Exhibit 10.3



                              MANAGEMENT AGREEMENT

                            dated as of June 30, 2003

                                     between

                             BRE/COTTONWOOD L.L.C.,

                                  as the Owner

                                       and

                           CAPITAL SENIOR LIVING, INC.

                                 as the Manager


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                                TABLE OF CONTENTS

                                                                                               Page
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ARTICLE I GENERAL PROVISIONS.....................................................................1
         Section 1.01.      Employment as Exclusive Leasing Agent and the Manager................1
         Section 1.02.      The Manager's Duties Generally.......................................1
         Section 1.03.      Term of Agreement....................................................3
         Section 1.04.      Compensation.........................................................3
         Section 1.05.      Termination..........................................................3
         Section 1.06.      Insurance............................................................6
         Section 1.07.      Plans and Specifications............................................11
         Section 1.08.      Ethical Standards...................................................11
         Section 1.09.      Cooperation and Consultation with Third Parties.....................11
         Section 1.10.      Indemnities.........................................................11
         Section 1.11.      Real Estate Tax Assessments.........................................12
         Section 1.12.      Policies and Procedures Manual......................................12

ARTICLE II LEASING..............................................................................12
         Section 2.01.      The Manager's Duties Generally As Leasing Agent.....................12
         Section 2.02.      Negotiation and Execution of Leases.................................12
         Section 2.03.      Liaison with Tenants................................................13
         Section 2.04.      Marketing of Rental Space...........................................13
         Section 2.05.      Advertising.........................................................13

ARTICLE III ADMINISTRATIVE SUPPORT..............................................................13
         Section 3.01.      Personnel...........................................................13
         Section 3.02.      Contracts...........................................................14
         Section 3.03.      Status Reports......................................................15
         Section 3.04.      Records.............................................................15
         Section 3.05.      Obligations Under Tenant Leases.....................................16
         Section 3.06.      Tenant Compliance...................................................16
         Section 3.07.      Licensing...........................................................16

ARTICLE IV MAINTENANCE AND OPERATIONS...........................................................16
         Section 4.01.      Engineering Management Services.....................................16
         Section 4.02.      Preventative Maintenance............................................17
         Section 4.03.      Capital Improvements................................................17
         Section 4.04.      Personnel Training..................................................17
         Section 4.05.      Development.........................................................17
         Section 4.06.      Maintenance.........................................................17
         Section 4.07.      Supervision of Contracts............................................18
         Section 4.08.      Service Requests....................................................18
         Section 4.09.      Emergencies.........................................................18
         Section 4.10.      Regulatory Requirements.............................................19
         Section 4.11.      Security............................................................19

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ARTICLE V FINANCIAL MANAGEMENT..................................................................19
         Section 5.01.      Bank Account........................................................19
         Section 5.02.      Collections and Deposits............................................19
         Section 5.03.      Disbursements.......................................................20
         Section 5.04.      Examinations and Audits of Accounts.................................21
         Section 5.05.      Books and Records...................................................21
         Section 5.06.      Budget..............................................................21
         Section 5.07.      Obligations for Expenses............................................22

ARTICLE VI MISCELLANEOUS........................................................................22
         Section 6.01.      No Partnership or Joint Venture.....................................22
         Section 6.02.      Notices.............................................................22
         Section 6.03.      Applicable Law......................................................23
         Section 6.04.      Successors and Assigns..............................................23
         Section 6.05.      Confidentiality.....................................................24
         Section 6.06.      Entire Agreement....................................................25
         Section 6.07.      Captions, Gender, Number............................................25
         Section 6.08.      Severability........................................................26
         Section 6.09.      Days................................................................26
         Section 6.10.      Subordination.......................................................26
         Section 6.11.      Counterparts........................................................26
         Section 6.12.      Waiver of Jury Trial................................................26
         Section 6.13.      CONSENT TO JURISDICTION.............................................26
         Section 6.14.      Arbitration.........................................................27

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                                       ii
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EXHIBIT A TO MANAGEMENT AGREEMENT           Description of Property
EXHIBIT B TO MANAGEMENT AGREEMENT           Fees and Compensation of the
                                              Manager

EXHIBIT C TO MANAGEMENT AGREEMENT           Budget
EXHIBIT D TO MANAGEMENT AGREEMENT           D-1 Form of Monthly Status Report
                                            D-2 Form of Annual Fiscal Year
                                                Status Report
                                            D-3 Form of Annual Calendar Year
                                                Status Report

EXHIBIT E TO MANAGEMENT AGREEMENT           Form of Rent Roll
EXHIBIT F TO MANAGEMENT AGREEMENT           List of Non-Property Staff












                                      iii
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                              MANAGEMENT AGREEMENT

         THIS AGREEMENT, dated as of June 30, 2003, by and between
BRE/COTTONWOOD L.L.C., a Delaware limited liability company (the "Owner") and
CAPITAL SENIOR LIVING, INC., a Texas corporation (the "Manager"), recites and
provides:

                                    RECITALS

         WHEREAS, the Owner owns the real estate and related personal property
described on Exhibit A hereto (the "Property").

         WHEREAS, the Property is operated as an assisted living and independent
living facility;

         WHEREAS, the Manager has experience and expertise in the management of
assisted living and independent living facilities; and

                  WHEREAS, the Owner wishes the Manager to manage the Property,
and the Manager desires to do so, pursuant to the terms and conditions set forth
in this Agreement.

                                    AGREEMENT

         NOW, THEREFORE, for and in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Owner and the Manager agree as
follows.

                                   ARTICLE I

                               GENERAL PROVISIONS

         Section 1.01. Employment as Exclusive Leasing Agent and the Manager.
The Owner hereby employs the Manager as its exclusive agent for leasing,
operating and managing the Property. The Manager accepts such employment and
agency and, subject to the terms and conditions hereof and such express
restrictions or limitations on its authority and, to the extent not inconsistent
with the terms and conditions hereof, such written instructions as may from time
to time be given by the Owner, agrees to perform the duties and obligations
described herein. In its performance of its duties under this Agreement, the
Manager shall be an independent contractor rather than an employee of the Owner.

         Section 1.02. The Manager's Duties Generally.

                  (a) The Manager shall assist the Owner in the leasing,
         management, operation, supervision, control and administration of the
         Property and, by its execution hereof, the Manager accepts the
         relationship of trust and confidence established between itself and the
         Owner. In accepting its employment hereunder, the Manager shall (i)
         perform its responsibilities hereunder with the same or a greater
         degree of diligence, competence and care exercised by leading real
         estate brokers, agents and managers of facilities of the same or
         similar type as the Property in the general areas in which the Property
         is located and (ii) act with due care in its management of the Owner's
         funds and property and avoid conflicts of interest or self dealing that
         would be detrimental to the interests of the Owner. In addition to the
         obligations expressly provided for in this Agreement, the Manager shall
         do such other things on behalf of the Owner that are consistent with
         this Agreement, necessary or appropriate, in the judgment of the Owner,
         and communicated to the Manager, for the proper and profitable
         operation of the Property.

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                  (b) Without limiting the restrictions placed upon the Manager
         pursuant to Subsection (a), the Manager hereby agrees that:

                           (i) during the Term of this Agreement neither the
                  Manager nor any person controlling, controlled by or under
                  common control with the Manager (an "Affiliate") shall
                  develop, finance, operate, manage or acquire any direct or
                  indirect interest in any assisted living, independent living,
                  or congregate care facility (as the case may be) located
                  within twenty-five miles of the Property (a "Competing
                  Facility") without the prior written consent of the Owner,
                  provided, however, that in the event that the Manager enters
                  into a transaction involving a Portfolio Transaction (as
                  defined below), the Manager may own, operate or manage, as
                  applicable, any Competing Facility, connected with a Portfolio
                  Transaction and located within such radius, if (A) the Manager
                  does not relocate any Property Staff involved in the marketing
                  of the Property to such Competing Facility or otherwise employ
                  marketing materials or trade secrets specifically developed
                  for use in the Property; and (B) the Manager does not
                  reposition the Competing Facility to compete directly with the
                  Property. For purposes of this Subsection, "Portfolio
                  Transaction" shall mean a single transaction in which the
                  Manager acquires the ownership of, leasehold interest in, or
                  is contracted to manage, at least five operating assisted
                  living or independent living facilities.

                           (ii) during the Term of this Agreement and for a
                  period of one year thereafter, neither the Manager nor any
                  Affiliate will, in connection with any independent living
                  facility or assisted living facility (as the case may be) in
                  which it directly or indirectly owns an interest or which it
                  manages, solicit any of the tenants of the Property or
                  interfere, either directly or indirectly, in any manner, with
                  any relationship between the tenants of the Property and their
                  landlord(s).

                           (iii) for a period of one year after the expiration
                  or termination of this Agreement, neither the Manager nor any
                  Affiliate will solicit any of the Property Staff (as defined
                  in Section 3.01) or interfere, either directly or indirectly,
                  in any manner, with their employment by the Owner, another
                  lessee or owner of the Property, or the successor to the
                  Manager, as applicable.

                  (c) If any provision of this Section is deemed invalid by a
         court of competent jurisdiction, the covenants contained herein shall
         be applicable and enforceable for such lesser period of time and for
         such lesser activity included within such limitations, as such court
         may then or thereafter determine to be reasonable and proper under the
         circumstances.

                  (d) In the event that any provision hereof is deemed to be
         unenforceable, the remainder of this Section shall not be affected
         thereby and each provision hereof shall be valid and enforced to the
         fullest extent permitted by law.

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                  (e) The Manager hereby acknowledges that the damages the Owner
         would sustain in the event of any violation of the provisions of this
         Section are difficult or impossible to ascertain. Accordingly, the
         Manager hereby agrees that the Owner shall be entitled, in addition to
         any other remedy or damages available to it in the event of any such
         violation, to injunctive relief to restrain such violation by the
         Manager and any person or entity acting for or with the Manager

         Section 1.03. Term of Agreement. The initial term of this Agreement
(the "Initial Term") shall commence on the date of this Agreement and unless
otherwise set forth in this Agreement, shall continue through the fifth
anniversary of the date of this Agreement, and shall thereafter be automatically
renewed for successive one-year extensions except as otherwise set forth in this
Agreement and the limited liability company agreement of BRE/CSL II L.L.C. (the
"Venture L.L.C. Agreement").

         Section 1.04. Compensation. As compensation for the Manager's
performance of its obligations hereunder, the Owner agrees to pay to the Manager
the fees for the Property as set forth on Exhibit B attached hereto.

         Section 1.05. Termination. (a) Termination for Cause. The Owner may
elect to terminate this Agreement immediately upon the occurrence of a Default
by notifying the Manager in writing that this Agreement has been terminated (a
"Notice of Default"). For purposes of this Agreement, "Default" shall mean:

                  (i) The Manager's gross negligence or willful misconduct in
         the performance of its duties under this Agreement;

                  (ii) The revocation of any license or permit necessary for the
         performance by the Manager of its duties hereunder or for the operation
         of the Property as independent living or assisted living facilities, as
         the case may be, or the Manager's failure to keep any such license or
         permit in force for any reason whatsoever which license or permit is
         not reinstated before a material adverse impact or effect on the
         operation of the Property or, if earlier, the expiration of 60 days
         after the Manager is initially notified of such revocation or failure
         by applicable authorities or the Owner;

                  (iii) A non-voluntary reduction in licensed bed capacity or a
         governmental or regulatory restriction on admission and/or retention of
         residents resulting from acts or omissions of the Manager;

                  (iv) The violation by the Manager in any material respect of
         any provision of this Agreement, provided, however, that no default
         shall be deemed to have occurred if the Manager cures such violation
         within 30 days after the Owner's written notice to the Manager of such
         violation with respect to a non-monetary default and within 5 days with
         respect to a monetary default;

                  (v) The violation by the Manager of any provision of any
         Management Agreement or lease, between the Manager or any affiliate of
         the Manager and the Owner or any affiliate of the Owner (each, an
         "Other Management Agreement"), which violation entitles the Owner or
         such affiliate of Owner to terminate an Other Management Agreement;

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                  (vi) The default of Capital Senior Living Properties, Inc., as
         member of BRE/CSL II L.L.C., under any material provision of the
         Venture L.L.C Agreement;

                  (vii) The entry by a court of competent jurisdiction of a
         decree or order for relief in respect of the Manager or Capital Senior
         Living Corporation (the "Parent"), in an involuntary case or proceeding
         under any bankruptcy, insolvency or similar law, or appointing a
         receiver, liquidator, trustee or similar official of the Manager or the
         Parent of all or any substantial part of the property of any of them,
         or ordering the reorganization of the Manager or the Parent, the
         winding up of the Manager or the Parent of its affairs or liquidation
         of its property, and such decree or order shall continue unstayed and
         in effect for a period of 30 days; or

                  (viii) The consent or acquiescence by the Manager or the
         Parent to the entry of any decree or order described in Subsection
         1.05(a)(vii) hereof, the commencement by the Manager or the Parent of a
         voluntary case or proceeding under any bankruptcy, insolvency or
         similar law, the making by the Manager or the Parent of any general
         assignment for the benefit of creditors, or the Manager's or the
         Parent's failure or admission in writing of its inability to pay its
         debts as they become due. The Manager or the Parent shall notify the
         Owner in writing of the occurrence of any of the events specified in
         Sections 1.05(a)(i)-(viii) above promptly after it first learns of such
         event.

                  (ix) Any material adverse change in the financial condition of
         Manager which adversely affects Manager's ability to perform its duties
         under this Agreement; or

                  (x) A transfer of any voting stock in the Manager which would
         cause the current owners of Manager to own less than 51% of all
         ownership interests in Manager.

         The Manager or the Parent shall notify the Owner in writing of the
occurrence of any of the events specified in Sections 1.05(a)(i)-(x) above
promptly after it first learns of such event.

                  (b) Termination Without Cause. The Owner may terminate this
         Agreement upon (i) the sale to an unaffiliated third party of the
         Property, or (ii) the transfer to an unaffiliated third party of all of
         (x) the Venture's ownership interest in Owner or (y) the Blackstone
         Member's (as defined in the Venture L.L.C. Agreement) ownership
         interests in the Venture (as defined in the Venture L.L.C. Agreement).

                  (c) Action on Termination. For purposes of this Section,
         "Effective Date" shall mean the date upon which (i) a Notice of Default
         is delivered by the Owner or (ii) an event described in Section 1.05(b)
         occurs.

                           (i) Within ten business days following the Effective
                  Date, the Manager shall provide the Owner with the following
                  items to facilitate the transfer of leasing and management
                  responsibilities to the Owner or its designee in a
                  comprehensive and professional manner:

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                                    (A) A schedule of termination activities
                           including notices to vendors, contractors and banks
                           and meetings with the successor entity responsible
                           for the leasing and management of the Property;

                                    (B) An itemized statement of the amounts due
                           hereunder from the Owner to the Manager;

                                    (C) An itemized statement of the amounts due
                           suppliers of services and goods which have been
                           ordered by the Manager in the name of the Owner;

                                    (D) An itemized statement of all accounts
                           receivable due the Owner from any source; and

                                    (E) A list of all records, reports,
                           financial statements, files and similar materials in
                           the Manager's possession related to the Property.

                           (ii) On the Effective Date, the Manager shall:

                                    (A) Deliver to the Owner all funds collected
                           and held for the account of the Owner including,
                           without limitation, passbook accounts, negotiable and
                           investment instruments, demand deposits and petty
                           cash, whether any of the foregoing is received before
                           or after the termination hereof;

                                    (B) Deliver to the Owner all property and
                           documents and all records, reports, files and similar
                           materials relating to the Property;

                                    (C) Assign to the Owner, or its designee,
                           all contracts not otherwise in the name of the Owner
                           relating to the operation or leasing of the Property
                           and assign, to the extent transferable, to the Owner,
                           or its designee, all applicable licenses and permits
                           necessary to operate the Property as an independent
                           living facility or assisted living facility, if
                           applicable;

                                    (D) Deliver to the Owner a complete list of
                           all contracts, agreements and obligations entered
                           into or incurred by the Manager on behalf of the
                           Owner during the Term hereof; and

                                    (E) Furnish such other information and take
                           such other actions as the Owner shall reasonably
                           require to transfer the Manager's leasing and
                           management responsibilities to the Owner or its
                           designee.

                           (iii) Within 25 days after the Effective Date, the
                  Manager shall deliver to the Owner a full accounting,
                  including a statement showing all payments collected by it and
                  all moneys held by it, for the period following the last date
                  covered by the last accounting furnished to the Owner.

                           (iv) The Manager's obligation to deliver to the Owner
                  or its designee the items described in this Section 1.05(c)
                  shall be a continuing obligation with respect to any of those

<PAGE>

                  items that may be in or come into the Manager's possession or
                  control on or after the effective date of termination of this
                  Agreement.

                           (v) The Manager shall cooperate fully with the Owner
                  or its designee in the transfer of, or in obtaining, all
                  applicable licenses and permits necessary to operate the
                  Property as an independent living or assisted living facility
                  (as the case may be) and of management, leasing and licensing
                  operational responsibilities to the Owner or such designee.

                           (vi) Manager shall provide a current list of all
                  Property Staff together with access to payroll, personnel and
                  employment records and assist Owner in reasonably
                  transitioning those employees of Manager at the Property which
                  Owner so selects or Owner's designee selects.

                  (d) Casualty or Condemnation. Notwithstanding the foregoing or
         anything to the contrary contained in this Agreement, either the
         Manager or the Owner may elect to terminate this Agreement immediately
         if the Property is subject to a Casualty or Condemnation Event (as
         defined herein) by giving written notice of termination to the other
         party. For purposes hereof, a "Casualty or Condemnation Event" shall
         mean damage to a Property by fire, smoke, lightning, wind storm,
         explosion, riot, vandalism, malicious mischief, theft and such other
         casualty hazards and risks to the extent that the Property cannot, in
         the Manager's or Owner's (as the case may be) reasonable judgment, be
         economically operated as the type of facility it was prior to such
         casualty and (i) such casualty occurred within 24 months of the end of
         the Term, or (ii) such casualty is an event for which insurance
         coverage is not required under Section 1.06 and a condemnation or
         taking by eminent domain which is either (i) 50% or more of the
         Property (measured by any of gross area, rentable square footage or
         number of rental units) or (ii) such portion or portions of the
         Property so that the portion remaining cannot, in the Manager's or
         Owner's (as the case may be) reasonable judgment, be economically
         operated as the type of facility it was prior to the taking.

                  (e) Termination by the Manager. The Manager may terminate this
         Agreement by written termination notice to the Owner in the event that
         the Manager fails to receive reimbursement of reimbursable expenses or
         any compensation due the Manager pursuant to the terms of this
         Agreement, and such failure continues for a period of 30 days after the
         Manager's written notice of such failure to the Owner.

                  (f) Effect of Termination. No termination of this Agreement
         shall affect any obligation owing by either party hereto to the other
         which accrued prior to the Effective Date of the Notice of Termination.

         Section 1.06. Insurance.

         (a) The Owner's Insurance Coverage. The Manager will obtain at the
Owner's sole cost and expense the following coverage for the Owner with respect
to the Property. The Owner retains the right to procure all such insurance for
itself should it see fit rather than having the Manager procure such insurance

<PAGE>

on behalf of the Owner. If the Owner is procuring insurance for itself, and
elects again to have the Manager procure insurance on behalf of the Owner, it
shall give the Manager sufficient notice to procure all required insurance.

                  (i) Building Insurance. The Manager shall obtain a building
         and contents insurance policy with comprehensive all risk coverage with
         respect to the buildings and personal property components of the
         Property (including, without limitation, any such personal property
         components owned by the Manager) and which shall not exclude the
         following: fire, lighting, extended coverage, theft, flood, earthquake
         (where available), vandalism, sprinkler leakage, water damage, collapse
         and debris removal.

         The amount of such insurance shall not be less than the full
replacement cost except where sublimits are appropriate (and a replacement cost
endorsement shall be provided for these purposes permitting payment of the loss
without a requirement to rebuild) as determined by an insurance appraisal or
such other valuation with provisions for the use of indexes at interim dates to
increase the value for inflation.

         The policy shall contain an endorsement called an "Agreed Amount
Endorsement" which shall waive any and all coinsurance provisions under the
policy as it applies to the coverage.

                  (ii) Business Interruption and Loss of Rent Insurance. The
         Manager shall obtain a business interruption and loss of rent insurance
         policy with coverage against all of the risks referred to in Subsection
         (a)(i) above. The insurance shall be in an amount equal to not less
         than 100% of the annual rent roll schedules of the Property covering
         all tenants and shall be endorsed to cover unoccupied and unleased
         space at pro forma rents and shall include gross budgeted revenues for
         all other activities. The policy shall contain an Agreed Amount
         Endorsement waiving all coinsurance provisions.

                  (iii) Comprehensive General Liability Insurance. This policy
         shall include coverage for claims arising from bodily injury, personal
         injury, and property damage occurring upon, in, or about the Property.
         The coverage shall be on an occurrence basis, and the minimum limits
         shall be not less than $1,000,000. Coverage for liquor law liability
         shall also be included if required by law.

         The policy should cover the following hazards: premises and operation
incidental malpractice; comprehensive owned and non-owned auto liability
insurance and coverage for hired vehicles on an "if any" basis.

                  (iv) Umbrella Liability Coverage. A policy shall be obtained,
         providing coverage in an amount equal to at least $10,000,000 in excess
         of the coverage to be maintained pursuant to Subsection (iii) of this
         Section 1.06(a).

                  (v) Additional Insurance. The Owner shall have the right to
         require the Manager to obtain and maintain, if requested in writing and
         at the Owner's sole cost and expense, such other insurance as the Owner
         may from time to time deem reasonably necessary, and which insurance is
         normal and customary for other operations of improved property similar
         to the Property.

<PAGE>

                  (vi) Priority of Coverage. The Owner's insurance will be
         primary as to any insurance carried by the Manager, and any such
         coverage of the Manager will be excess insurance to the extent that the
         Manager is acting within the scope of its duties under this Agreement.

         (b) The Manager's Operational Insurance Coverage. Throughout the Term,
the Manager shall procure and maintain, at the Owner's sole cost and expense,
the insurance coverage set forth in this Section 1.06(b). The Owner retains the
right to procure all such insurance for itself or the Manager, as appropriate,
should it see fit rather than having the Manager procure such insurance.

                  (i) Worker's Compensation and Unemployment Compensation.
         Workers' compensation and unemployment compensation with respect to the
         Property Staff in full compliance with all applicable state and federal
         laws and regulations;

                  (ii) Employer's Liability Insurance. Employer's liability
         insurance in an amount not less than $100,000 for each accident,
         $500,000 for each disease policy limit and $100,000 for diseases for
         each employee covering all Property Staff;

                  (iii) Comprehensive Automobile Liability Insurance.
         Comprehensive automobile liability insurance coverage with respect to
         those motor vehicles owned by the Owner which are used by the Property
         Staff in connection with the Property which has limits for bodily
         injury of not less than $250,000 per person and $500,000 per accident
         and property damage of $100,000 per accident. The comprehensive
         automobile liability policy shall include blanket non-owned coverage;

                  (iv) Employee Dishonesty Insurance. Employee dishonesty
         insurance with respect to the Property Staff and any agents against
         employee dishonesty in an amount not less than the greater of (A)
         $1,500,000 or (B) an amount equal to the average monthly receipts from
         the Property;

                  (v) Professional Liability Insurance. Professional liability
         insurance in an amount equal to at least $1,000,000 with respect to
         bodily injury, property damage or personal injury arising out of
         professional acts, errors or omissions;

                  (vi) Fiduciary Liability Insurance. In the event that the
         Manager makes any employee benefit plan available to the Property
         Staff, fiduciary liability insurance in an amount equal to at least
         $1,000,000 with respect to claims alleging breach of fiduciary
         obligations under the Employment Retirement Income Security Act of 1974
         and any acts, errors or omissions committed in connection with the
         administration of any employee benefit plans for the Property Staff;

                  (vii) Employment Practices Insurance. Employment practices
         insurance in an amount equal to at least $1,000,000 with respect to
         lawsuits brought by employees alleging wrongful discharge,
         discrimination, harassment or other employment related exposure with
         respect to the Property Staff; and

<PAGE>

                  (viii) Umbrella Liability Coverage. A policy shall be
         obtained, providing coverage in an amount equal to at least $10,000,000
         in excess of the coverage to be maintained pursuant to Subsections (i)
         through (vii) of this Section 1.06(b).

                  (ix) Other Insurance. Such other insurance as may be carried
         at similar properties as the Owner may from time to time reasonably
         deem necessary in connection with or for the performance of the
         Manager's duties hereunder.

         (c) The Manager's Insurance Coverage. Throughout the Term, the Manager
shall procure and maintain, at the Manager's sole cost and expense, the
following insurance coverage:

                  (i) Comprehensive General Liability Insurance. Comprehensive
         general liability insurance which includes coverage for all
         Non-Property Staff (as defined in Section 3.01(b)) and if the Manager
         is found to be acting outside the scope of his duties under this
         Agreement, with minimum limits of at least $1,000,000 per occurrence
         for bodily injury, personal injury and property damage;

                  (ii) Worker's Compensation and Unemployment Compensation.
         Workers' compensation and unemployment compensation with respect to the
         Non-Property Staff in full compliance with all applicable state and
         federal laws and regulations;

                  (iii) Employer's Liability Insurance. Employer's liability
         insurance in an amount not less than $100,000 for each accident,
         $500,000 for each disease policy and $100,000 for diseases for each
         employee covering all Non-Property Staff performing any work relating
         to the Property;

                  (iv) Comprehensive Automobile Liability Insurance.
         Comprehensive automobile liability insurance coverage with respect to
         those motor vehicles owned by the Manager which are used by
         Non-Property Staff in connection with the Property which has limits for
         bodily injury of not less than $250,000 per person and $500,000 per
         accident and property damage of $100,000 per accident. The
         comprehensive automobile liability policy shall include blanket
         non-owned coverage;

                  (v) Umbrella Liability Insurance. An "umbrella" liability
         coverage providing coverage in an amount equal to at least $10,000,000
         in excess of the coverage to be maintained pursuant to Subsections (i),
         (iii) and (iv) above;

                  (vi) Employee Dishonesty Insurance. Employee dishonesty
         insurance with respect to the Non-Property Staff and any agents,
         officers and employees of the Manager against dishonesty by any of such
         persons in an amount not less than the greater of (A) $1,500,000 or (B)
         an amount equal to the average monthly receipts from the Property;

                  (vii) Fiduciary Liability Insurance. Fiduciary liability
         insurance in an amount equal to at least $1,000,000 with respect to
         claims alleging breach of fiduciary obligations under the Employment
         Retirement Income Security Act of 1974 and any acts, errors or
         omissions committed in connection with the administration of any
         employee benefit plans made available to the Non-Property Staff;

<PAGE>

                  (viii) Employment Practices Insurance. Employment practices
         insurance in an amount equal to at least $1,000,000 with respect to
         lawsuits brought by employees alleging wrongful discharge,
         discrimination, harassment or other employment related exposure with
         respect to Non-Property Staff; and

                  (ix) Other Insurance. Such other insurance as may be carried
         at similar properties as the Owner may from time to time reasonably
         deem necessary in connection with or for the performance of the
         Manager's duties hereunder.

         (d) Payment of Insurance. The insurance required by Subsection (a) and
(b) of this Section, whether obtained by the Manager on behalf of the Owner or
by the Owner directly, shall be an operating expense of the applicable Property
and paid from such Property's revenues or reserves or by the Owner, as directed
by the Owner. The insurance coverage required pursuant to Subsection (c) shall
be paid for by the Manager from its own funds.

         (e) Policy Requirements. The policies described in Subsections (a)
through (c) above shall be in form and substance reasonably satisfactory to the
Owner and with insurance companies that are reasonably acceptable to the Owner,
reputable and properly licensed in each State in which they propose to effect
coverage. The Manager shall furnish the Owner with certificates of insurance or
certified copies of each of the insurance polices required to be obtained and
maintained by the Manager pursuant to the terms of this Agreement. The insurance
policies required pursuant to Subsection (a) shall be in the name of the Owner
with the Manager named as an additional insured party. The insurance policies
required pursuant to Subsections (b) and (c) shall be in the name of the Manager
with the Owner named as an additional insured party. Each insurance policy
required by this Section shall provide that such policies shall not be canceled
or otherwise modified without 30 days' prior written notice to the Owner. At
least 5 days prior to the extension of any such policy the Manager shall furnish
the Owner with evidence that the insurance policies required hereunder have been
renewed. The Manager shall in all cases obtain the Owner's prior written
approval before obtaining, renewing, canceling or modifying the coverages under
any insurance policies required hereunder. The Manager shall make periodic
reports and recommendations to the Owner regarding the adequacy of the then
current insurance policies and provide the Owner with adequate warning of any
potential lapses in coverage of which the Manager becomes aware.

         (f) Waiver of Subrogation. The Owner and the Manager hereby waive and
release any and all claims either may have or acquire against the other by way
of subrogation or otherwise, for any loss or damage occasioned by the negligence
of either of them or their respective agents, employees, contractors, licensees
or invitees, which results in any loss or damage to person or property and which
is fully insured against by either the Owner or the Manager in accordance with
the terms of this Agreement. Each party agrees to obtain from its respective
insurance carriers waiver of subrogation endorsements to all such insurance
policies maintained hereunder (excluding workmen's compensation or employer's
liability insurance) providing that each insurance carrier waives its right of
subrogation against the other party in the event of any loss or damage which is
fully insured against pursuant to the provisions of this Agreement. In the event
that such endorsements cannot be obtained and the mutual waiver contained herein
would invalidate any such insurance policy, then the provisions of this
Subsection (f) shall be inapplicable to such insurance policy.

<PAGE>

         (g) Compliance With Insurance Requirements. The Manager shall use its
best efforts to assure that the Property is not used for any purpose which may
void or impair, or increase the premium payable under, any policy of insurance
held by the Owner pursuant to the terms of this Section 1.06, or which may
render any loss under any such policy uncollectible.

         (h) Insurance Claims. The Manager shall promptly report to Gary M.
Sumers, on behalf of the Owner, c/o The Blackstone Group, 345 Park Avenue, New
York, New York 10154, facsimile (212) 583-5726, and the insurance agent, broker
or adjustor designated by the Owner, all material damages, accidents or claims
relating to the ownership, maintenance or operation of the Property and shall
cooperate with such agent, broker or adjustor in connection with its
investigation thereof and its reporting to the appropriate insurance carrier.
The Manager shall not compromise or settle any claims against insurance carriers
without the prior written approval of the Owner.

         Section 1.07. Plans and Specifications. Upon request by the Owner and
if reasonably available to the Manager, the Manager shall promptly furnish the
Owner with a set of plans and specifications for the Property and, with the aid
of these documents and its own inspections the Manager shall remain
knowledgeable with respect to the organization, location, character, plan and
operation of the lighting, plumbing, heating, air conditioning and all other
mechanical systems and equipment of the Property.

         Section 1.08. Ethical Standards. In any transaction with vendors,
contractors or others who provide services or goods for the Owner or the
Property, the Manager shall act at all times in the best interests of the Owner
and shall credit to the Owner all discounts, commissions, rebates, finders fees
and similar amounts obtainable as a result of such transactions. The Manager
shall not enter into any agreement to provide goods or services for the Property
with any party, partnership, corporation or other entity related to or
affiliated with the Manager without the prior written approval of the Owner.

         Section 1.09. Cooperation and Consultation with Third Parties. The
Owner may appoint and employ auditors, attorneys, appraisers and other persons
for the purpose of rendering advice about or for conducting research and inquiry
with respect to the leasing, management, operation and valuation of the Property
and, in any such case, the Manager shall cooperate fully with such persons and,
within the authority invested in such persons, communicate all information
requested and advise and consult with them in good faith.

         Section 1.10. Indemnities.

         (a) Manager Indemnity

                  Subject to the provisions of Section 1.06 hereof, the Manager
         shall indemnify and hold the Owner, its officers, directors and
         employees harmless from and against all losses, costs, expenses,
         claims, damages, deficiencies, actions, suits, proceedings, demands,
         assessments, orders, judgments, writs, decrees, debts, obligations and
         liabilities (including reasonable attorney's and accounting fees)
         ("Losses") of any nature and of any kind whatsoever which may be made
         against or incurred by any of them resulting from or arising out of or
         in any way connected with any of the following unless such Losses are

<PAGE>

         directly caused by the Owner: acts of Manager which (i) constitute a
         breach of the provisions of this Agreement, (ii) are otherwise outside
         the scope of Manager's employment and (iii) result from Manager's own
         negligence or misconduct.

         (b) Owner Indemnity

                  Subject to the provisions of Section 1.06 hereof, the Owner
         shall indemnify and hold the Manager, its officers, directors and
         employees harmless from and against all Losses arising out of or in
         connection with the management, operation and leasing of the Property,
         except for acts of Manager which (i) constitute a breach of the
         provisions of this Agreement, (ii) are otherwise outside the scope of
         its employment or (iii) result from Manager's own negligence or
         misconduct.

         Section 1.11. Real Estate Tax Assessments. If during the Term, the
Owner shall elect to protest any real or personal property tax assessment in
connection with Property, the Manager shall cooperate with the Owner and its tax
advisors in connection therewith. The Manager will have no responsibility for
the institution of any legal proceedings in connection with tax assessments.

         Section 1.12. Policies and Procedures Manual. Upon request by the
Owner, the Manager shall promptly provide the Owner a policies and procedures
manual for the Property (the "Manual") for review and approval by the Owner.
Following the approval by the Owner of the Manual, the Manager shall utilize the
Manual in connection with the leasing, management or operation of the Property
and shall submit any proposed modifications to the Manual to the Owner in
writing. Following the Owner's review and approval of such modifications, the
Manager shall utilize the modified Manual.

                                   ARTICLE II

                                     LEASING

         Section 2.01. The Manager's Duties Generally As Leasing Agent. The
Manager shall use its best efforts to lease and keep leased all leasable space
in the Property to such tenants as it may deem compatible with the character and
location of the Property. The Manager shall use its best efforts to develop and
maintain the character and reputation of the Property while maintaining the
highest possible net income. The Manager shall be familiar with all tenant
leases for the Property, particularly with regard to the services, charges and
procedures applicable to the various tenants.

         Section 2.02. Negotiation and Execution of Leases. The Manager shall
respond to all inquiries concerning tenant leases and shall conduct all
negotiations in connection with their execution, renewal, extension,
modification, amendment or termination. All leases entered into after the date
hereof shall be in such form as may be approved by the Owner, and the Manager
shall furnish the Owner executed originals of such leases upon request.

<PAGE>

         Section 2.03. Liaison with Tenants. The Manager shall schedule and
coordinate tenant moves, maintain personal contact with tenants and serve as
liaison with the Owner in order to minimize misunderstandings and receive and
resolve tenant complaints in a timely and courteous manner.

         Section 2.04. Marketing of Rental Space. The Manager shall develop a
comprehensive, professional program for marketing the Property (a "Marketing
Plan") and, following the approval of the Marketing Plan by the Owner, implement
and monitor the effectiveness of such Marketing Plan.

         Section 2.05. Advertising. The Manager, at the Owner's expense and in
accordance with the Budget (as that term is defined in Section 5.06 below) and
the Marketing Plan, shall advertise, to such extent and in such media as the
Manager deems advisable, the availability of units in the Property; provided,
however that the Manager shall pay all costs associated with advertisements that
do not relate specifically and exclusively to the availability of rental space
in, or the operational needs of, the Property, unless otherwise approved in
writing by the Owner.

                                  ARTICLE III

                             ADMINISTRATIVE SUPPORT

         Section 3.01. Personnel.

         (a) Property Staff. Based upon job standards, wage rates and the
applicable Plan of Operation (as defined in Subsection (c), below) but subject
to the Budget, the Manager shall recruit, hire, train, supervise and discharge
all on-site management, administrative, maintenance, cleaning and other
personnel, including, without limitation, the Property director or administrator
(collectively, the "Property Staff") necessary to properly manage, administer,
repair, maintain and otherwise operate the Property. The Property Staff may be
full-time, part-time, temporary or contract personnel. The Property Staff shall
be employees of the Manager and not the Owner, provided, however, that the costs
of such Property Staff shall be paid from the Owner's funds. All costs of
hiring, equipping and providing the services of Property Staff, including but
not limited to, compensation, health insurance, employer liability insurance,
payroll taxes, bonding, workers compensation insurance, benefits and vacations
shall be an expense of Owner. The Manager shall pay wages and required payroll
taxes and all costs and expenses of such Property Staff from the Owner's funds
and shall make provision at the Owner's expenses for employee group benefits as
agreed upon by the Owner. The Manager will abide by all local, state and federal
laws, regulations and guidelines in administering the payroll. The Manager will
cause to be prepared and filed all forms, reports and returns as required by law
in connection with unemployment insurance, workers' compensation insurance,
withholding tax, social security and other similar taxes now in effect. In
addition the Manager shall take such actions as may be necessary to comply with
the provisions of wage, hour, health, safety, income tax, social security,
unemployment compensation, workman's compensation and similar laws, regulations
and requirements relating to the Property Staff. The Manager shall, at the
request of the Owner, promptly provide the Owner with the then-current list of
Property Staff.


<PAGE>

         (b) The Manager's Personnel. The Manager shall maintain sufficient
personnel to fulfill its obligations hereunder. Prior to the commencement of its
duties hereunder, the Manager shall provide the Owner with a listing of the
personnel which it intends to employ in connection with the obligations to be
performed by the Manager hereunder (the "Non-Property Staff"), together with a
job description for each member of the Non-Property Staff. The Owner and the
Manager shall mutually agree upon the personnel required by the Manager to
fulfill its obligations hereunder. The Manager shall, upon the request of the
Owner, provide the Owner with a list of the then-current Non-Property Staff. The
Owner shall have no authority to provide directions to the Managers employees or
to terminate such employees employment by the Manager. Nothing in this section
is intended or shall be construed to make any person employed by the Manager an
employee of the Owner, to influence the hiring decisions of the Manager or to
alter the relationship between the Owner and the Manager of independent
contractor. The Manager acknowledges that in entering into this Agreement the
Owner is relying upon the experience and capabilities of the employees of the
Manager. Accordingly, the Manager agrees to maintain each of positions listed on
Exhibit F to this Agreement (the "Positions") and shall not eliminate or change
any of the Positions without the prior written consent of the Owner. The initial
occupants of each of the Positions are listed on Exhibit F and the Manager
agrees to keep each of the Positions permanently occupied during the Term by
personnel with experience and capabilities similar or superior to the
individuals listed on Exhibit F (the "Personnel"), with any vacancies in any
such Positions occurring during such Term to be filled on a timely basis. The
Manager shall notify the Owner of any change in the Personnel and shall supply
the Owner with information which is reasonably sufficient to demonstrate the
caliber and experience of any replacement Personnel.

         (c) Plan of Operation. Upon request by the Owner and if plans of
operation for the Property are required by law, the Manager shall promptly
provide to the Owner the current plan of operation for the Property (the "Plan
of Operation"). The Plan of Operation shall (i) describe each of the services to
be supplied to tenants at the Property and (ii) list all Property Staff that
will be required at the Property in order to provide such services to the
tenants, to provide management and administrative services for such Property
(other than such administrative services as are to be provided by the Manager
hereunder) or to maintain the Property. The Plan of Operation must be approved
by the Owner in writing. The Owner and the Manager shall review the Plan of
Operation for the Property not less than annually and shall amend the Plan of
Operation from time to time as appropriate.

         (d) Job Descriptions. Upon the request of the Owner, the Manager shall
provide to the Owner job descriptions for all Property Staff positions in the
Plan of Operation. The Manager shall furnish the job descriptions, along with
job performance standards, to the Owner to delineate clearly between the
Manager's exclusive responsibilities which are to be performed by the
Non-Property Staff, and those responsibilities that are delegated by the Manager
to the Property Staff.

         Section 3.02. Contracts.

         (a) Renewal and Execution. The Manager shall be familiar with the
provisions of, and provide to the Owner copies of, all material contracts
affecting the leasing, management or operation of the Property. At least 60 days
prior to the scheduled termination of any of these contracts, the Manager shall

<PAGE>

recommend to the Owner whether such contracts should be renewed, modified or
canceled, and renew, modify or cancel such contracts as the Owner may direct.
Where new contracts are necessary, the Manager shall recommend to the Owner for
its approval contracts from responsive and responsible contractors for work to
be performed according to written specifications developed by the Manager in
consultation with the Owner. The Manager shall assure that all contractors are
properly insured (and bonded, if appropriate) for the duration of their
contracts. Except for emergencies and those cases where the Owner authorizes
otherwise due to the size or nature of the contract, all contracts and
procurements shall be let by competitive bidding procedures. The Manager, its
employees and the Property Staff shall disclose to the Owner the extent of any
financial interest that it or they may have in any firm or person providing
goods or services to the Owner pursuant to any such contracts. The Manager shall
exploit fully all commonality of contracting and purchasing so as to accrue to
the Owner all possible benefits deriving from a unified procurement policy.

         (b) Supervision and Enforcement. The Manager shall supervise and
oversee the activities of all contractors, review the quality of their
workmanship, enforce contractors' warranties and approve all work and materials
prior to payment therefor.

         Section 3.03. Status Reports.

         (a) Monthly Status Reports. The Manager shall prepare and deliver to
the Owner within the prescribed time period set forth on Exhibit D-1 a written
Monthly Status Report in the form attached hereto as Exhibit D-l.

         (b) Annual Fiscal Year Status Reports. The Manager shall submit to the
Owner within 30 days following the end of each fiscal year, a report in the form
of Exhibit D-2 attached hereto.

         (c) Annual Calendar Year Status Reports. The Manager shall submit to
the Owner within 15 days following the end of each calendar year, a report in
the form of Exhibit D-3 attached hereto.

         (d) Healthcare Reports. The Manager shall submit to the Owner all
healthcare surveys, responsive plans of correction, notices from governmental
regulatory authorities, administrative orders, and notices of change of
law/regulation impacting the operation and provision of services at the
Property.

         (e) Other. The Manager shall prepare and deliver to the Owner such
other reports and/or statements in such form as may reasonably be requested by
the Owner from time to time, which reports shall be delivered within 30 days
after request thereof (or as soon thereafter as is practicable).

         Section 3.04. Records. The Manager shall maintain and keep complete,
accurate and up-to-date all books and records of the Owner relating to the
Property including, without limitation, all accounting and financial records,
rent rolls, memoranda, correspondence, notices and all other such records as may
be appropriate or customary in connection with the leasing and operation of the
Property and the transaction of business with third parties including, without
limitation, suppliers, employees, labor unions and governmental or municipal

<PAGE>

authorities. All of these records shall be kept and maintained available for
inspection at any and all reasonable times during normal business hours by any
person authorized in writing by the Owner, but not by others.

         Section 3.05. Obligations Under Tenant Leases. The Manager shall comply
with all requirements respecting the operation or maintenance of the Property
imposed upon the Owner as "landlord" under any lease for the Property. The
Manager's duties hereunder shall include, without limitation, the selection and
supervision of all contractors or others providing required tenant services or
performing tenant repair or capital improvement work at the Property.

         Section 3.06. Tenant Compliance. The Manager shall monitor the
performance of all tenants and use its best efforts to secure the full
compliance by tenants with the terms and provisions of their leases. The Manager
shall inform all tenants of such rules, regulations and notices as may be
promulgated by the Owner or the Manager. The Manager, at the expense of and
using attorneys approved by the Owner, may institute legal proceeding in its own
name or in the name of the Owner to collect rent, security deposits and other
tenant charges, to oust or dispossess tenants or others occupying the Property
and otherwise to enforce the rights of the Owner with respect thereto. The
Manager shall secure the prior written approval of the Owner before instituting
legal proceedings or compromising or settling any such claim or proceeding. The
Manager shall give the Owner prompt written notice of all matters involving
actual or threatened litigation.

         Section 3.07. Licensing. The Manager shall be responsible for obtaining
all licenses, permits or other authorizations (the "Permits") necessary to
operate the Property as an independent and assisted living facility in the name
of the Owner or such other name as the Owner may designate. All amounts payable
to state or local governmental authorities with respect to the Permits for a
Property, and all legal fees incurred in connection with obtaining such Permits
with the prior written permission of the Owner, shall be paid by the Owner. Upon
request, the Manager shall provide such assistance as may be necessary in order
to obtain Permits for such other affiliate of the Owner with respect to the
Property, whether such Permits are required by applicable law or are being
requested at the option of the Owner or the applicable affiliate.

                                   ARTICLE IV

                           MAINTENANCE AND OPERATIONS

         Section 4.01. Engineering Management Services.

         (a) Benchmark Study. Upon request by the Owner, the Manager shall
promptly prepare and deliver to the Owner a report containing corrective and
deferred maintenance work or capital improvements required to be performed at
the Property.

         (b) Quarterly Inspections. The Manager shall conduct physical
inspections of the Property at least quarterly unless the Owner reasonably
determines that a more frequent inspection is necessary. Specific problems shall
be investigated on an "as-needed" basis. The Manager shall submit to the Owner a
written report containing findings, conclusions and recommendations of actions

<PAGE>

to be taken to correct deficiencies noted during the inspections. This quarterly
inspection and report shall address deficiencies found in, among other areas,
the building foundations, exterior, roof, flashings, concrete work, sidewalks,
retaining walls, parking areas, gutter and downspout systems, mechanical
equipment and utility distribution systems.

         (c) Engineering On-Site Inspections. At the request of the Owner, and
at the Owner's expense, the Manager shall employ or retain a licensed,
experienced mechanical engineer or engineering firm to conduct engineering
on-site inspections of the Property. During these inspections, the engineering
firm shall: (i) inspect all mechanical equipment for corrective maintenance and
other action that should be completed by the Property Staff or outside
contractors; (ii) review preventive maintenance records, logs and other related
records to evaluate work completed; (iii) review energy practices; (iv) consult
with the Property Staff on the findings with regard to the foregoing items; and
(v) submit to the Owner a written, itemized report with respect to the foregoing
immediately following the inspection.

         Section 4.02. Preventative Maintenance. Upon request by the Owner, the
Manager shall promptly provide to the Owner the current preventative maintenance
program for the Property. The Manager shall review or develop, as applicable, a
program designed to keep the Property and all installed mechanical and
electrical systems in proper condition. Following the Owner's review and
approval of any such program for the Property, the Manager shall maintain such
program on a regular basis and such program shall reflect the useful lives of
the various components and items of equipment comprising the Property. The
Manager shall establish and monitor a seasonal maintenance program for the
heating and cooling systems in the Property to assure that they are in good
working order and conserve utility consumption.

         Section 4.03. Capital Improvements. The Owner shall pay for all capital
expenditures set forth in the Budget or otherwise approved by the Owner.

         Section 4.04. Personnel Training. Upon the request of the Owner, the
Manager shall outline in writing the training needs of the Property Staff,
create a training manual for the Property, and establish a training program
based on such training manual that will teach, maintain and improve the
technical proficiency of each member in his or her assigned job.

         Section 4.05. Development. If Manager believes that a Property should
be expanded or improved, Manager shall recommend such action to Owner. If Owner
decides to proceed with the expansion or improvement of a Property, Owner shall
give Manager a right of first offer to act as development consultant.

         Section 4.06. Maintenance. The Manager shall be responsible, at the
Owner's expense, for maintaining the Property according to standards at least
comparable to similar properties in the general areas in which they are located.
The Manager's maintenance responsibilities shall include, without limitation,
interior cleaning of common areas, exterior window cleaning, painting,
decorating, grounds care and landscaping, plumbing, electrical repair,
carpentry, plastering and such other normal maintenance and repair work as may
be necessary. The areas and items to be maintained shall include, without
limitation, roofing, mechanical and other equipment, building exterior surfaces
(including windows), parking areas, sidewalks, gutters, walkways, hallways,
stairwells, storage rooms, the management office and all other related areas

<PAGE>

including fencing, signs and lighting. The Property Staff shall, at least
weekly, conduct walk through inspections of these areas to assure that they are
receiving adequate and appropriate care. The Manager shall supervise the work of
the Property Staff to assure that it is performed in accordance with the Owner's
standards.

         Section 4.07. Supervision of Contracts. The Manager shall arrange for,
coordinate, supervise and enforce the conditions of all contracts necessary or
advisable for the proper operation of the Property including, without
limitation, contracts for the maintenance and repair work described in Section
4.05 above and for water, sewer, electricity, telephone, vermin extermination,
trash removal, landscaping, heating fuels, air conditioner contractual
maintenance, and snow and ice removal. All such contracts (excluding contracts
which provide for payment to vendors directly by residents) shall be at the
Owner's expense. Such contracts entered into during the Term shall provide for
cancellation by the Owner without penalty upon 30 days written notice and shall
not terminate upon the termination of this Agreement, unless the Owner has
agreed otherwise in writing. Any such contracts in the Manager's possession at
the commencement of the Term which do not allow for such 30-day cancellation
will be identified by the Manager and reported to the Owner within 30 days of
the commencement of operations. Further, the Manager shall place orders for such
equipment, tools, appliances, materials, and supplies as are required to
adequately maintain and operate the Property. Such equipment, tools, appliances,
supplies and materials shall be used only for operating, maintaining and
repairing the Property, unless the cost thereof is prorated on a basis
satisfactory to the Owner.

         Section 4.08. Service Requests. The Manager shall maintain
business-like relations with tenants of the Property and receive, record and
take appropriate action with respect to any service requests that may be made.
Complaints of a serious nature shall, after investigation, be reported to the
Owner in a timely manner, together with appropriate recommendations. The Manager
shall make reasonable efforts to obtain full compliance by tenants for all items
of maintenance for which they are individually responsible. Scheduled outages of
water, electricity or other services shall be reported to the Owner and to all
tenants, individually, as promptly, fully and courteously as possible and in a
manner and at a time which are customary under the circumstances or as may
otherwise be required by applicable law. Unscheduled material outages shall be
reported to the Owner and the tenants as soon after occurring as is reasonably
possible.

         Section 4.09. Emergencies.

         (a) Services. Upon request by the Owner, the Manager shall promptly
provide to the Owner details of the current 24-hour, seven day-a-week
maintenance emergency system and any system designed to be responsive to
emergencies (the "Emergency System") for the Property for the Owner's review and
approval. An emergency is defined as any condition of, in or acting on a
Property which if not responded to could injure or damage or impose a threat of
injury or damage to property or persons. The definition of an emergency
includes, without limitation, fire, flood, insufficient heat during winter
weather, lack of hot water and utility shut offs. Following the review of the
Emergency System for the Property submitted by the Manager, the Manager shall
insure that all appropriate Property Staff and Non-Property Staff are familiar
with the applicable Emergency System and shall undertake periodic reviews to
insure that such Emergency System is being complied with.

<PAGE>

         (b) Readiness. In addition to such programs as may be required by
applicable state or local law, rules or regulations, the Manager shall
establish, with the approval of the Owner, a comprehensive program ensuring that
emergencies are dealt with by the Property Staff and outside agencies in a
manner in the best interests of the Owner and the Property and in compliance
with applicable law. This responsibility shall include notification and testing
procedures as may be necessary.

         Section 4.10. Regulatory Requirements. The Manager shall take such
action as may be necessary to (a) obtain and maintain all licenses, permits and
approvals necessary for the operation and maintenance of the Property and (b)
comply in all material respects with all laws, ordinances, orders and
requirements affecting the Property or services provided at the Property; (or
the Owner or the Manager in connection therewith) imposed by any governmental or
quasi-governmental authority having jurisdiction, including but not limited to
building codes, anti-discrimination laws, zoning, assisted living, healthcare,
independent living, and licensing requirements affecting the Property. The
Manager shall give the Owner prompt written notice of any violation or claimed
violation of any such requirement.

         Section 4.11. Security. The Manager shall consult with the Owner to
plan, arrange and supervise a comprehensive security program for the Property.
This program shall include, without limitation, that adequate communications
equipment is operable and available to the Property Staff and all Property Staff
are fully aware of their security responsibilities. Detailed security, fire and
safety procedures shall be developed and distributed to the Owner, all tenants
and the Property Staff. The Manager shall maintain effective liaison with local
fire and police organizations and keep detailed logs covering all security
incidents. The Manager shall promptly inform the Owner of all security incidents
and other material matters prejudicial to the security and safety of the
Property.

                                   ARTICLE V

                              FINANCIAL MANAGEMENT

         Section 5.01. Bank Account. The Manager shall open and maintain, for
the Property, in a local bank selected by the Owner, a checking account (the
"Checking Account") for moneys to be paid or received by the Manager in
connection with its duties hereunder. The Checking Account shall be in the name
determined by the Owner and the Owner shall pay all costs (if any) charged by
the bank for maintaining the account including monthly service fees and the cost
of blank checks; provided, however, that the Manager shall pay all costs charged
by the bank on account of the Manager's errors or negligence in maintaining the
Checking Account including, without limitation, the maintenance of any necessary
cash reserve therein provided that sufficient funds are made available by Owner.
The Manager shall not deposit any of its funds to the Checking Account or
otherwise commingle its funds with the Owner's funds. The Manager shall have
authority to endorse checks payable to the Owner and deposit funds paid or
payable to the Owner into the Checking Account.

         Section 5.02. Collections and Deposits. The Manager shall collect and
deposit in the Checking Account all rents, security deposits, late charges,
insurance and condemnation proceeds, fees, refunds and other monies due from any
source which are payable to the Owner in connection with the leasing and

<PAGE>

operation of the related Property; provided, however, that the Manager shall
deposit security deposits in bank accounts selected by and owned by the Owner
and shall otherwise handle security deposits in accordance with applicable law.
All amounts deposited to the Checking Account shall be swept by the Manager from
the Checking Account on a regular basis into an Operating Expense Account
(herein so called) for the Property. Each Operating Expense Account shall be in
an FDIC insured bank approved by the Owner and shall be owned by the Owner. The
style of the Operating Expense Account shall be in the name of the Property with
designated representatives from the Owner and the Manager being the only parties
authorized to draw from said account. If required by Owner's lender and if
permitted by applicable laws and regulations, all payments made by tenants of
the Property shall be paid directly into a lockbox controlled by Owner's lender
or Owner and payments for Operating Expenses and debt service shall be made
pursuant to an agreement between Owner and Owner's lender.

         Section 5.03. Disbursements. On the 15th day of each calendar month or,
if such day is not a business day, the immediately succeeding business day, the
Manager shall deliver to the Owner a check representing all amounts in the
Operating Expense Account (after allowing for outstanding checks written and
deposits made pursuant to this Agreement which had not yet cleared such
Operating Expense Account) in excess of the sum of (i) the amounts to be
expended or disbursed by the Manager with respect to the Property during such
calendar month as set forth in the Budget; (ii) amounts expended in any prior
month in excess of the amount specified in the Budget with respect to which the
Manager has not yet been reimbursed and which have been approved in writing by
the Owner; and (iii) a cushion equal to 5% of the aggregate amount to be
expended in accordance with the Budget in the immediately succeeding month or
such other amount as may be designated by the Owner. If there is a deficit in
the amount required in the preceding sentence relating to payroll costs,
benefits and other payroll-related expenses, Owner shall fund such deficit from
Owner's own funds. The Manager shall pay out of the Operating Expense Account
for the Property all operating expenses of the Property in accordance with the
Budget for such Property, as permitted by this Agreement or as otherwise
approved in writing by the Owner. The Manager shall hold, remit or expend the
funds in the Checking Account and Operating Expense Account according to the
Budget or the directions of the Owner. The funds in the Checking Account and
Operating Expense Account shall not be co-mingled with funds from any other
projects or facilities managed or operated by the Manager and the Manager shall
compile detailed records concerning all transactions relating to the Checking
Account and Operating Expense Account and shall promptly deliver to the Owner
copies of all statements or other correspondence received by the Manager with
respect to such Checking Account and Operating Expense Account. Except in
emergencies, the Manager shall not incur any obligation in excess of $2,000
which is not specifically included in the Budget, and neither shall the Manager
incur any substantial overrun of any budgeted item without the Owner's prior
written approval. Where an emergency relating to a Property precludes the
Manager's obtaining the prior written consent of the Owner, the Manager shall
make reasonable expenditures as necessary to abate the emergency and shall use
its best efforts to contact the Owner by telephone or otherwise as soon as
possible. The Manager shall also notify the Owner in writing of any such
emergency expenditures within 24 hours thereafter. Except as specifically
authorized by the Owner, the Manager will not incur any obligation (whether or
not in the Budget) which will exceed $10,000 or mature more than one year after

<PAGE>

its creation. At least two but no more than three persons (including Property
Staff) shall be responsible for handling cash in order to maintain adequate
financial control procedures.

         Section 5.04. Examinations and Audits of Accounts. The Checking
Account, the Operating Expense Account and any other accounts maintained by the
Manager in the name of or for the benefit of the Owner may be examined by the
Owner or its designated representatives during normal business hours. The Owner
shall have the right to cause an audit of such accounts at any time at its
expense and the Manager shall make its facilities available for, and cooperate
in, any such audit. In addition, the Manager shall promptly supply to the
Owner's accountants, without charge therefor, all records or documents
respecting the Property that such accountant may request in connection with
audits of the Owner's accounts and preparation of necessary tax returns.

         Section 5.05. Books and Records. The Manager shall maintain, in a
manner consistent with generally accepted accounting principles, a system of
books and records that fully and accurately detail all financial transactions
with respect to the leasing and operation of the Property. Such books and
records shall be (a) the property of the Owner, (b) maintained at the Manager's
office at the Property or at the Manager's corporate office, (c) available to
the Owner upon reasonable request and (d) delivered to the Owner upon the
termination of this Agreement. Manager shall provide to the Owner, during the
term of this Agreement, appropriate on-site accounting systems and software,
which shall include complete accounting, bookkeeping and record keeping services
for the Property, specifically including, but not limited to, resident billings,
accounts payable, accounts receivable, general ledger and inventory records and
maintain demographic information on the residents. The cost allocation between
the Owner and the Manager for the accounting systems shall continue as presently
conducted and as set forth in the Budget. Notwithstanding anything contained
herein, there shall be no allocation of costs to the Owner for corporate-level
accounting of the Manager. Acquisition of software for Property based
operations, software maintenance and update charges will be budgeted expenses of
the Property. Payroll processing may be delegated to a third party, the cost of
which will be the responsibility of the Property. The Owner agrees at its
expense to maintain the computer terminal at the Property compatible with the
mainframe computer currently in use by the Manager and to transmit data to the
Manager via telephone lines.

         Section 5.06. Budget.

         (a) Annual Operating and Capital Budget. The Budget shall serve as the
major control under which the Manager shall operate the Property and there shall
be no substantial deviations therefrom, excluding deviations for such expenses
as utilities, fuel, insurance and other expenses not within the control of the
Manager, except as may be approved in writing by the Owner. No expenses may be
incurred and no commitments may be made by the Manager in the name of the Owner
in connection with the maintenance and operation of the Property in excess of
the amounts allocated to the various classifications of expense in the Budget
for Property, except as otherwise provided herein.

         (b) Budget Preparation. The Manager shall prepare for the Owner's
written approval operating and capital budgets for the Property addressing each
of the items listed on Exhibit C attached hereto (with the Owner-approved budget
in effect from time to time being herein called the "Budget"). The Manager shall

<PAGE>

submit to the Owner, at least 45 days prior to the end of the Owner's fiscal
year, a proposed budget for the next ensuing fiscal year. The proposed budget
submitted by the Manager shall include an analysis of repair and maintenance
needs, operating expenses and any capital improvements anticipated for that
period. Reserve fund requirements, adjusted for inflationary factors, shall also
be included on an updated cost basis in the proposed budget. Reasonable
supporting schedules shall be submitted with the proposed budget. The proposed
budget will reflect a "three year cycles" and will be based on actual income and
expenses for the past completed year and projected income and expenses for the
current year and for the future year for which the Budget is being prepared.
Increases or decreases in actual or estimated amounts for income and expense
items shall also be shown as percentage increases or decreases. The proposed
budget also shall contain a forecast of cash flow for each month of the budget
period, an assessment of personnel needs for operating the Property, a forecast
of rental rates, an analysis of leases then in effect, and such other
supplemental information as may be reasonably required by the Owner. Following
the review and approval of a budget by the Owner, the Manager shall implement
such budget and perform in accordance therewith.

         Section 5.07. Obligations for Expenses. Except as otherwise set forth
herein, all obligations and expenses incurred by the Manager in accordance with
this Agreement shall be deemed to be obligations and expenses of the Owner, the
parties acknowledging that the Manager may engage, at the Owner's expense,
independent contractors and service providers as permitted under this Agreement,
as may be usual and customary in the circumstances in connection with the
performance of the Manager's duties hereunder. The salaries and benefits of the
Non-Property Staff of the Manager and all other general overhead costs and
expenses of Manger shall be paid by the Manager from its own funds. For
avoidance of doubt, the flat amount for allocated overhead expenses of the
Manager (or its Affiliates) currently being paid by the owners or the lessees of
the Property shall not be payable, directly or indirectly by the Owner. The
Manager shall be reimbursed for any costs and expenses (other than those
described in the immediately preceding sentence) related to a Property and which
are contained in the current Budget. The Manager shall also be reimbursed for
travel expenses related to the Property in an amount equal to up to $6,000/year
(to be adjusted annually in accordance with the Consumer Price Index).

                                   ARTICLE VI

                                  MISCELLANEOUS

         Section 6.01. No Partnership or Joint Venture. This Agreement is a
management agreement only and does not grant to the Manager any ownership right
or interest in the Property or any other property of the Owner pertaining
thereto. This Agreement is not intended to and does not constitute a partnership
or joint venture of any kind between the Owner and the Manager with respect to
the operation of the Property or any other matter.

         Section 6.02. Notices. Any notice that is provided for in this
Agreement shall be in writing, shall be given either manually or by mail,
overnight courier, hand delivery or facsimile or cable, and shall be deemed
sufficiently given if and when received by the party to be notified at its
address or facsimile set forth below or if and when mailed by registered or
certified mail, postage prepaid, addressed to such party at such address (any

<PAGE>

single notice given pursuant to this Section 6.02 to the address designated
below for the Manager shall be deemed as notice so given to both the Manager).
Any party and any representative designated below may, by notice to the others,
change its address for receiving such notices. Refusal to accept such notice or
inability to deliver such notice on account of a change in address not given the
other addressees shall be deemed receipt of notice.

                  If to the Owner:
                                 BRE/Cottonwood L.L.C.
                                 c/o The Blackstone Group
                                 345 Park Avenue
                                 New York, New York  10154
                                 Attn:  Stavros Galiotos
                                 Facsimile:  (212) 583-5730

                  With a copy to:
                                 Simpson Thacher & Bartlett
                                 425 Lexington Avenue
                                 New York, New York  10017
                                 Attn:  Scott M. Kobak, Esq.
                                 Facsimile:  (212) 455-2502

                  If to the Manager:

                                 Capital Senior Living, Inc.
                                 14160 Dallas Parkway
                                 Suite 300
                                 Dallas, Texas 75240
                                 Attn:  Keith Johannessen and David Brickman
                                 Facsimile:  (972) 770-5666

         Section 6.03. Applicable Law. This Agreement shall be executed,
construed and performed in accordance with the laws of the State of New York.

         Section 6.04. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Manager shall not assign its rights or
delegate its duties hereunder to any party by operation of law, or otherwise,
and no shares of stock in the Manager shall be transferred, without the prior
written consent of the Owner, which consent may be withheld in the Owner's sole
discretion. Notwithstanding the foregoing, subject to requirements of law and
regulatory approvals, the Manager may, without the Owner's consent, enter into a
merger transaction with Manager or an affiliate or Manager or assign its rights
and delegate its duties hereunder to an affiliate of Manager, provided, however,
that no such merger or assignment shall relieve the Manager from any of its
obligations under this Agreement. Any attempted assignment or delegation by the
Manager other than as permitted hereby shall be void and of no force or effect.

<PAGE>

The Owner shall be entitled, at any time during the Term and in its sole
discretion, to assign its rights and benefits under this Agreement so long as
such assignee assumes the Owner's obligations hereunder and agrees to be bound
by the terms and conditions hereof or succeeds the Owner as the owner of the
Property.

         Section 6.05. Confidentiality. (a) Confidential Information;
Representatives. For purposes of this Section:

                  (i) The term "Owner Confidential Information" shall be deemed
         to include all information concerning the Property and the Owner
         (whether prepared by the Owner, its Representatives or otherwise and
         irrespective of the form of communication) which is furnished to the
         Manager or Representative (as defined below) of the Manager
         (collectively, the "Management Group") now or in the future by the
         Owner or by its Representatives, together with all notes, analyses,
         compilations, studies, interpretations or other documents prepared by
         any member of the Management Group which contain, reflect or are based
         upon, in whole or in part, the information furnished to any member of
         the Management Group pursuant hereto. The term "Owner Confidential
         Information" shall also include the Required Information (as defined
         below), but does not include the Proprietary Information (as defined
         below), or information which is or becomes generally available to the
         public other than as a result of a disclosure in violation of this
         Agreement by any member of the Management Group.

                  (ii) The term "Required Information" shall be deemed to
         include all information required to own and operate the Property as it
         is currently being operated and as it is required to be operated in
         accordance with this Agreement.

                  (iii) The term "Proprietary Information" shall be deemed to
         include all materials developed by Manager and of a proprietary nature.
         The term "Proprietary Information" does not include information which
         is or becomes generally available to the public other than as a result
         of a disclosure in violation of this Agreement by the Owner and its
         Representatives (the "Owner Group").

                  (iv) The term "Representatives" shall mean, collectively, and
         as applicable, a person's directors, officers, employees, affiliates
         (as such term is defined under the Securities Exchange Act of 1934, as
         amended), agents or advisors (including, without limitation, attorneys,
         accountants, consultants, bankers and financial advisors).

         (b) Use of Proprietary Information. The Owner hereby agrees that the
Owner Group shall use the Proprietary Information solely for the purpose of
owning and operating the Property or otherwise performing or assisting the
Manager in the performance of its obligations under this Agreement, that the
Proprietary Information will be kept confidential and that no member of the
Owner Group will use the Proprietary Information for any other purpose or
disclose any of the Proprietary Information in any manner whatsoever; provided,
however, that the Owner may make any disclosure of the Proprietary Information
to the extent that the Manager gives its prior written consent. Notwithstanding
the foregoing or anything else contained herein, the Owner Group may disclose to
any and all persons, without limitation of any kind, the federal income tax
treatment and federal income tax structure of the activities contemplated by

<PAGE>

this Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to them relating to such U.S. federal income tax
treatment and federal income tax structure; provided, however, that any such
information relating to such federal income tax treatment or federal income tax
structure is required to be kept confidential to the extent reasonably necessary
to comply with any applicable federal or state securities laws.

         (c) Use of Owner Confidential Information. The Manager hereby agrees
that each member of the Management Group shall use the Owner Confidential
Information solely for the purpose of managing the Property or otherwise
performing or assisting the Manager in the performance of its obligations under
this Agreement, that the Owner Confidential Information will be kept
confidential and that no member of the Management Group will use the Owner
Confidential Information for any other purpose or disclose any of the Owner
Confidential Information in any manner whatsoever; provided, however, that the
Manager may make any disclosure of the Owner Confidential Information to the
extent that the Owner gives its prior written consent. It is understood and
agreed that the Manager shall inform each member of the Management Group of the
confidential nature of the Owner Confidential Information prior to delivery
thereof to such person, and of the obligation to not contact or communicate with
the persons described above, and that by receiving such materials, such member
of the Management Group will be deemed to have agreed to be bound by this
Agreement. In any event, the Manager shall be responsible for any breach of this
Agreement by the Manager or by any member of the Management Group, unless such
Management Group member has signed a separate Confidentiality Agreement with the
Owner, and the Manager agrees, at the Manager's sole expense, to take all
reasonable measures (including but not limited to court proceedings) to restrain
any member of the Management Group from prohibited or unauthorized contacts or
disclosure or use of the Owner Confidential Information. Notwithstanding any
other provision of this Agreement, the foregoing restriction shall continue in
full force and effect throughout the Term and following the termination of this
Agreement.

         (d) Remedies. The Manager and the Owner agree that either party shall
be entitled to equitable relief, including injunction and specific performance,
in the event of any breach of the provisions of this Section and that the
Manager and the Owner shall not oppose the granting of such relief.

         Section 6.06. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous negotiations, understandings and
agreements, written or oral, between the parties. This Agreement shall not be
amended or modified, and no waiver of any provision hereof shall be effective,
unless set forth in a written instrument authorized and executed with the same
formality as this Agreement.

         Section 6.07. Captions, Gender, Number. The captions hereof are for
convenience of reference only and shall neither limit nor enlarge the provisions
hereof. All personal pronouns used herein, whether used in the masculine,
feminine or neuter gender, shall include all other genders. The singular shall
include the plural and vice versa unless the context requires otherwise.

<PAGE>

         Section 6.08. Severability. If any provision hereof, or the application
thereof to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of the provisions hereof, or the application of
such provision to other persons or circumstances, shall not be affected thereby,
and each provision hereof shall be valid and enforceable to the fullest extent
permitted by law.

         Section 6.09. Days. If any action is required to be performed, or if
any notice, consent or other communication is to be given, on a day that is a
Saturday or Sunday or a legal holiday in the jurisdiction in which the action is
required to be performed or in which is located the intended recipient of such
notice, consent or other communication, such performance shall be deemed to be
required, and such notice, consent or other communication shall be deemed to be
given, on the first business day following such Saturday, Sunday or legal
holiday. Unless otherwise specified herein, all references herein to a "day" or
"days" shall refer to calendar days and not business days.

         Section 6.10. Subordination. This Agreement and all rights of Manager
shall be subject and subordinate to any mortgage or deed of trust encumbering
the Property. Such subordination include the absolute right of the holder of
such mortgage or deed of trust to terminate this Agreement, without premium or
penalty, upon a default by Owner under the loan secured by such mortgage or deed
of trust. The foregoing subordination shall be self-operative, provided that
upon request of a lender or Owner, Manager shall execute such subordination
agreements to confirm such subordination and rights of termination.
Notwithstanding the foregoing, Manager shall not be required to perform under
this Agreement, unless it receives the compensation due to Manager hereunder.

         Section 6.11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.

         Section 6.12. Waiver of Jury Trial. The Owner and the Manager waive
trial by jury in any action, proceeding or counterclaim brought by any of them
against the other on all matters arising out of this agreement.

         Section 6.13. CONSENT TO JURISDICTION. THE MANAGER HEREBY IRREVOCABLY
SUBMITS AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR
FEDERAL COURT HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK OR ANY COUNTY
IN WHICH A PROPERTY IS LOCATED FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY MATTER ARISING FROM OR RELATED TO THIS AGREEMENT. THE MANAGER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING.

         THE MANAGER AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST THE OWNER OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF THE

<PAGE>

OWNER, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
COURT OTHER THAN A STATE OR FEDERAL COURT HAVING JURISDICTION OVER NEW YORK
COUNTY, NEW YORK

         THE MANAGER AND THE OWNER HEREBY CONSENT TO SERVICE OF PROCESS BY THE
OWNER IN ANY MANNER AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN
SHALL AFFECT OR IMPAIR THE MANAGERS'S AND THE OWNER'S RIGHT TO SERVE LEGAL
PROCESS IN ANY MANNER PERMITTED BY LAW.

         Section 6.14. Arbitration. In the event of any dispute, claim or
controversy of any kind between the parties, concerning this Agreement or the
termination of this Agreement, the matter shall be submitted to arbitration in
accordance with rules of the American Association. The parties jointly shall
agree on an arbitrator. If the parties are unable to agree, in good faith within
a reasonable time, on the selection of an arbitrator, either party may request
appointment of an arbitrator chosen by the American Arbitration Association who
shall be the selected arbitrator. Such arbitrator shall be limited in his
decision to a choice between the final position as requested by each party. Said
arbitration shall be held or such other place as is mutually agreeable. The
arbitration decision shall be final and binding on both parties unless the
arbitration is fraudulent or so grossly erroneous as to necessarily imply bad
faith. Costs of arbitration are to be shared by both parties equally, provided
that the arbitrator may choose to award the costs of arbitration against the
loss party if the arbitrator determined that the final position urged by the
losing party was not reasonable.


<PAGE>


         WITNESS the following signatures.

                                           OWNER:

                                           BRE/COTTONWOOD L.L.C., a Delaware
                                           limited liability company


                                           By:
                                              ----------------------------------
                                              Name:  Stavros Galiotos
                                              Title: Managing Director and
                                                     Vice President

                                           MANAGER:

                                           CAPITAL SENIOR LIVING, INC., a Texas
                                           corporation



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