager harmless from and against any costs, liability or damages arising
out of any violation of subsection (a) hereinabove. In the event that the
requirements applicable to the Owners for qualification as a REIT under existing
laws, rules and regulations or by reason of amendments thereto, issuance of new
laws, rules or regulations, or interpretations of existing or new laws, rules or
regulations by any governmental authority requires the Owners and Cypress to
modify the Master Agreement and Cypress and Manager to modify this Agreement,
Manager, upon notification thereof by Cypress, shall modify this Agreement to
incorporate any revisions necessary in

                                      -5-
<PAGE>

order to allow the Owners to continue to qualify as a REIT; provided, however,
that if the applicable requirements of such modifications would have a material
adverse economic effect on the consideration due Manager under this Agreement,
adjustments shall be made in the consideration due Manager hereunder in order to
equalize such adverse economic effect.

         3.3 Ongoing Management Services.

                  (a) Manager agrees to use commercially reasonable efforts to
prevent the use of the Facilities for any purpose that might void any policy of
insurance held by Owner or Cypress, that might render any loss insured
thereunder uncollectible or that would be in violation of any governmental
restriction or the provisions of any tenant lease. Manager shall at all times
supervise the compliance by Cypress with each and all of Cypress and Owner's
obligations under each and all of the warranties, guaranties, and service
contracts and agreements relating in any way to the Facilities, including,
without limitation, such warranties, guaranties, and service contracts and
agreements relating to the building systems, any construction, and the personal
property located at the Facilities. Manager shall use its commercially
reasonable efforts to enforce the terms and conditions of the tenant leases,
including, but not limited to, periodic maintenance of all building systems,
including individual tenant's heating, ventilation and air-conditioning systems
except to the extent required to be maintained by tenants. Manager shall be
expected to perform such other acts and deeds as are reasonably necessary and
proper in the discharge of its duties under this Agreement.

                  (b) Manager shall establish, in the name of Manager and
Cypress, a deposit account (the "Deposit Account") and the Operating Account,
and Manager shall deposit in the Deposit Account all moneys paid or furnished by
Cypress or Owner to Manager pursuant to the terms hereof as operating capital or
for other authorized costs and expenses, and all rentals, fees, charges and
other amounts hereafter received by Manager, for and on behalf of Cypress and/or
Owner, in connection with the management, rental and operation of the
Facilities. Manager shall make disbursements from the Operating Account on
behalf of Owner in such amounts as are required in connection with the
day-to-day management and operation of the Property; provided, however, Manager
shall ensure that all such disbursements shall be made strictly in accordance
with the Approved Budget, unless Owner shall agree otherwise. All costs relating
to the Deposit Account and the Operating Account shall be for the account and at
the expense of Owner and/or Cypress, whether invoices for such costs are
received during the term of this Agreement or at anytime thereafter. All funds
in the Deposit Account and the Operating Account shall be Owner's property and
shall not be commingled with funds of Manager. All funds received by Manager
from the Facilities must be deposited into the Deposit Account as soon as
possible, but no later than the second (2nd) business day following receipt.
Notwithstanding anything to the contrary set forth herein, if the funds in the
Operating Account are insufficient to make the disbursements required to be made
from the Operating Account according to the terms hereof, or if the Operating
Account has been closed pursuant to the terms hereof after the termination of
this Agreement, Cypress shall, within five (5) days after being notified by
Manager of the existence and amount of the deficiency in the Operating Account
or having been otherwise informed of the necessary disbursement after the
closing of the Operating Account pursuant to the terms hereof, deposit such
amount in the Deposit Account or the Operating Account, as appropriate, or, if
the Deposit Account or Operating Account is closed, otherwise pay the
disbursement or reimburse Manager therefor.

                  (c) From the funds in the Operating Account, the Manager will
make the following disbursements promptly when payable:

                            (i) Reimbursement to the Manager for compensation
         paid by Manager to the

                                      -6-
<PAGE>

         personnel employed by Manager pursuant to Section 3.4(a), and for the
         taxes and assessments paid by Manager to local, state and federal
         governments in connection with the employment of such personnel.

                           (ii) All sums otherwise due and payable by the Owner
         and/or Cypress as expenses of the Facility authorized to be incurred
         and advanced by the Manager under the terms of this Agreement,
         including amounts payable to the Manager pursuant to Section 8 and any
         sums advanced by Manager for the account of Owner and/or Cypress.

                            (iii) Except for the disbursements mentioned herein,
         funds will be disbursed or transferred from said bank accounts only as
         Cypress may from time to time direct in writing.

                  (d) In order to achieve certain "economies of scale", Manager
shall incorporate all cash management, accounting and financial reporting at the
Facility into Manager's centralized accounting system, provided such centralized
accounting does not increase the overall cost of financial reporting at the
Facilities. Any costs associated with the internalization of this reporting
system shall be deemed an Operating Expense and shall be paid to Manager out of
the Operating Account, except to the extent that such costs are in excess of the
overall cost of financial reporting at the Facilities prior to the date of this
Agreement.

                  (e) Cypress and Manager acknowledge and agree that the
efficient operation of the Facilities require that Manager have ready access to
the funds required therefor. Accordingly, unless otherwise agreed by Cypress and
Manager, Cypress agrees not to withdraw any funds from the Deposit Account below
the amount appropriate reserves (hereinafter defined) with respect thereto as
set forth in the most recently Approved Budget. Notwithstanding anything to the
contrary contained herein, Cypress agrees that the level of "appropriate
reserves" in the Deposit Account shall at all times hereunder and for sixty (60)
days after the termination of this Agreement be a mutually agreed upon amount
based on cash flow projections developed by Manager and delivered to Cypress
within sixty (60) days after the Effective Date.

                  (f) Manager shall make or cause to be made all necessary
repairs to each Facility, to purchase all necessary supplies and materials, and
to do all other things necessary to maintain each Facility in a clean, safe and
orderly condition in conformance with the Approved Budget for such Facility,
provided that Cypress makes all necessary funds to do so available as required
by and in accordance with this Agreement.

                  (g) In accordance with the Approved Budget for such Facility,
Manager shall keep each Facility, its furniture, furnishings and fixtures and
other equipment appurtenant to the Facility in good order and repair, and fully
insured, as provided in Section 5.3 below, provided that Cypress makes all
necessary funds to do so available as required by and in accordance with this
Agreement. Manager shall advise Cypress of, and, at Cypress' request, shall
obtain for Cypress, such available rebates, discounts or other incentives
pertaining to the furnishing to each Facility of utility, maintenance, and other
services and for the acquisition of equipment and supplies as necessary for the
management, operation, maintenance and servicing of each Facility.

                  (h) Unless instructed otherwise by Cypress, and to the extent
that Cypress makes all necessary funds to do so available as required by and in
accordance with this Agreement Manager shall pay all real and personal property
taxes when due and keep Cypress informed of any change in the amount of, or the
method of calculating, real or personal property assessments or taxes relating
to each Facility, and shall recommend, from time to time, the advisability of
engaging an independent tax consultant for purposes of contesting either the
validity or the amount thereof. In addition, Manager shall complete any real and
personal

                                      -7-
<PAGE>

property tax filings if requested to do so by Cypress. Any tax filings prepared
by Manager shall be reviewed and approved by Cypress prior to submission. At
Cypress' request, Manager shall further retain independent tax counsel, which
will be paid by Cypress. In the event Cypress retains an independent tax
consultant, Manager shall diligently cooperate with such tax consultant as
requested by such tax consultant. Notwithstanding anything to the contrary
contained herein, Manager shall not be required or obligated to prepare any of
Owner's state or Federal tax returns.

                  (i) Manager's duties will include, but not be limited to: (i)
preparing and providing Cypress with copies of all monthly quality assessment
reports; (ii) perform an independent quality assessment at least twice a year
and copies of these reports will be provided to Cypress; (iii) cause surveys to
be provided to be taken regularly (but not more often than annually) to
determine the level of satisfaction of the residents, families of residents, and
physicians of residents to ensure quality standards; and (iv) working with
Cypress to adopt quality assessment standards and processes in each Facility.

                  (j) Manager shall maintain complete customary loss reports in
connection with fire and other damage to each Facility, and incidents involving
residents, and keep Cypress informed of the status of each such matter through
the resolution thereof by supplying such reports and any other correspondence.

                  (k) Manager shall provide emergency work services to each
Facility. These services will include a telephone answering service available
during all non-business hours, an on-call manager, and emergency engineering
services. In instances where the Executive Director for a Facility is not
available, Manager shall maintain an on-call backup contact that shall be
available to assist such Facility, as necessary, with emergency services.

                  (l) Manager shall perform all other acts necessary or
desirable in the operation and maintenance of each Facility in accordance with
the terms and conditions of this Agreement.

         3.4 Personnel Administration.  With respect to each Facility:

                  (a) The Executive Director and all on-site employees at the
Facility shall be employees of Manager. Manager shall advise and consult with
Cypress in the recruitment, selection, employment, training, supervision,
evaluation of the performance and discharge, if necessary, of the Executive
Director and Marketing Director, but, except as set forth in subparagraph 3.4(b)
below, all final decisions with respect to same shall be made by Manager in its
reasonable discretion. Manager shall formulate, implement, modify and administer
the wage scales, rates of compensation, bonuses, benefits and wage increases in
conformity with the Approved Budget, staffing schedules, job descriptions, and
personnel policies and procedures. In accordance with the Approved Budget,
Manager shall employ such personnel as may be necessary in order for Manager to
perform its obligations hereunder. Manager shall carry workers' compensation
covering such employees, as is customary in the industry, and use reasonable
care in the selection of such employees, including without limitation, a
criminal record check and other adequate background check of each potential new
hire. Manager shall have no responsibility for any employee matters at the
Facility arising prior to the Effective Date.

                  (b) Cypress reserves the right to accept or reject, in its
reasonable discretion, Manager's selection for the Regional Director (or
equivalent), Executive Director or Marketing Director (or equivalent) of the
Facility; provided, however, if Cypress has not rejected Manager's aforesaid
selection within three (3) days after Manager has provided written notice, such
selection shall be deemed accepted. In the event Cypress is not satisfied, in
its reasonable discretion, with the performance of an Executive Director,
Manager shall remove

                                      -8-
<PAGE>

that person assigned to the Facility upon receipt of sixty (60) days written
request for removal from Cypress. Manager understands and acknowledges the
overriding importance of the Executive Director's active supervision of the
management services required by this Agreement, and accordingly, Manager
confirms that the Executive Director will be actively and continuously involved
in Manager's duties hereunder. Manager shall maintain a policy of providing for
Executive Directors to remain employed for at least three (3) years at the same
Facility as long as employed by Manager, barring unsatisfactory performance or
unusual circumstances. Notwithstanding the foregoing or any other provision of
this Agreement to the contrary, in no event shall Manager terminate (for
non-disciplinary reasons) or relocate the Executive Director existing on the
date of this Agreement without the prior consent of Cypress, which shall not be
unreasonably withheld or delayed.

                  (c) Except as otherwise set forth herein, compensation for the
services of Manager's off-site employees shall be at the expense of Manager.

                  (d) If this Agreement is terminated with regard to the
Facility pursuant to a Sale Event or otherwise, Manager shall terminate its
employer-employee relationship with all employees of the Facility.

         3.5 Resident Services.  With respect to each Facility:

                  (a) All leases/resident agreements and amendments or revisions
thereto with respect to a Facility shall comply fully with the requirements of
the State where the Facility is located and local laws and ordinances and the
requirements of any lender holding a Mortgage on such Facility, and shall be
submitted to Cypress for its approval in advance of first use.

                  (b) Manager shall supervise, cooperate and coordinate with the
Executive Director in managing the Facility in accordance with the Annual
Marketing Plan and the Approved Budget in order to ensure that each resident of
the Facility is provided with those services and level of care as defined in the
resident agreement with each resident and those personalized services which a
resident may have agreed to pay for as set forth elsewhere in the resident
agreement.

                  (c) Manager shall provide Cypress with a schedule of aged
accounts receivables on a monthly basis. Owner and Cypress hereby authorize
Manager, as agent of Cypress in its capacity as agent of Owner, to take all
appropriate action on Owner's behalf to enforce any and all rights and remedies
of Owner under leases in the Facility, as well as at law or in equity, if
appropriate, with respect to a default by a tenant including, but not limited
to, the giving of all notices of intention to end the term of a lease or
otherwise, and the taking of all such other action as may, in the reasonable
professional judgment of Manager, be desirable or proper for the protection of
the interests of Owner (however, no tenant may be evicted from its space and no
lease or residency agreement may be terminated, other than in accordance with
the lease or residency agreement, without Cypress' prior written approval, not
to be unreasonably withheld). Manager may, at the expense and in the name of
Owner and with Cypress' prior written approval, employ counsel and collection
agencies to enforce any right or remedy against any tenant that is in default in
the performance of its obligations under any lease in the Facility. Cypress
reserves the right to supervise and designate such counsel.

                                      -9-
<PAGE>

         3.6 Procurement. With respect to each department at the Facilities
(each a "Facilities Department"):

                  (a) Manager shall purchase on behalf of the Facilities
Department and as a Facility Expense for such Facilities Department on contracts
all items which Manager deems reasonably necessary or appropriate for the
operation and maintenance of the Facilities Department, at competitive prices,
including, without limitation, utilities, concessions, equipment, expendable
supplies, furniture or furnishings, inventory items, machinery, services and
supplies; provided, however, that Manager, shall not purchase any service,
supplies or equipment provision for which has not been made in the Approved
Budget for such Facilities Department, or the purchase of which would cause a
particular line item in the Approved Budget for the Facilities Department to be
exceeded by Ten Thousand Dollars ($10,000.00) or ten percent (10%) of such line
item, whichever is greater without the prior approval of Cypress. Cypress
understands that Manager is not a vendor and makes no representations or
warranties, express or implied, with regard to the goods purchased for use at
the Facility. Manager shall fully disclose to Cypress any material interest of
Manager in any vendor, and establish to Cypress' satisfaction that the purchase
or contract was made after a competitive selection process and at a fair market
price, unless good cause dictates procurement on another basis.

                  (b) Manager shall have the power and authority to make
reasonable contracts for any or all of the Facilities, for terms not to exceed
one (1) year (except for leases), and disbursements necessary to carry out its
duties under this Section 3.6. Unless otherwise agreed to in writing by Cypress,
all contracts executed by Manager under this Section 3.6(b) shall include a
provision which allows Cypress or Owner to cancel any such contract, without
penalty to Cypress or Owner, on thirty (30) days' written notice to the
contractor. All contracts submitted to Cypress for execution shall be
accompanied by a brief description of the work or services, the budget
authority, summary of bids, and explanation for the selection of the bids.
Manager shall monitor and supervise contractors for services rendered to the
Facility to reasonably assure the required quality of the workmanship,
enforcement of warranties and compliance with the contracts for the daily
operation of the Facility.

                  (c) Manager shall not be obligated to make any advance to or
for the account of Cypress or Owner or to pay any sum except out of funds held
or provided as aforesaid

         3.7 Financial Management Services.  With respect to each Facility:

                  (a) Manager shall establish and maintain a comprehensive
system of records, books and accounts for the Facility. The cost of hardware and
software for such system shall be a Facility Expense.

                  (b) Manager shall assist Cypress and its accountants in the
preparation of an audited financial report prepared by a certified public
accountant or other person acceptable to Cypress, with respect to each Fiscal
Year during the term of this Agreement (and, with respect to the year in which
this Agreement commences and is terminated, if this Agreement commences and
terminates on a date other than the commencement of the Fiscal Year), based on
the preparer's examination of the books and records of Cypress and Manager
pertaining to the operation of the Facility. The report will be prepared in
accordance with the directives of Cypress, will be certified by the preparers
and will be submitted to Cypress within ninety (90) days after the end of the
Fiscal Year of the Facility. The cost of preparing such report shall be a
Facility Expense for the Facility.

                                      -10-
<PAGE>

                  (c) Manager shall make available to Cypress at the request of
Cypress, at a reasonable time and place, Manager's records and those of its
affiliated companies, which records relate to goods and services provided to the
Facility and licensing, inspections, findings and proceedings by other
governmental agencies regarding the Facility. Records and information shall be
sufficient to enable Cypress to determine the nature of the services performed,
the time consumed in providing the services, the charges made for materials, the
place at which such materials were consumed, and the per unit and total charges
levied for said services. Such records shall be maintained for a period of five
(5) years after termination of this Agreement. Notwithstanding the foregoing,
Cypress shall have no right to any electronic or database files generated by
Manager; provided, however, Manager shall deliver to Cypress copies of the
relevant portion of such electronic or database files upon request.

                  (d) Manager shall prepare, or secure the preparation of
appropriate financial reports and submit them at the following times:

                           (i) Twenty (20) days after the previous month's end,
         a balance sheet, operating statement, cash flow statement (prepared on
         an accrual basis) and check register;

                           (ii) Twenty (20) days after the previous month's end,
         a reconciled bank statement for any and all cash accounts as of the end
         of the month;

                           (iii) Twenty (20) days after the previous month's
         end, an itemized list of all delinquent accounts, including rental
         accounts;

                           (iv) All returns and reports required by taxing
         authorities for which Manager is responsible hereunder;

                           (v) Such forms, written reports and other documents
         as Cypress, in its reasonable judgment and with reasonable advance
         notice, or governmental authorities having jurisdiction over the
         Facility, or providing financial assistance to the Facility or to any
         resident thereof, may from time to time request or require;

                           (vi) All reports, findings and investigative
         statements provided by any licensing authority for any function or
         service provided at the Facility, each such statement to be submitted
         to Cypress within five (5) days of receipt;

                           (vii) Twenty (20) days after the previous month's
         end, an electronic file containing the foregoing information and
         materials in (i), (ii) and (iii), in a format that is fully compatible
         with the electronic accounting system employed by Cypress.

         3.8 Utilities and Service Contracts. With respect to each Facility,
Manager shall make arrangements, to the extent necessary to perform its
obligations hereunder, for the continued provisions of water, electricity, gas,
fuel and telephone services to and the removal of sewage and trash and
extermination of vermin from, the Facility. Manager shall not execute any
contracts with any of its affiliates without Cypress' prior written consent. All
contracts for goods and services (other than utilities) exceeding $5,000.00
shall be awarded on the basis of competitive bidding where commercially
practicable. Manager shall solicit no fewer than three written bids for each
such contract and all other factors being equal, elect the lowest bid. If,
however, Manager recommends acceptance of any bid other than the lowest bid,
Manager shall adequately support, in writing, its recommendations to Cypress and
obtain Cypress' prior written approval.

                                      -11-
<PAGE>

         3.9 Other Services. Manager shall be available to Cypress for services
rendered and related to activities for which the need may arise and which are
not specified in this Agreement under any other provision. Manager's
compensation for such services performed under this Section 3.9 shall be
negotiated by Manager and Cypress at the time the work is authorized or as noted
in this Agreement. For purposes of this Agreement, "marketing" and similar terms
shall refer only to the marketing by Manager of lease/rental space in the
Facilities, and shall not refer to the marketing for sale of real property,
personal property or services.

                                   ARTICLE IV
                       Budget and Other Financial Matters

         4.1 Budget. With respect to the Facilities:

                  (a) Not later than ninety (90) days before the end of each
Fiscal Year during the Term, Manager shall prepare and deliver to Cypress for
its approval, and to any federal, state, county or local agency providing a
subsidy to the Facilities, or any Mortgagee requiring it for its approval, a
capital expenditure and operating budget and a management plan for the next
Fiscal Year of the Facilities, together with such other information as may be
reasonably required by Cypress (collectively, the "Budget"). Notwithstanding the
foregoing, the Budget for the remainder of 2004 and Fiscal Year 2005 shall be
delivered no later than sixty (60) days after the Effective Date.

                  (b) The capital expenditure portion of the Budget shall
outline a program of capital expenditures for the next Fiscal Year (in which
each such expenditure shall be designated as mandatory or desirable) and a three
(3) year capital plan. The operating portion of the Budget shall set forth an
estimate of operating revenues and expenses, with an explanation of anticipated
changes to resident charges, payroll rates and positions, non-wage costs
increases, and all other factors differing from the current Fiscal Year.

                  (c) The Budget, as proposed, shall be considered by Cypress in
consultation with Manager, and with such revisions as Cypress may deem
reasonably necessary or desirable, shall be adopted by Cypress as the Approved
Budget. If there is a delay in the adoption of the Approved Budget, or if
Cypress shall fail to adopt Manager's proposed Budget and Manager by reason
thereof gives notice of termination as herein provided, Manager shall operate
under the expired Approved Budget plus two percent (2%) until a new Budget is
approved. Manager shall operate the Facilities in such manner that the actual
revenues, costs and expenses of the operation and maintenance of the Facilities
during any period of the Fiscal Year of the Facilities shall be consistent with
the Approved Budget, unless otherwise directed or consented to by Cypress.

         4.2 Charges. From time to time, as requested by Cypress, Manager will
recommend for Cypress' approval the overall rent structure for each Facility,
including, without limitation, residency room charges, charges for all ancillary
services, and charges for supplies and special services performed by such
Facility's personnel. All such charges shall take into account the financial
obligations of such Facility and the level of rents at other comparable
facilities and the importance of providing good care at a competitive rate.
Final approval of rents and charges for services rendered by each Facility shall
be vested in Cypress.

                                      -12-
<PAGE>

                                    ARTICLE V
                        Regulatory Requirements/Licensing

         5.1 Qualifications. Manager warrants and represents to Owner and
Cypress that Manager is adequately equipped to perform the duties described
herein. Manager warrants and represents to Owner and Cypress that Manager has
qualified to do business in each State where a Facility is located a and shall
at its own expense continue during the term of this Agreement and any renewals
thereof to be so qualified.

         5.2 Licenses and Permits. On behalf of each Facility and as an
Operating Expense, Manager shall obtain and maintain all licenses, permits and
approvals from governmental authorities as may be necessary for operation of the
Facility. Manager, as an Operating Expense, shall take or cause to be taken, all
actions necessary or reasonable to substantially comply promptly with (and to
correct violations of) all applicable laws, statutes, ordinances, codes, rules,
regulations and policies of federal, state, county and municipal authorities and
insurance bodies and underwriters concerning the use, operation, management and
maintenance of each Facility.

         5.3 Intentionally Omitted.

         5.4 Insurance by Manager. Each Facility that meets and continues to
meet the underwriting and approval criteria required to participate in Manager's
master insurance program (the "Master Insurance Program") will be included in
that Master Insurance Program and/or provided with at least the same benefits
and coverages as provided in the Master Insurance Program, subject to the terms
and conditions of this paragraph. Subject to the terms of this Agreement,
Manager shall use commercially reasonable efforts to ensure that each Facility
meets the underwriting and approval criteria throughout the term of this
Agreement. Provided, however, in the event than any Facility fails to meet the
underwriting and approval criteria at any point in time either due to (i) a
change in such underwriting requirements or (ii) a Facility's loss history, that
Facility will no longer be eligible to participate in the Master Insurance
Program and, at the election of Cypress, either Cypress or Manager will arrange
for separate coverage, which may increase the cost to Cypress of any such
coverage. Manager will obtain (except as otherwise set forth), at Owner's
expense, at least the following insurance either as part of the Master Insurance
Program or separately:

                  (a) Commercial General Liability Insurance, including
Healthcare Professional Liability for the Owner and Manager against all claims
and losses arising out of the operations of the Facility, including, but not
limited to claims made by third parties, including residents, against Owner and
Manager. Such Liability insurance shall include Owner as an Additional Insured
and Manager as Named Insured. Such insurance will have limits of no less than
Five Million Dollars ($5,000,000) per claim and in the aggregate. Such Insurance
will cover the operations of the Property in the state in which the Property is
located. Such policy may contain a deductible or Self Insured Retention as part
of its terms and conditions. Such deductible or Self Insured Retention shall be
the responsibility of the Owner, and as such will be considered an operating
expense of the Property; such responsibility shall survive the expiration or
ealier termination of this Agreement. Such Liability insurance may be on a
"Claims Made" form with respect to Medical Professional Liability and General
Liability, however if a "Claims Made" form is used an Extended Reporting Period
of at least twenty-four (24) months must be available. Owner agrees to reimburse
Manager for the purchase of such extended reporting period should the policy
terminate for any reason, or should the Facility be sold or this Agreement
otherwise terminate. Further, Owner agrees that it shall cause to be placed
insurance policies with limits and terms equivalent to the policies outlined
above for a period of 24 months, for claims incurred during

                                      -13-
<PAGE>

the term of this agreement, should this agreement terminate for any reason.
Manager shall be named as a Named Insured under any subsequent insurance
policies.

                  (b) Property Insurance will be provided on a "Special Form"
basis, at an agreed amount, replacement cost valuation covering the building,
business personal property and business income of the subject property. Owner
shall provide Manager with the building and personal property replacement cost,
and business income valuations for the Property. Owner assumes all liability for
loss to Owner's property not covered by such insurance or above insurance
proceeds should the Owner's replacement cost valuation be inadequate. Such
property insurance shall contain deductibles which shall be the responsibility
of the Owner and shall be reimbursable as an operating expense; such
responsibility shall survive the expiration or earlier termination of this
Agreement.

                  (c) Automobile Liability Insurance, covering owned, non-owned
and hired vehicles, with limits not less than Five Million Dollars ($5,000,000)
combined single limit per occurrence. The Automobile Liability Insurance
requirements can be satisfied with an Umbrella or Excess Liability policy.

                  (d) Workers' Compensation Insurance, as required by law.

                  (e) Employer's Liability Insurance, with limits not less than
Five Hundred Thousand Dollars ($500,000).

                  (f) Blanket Crime Insurance, with limits not less than One
Million Dollars ($1,000,000), covering on a primary basis all employees who may
handle or be responsible for monies or other property of Owner.

                  (g) With respect to (a), (c) and (e) above, excess liability
(umbrella) insurance on the above with limits of $5,000,000.

                  (h) At Cypress' option, Professional liability (professional
errors and omissions) insurance covering the activities of Manager written on a
"claims made" basis with limits of at least $2,000,000 with a maximum deductible
of $25,000. Any loss within the deductible shall be borne by Manager. Coverage
shall be maintained in effect during the period of this Agreement and for not
less than two (2) years after termination of this Agreement.

                  (i) Such other insurance as Manager or Cypress reasonably
deems advisable for protection against claims, liabilities and losses arising
out of or connected with the operation of the Facilities. Any additional
insurance coverage shall be paid out of the Operating Account.

The minimum acceptable A.M. Best's rating of each insurer is A-VII. Such
insurance shall be subject to commercially reasonable deductibles. Manager will
furnish Owner with certificates of insurance evidencing that the said insurance
is in effect at the inception of this Agreement and when coverage is renewed or
replaced, which will include provisions to the effect that Owner will be given
at least thirty (30) days' prior written notice of cancellation or non-renewal
of or any material change in any of the aforesaid policies.

In the event that Manager shall fail to comply with its obligations under this
Section 5.4, Cypress and/or Owner may (but shall not be obligated to) obtain
such coverage. All cost and expense of obtaining or performing same, up to the
amount being expended on such coverage prior to Manager's failure to comply,
shall be a Facility Expense, and any incremental cost and expense above such
amount shall be paid by Manager to

                                      -14-
<PAGE>

Cypress or Owner (or, at the election of Cypress or Owner, offset against sums
coming due hereunder to Manager from Cypress or Owner).

         5.5 Duties of Manager in Event of Fire or Other Casualty. In the event
of fire or other casualty, epidemic or other public health emergency, or force
majeure (herein collectively a "Major Event"), Manager will continue at all
times thereafter to exercise its commercially reasonable efforts to provide to
each Facility and its residents the same level of service that was provided
prior to such Major Event; and in no event shall Manager rely on the occurrence
of such Major Event or its after effects as grounds for termination or
suspension of any such services or as grounds for termination of this Agreement,
except with the approval of Cypress.

         5.6 Compliance with Governmental Orders. Manager will take such actions
as may be necessary to comply promptly with any and all governmental orders or
other requirements affecting each Facility, whether imposed by federal, State,
county or municipal authority; Cypress hereby agrees to cooperate with Manager's
fulfillment of the foregoing obligation. Nevertheless, Manager shall take no
action so long as Cypress is contesting, or has affirmed its intention to
contest, any such order or requirement. Manager will notify Cypress in writing
of all notices of such orders or requirements, within two (2) business days of
receipt thereof.

         5.7 Waiver of Subrogation. Cypress and the Owners, on the one hand, and
Manager, on the other, each hereby waive and release all claims, rights of
recovery and causes of action that such party (or any party claiming by, through
or under such party, directly or by subrogation, or otherwise) may now have or
hereafter have against the other party (or any of the other party's directors,
officers, employees or agents) for any loss or damage that may occur to the
Facilities or any of the contents of same occurring by reason of fire or other
casualty or resulting from the acts or omissions of the other party or any
tenant or occupant of the Facilities (or such parties' agents, employees,
contractors, customers or invitees) or resulting from any other cause,
including, without limitation, the negligence of the other party or the
negligence of any tenant or occupant of the Facilities (or such parties' agents,
employees, contractors, customers or invitees) or the negligence of the other
party's directors, officers, employees or agents to the extent that such loss or
damage is or would have been covered under insurance of such party as required
by this Agreement. The waiver set forth in this subparagraph shall preclude all
rights of recovery by third parties by way of subrogation, assignment or
otherwise. Cypress, the Owners and Manager each agree to cause its respective
insurer to endorse all applicable policies waiving the carrier's right of
subrogation or otherwise in accordance with the provisions hereof and provide a
certificate of insurance verifying the same

                                   ARTICLE VI
                         Obligations, Rights of Cypress

         6.1 Access to Facility. Cypress shall provide to Manager undisturbed
access to the Facilities. Manager shall allow scheduled and unscheduled visits
by Cypress for purposes of inspection, to include but not limited to: e.g.,
grounds, maintenance, housekeeping, food service, risk management and quality of
care.

         6.2 Cypress' Right of Entry; Additional Services. Cypress, by its
employees and agents, shall during the Term have the unrestricted right of entry
into the Facilities for any purpose whatsoever, to speak to residents in the
presence of personnel of Manager or outside their presence, as Cypress or the
residents wish. The right of Cypress under this Section 6.2 shall be exercised
in such manner as to minimize unreasonable disruptions to the daily routine of
the residents and the operation of the Facilities. The parties agree that, in
limitation of the above, Cypress shall not, through its employees or agents,
offer to the residents services

                                      -15-
<PAGE>

normally offered by Manager, or offered by Manager at an additional cost to
residents. However, Cypress in conjunction with Manager, shall see to it that
services helpful to residents but not routinely available to them through
personnel of Manager are offered at the Facilities. The cost, if any, of such
service for a Facility shall be charged against the Approved Budget then in
effect for such Facility as appropriate.

         6.3 Consultations. Manager shall make its consultants and/or employees
available to Cypress for consultation and advice in areas of Facility operation
at the Facilities, including, without limitation, accounting, budgeting,
business office management, human resources and personnel development,
marketing, finance, government programs, insurance, building maintenance,
management development, public relations, purchasing, quality assurance, systems
and procedures (including computer systems), third party reimbursement, and
other areas of operation as Manager may have available in the future or which
are, in the reasonable judgment of Cypress, required to enable Manager to carry
out its responsibilities under Article III above. Such consultants and/or
employees hired and retained by Manager shall be provided to Cypress at no
charge to Cypress or the Facilities. Notwithstanding the foregoing, should
Cypress reasonably request a type, form or level of service that such personnel
or consultant of Manager do not provide, Manager shall locate and make available
such service, the cost of which shall be a Facility Expense (for the particular
Facility) when approved by Cypress, in advance of contracting for the services.

         6.4 No Covenants or Restrictions. Throughout the term of this
Agreement, Cypress shall not enter into or cause the imposition of any covenants
or restrictions concerning or affecting the Facilities that would prohibit or
limit Manager from managing the Facilities in a manner consistent with
applicable laws, rules and regulations.

         6.5 Payments to Manager. Cypress shall make all payments to Manager
subject to the terms of this Agreement.

                                   ARTICLE VII
                 Legal Actions: Liability of Manager; Indemnity

         7.1 Legal Actions. Except in legal actions in which counsel has been
appointed by insurance companies providing coverage hereunder, Cypress' counsel
shall be the lead counsel in any legal action arising out of the ownership or
operation of the Facilities, where an Owner or Cypress are named as plaintiff or
defendant, or third party plaintiff or defendant, in such action. Manager shall
not institute any legal action affecting any Facility without notice to Cypress
and Cypress' consent. Manager shall not defend any legal action affecting any
Facility without notice to Cypress and Cypress' consent, except through counsel
appointed by insurance companies providing coverage hereunder, in which case
Manager shall provide written notice of same to Cypress as soon as possible.
Manager shall advise and assist Cypress in prosecuting or defending all actions
or administrative proceedings, at every level, arising out of the ownership or
operation of the Facilities.

         7.2 Legal Fees and Costs. In the event of any litigation between
Cypress, the Owners and/or Manager arising under this Agreement or concerning
the meaning or interpretation of any provision contained herein, the losing
party shall pay the prevailing party's costs and expenses of such litigation,
including, without limitation, reasonable attorneys' fees and court costs.

         7.3 Liability of Manager.

                                      -16-
<PAGE>

                  (a) Manager agrees to exercise, with respect to all services
provided by Manager under or pursuant to this Agreement, a high and qualified
standard of care, skill and diligence such as is at least comparable to that
which prevails in other similarly-situated, high-quality senior living
facilities in the same geographic region and as is necessary for the maintenance
of any license or permit required for the Facilities. Manager agrees to exercise
its commercially reasonable efforts to exercise due diligence to collect any
outstanding debts owed to the Facilities.

                  (b) Manager shall not be responsible for the acts or omissions
of any other contractor or subcontractor of Cypress, or of Cypress' employees,
or any other persons representing Cypress performing any services for or in
connection with the Facilities, or any consultants or other persons engaged by
Cypress with respect thereto, unless and only to the extent that Manager has
employed such subcontractor or employee, is supervising, or should be
supervising.

         7.4 Manager's Indemnity. Manager hereby indemnifies and agrees to pay
on behalf of, defend and hold harmless Owner, Cypress, and their principals,
officers, directors, trustees, fiduciaries, shareholders, partners, employees
and agents (individually and collectively, the "Cypress Indemnified Party") from
and against all liabilities, claims, actions, suits, damages, judgments, costs
and expenses of whatever nature, including, but not limited to reasonable
attorney's fees and disbursements, to which the Cypress Indemnified Party may
become subject by reason or arising out of Manager's negligence or willful
malfeasance or Manager's actions in breach of or outside the scope of authority
under this Agreement, provided that (i) the Cypress Indemnified Party promptly
notifies Manager of any matter with respect to which Manager is required to
indemnify, hold harmless or reimburse the Cypress Indemnified Party and (ii) the
Cypress Indemnified Party does not take any actions, including an admission of
liability which would bar Manager from enforcing any applicable coverage under
policies of insurance held by Manager or would prejudice Manager from defending
itself with respect to such matter. Notwithstanding the foregoing, Manager shall
not be required to indemnify, defend, hold harmless or reimburse the Cypress
Indemnified Party with respect to any matter to the extent the same resulted
from the negligence or willful malfeasance of the Cypress Indemnified Party. The
provisions of this Section 7.4 shall survive the expiration and any termination
of the Agreement and are subject to the waiver of subrogation provisions of
Section 5.7.

         7.5 Cypress' Indemnity. Cypress hereby indemnifies and agrees to pay on
behalf of, defend and hold harmless Manager, its principals, officers,
directors, shareholders, partners, employees and agents (individually and
collectively, the "Manager Indemnified Party") from and against all liabilities,
claims, suits, damages, judgments, costs and expenses of whatever nature,
including, but not limited to reasonable attorney's fees and disbursements, to
which Manager Indemnified Party may become subject arising out of the negligence
or willful malfeasance of Cypress or actions in breach of this Agreement,
provided that (i) the Manager Indemnified Party promptly notifies Cypress of any
matter with respect to which Cypress is required to indemnify, hold harmless or
reimburse the Manager Indemnified Party and (ii) the Manager Indemnified Party
does not take any actions, including an admission of liability which would bar
Cypress from enforcing any applicable coverage under policies of insurance held
by Cypress or would prejudice Cypress from defending itself with respect to such
matter. Notwithstanding the foregoing, Cypress shall not be required to
indemnify, defend, hold harmless or reimburse the Manager Indemnified Party with
respect to any matter to the extent the same resulted from the negligence or
willful malfeasance of the Manager Indemnified Party or actions taken by the
Manager Indemnified Party outside of the scope of Manager's authority under this
Agreement or contrary to any express direction of Cypress. The provisions of
this Section 7.5 shall survive the expiration and any termination of the
Agreement and are subject to the waiver of subrogation provisions of Section
5.7.

                                      -17-
<PAGE>

                                  ARTICLE VIII
                             Compensation to Manager

         8.1 Management Fee. From and after the Effective Date, for each
applicable calendar month during the Term, Cypress shall pay Manager a
Management Fee for the Facilities equal to four percent (4%) of the Revenues of
the Facilities collected for such calendar month.

         8.2 Incentive Fee. Subject to the conditions and provisions of this
Agreement, Cypress shall pay to Manager, upon the occurrence of a Sales Event of
a Facility, an Incentive Fee in cash equal to (a) one percent (1%) of the Sales
Proceeds, if any, in excess of the 1% Floor for such Facility up to the 1% Cap
for such Facility, and (b) two percent (2%) of the Sales Proceeds, if any, in
excess of the 1% Cap for such Facility, as defined and set forth on Exhibit B
attached hereto. The payment to Manager of the Incentive Fee is a contingent and
unsecured obligation. Manager does not reserve, and no provision herein shall be
deemed to grant to Manager, any express or implied lien or charge against the
Facility or any proceeds or revenues therefrom to secure any payment, and to the
greatest extent permitted by law, Manager expressly releases and relinquishes
any such liens or charges; provided, however, Manager reserves all lien rights
available at law or in equity in any of the jurisdictions of the Facilities
hereunder. Cypress and Manager acknowledge and agree that: (a) the Incentive Fee
is, as of the date hereof, contingent and speculative; (b) neither Cypress nor
Manager warrants or guarantees that the conditions necessary for the realization
of the Incentive Fee will occur; and (c) Cypress does not have any implied
obligation under this Agreement to maximize the Incentive Fee.

         8.3 Reimbursable Expenses. With respect to each Facility:

                  (a) Executive Director's and Employee Expenses. Cypress shall
pay to Manager, monthly (in advance) during the term of this Agreement, an
amount equal to the salary and direct costs of employee benefits and payroll
(including, without limitation, social security, unemployment insurance and
workman's compensation insurance) of the Executive Director and other employees;
provided, however, that all salary and other direct costs shall be approved in
advance by Cypress. In addition to the payments required hereinabove, Cypress
shall pay the reasonable expenses of the Executive Director, Marketing Director
(or equivalent), and Food and Beverage Director (or equivalent) in attending any
meetings specifically approved in writing by Cypress. Cypress shall also pay the
reasonable costs and expenses incurred by the Executive Director in maintaining
appropriate licenses and will provide publications and periodicals as may be
required to keep the Executive Director current with state and national
developments in his or her profession. All such costs and expenses as set forth
in this paragraph are subject to Cypress' prior written approval, or inclusion
in the Approved Budget. In addition to the payments set forth hereinabove, it is
specifically agreed that Cypress shall pay all moving expenses (if any) incurred
by an Executive Director incidental to his or her move to the Facility. Such
expenses shall not exceed $5,000 without the prior written approval of Cypress.

                  (b) Expenses of Manager Other Than Executive Director and
Employee Expenses. In addition to the fees provided for herein, Cypress shall
reimburse Manager all reasonable out-of-pocket travel expenses incurred in
connection with the rendering of all services as set forth in this Agreement,
but only to the extent such travel is specifically approved in writing by
Cypress. Manager shall furnish to Cypress for Cypress' approval an annual budget
of such travel expenses.

                  (c) Expenses of Accounting Systems. In addition to the above,
Cypress shall be responsible for and pay all costs associated with the
Facility's accounting system to be located at the Facility. Manager shall
furnish to Cypress for Cypress' approval an annual budget of such accounting
system.

                                      -18-
<PAGE>

          8.4 Timing of Payments to Manager. Each month during the term of this
Agreement, Cypress shall pay to Manager, or Manager shall be paid pursuant to
the terms of Section 3.3(c)(ii), a monthly installment of the fees due under
this Article VIII. Monthly installments of such fees shall be paid to Manager in
arrears on or prior to the fifteenth (15th) day after the receipt of the
financial statements in Section 3.7(d)(i). With respect to each month during the
term of this Agreement, Cypress shall pay to Manager all out-of-pocket and other
reimbursable expenses incurred as a result of its performance hereunder and as
further identified in Section 8.3 hereof.

                                   ARTICLE IX
                          Subordination and Attornment

         9.1 No Property Interest in the Facility. This Agreement, and the
performance thereof by Manager, confers on Manager no right, title or interest
in or to the Facilities, and that it has no rights against the Facilities or
against Cypress other than those conferred by this Agreement.

         9.2 Manager's Rights Subordinate to Mortgagees'. This Agreement and any
renewals, extensions or modifications thereof, and all rights and interests of
Manager therein shall at all times be subject and subordinate to any and all
financing instruments of and to the rights and claims of any Mortgagee
thereunder. This provision shall be unconditional and self-operative, but, at
the request of Cypress, Owner or a Mortgagee, Manager shall execute any
instrument submitted to it in confirmation of the foregoing provisions.

         9.3 Continuation Upon Foreclosure. In the event of foreclosure of a
mortgage on a Facility, or in the event a Mortgagee comes into possession of or
acquires title to a Facility by any other means arising out of the default of
Owner under any financing instrument, the Mortgagee may, at its option:

                  (a) continue this Agreement as successor to Cypress and
continue to perform all of the obligations of Cypress hereunder, including but
not limited to continuing to pay the fees payable to Manager hereunder for the
satisfactory performance of services to Cypress, for the balance of the term of
this Agreement or for such other period as the Mortgagee may in its sole
discretion determine; or

                  (b) terminate this Agreement without obligation to Manager for
any fees payable to Manager subsequent to the effective date of such
termination.

         9.4 Manager to Attorn to Mortgagee. In the event that Mortgagee or any
assignee of the Mortgagee comes into possession of or acquires a Facility and
elects not to terminate this Agreement as aforesaid, Manager agrees to attorn to
Mortgagee and to be bound to Mortgagee under all of the terms, covenants and
conditions of this Agreement for the balance of its term, to the same force and
effect as if the Mortgagee were an original party to this Agreement, and said
attornment shall be effective and self-operative as an agreement between Manager
and the Mortgagee, without execution of any further instruments on the part of
any party hereto, immediately upon the succession by the Mortgagee to the
interest of Owner in such Facility. Manager agrees, however, to execute such
other instruments as the Mortgagee may submit to it in confirmation of the
foregoing provisions.

         9.5 No Termination During Foreclosure. Manager shall not terminate this
Agreement while a Mortgagee is proceeding with foreclosure of a financing
instrument or otherwise exercising its remedies against Owner by reason of a
default by Owner under such financing instrument; provided, however, that (i)

                                      -19-
<PAGE>

Mortgagee (or it successors or assigns) are performing all of its obligations
hereunder, and (ii) Manager shall be compensated for the services rendered on
behalf of Owner or the Mortgagee, or any Court appointed receiver, in accordance
with this Agreement.

                                    ARTICLE X
                                   Termination

         10.1 Termination for Cause.

                  (a) By Manager. Manager may terminate this Agreement in the
event that (i) Cypress has defaulted in the performance of its obligations
hereunder subject to the provisions of Section 10.3 below; (ii) a receiver,
liquidator or trustee of Cypress or Owner shall be appointed by court order, or
a petition to liquidate or reorganize manager shall be filed against Cypress or
Owner under any bankruptcy, reorganization, or insolvency law, and such order or
petition is not vacated or dismissed within sixty (60) days, or Cypress or Owner
shall file a petition in bankruptcy or request reorganization or insolvency
laws, or if Cypress or Owner shall make an assignment for the benefit of its
creditors, or if Cypress or Owner is adjudicated as bankrupt; (iii) there is
damage or destruction to all or a substantial portion of the Facility and Owner
decides not to rebuild or restore such Facility or there is a taking by
condemnation, or similar proceeding, of a substantial portion of the Facility;
or (iv) (vi) a Mortgagee, in the exercise of its rights under a Mortgage or
other agreement with Owner, modifies the Agreement in a manner unacceptable to
Manager .

                  (b) By Cypress. Cypress may terminate this Agreement, as to a
specific Facility, group of Facilities or all of the Facilities, subject to the
provisions of Section 10.3 below, in the event that: (i) Manager has defaulted
in the performance of its obligations hereunder; (ii) a receiver, liquidator or
trustee of Manager shall be appointed by court order, or a petition to liquidate
or reorganize manager shall be filed against Manager under any bankruptcy,
reorganization, or insolvency law, and such order or petition is not vacated or
dismissed within sixty (60) days, or Manager shall file a petition in bankruptcy
or request reorganization or insolvency laws, or if Manager shall make an
assignment for the benefit of its creditors, or if Manager is adjudicated as
bankrupt; (iii) there is damage or destruction to all or a substantial portion
of a Facility and Owner decides not to rebuild or restore such Facility or there
is a taking by condemnation, or similar proceeding, of a substantial portion of
a Facility; (iv) there shall occur a Sales Event; (v) from and after January 1,
2005, the actual Annualized NOI is less than ninety percent (90%) of the
budgeted Annualized NOI as set forth in the Approved Budget for such Facility;
or (vi) a Mortgagee, in the exercise of its rights under a Mortgage or other
agreement with Owner, instructs Owner or Cypress to terminate this Agreement, or
to modify the Agreement in a manner unacceptable to Manager.

Notwithstanding anything in this Agreement to the contrary, in the event that
Cypress shall give a notice of termination pursuant to Section 10.1(b)(iv) and
the contemplated Sales Event does not actually occur by the date of termination
established in such notice, then Cypress shall have the right to rescind such
termination by written notice of such rescission to Manager on or before said
date of termination, with all actual, reasonable and documented costs incurred
by Manager as a result of such contemplated Sales Event to be reimbursed by
Cypress within thirty (30) days after Manager's submission of an invoice
therefor. In the event that the Sales Event does occur, Cypress shall pay to
Manager a Termination Fee calculated as provided in Section 10.2(b) below.

                                      -20-
<PAGE>

Further, in the event that the original, thirty-six (36) month term of this
Agreement shall expire without a Sale Event having occurred as to a Facility,
then Cypress shall pay to Manager a Termination Fee for such Facility calculated
as provided in Section 10.2(b) below.

Further, Cypress shall inform Manager in writing of (i) the marketing any or all
Facilities at the outset of such process, or (ii) any bid or offer Cypress
receives for the purchase of any or all of the Facilities, and Manager shall
have the right to submit a bid for such Facilities within the framework and on
the terms of such marketing process (with respect to (i)) or within thirty (30)
days after receipt of Cypress' notice of such bid or offer (with respect to
(ii)). Notwithstanding anything to the contrary contained herein, Cypress has no
obligation to accept any such bid by Manager.

Finally, in the event that a Sales Event shall occur for a Facility prior to the
expiration of the first twelve (12)-month period following the Effective Date,
and Manager is not retained by the purchaser of same, then Cypress shall pay to
Manager at the closing of the Sale Event a sum such that, when added to the
Management Fees already paid to Manager and allocable to such Facility, Manager
shall have received an amount equal to twelve (12) months' worth of Management
Fees allocable to such Facility. In such event, the monthly Management Fee
allocable to such Facility for the remaining months out of such twelve (12)
month period shall be the average monthly Management Fee allocable to such
Facility in the preceding three (3) months of the term.

                  (c) Notice and Opportunity to Cure. Except as otherwise
provided herein, any termination for cause shall be effective upon receipt of
written notice of termination given by the terminating party to the defaulting
party or thereafter upon such other date as specified by the termination party
in such written notice; provided, however, that for those causes for termination
set forth in Section 10.1(a) and Section 10.1(b)(i) the terminating party shall
notify in writing the defaulting party that the defaulting party shall have
thirty (30) days (the "Cure Period") after receiving such written notice within
which to commence to cure to the satisfaction of the terminating party any such
cause, provided however, that any such cure shall be diligently and promptly
pursued to completion, except for financial and reporting requirements which
should be delivered in accordance with the requirements set forth in this
Agreement. Notwithstanding the above, if Manager is terminated as a result of
fraud, bad faith, or illegal activity, no cure period shall be permitted.

         10.2 Termination Without Cause by Cypress.  With respect to each
Facility:

                  (a) By Cypress. Following the expiration of the twenty-fourth
(24th) month of the initial term of this Agreement, Cypress may terminate this
Agreement without cause by written notice to Manager subject to the provisions
of Section 10.3 below. Such termination shall be effective sixty (60) days after
receipt of written notice of such termination given by Cypress to Manager or
thereafter upon such other later date as specified by Cypress in such written
notice.

                  (b) Unsold Facility. In the event that Cypress terminates this
Agreement pursuant to Section 10.2(a), if there has not been a Sales Event for
such Facility as of the date of termination, Cypress shall pay a termination fee
(the "Termination Fee") to Manager equal to ten percent (10%) of the amount by
which the actual Annualized NOI for the Facility subject to such termination
exceeds the budgeted Annualized NOI for such Facility as set forth on Exhibit C,
adjusted for actual operations for 2004 prior to the Effective Date and as
adjusted for future years during the term of this Agreement.

         10.3 Termination Procedure. Upon termination of this Agreement with
respect to a Facility or Facilities, Cypress, in addition to any other rights
provided in this Agreement, may require Manager to deliver

                                      -21-
<PAGE>

to Cypress any property specifically produced or acquired for the performance of
this Agreement. Cypress shall pay to Manager the agreed upon price, if
separately stated, for completed work and services accepted by Cypress, and the
amount agreed upon by Manager and Cypress for (i) completed work and services
for which no separate price is stated, (ii) partially complete work and
services, (iii) other property or services which are accepted by Cypress, and
(iv) the protection and preservation of property, unless the termination is for
cause, in which case Cypress shall determine the extent of the liability of
Manager. Cypress may withhold from any amounts due Manager such sum as Cypress
determines to be reasonably necessary to protect Cypress against potential loss
or liability; provided, however, in the event Manager determines that the amount
withheld by Cypress exceeds an amount reasonable necessary to protect Cypress
against such potential loss or liability, then upon written notice from Manager
to Cypress, the parties agree that any dispute as to the calculation of such
amount to be withheld by Cypress shall be submitted to binding arbitration in
Houston, Texas under the auspices of, and pursuant to the Commercial Arbitration
rules of, the American Arbitration Association as then in effect, or such other
procedures as the parties may agree to at the time, subject to the requirement
that a single arbitrator unaffiliated with either party shall be selected by
Cypress and Manager. The amount determined by such arbitrator as a result of
such arbitration shall be final and binding between the parties, and shall be
enforceable by any court having jurisdiction over the party against whom
enforcement is sought. All costs and expenses of the arbitration, including
actual attorney's fees, shall be allocated among the parties according to the
arbitrator's discretion. Arbitration shall be limited to the calculation of the
amount of funds that may be withheld by Cypress pursuant to this Section 10.3.
No other issue arising under this Agreement shall be subject to arbitration. The
rights and remedies of Cypress provided in this Section 10.3 shall not be
exclusive and are in addition to any other rights and remedies provided by law
or under this Agreement. After receipt of a notice of termination, and except as
otherwise directed by Cypress, Manager shall, with respect to each Facility
subject to such termination:

                  (a) stop work under this Agreement on the date, and to the
extent specified in the notice;

                  (b) place no further orders or subcontracts for materials,
services, or facilities except as may be necessary for completion of such
portion of the work under this Agreement as is not terminated;

                  (c) deliver to Cypress, within thirty (30) days after
termination, a final accounting, reflecting the balance of income and expense of
the Facility as of the date of termination;

                  (d) deliver to Cypress all books and records of account,
contracts, leases, receipts for deposits, unpaid bills and other papers or
documents which pertain to the Facility;

                  (e) assign, transfer or convey to Cypress or its designee all
service contracts and personal property relating to or used in the operation,
management and maintenance of the Facility, any personal property which is owned
by tenants or other occupants at the Facility or which was paid for and is owned
by Manager, if any; and

                  (f) for a reasonable period of time after the effective date
of termination of this Agreement, make itself available to consult with and
advise Cypress or such other person or persons designated by Cypress, regarding
the operation, leasing, management and maintenance of the Facility.

         10.4 Manager's Obligations after Termination. Within thirty (30) days
after the expiration or earlier termination of this Agreement, or the
termination of Manager's services hereunder as provided above, with respect to
each Facility subject to such termination:

                                      -22-
<PAGE>

                  (a) Books and Records. Manager shall deliver to Cypress, or
such other person or persons designated by Cypress, copies of all books and
records of the Facility not previously transmitted to Cypress, all plans,
specifications, permits, leases and any other property associated with the
Facility and not owned by Manager but which is in Manager's possession.

                  (b) Service Contracts. Manager shall assign, transfer, or
convey to Cypress or such other person or persons designated by Cypress, all
service contracts and personal property relating to or used in the operation and
maintenance of the Facility to the extent same are assignable or transferable.
Any such contract entered into by Manager after the Effective Date that is not
assignable or transferable as provided above must provide that same is
terminable by Manager without penalty upon thirty (30) day's notice. Manager
shall, at its sole cost and expense, remove all signs that it may have placed at
the Facility indicating that it is Manager of same and replace and restore any
damage resulting therefrom. Upon any voluntary termination or the expiration
pursuant to this Article X, the obligations of the parties hereto (except those
specified as surviving) shall cease as of the date specified in the notice of
termination, except that Manager shall comply with the applicable provisions
hereof and shall be entitled to receive any and all compensation that may be due
Manager hereunder at the time of such termination or expiration.

                  (c) Continuing Covenant. Manager shall refer questions or
requests from tenants of the Facility subject to such termination regarding such
Facility to Manager's replacement.

                  (d) Confidentiality. Upon termination of the Agreement, each
party shall remain under a duty to protect the confidence of the other, and it
shall not voluntarily provide any information relating to the protected party to
any other entity or individual without first obtaining such party's written
authorization. If production of documents or information is compelled by legal
process, the party from whom production is sought will use reasonable efforts to
notify the other party prior to responding, so that such party may seek to
oppose production, if necessary, by appropriate legal means.

                                   ARTICLE XI
                      Statutory and Regulatory Requirements

         11.1 Statutory and Regulatory Requirements. Manager shall cause all
things to be done in and about the Facilities necessary to comply with the
requirements of any applicable constitution, statute, ordinance, law, rule,
regulation or order of any governmental or quasi-governmental regulatory body or
agency, or board of fire underwriters respecting the use of the Facilities or
the construction, maintenance and operation thereof. Manager shall obtain and
maintain in effect all county, state and federal permits and licenses needed for
its management services and the Facilities. Manager and Cypress shall keep their
respective corporate organizations in good standing and Manager shall maintain
all permits and licenses required by said jurisdictions.

                                   ARTICLE XII
                         Non-Discrimination Requirements

         12.1 Equal Employment Opportunity. Without limitations of any other
provisions of this Agreement, Cypress and Manager expressly agree to abide by
any and all applicable federal and/or state equal employment opportunity
statues, rules and regulations, including without limitation, Title VII of the
Civil Rights Act of 1964, the Equal Pay Act of 1963, the National Labor
Relations Act, the Fair Labor Standards Act, the

                                      -23-
<PAGE>

Rehabilitation Act of 1973, the Occupational Health and Safety Act of 1970, and
the Americans With Disabilities Act, all as may be from time to time modified or
amended.

         12.2 Equal Housing Opportunity. Without limitation of any other
provisions of this Agreement, Cypress and Manager expressly agree to abide by
any and all applicable federal, state and county equal housing opportunity
statutes, rules and regulations, as from time to time modified or amended
prohibiting discrimination in housing on the grounds of race, color, sect, creed
or national origin, or source of income, including Title VI of the Civil Rights
Act of 1964 (Public Law 88-352, 78 Stat. 241), all requirements imposed by or
pursuant to the Regulations of the Secretary of HUD (24 CFR, Subtitle A, Part 1)
issued pursuant to that Title, and regulations issued pursuant to Executive
Order 11063 and Title VIII of the 1968 Civil Rights Act.

         12.3 Procedure for Declining Certain Resident Applicants. In the event
that Manager shall determine that a resident applicant should not be accepted as
a resident in a Facility based upon the assessment of Manager, then Manager
shall provide to Cypress written notice of such assessment, such notice to
contain detail and observations consistent with standards and practices
consistent with similarly-situated, high quality senior living facilities.

                                  ARTICLE XIII
                                 Confidentiality

         13.1 Confidentiality of Information. Manager agrees to keep
confidential and not to use or to disclose to others, except as expressly
consented to in writing by Cypress or otherwise required by law, any secrets or
confidential technology, proprietary information, and information of any kind
whatsoever concerning its residents, either individually or as a class, acquired
by Manager through its association with Cypress hereunder. Cypress and Owner
agree to keep confidential and not to use or to disclose to others, except as
expressly consented to in writing by Manager or otherwise required by law, any
secrets or confidential technology, proprietary information, and information of
any kind whatsoever by Cypress or Owner through their association with Manager
hereunder.

         13.2 Proprietary Interest. The systems, methods, procedures and
controls employed by Manager and any written materials or brochures developed by
Manager to document the same are to remain the property of Manager. Upon
termination of the Agreement, all such proprietary materials at the Facilities
or in possession of Cypress or Owner shall be returned to Manager.

                                   ARTICLE XIV
                                  Miscellaneous

         14.1 Right to Perform. In the event that either party fails to perform
any duty or fulfill any obligation hereunder to the material detriment of the
other, the other party, in addition to any rights or remedies available to it
under law, shall have the right, but not the obligation, to perform any such
duty or fulfillment of any such obligation, but in no way obligating the party
beyond any termination period allowable hereunder.

         14.2 Binding Effect. This Agreement binds and benefits the parties and
their respective successors and assigns; provided, however, that neither this
Agreement nor any right to claims Manager may have hereunder may be assigned or
transferred by Manager except to a related entity without the prior written

                                      -24-
<PAGE>

consent of Cypress. This Agreement and any rights thereunder may be assigned by
Cypress and the Owners, without the prior written consent of Manager, in whole
or in part; provided, however, such assignee must assume all obligations of
Cypress accruing under this Agreement from and after the date of such
assignment. Further, Cypress and the Owners shall have the unfettered right to
sell a Facility, group of Facilities or all of the Facilities and to assign this
Agreement, in whole or in part, to the purchaser(s) of same, without the prior
written consent of (but with notice to) Manager.

         14.3 Changes in Ownership or Management of Manager. Prior to public
notification, Manager shall advise Cypress of any change of twenty-five percent
(25%) or more in the ownership of Manager including the identity of any new
owners and changes in direct supervisory management or operation of Manager.

         14.4 No Waiver. The failure of either party to this Agreement to insist
upon strict performance of any term or condition of this Agreement, or to
exercise any option, right or remedy, herein contained, shall not be construed
as a waiver or a relinquishment for the future of such term, provision, option,
right or remedy, but the same shall continue to remain in full force and effect.
No waiver by either party of any term or condition hereof shall be deemed to
have been made unless expressed in writing signed by such party. No express
waiver of any term, condition, covenant or provision hereof by either party
shall constitute a waiver of any other term, condition, covenant or provision
hereof or a waiver of any future performance under the same term, condition,
covenant or provision.

         14.5 No Third Pay Beneficiaries. Except for Owner and any Mortgagee, no
person, firm, corporation or entity not a party to this Agreement shall be
entitled to rely upon or demand enforcement of any term, covenant, condition,
agreement or understanding set forth and contained herein.

         14.6 Notices. All notices, demands, consents, approvals and requests
given by either party to the other hereunder shall be in writing and shall be
sent by either (a) certified mail, return receipt requested, in which case
notice shall be deemed delivered three (3) business days after deposit, postage
prepaid in the U.S. Mail, (b) overnight delivery using a nationally recognized
overnight courier, in which case notice shall be deemed delivered one business
day after deposit with such courier, (c) facsimile transmission, in which case
notice shall be deemed delivered upon transmission of such notice, or (d)
personal delivery, in which case notice shall be deemed delivered upon delivery
of such notice. Which notices, demands, consents, approvals and requests shall
be addressed as follows:

              Cypress:            Cypress Senior Management Services Limited
                                  Partnership
                                  c/o Cypress Real Estate Advisors, Inc.
                                  1501 South Mopac Expressway, Suite 230
                                  Austin, Texas 78746
                                  Attn: Steve Clark
                                  Fax: 713/494-8519

              with a copy to:     Cypress Senior Management Services Limited
                                  Partnership
                                  c/o Bridgewood Property Company
                                  1800 St. James Place, Suite #207
                                  Houston, Texas 77056
                                  Attn: James D. Gray
                                  Fax: (713) 623-6772

                                      -25-
<PAGE>

              and with a copy to: Locke, Liddell & Sapp L.L.P.
                                  3400 JPMorgan Chase Tower
                                  600 Travis Street
                                  Houston, Texas  77002-3095
                                  Attn: Brett Hamilton
                                  Fax: (713) 223-3717

              Manager:            Brookdale Cypress Management, LLC
                                  c/o Brookdale Living Communities, Inc.
                                  330 North Wabash Avenue, Suite 1400
                                  Chicago, Illinois  60611
                                  Attn: Stephan Beck
                                  Fax: (866) 344-1564

              with a copy to:     Brookdale Living Communities, Inc.
                                  330 North Wabash Avenue, Suite 1400
                                  Chicago, Illinois 60611
                                  Attn: Deborah C. Paskin, Esq.
                                  Fax: (866) 309-2654

The above addresses may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice.

         14.7 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance is held to be invalid or
unenforceable for any such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and be enforced to the fullest extent permitted by law.

         14.8 Choice of Law: Venue. The parties agree that this Agreement shall
be governed by and construed in accordance with the laws, including application
decisional law and conflicts law, of the State of Texas. The courts and
administrative agencies of the State of Texas shall be the exclusive venue for
any litigation or proceeding between the parties that may be brought, or arise
out of or in connection with, this Agreement.

         14.9 Entire Agreement and Amendment. With respect to the subject matter
hereof, this Agreement supersedes all previous contracts and constitutes the
entire agreement between the parties, and no party shall be entitled to benefits
other than those specified therein. As between the parties, no oral statements
or prior written material not specifically incorporated herein shall be of any
force and effect. The parties specifically acknowledge that in entering into and
executing this Agreement, the parties rely solely upon the representations and
agreements contained in this Agreement and no others. All prior representations
or agreements not expressly incorporated herein, whether written or verbal, are
superseded, and no changes in or additions to this Agreement shall be recognized
unless and until made in writing and signed by both parties hereto. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and which together shall constitute one and the same
instrument.

                                      -26-
<PAGE>

         14.10 Division and Headings. The divisions of this Agreement into
Articles, Sections and Subsections and the use of captions and headings in
connection therewith are solely for convenience and shall have no legal effect
whatsoever in construing the provisions of this Agreement.

         14.11 Covenant Not to Compete. Excluding the property known as Grand
Court in Overland Park, Kansas, during the term of this Agreement neither
Manager nor Manager's subsidiaries or affiliates (but not including its owners
or investors or their respective non-Brookdale affiliates) (collectively,
"Brookdale"), shall: (a) develop an independent living facility of similar
quality within a ten (10) mile radius of any Facility; or (b) manage or acquire
an independent living facility (or convert an existing property into an
independent living facility) of similar quality within a three (3) mile radius
of (the "Three Mile Radius") of any Facility.

         Provided, however, that the restriction set forth in (b) above shall
not pertain to the following agreements to manage or acquisitions: (y) an
agreement to manage or an acquisition of three (3) or more properties by Manager
or Brookdale (or three (3) or more properties acquired in a succession of
transactions taking place within a six (6) month span of time) where one or more
of the subject properties are in a particular Three Mile Radius; or (z) a single
independent living facility acquired by Manager or Brookdale if Cypress has
consented to the agreement to manage or acquisition in writing prior to the
consummation thereof.

         With respect to item (y) above, Manager shall provide written notice
(the "Non-Compete Notice") to Cypress no less than thirty (30) days prior to the
consummation of any such agreement to manage or any such acquisition Cypress
shall have the option to terminate this Agreement with respect to the Facility
or Facilities within the Three Mile Radius without penalty by providing Manager
with a written notice of such termination (the "Termination Election") on or
before ninety (90) days following the date of such Non-Compete Notice (the
"Non-Compete Notice Period"). If, and only if, Manager has previously provided
Cypress during the term of this Agreement with a Non-Compete Notice with respect
to one or more Facilities and Manager provides a subsequent Non-Compete Notice
to Cypress covering any Facility, then during the ensuing Non-Compete Notice
Period, Cypress shall have the option to terminate the Agreement without penalty
with respect to all remaining Facilities. If Cypress does not exercise either of
the foregoing termination options during the applicable Non-Compete Notice
Period, Cypress will be deemed to have waived such termination option, but only
on a one-time basis and only with respect to the specific matters set forth in
the applicable Non-Compete Notice.

         The parties agree that the damage suffered by Cypress as a result of a
violation of this provision would be irreparable and Cypress shall be entitled
to injunctive relief, damages and reasonable attorney's fees if required to see
enforcement hereof if Cypress prevails.

         14.12 Non-Solicitation of Employees. For a period of one (1) year
following the expiration of the term or other termination of this Agreement as
to any Facility such that the employees of such Facility are no longer employed
by Manager, Manager agrees that Manager will not, directly or indirectly,
through an existing or to be existing corporation, unincorporated business or
affiliated party or otherwise, solicit for employment any such employee.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

                                      -27-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
entered.

                                          CYPRESS:

                                          CYPRESS SENIOR MANAGEMENT SERVICES
                                          LIMITED PARTNERSHIP,
                                          a Delaware limited partnership

                                          By: Cypress Senior Management
                                              Services G.P.,
                                              Inc., a Delaware corporation,
                                              its general partner

                                              By: /s/ Stephen T. Clark
                                                 ---------------------------
                                                 Stephen T. Clark, President

                                          MANAGER:

                                          BROOKDALE MANAGEMENT CYPRESS, LLC,
                                          a Delaware limited liability company

                                          By:/s/ R. Stanley Young
                                             -----------------------------------
                                          Name R. Stanley Young
                                               ---------------------------------
                                          Title Vice President
                                                --------------------------------

                                      -28-
<PAGE>

         The undersigned, being the general partner of each of the Owners, by
its duly authorized officer, as of the day and year first above entered, hereby
executes this Agreement for the sole purpose of acknowledging and agreeing to
the obligation of such owners contained in Section 3.2.

                                          Cypress Living Senior Partner, Inc.

                                          By: /s/ Stephen T. Clark
                                              -----------------------------
                                               Stephen T. Clark, President

                                      -29-
<PAGE>

                                    EXHIBIT A

                              OWNERS AND FACILITIES

<TABLE>
<CAPTION>
Owner:                                      Facility:
-----                                       --------
<S>                                         <C>
Town Village Dallas, L.P.                   Town Village Dallas a/k/a Town Village North
Town Village Arlington, L.P.                Town Village Arlington
Town Village Ft. Worth L.P.                 Town Village Fort Forth a/k/a Town Village Ridgmar
Town Village Leawood, L.L.C.                Town Village Leawood
Town Village Tulsa, L.L.C.                  Town Village Tulsa
Town Village Vestavia Hills, L.L.C.         Town Village Vestavia Hills a/k/a Town Village Birmingham
Town Village Memphis, L.L.C.                Town Village Memphis a/k/a Town Village Audubon Park
Town Village Sterling Heights, L.L.C.       Town Village Sterling Heights a/k/a Town Village Detroit
</TABLE>

<PAGE>

                                    EXHIBIT B

                  FACILITY VALUES FOR INCENTIVE FEE CALCULATION

<TABLE>
<CAPTION>
Facility:                           1% Floor:               1% Cap:
--------                            ----------------        ----------------
<S>                                 <C>                     <C>
Town Village Dallas                 $  42,300.000.00        $  47,000,000.00
Town Village Arlington              $  25,000,000.00        $  27,750,000.00
Town Village Ft. Worth              $  25,000,000.00        $  27,750,000.00
Town Village Leawood                $  27,000,000.00        $  30,300,000.00
Town Village Tulsa                  $  24,000,000.00        $  26,750,000.00
Town Village Vestavia Hills         $  28,000,000.00        $  31,000,000.00
Town Village Memphis                $  24,000,000.00        $  26,750,000.00
Town Village Sterling Heights       $  29,700,000.00        $  32,700,000.00
============================================================================

TOTALS:                             $ 225,000,000.00        $ 250,000,000.00
</TABLE>

<PAGE>

                                    EXHIBIT C

                             BUDGETED ANNUALIZED NOI

                                   [Attached]