447419-81                                                     FILED
                                                              Sep 12 1995
                                                              Secretary of State

                            CERTIFICATE ACCOMPANYING
                      RESTATED ARTICLES OF INCORPORATED OF
                      BOWEN SENIOR LIVING MANAGEMENT, INC.


     1.  The name of the corporation is Bowen Senior Living Management, Inc.
(the "Corporation").

     2.  A copy of the Restated Articles of Incorporation ("Restated Articles")
is attached.  Shareholder action was required to adopt the Restated Articles.

     3.  The Restated Articles were adopted by the shareholders of the
Corporation on August 28, 1995.

     4.  The shareholder vote for the adoption of the Restated Articles was
as follows:

Class         Number of       Number of          Number of      Number of
or Series     Shares          Votes Entitled     Votes Cast     Votes Cast
of Shares     Outstanding     To Be Cast         For            Against
---------     -----------     --------------     ----------     ----------

Common
  Stock       1,000           1,000              1,000          0

     DATED:  August 28, 1995.

                                       BOWEN SENIOR LIVING MANAGEMENT, INC.



                                       By: WALTER C. BOWEN
                                           --------------------------------
                                           Walter C. Bowen, President
<PAGE>
                       RESTATED ARTICLES OF INCORPORATION
                                       OF
                      BOWEN SENIOR LIVING MANAGEMENT, INC.

                                    ARTICLE I

     The name of the Corporation is Regent Assisted Living, Inc.


                                   ARTICLE II

     A. The Corporation is authorized to issue shares of two classes of stock:
25,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock.

          When these Restated Articles of Incorporation become effective, each
of the shares of Common Stock issued and outstanding immediately before the time
these Restated Articles of Incorporation become effective shall be reclassified
and changed into and constitute 3,000 shares of fully paid Common Stock of the
Corporation without further action of any kind. No fractional shares shall be
issued on reclassification of the Common Stock and the number of shares for
which the Common Stock is reclassified shall be rounded up to the nearest whole
share.

     B. Holders of Common Stock are entitled to one vote per share on any matter
submitted to the shareholders. On dissolution of the Corporation, after any
preferential amount with respect to the Preferred Stock has been paid or set
aside, the holders of Common Stock and the holders of any series of Preferred
Stock entitled to participate in the distribution of assets are entitled to
receive the net assets of the Corporation.

     C. The Board of Directors is authorized, subject to limitations prescribed
by the Oregon Business Corporation Act, as amended from time to time (the
"Act"), and by the provisions of this Article, to provide for the issuance of
shares of Preferred Stock in series, to establish from time to time the number
of shares to be included in each series and to determine the designations,
relative rights, preferences and limitations of the shares of each series. The
authority of the Board of Directors with respect to each series includes
determination of the following:

          (1) The number of shares in and the distinguishing designation of that
series;
<PAGE>
          (2) Whether shares of that series shall have full, special,
conditional, limited or no voting rights, except to the extent otherwise
provided by the Act;

          (3) Whether shares of that series shall be convertible and the terms
and conditions of the conversion, including provision for adjustment of the
conversion rate in circumstances determined by the Board of Directors;

          (4) Whether shares of that series shall be redeemable and the terms
and conditions of redemption, including the date or dates upon or after which
they shall be redeemable and the amount per share payable in case of redemption,
which amount may vary under different conditions or at different redemption
dates;

          (5) The dividend rate, if any, on shares of that series, the manner of
calculating any dividends and the preferences of any dividends;

          (6) The rights of shares of that series in the event of voluntary or
involuntary dissolution of the Corporation and the rights of priority of that
series relative to the Common Stock and any other series of Preferred Stock on
the distribution of assets on dissolution; and

          (7) Any other rights, preferences and limitations of that series that
are permitted by law to vary.

                                   ARTICLE III

          No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
provided that this Article shall not eliminate the liability of a director for
any act or omission for which such elimination of liability is not permitted
under the Act. No amendment to the Act that further limits the acts or omissions
for which elimination of liability is permitted shall affect a director's
liability for any act or omission that occurs before the effective date of the
amendment.

                                   ARTICLE IV

          The Corporation shall indemnify to the fullest extent not prohibited
by law any current or former director of the Corporation who is made, or
threatened to be made, a party to an action, suit or proceeding, whether civil,
criminal, administrative, investigative or other (including an action, suit or
proceeding by or in the right of the Corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of the Corporation
or a fiduciary within the meaning of the Employee Retirement Income Security Act
of 1974, as amended, with respect to any employee benefit plan of the
Corporation, or serves or served at the Corporation's request as a director,
officer, employee or agent, or as a fiduciary of an employee benefit plan, of
another corporation,

                                        2
<PAGE>
partnership, joint venture, trust or other enterprise. The Corporation shall pay
for or reimburse the reasonable expenses incurred by any such current or former
director in any such proceeding in advance of the final disposition of the
proceeding if the person sets forth in writing (i) the person's good faith
belief that the person is entitled to indemnification under this Article and
(ii) the person's agreement to repay all advances if it is ultimately determined
that the person is not entitled to indemnification under this Article. No
amendment to this Article that limits the Corporation's obligation to indemnify
any person shall have any effect on such obligation for any act or omission that
occurs before the later of the effective date of the amendment or the date that
notice of the amendment is given to the person. This Article shall not be deemed
exclusive of any other provisions for indemnification or advancement of expenses
of directors, officers, employees, agents and fiduciaries that may be included
in any statute, bylaw, agreement, general or specific action of the Board of
Directors, vote of shareholders or other document or arrangement.

                                    ARTICLE V

          The mailing address for the Corporation for notices is 2260 US Bancorp
Tower, 111 SW Fifth Avenue, Portland, Oregon 97204.


Executed:  August 28, 1995.



                                       BOWEN SENIOR LIVING MANAGEMENT, INC.


                                       WALTER C. BOWEN
                                       ------------------------------------
                                       Walter C. Bowen, President

                                        3
<PAGE>
447419-81                                                     FILED
                                                              Dec 13 1996
                                                              Secretary of State

                              ARTICLES OF AMENDMENT
                                       OF
                          REGENT ASSISTED LIVING, INC.
              (Establishing Series A and Series B Preferred Stock)


     1. The name of the Corporation is Regent Assisted Living, Inc.

     2. The Restated Articles of Incorporation of the Corporation are amended to
add a new Article II.D to the end of Article II to read in its entirety as
follows:

     "D. Series A and Series B Preferred Stock. This Article II.D sets for the
designation, preferences, limitations and relative rights of two series of
Preferred Stock of the Corporation as determined by the Board of Directors of
the Corporation pursuant to its authority under ORS 60.134 and Article II.C
above. The shares of the first of such series shall be designated Series A
Preferred Stock ("Series A Preferred") and the number of shares constituting
such series shall be 1,666,667, and the shares of the second of such series
shall be designated Series B Preferred Stock ("Series B Preferred") and the
number of shares constituting such series shall be 382,882. The Series A
Preferred and the Series B Preferred shall be referred to collectively herein as
the "Preferred Stock." Except as otherwise provided herein or as otherwise
required by applicable law, all shares of Series A Preferred and Series B
Preferred shall be identical in all respects and shall entitle the holders
thereof to the same rights, preferences and privileges, subject to the same
qualifications, limitations and restrictions, as set forth below.

          Section 1. Dividends.

               (i) When and as declared by the Corporation's Board of Directors
and to the extent permitted under the Oregon Business Corporation Act, the
Corporation will pay preferential cumulative dividends to the holders of the
Preferred Stock as provided in this Section 1. Except as otherwise provided
herein, dividends on each share of Preferred Stock will accrue on a daily basis
at the rate of six percent per annum of the Liquidation Value thereof plus,
during any period in which accrued dividends have remained unpaid for more than
12 months, accrued and unpaid dividends thereon, determined on a quarterly
basis, from and including the date of issuance of such share of Preferred Stock
to and including the earlier of (a) the date on which the Liquidation Value of
such share of Preferred Stock plus any accrued and unpaid dividends thereon is
paid to the holder thereof upon any liquidation, dissolution or winding up of
the Corporation or upon any redemption by the Corporation, (b) the date on which
such share of Preferred Stock is converted into Common Stock or (c) the date as
of which the Weighted Average Market Price of the Common Stock for a period of
90 consecutive calendar days commencing after November 30, 1999, is at least
$12.00 per share (as appropriately adjusted for any combination or subdivision
of shares, stock dividend, stock split or other recapitalization). Such
dividends will accrue whether or not they have been declared and whether or not
there
<PAGE>
are profits, surplus or other funds of the Corporation legally available for the
payment of dividends. The date on which the Corporation initially issues any
share of Preferred Stock will be deemed to be its "date of issuance" regardless
of the number of times transfer of such share of Preferred Stock is made on the
stock records maintained by or for the Corporation and regardless of the number
of certificates which may be issued to evidence such share of Preferred Stock.
To the extent not paid on March 31, June 30, September 30, and December 31 of
each year beginning on March 31, 1997 (the "Dividend Payment Date"), all
dividends which have accrued on each share of Preferred Stock outstanding during
the three-month period (or other period in the case of the initial Dividend
Payment Date) shall be accumulated and shall remain accumulated dividends with
respect to each such share of Preferred Stock until paid. If at any time the
Corporation pays less than the total amount of dividends then accrued with
respect to the Preferred Stock, such payment will be distributed ratably among
the holders of the Preferred Stock on the basis of the amount of accrued and
unpaid dividends with respect to the shares of Preferred Stock owned by each
such holder.

               (ii) In the event that at any time after dividends cease to
accrue on the Preferred Stock in accordance with Section 1(i)(c) above, and the
Corporation declares or pays any dividends upon the Common Stock (whether
payable in cash, securities or other property) other than dividends payable in
shares of Common Stock, the Corporation shall also declare and pay to the
holders of the Preferred Stock at the same time that it declares and pays such
dividends to the holders of the Common Stock the dividends which would have been
declared and paid with respect to the Common Stock issuable upon conversion of
the Preferred Stock had all of the outstanding Preferred Stock been converted
immediately prior to the record date for such dividend, or, if no record date is
fixed, the date as of which the record holders of Common Stock entitled to such
dividends are to be determined; provided that if any dividends consist of voting
securities, the Corporation shall make available to each holder of Preferred
Stock, at such holder's request, dividends consisting of non-voting securities
which are otherwise identical to the dividends consisting of voting securities
and which non-voting securities are entitled to vote under the same
circumstances as the Series B Preferred and are convertible into such voting
securities on the same terms as Series B Preferred is convertible into Series A
Preferred.

          Section 2. Liquidation.

               (i) Upon any liquidation, dissolution or winding up of the
Corporation, each holder of Preferred Stock shall be entitled to be paid, before
any distribution or payment is made upon any Junior Securities, an amount in
cash equal to the aggregate Liquidation Value of all Preferred Stock held by
such holder (plus all accrued or declared dividends unpaid thereon), and the
holders of Preferred Stock shall not be entitled to any further payment. If,
upon any such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the Preferred Stock
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid hereunder, then the entire assets to be distributed
to the Corporation's

                                        2
<PAGE>
stockholders shall be distributed pro rata among such holders based upon the
aggregate Liquidation Value of all Preferred Stock held by each such holder
(plus all accrued or declared dividends unpaid thereon). At least 30 days prior
to any liquidation, dissolution or winding up of the Corporation, the
Corporation shall give written notice of such event to each record holder of
Preferred Stock, specifying the amount of liquidation proceeds per share to be
distributed to the holders of the Preferred Stock and to the holders of the
Common Stock.

               (ii) At least 30 days prior to the consummation of any
Fundamental Change, the Corporation shall give written notice of such event to
each record holder of the Preferred Stock, describing in reasonable detail the
terms and conditions of the Fundamental Change, and the Corporation shall give
each record holder of the Preferred Stock prompt written notice of any material
change in such terms and conditions. Upon the election of the holders of a
majority of the outstanding Preferred Stock delivered to the Corporation within
ten days after receipt of the written notice referred to in the preceding
sentence, such Fundamental Change shall be deemed to be a liquidation,
dissolution and winding up of the Corporation for purposes of this Section 2,
and the holders of the Preferred Stock shall be entitled to receive payment from
the Corporation equal to the amounts payable with respect to the Preferred Stock
upon a liquidation, dissolution or winding up of the Corporation in cancellation
of their shares of Preferred Stock upon the consummation of the Fundamental
Change. If the Fundamental Change is not consummated, the holders' election
shall be rescinded automatically or if there have been material changes in the
terms and conditions of the Fundamental Change, the holders of a majority of the
outstanding Preferred Stock may rescind the election by written notice to the
Corporation, subject in each case to exercise in the future upon another
Fundamental Change.

          Section 3. Voting Rights.

               (i) The holders of Preferred Stock shall have no right to vote on
matters to be voted on by the stockholders of the Corporation except as provided
in this Section 3 and as otherwise expressly required by applicable law;
provided that in any event, each holder of Preferred Stock shall be entitled to
notice of all stockholder meetings at the same time and in the same manner as
notice is given to the stockholders entitled to vote at any such meeting.

               (ii) The holders of Series A Preferred shall be entitled to vote,
together as a single class with the holders of the Common Stock and the other
classes of the Corporation's capital stock voting with the Common Stock, on all
matters submitted to the stockholders for a vote with each share of Series A
Preferred having a number of votes equal to the number of shares of Common Stock
issuable upon the conversion of such share on the record date for the
determination of stockholders entitled to vote and shall be entitled to notice
of each stockholders meeting in accordance with the Bylaws of the Corporation.

                                        3
<PAGE>
               (iii) In addition to and not in derogation of any voting rights
expressly provided under applicable law, the holders of Series B Preferred shall
be entitled to vote, together as a single class with the holders of Common Stock
and Series A Preferred and all other classes of the Corporation's capital stock
voting with the Common Stock, with respect to each Voting Event (as defined
below) with each share of Series B Preferred having a number of votes equal to
the number of shares of Common Stock issuable upon conversion of such share on
the record date for the determination of stockholders entitled to vote, and the
holders of Series B Preferred shall be entitled to notice in accordance with the
Bylaws of the Corporation of each stockholders meeting held in connection with
any Voting Event. Each of the following corporate actions, to the extent
presented for the approval of stockholders, shall constitute a "Voting Event":

                    (a) any change in the authorized number of shares of the
     Series A Preferred, the Series B Preferred or the Common Stock or any other
     amendment to the Articles of Incorporation or Bylaws of the Corporation;

                    (b) the liquidation, dissolution or winding-up of the
     Corporation, the filing of a bankruptcy, insolvency or receivership
     petition by the Corporation or the reclassification or recapitalization of
     the capital stock of the Corporation;

                    (c) any merger, consolidation or other business combination
     or reorganization of the Corporation or (except as otherwise permitted by
     subparagraph (g) below) any of its Subsidiaries with another entity or
     entities;

                    (d) the sale, lease, exchange or other disposition of all or
     substantially all of the property and assets of the Corporation or more
     than 50% of the property and assets of the Corporation and its Subsidiaries
     (excluding cash and cash equivalents and determined on a consolidated basis
     in accordance with generally accepted accounting principles) in any
     transaction or series of related transactions (other than sales of
     inventory in the ordinary course of business);

                    (e) any issuance of shares of capital stock of the
     Corporation other than upon exercise of options and warrants outstanding on
     the date of issuance of the Preferred Stock and up to an aggregate of
     600,000 shares of Common Stock issued upon exercise of options issued or
     granted to officers, directors, employees, agents, consultants, advisors
     and independent contractors of the Corporation and its Subsidiaries
     pursuant to any stock option plan adopted by the Corporation's board of
     directors (as such number of shares is equitably adjusted for subsequent
     stock splits, stock combinations, stock dividends and recapitalizations,
     the "Reserved Stock");

                    (f) any issuance of any options, warrants or other rights to
     acquire any shares of capital stock of the Corporation other than the
     Reserved Stock;

                                        4
<PAGE>
                    (g) any acquisition (whether by purchase of stock or assets,
     merger or otherwise) by the Corporation or any of its Subsidiaries of any
     other entity or business or any interest therein in connection with which
     the aggregate consideration to be paid by the Corporation and its
     Subsidiaries exceeds $250,000 (including the direct and indirect assumption
     of liabilities) in any transaction or series of related transactions;

                    (h) any material change in the nature of the business of the
     Corporation and its Subsidiaries from that of owning, operating and/or
     managing assisted living facilities and all related activities contributing
     to or facilitating such business; and

                    (i) the election or removal of the chief executive officer
     of the Corporation.

          Section 4. Conversion.

          4A. Right to Convert.

               (i) Subject to the terms and conditions of this Section 4, each
holder of Preferred Stock shall have the right, at its option, to convert all or
any portion of the Preferred Stock (including any fraction of a share) held by
such holder as follows:

                    (a) at any time in the case of Series A Preferred, into such
     number of fully paid and nonassessable shares of Common Stock, and at any
     time in the case of Series B Preferred upon the occurrence of a Conversion
     Event (as defined below), into such number of fully paid and nonassessable
     shares of Common Stock, as is obtained by multiplying the number of shares
     of Preferred Stock so to be converted by $6.00 and dividing the result by
     the conversion price of $6.00 per share, or by the conversion price as last
     adjusted and in effect at the date any Preferred Stock is surrendered for
     conversion (such price, or such price as last adjusted, being referred to
     herein as the "Conversion Price"); and

                    (b) in the case of Series B Preferred, into an equal number
     of fully paid and nonassessable shares of Series A Preferred upon the
     occurrence of a Conversion Event.

               (ii) In the case of the Conversion Events described in clauses
(a) and (b) below, the right of conversion shall apply only to the shares of
Series B Preferred that are subject to the transfers or conversions described
therein, and in the case of the Conversion Events described in clauses (c)
through (j) below, the right of conversion shall apply to all shares of Series B
Preferred (except as otherwise provided in clause (g)). In addition, a
conversion in connection with a Conversion Event described in clauses (c)
through (j) below shall be exercisable only for a period of 60 days following
written notice

                                        5
<PAGE>
of such Conversion Event from the Corporation and shall lapse thereafter until
the occur rence of a subsequent Conversion Event. Each of the following shall
constitute a "Conversion Event" with respect to the shares of Series B
Preferred:

                    (a) the sale or other transfer of such shares by Prudential
     Private Equity Investors III, L.P. ("PPEI") or an affiliate of PPEI, or by
     The Prudential Insurance Company of America ("Prudential") or an affiliate
     of Prudential, to a party not affiliated with PPEI or Prudential;

                    (b) the distribution of such shares to any limited partner
     of PPEI, other than Prudential Equity Investors, Inc. or Prudential or any
     other affiliate of PPEI or Prudential;

                    (c) a sale of all or substantially all the assets of the
     Corporation or of the Corporation and its Subsidiaries on a consolidated
     basis (in any transaction or series of related transactions other than in
     the ordinary course of business) or any other acquisition of the
     Corporation by means of a merger, a negotiated stock purchase or a purchase
     pursuant to a tender offer for substantially all of the outstanding shares
     of Common Stock of the Corporation;

                    (d) if for any period of two consecutive fiscal quarters of
     the Corporation, the quarterly financial statements of the Corporation
     reflect an aggregate decline of 20% or more in the Corporation's
     consolidated net income from the fiscal quarter immediately preceding such
     consecutive fiscal quarters, determined in accordance with generally
     accepted accounting principles;

                    (e) if the quarterly financial statements of the Corporation
     for any fiscal quarter reflect a decline of 50% or more in the
     Corporation's consolidated net income from the immediately preceding fiscal
     quarter, determined in accordance with generally accepted accounting
     principles;

                    (f) if for any period of two consecutive fiscal quarters of
     the Corporation, the quarterly financial statements of the Corporation
     reflect an earnings before interest, taxes, depreciation and amortization
     ("EBITDA") that is more than 20% less than the EBITDA contained in the then
     current annual budget showing projected EBITDA for such quarter as approved
     by the Corporation's board of directors from time to time;

                    (g) any default or event of default under any agreement
     pursuant to which the Corporation or any of its Subsidiaries has incurred
     indebtedness for borrowed money in excess of $500,000, unless and until
     such default or event of default is cured or waived (provided that the
     holder of the shares proposed to be converted is not a lender, or in the
     case of PPEI, Prudential or their affiliates, neither PPEI, Prudential or
     any of their affiliates is a lender, under such agreement);

                                        6
<PAGE>
                    (h) if the total number of shares of Common Stock held by,
     or obtainable upon the exercise of rights held by, PPEI and its affiliates
     as a percentage of the total number of shares of Common Stock outstanding
     on a fully-diluted basis is less than 50% of such percentage on the date of
     original issuance of the Preferred Stock;

                    (i) if, during any twelve-month period, more than 30% of the
     Corporation's directors have resigned or have been replaced; or

                    (j) upon the sale or transfer of more than 50% of the Common
     Stock owned by the executive employees of the Corporation and its Subsid
     iaries as a group immediately following the original issuance of the
     Preferred Stock, or the sale or transfer of more than 50% of the Common
     Stock owned by the Original Stockholder immediately following the original
     issuance of the Preferred Stock.

          4B. Conversion Procedure.

               (i) Except as otherwise provided herein, each conversion of
Preferred Stock shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Preferred Stock to be converted have been surrendered at the principal office of
the Corporation (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Preferred
Stock). At such time as such conversion has been effected, the rights of the
holder of such Preferred Stock as such holder shall cease and the Person or
Persons in whose name or names any certificate or certificates for shares of
Conversion Stock or Series A Preferred, as the case may be, are to be issued
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.

               (ii) The conversion rights of each share of Preferred Stock shall
terminate on the date the Corporation has paid to the holder of such share the
Liquidation Value thereof (plus all accrued or declared dividends unpaid
thereon).

               (iii) Notwithstanding any other provision hereof, if a conversion
of any Preferred Stock is to be made in connection with a Public Offering or the
sale of the Corporation or other transaction involving the Corporation, the
conversion of any shares of Preferred Stock may, at the election of the holder
thereof, be conditioned upon the consummation of the Public Offering or sale or
other transaction in which case such conversion shall not be deemed to be
effective until the consummation of the Public Offering or sale or other
transaction.

               (iv) As soon as possible after a conversion has been effected
(but in any event within three business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:

                                        7
<PAGE>
                    (a) a certificate or certificates representing the number of
     shares of Conversion Stock or Series A Preferred, as the case may be,
     issuable by reason of such conversion in such name or names and such
     denomination or denominations as the converting holder has specified;

                    (b) payment in an amount equal to all accrued dividends
     unpaid with respect to each share of Preferred Stock converted into
     Conversion Stock, which have not been paid prior thereto, plus the amount
     payable under subparagraph (viii) below with respect to such conversion;
     and

                    (c) a certificate representing any shares of Preferred Stock
     which were represented by the certificate or certificates delivered to the
     Corporation in connection with such conversion but which were not
     converted.

               (v) If the Corporation is not permitted under applicable law to
pay any portion of the accrued dividends on the shares of Preferred Stock being
converted into Conversion Stock, the Corporation shall pay such dividends to the
converting holder as soon thereafter as funds of the Corporation are legally
available for such payment. At the request of any such converting holder, the
Corporation shall provide such holder with written evidence of its obligation to
such holder.

               (vi) The issuance of certificates for shares of Conversion Stock
or Series A Preferred, as the case may be, upon any conversion of Preferred
Stock shall be made without charge to the holders thereof for any issuance tax
in respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares; provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the shares which are being converted. Upon
conver sion of each share of Preferred Stock, the Corporation shall take all
such actions as are necessary in order to insure that the Conversion Stock or
Series A Preferred, as the case may be, issuable with respect to such conversion
shall be validly issued, fully paid and nonassessable.

               (vii) The Corporation shall not close its transfer books against
the transfer of Conversion Stock or Series A Preferred issued or issuable upon
conversion of Preferred Stock in any manner which interferes with the timely
conversion of the Preferred Stock. The Corporation shall assist and cooperate
with any holder of Preferred Stock required to make any governmental filings or
obtain any governmental approval prior to or in connection with any conversion
of Preferred Stock hereunder (including, without limitation, making any filings
required to be made by the Corporation).

               (viii) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be deliverable upon any
conversion of Preferred Stock, the Corporation, in lieu of delivering the
fractional share therefor, shall pay

                                        8
<PAGE>
an amount to the holder thereof equal to the Market Price of such fractional
interest as of the date of conversion.

               (ix) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Series A Preferred and
Common Stock, solely for the purpose of issuance upon the conversion of the
Series B Preferred, such number of shares of Series A Preferred and Common Stock
issuable upon the conversion of all outstanding Series B Preferred, and the
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of issuance upon the
conversion of the Series A Preferred, such number of shares of Common Stock
issuable upon conversion of all outstanding Series A Preferred. All shares of
stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges. The
Corporation shall take all such actions as may be necessary to ensure that all
such shares may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of such stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Corporation upon each such
issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Series A Preferred or Common Stock
to be less than the required number of such shares to be reserved hereunder.

          4C. Conversion Price.

               (i) The initial Conversion Price of the Series A Preferred and
the Series B Preferred shall be $6.00. In order to prevent dilution of the
conversion rights granted hereunder, the Conversion Price shall be subject to
adjustment from time to time pursuant to this Section 4.

               (ii) If and whenever the Corporation issues or sells, or in
accordance with paragraph 4D is deemed to have issued or sold, any shares of its
Common Stock for a consideration per share less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale the Conversion Price shall be reduced to the Conversion Price
determined by dividing (a) the sum of (1) the product derived by multiplying the
Conversion Price in effect immediately prior to such issue or sale times the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the consideration, if any, received by the Corporation
upon such issue or sale, by (b) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.

               (iii) Notwithstanding the foregoing, there shall be no adjustment
in the Conversion Price under this paragraph 4C as a result of issuances or
deemed issuances of Common Stock (a) upon the grant or exercise of any options
with respect to any shares of the Reserved Stock (a "Permitted Option"), or (b)
upon the conversion of the Preferred Stock.

                                        9
<PAGE>
          4D. Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price hereunder, the following shall be
applicable:

               (i) Issuance of Rights or Options. If the Corporation in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of the Convertible Securities issuable upon exercise of such Options,
is less than the Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the granting or sale of
such Options for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount, if any, received or receivable by the Corporation
as consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation upon
exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment of
the Conversion Price shall be made when Convertible Securities are actually
issued upon the exercise of such Options or when Common Stock is actually issued
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

               (ii) Issuance of Convertible Securities. If the Corporation in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon such conversion or exchange is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale, then the maximum number of shares of Common Stock issuable upon conversion
or exchange of such Convertible Securities shall be deemed to be outstanding and
to have been issued and sold by the Corporation at the time of the issuance or
sale of such Convertible Securities for such price per share. For the purposes
of this paragraph, the "price per share for which Common Stock is issuable"
shall be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other

                                       10
<PAGE>
provisions of this Section 4, no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.

               (iii) Change in Option Price or Conversion Rate. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Conversion Price in effect at the time of such
change shall be adjusted to the Conversion Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold.

               (iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
to the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued.

               (v) Calculation of Consideration Received. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
gross purchase price therefor. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash and securities shall be determined jointly by the Corporation
and the holders of a majority of the outstanding Preferred Stock. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
Corporation and the holders of a majority of the outstanding Preferred Stock.
The determination of such appraiser shall be final and binding upon the parties,
and the fees and expenses of such appraiser shall be borne equally by the
Corporation on the one hand and the holders of the outstanding Preferred Stock
on the other hand, and the portion of the cost to be borne by the holders of
Preferred Stock will be apportioned among such holders pro rata on the basis of
the number of shares of Preferred Stock owned by each such holder.

                                       11
<PAGE>
               (vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for no consideration.

               (vii) Record Date. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

          4E. Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.

          4F. Subdivision or Combination of Preferred Stock. If the Corporation
at any time subdivides by any stock split, stock dividend, recapitalization or
otherwise the outstanding shares of either the Series A Preferred or the Series
B Preferred into a greater number of shares, then the shares of the other series
shall be similarly subdivided, and if the Corporation at any time combines (by
reverse stock split or otherwise) the outstanding shares of the Series A
Preferred or the Series B Preferred into a smaller number of shares, then the
shares of the other series shall be similarly combined.

          4G. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets or other
transaction in each case which is effected in such a manner that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and sub stance reasonably satisfactory to the holders of a
majority of the Preferred Stock then outstanding) to insure that each of the
holders of Preferred Stock shall thereafter have the right to acquire and
receive, in lieu of or in addition to (as the case may be), the shares of
Conversion Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Preferred Stock, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted its

                                       12
<PAGE>
Preferred Stock into Conversion Stock immediately prior to such Organic Change.
In each such case, the Corporation shall also make appropriate provisions (in
form and substance reasonably satisfactory to the holders of a majority of the
Preferred Stock then outstanding) to insure that the provisions of this Section
4 and Section 5 and 6 hereof shall thereafter be applicable to the Preferred
Stock (including, in the case of any such consolidation, merger or sale in which
the successor entity or purchasing entity is other than the Corporation, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Conversion Stock
acquirable and receivable upon conversion of Preferred Stock, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Corporation) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance reasonably satisfactory to the holders of a majority of the
Preferred Stock then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.

          4H. Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 4 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Corporation's board of directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of Preferred Stock;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 4 or decrease the number of shares
of Conversion Stock issuable upon conversion of each share of Preferred Stock.

          4I. Notices.

               (i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Preferred Stock,
setting forth in reasonable detail and certifying the calculation of such
adjustment.

               (ii) The Corporation shall give written notice to all holders of
Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.

               (iii) The Corporation shall also give written notice to the
holders of Preferred Stock at least 20 days prior to the date on which any
Organic Change shall take place.

                                       13
<PAGE>
          4J. Automatic Conversion. All of the outstanding Preferred Stock shall
be automatically converted into Conversion Stock upon the closing of the sale of
shares pursuant to a Qualified Public Offering. Any such automatic conversion
shall only be effected at the time of and subject to the closing of the sale of
such shares pursuant to such Qualified Public Offering.

          4K. Additional Adjustments. If a "Special Adjustment Event" occurs
then the Conversion Price of the Preferred Stock shall be readjusted to the
Conversion Price which would have been in effect if the Conversion Price at the
original issuance of the Preferred Stock had been $5.50 per share. A "Special
Adjustment Event" shall be deemed to have occurred if the Corporation's
independent outside auditors have not certified in writing to the holders of the
Preferred Stock within 30 days after December 31, 1997, that the Corporation
has, during the calendar year ending December 31, 1997, opened and secured all
necessary permits and approvals for the operation of (i) at least ten new
assisted living facilities (not operated or managed by the Company as of the
date of issuance) and (ii) at least 1,000 units within all such new assisted
living facilities. For purposes of calculating the number of new facilities and
units opened by the Corporation, facilities and units in facilities in which the
Corporation has an ownership interest of at least 50% or a lease of at least 15
years (including any available options or extensions of such lease) shall be
counted in their entirety, whereas facilities and units in facilities for which
the Corporation obtains a management contract but in which the Corporation does
not have an ownership interest of at least 50% or a lease of at least 15 years
(including any available options or extensions of such lease) ("Managed
Facilities" and "Managed Units," respectively) shall be counted as one-third of
a facility and one-third of a unit, respectively; provided that no more than
three Managed Facilities and 300 Managed Units (counting as one new assisted
living facility and 100 new units, respectively) shall be counted for purposes
of determining whether a Special Adjustment Event has occurred. Notwithstanding
anything to the contrary set forth in this paragraph 4K, no adjustment to the
Conversion Price shall be made pursuant to this paragraph 4K if the effect of
such adjustment would be to increase the Conversion Price then in effect.

          Section 5. Liquidating Dividends.

          Prior to the time that the Corporation ceases to accrue dividends on
the Preferred Stock as a result of Section 1(i)(c) hereof, if the Corporation
declares or pays a dividend upon the Common Stock payable otherwise than in cash
out of earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then the
Corporation shall pay to the holders of Preferred Stock at the time of payment
thereof the Liquidating Dividends which would have been paid on the shares of
Conversion Stock had such Preferred Stock been converted immediately prior to
the date on which a record is taken for such Liquidating Dividend, or, if no
record is taken, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined; provided that if the
Liquidating Dividends consist of voting securities, the

                                       14
<PAGE>
Corporation shall make available to each holder of Series B Preferred, at such
holder's request, Liquidating Dividends consisting of securities which are
non-voting (except as otherwise required by law), which are otherwise identical
to the Liquidating Dividends consisting of voting securities and which are
convertible into such voting securities on the same terms as Series B Preferred
is convertible into Series A Preferred or Common Stock.

          Section 6. Purchase Rights.

          If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Preferred Stock shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Conversion Stock acquirable upon conversion of such
holder's Preferred Stock immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights; provided that
if the Purchase Rights involve voting securities, the Corporation shall make
available to each holder of Preferred Stock, at such holder's request, Purchase
Rights involving non-voting securities which are otherwise identical to the
Purchase Rights involving voting securities and which non-voting securities are
entitled to vote under the same circumstances as the Series B Preferred and are
convertible into such voting securities on the same terms as Series B Preferred
is convertible into Series A Preferred or Common Stock.

          Section 7. Events of Noncompliance.

               (i) Definition. An Event of Noncompliance shall have occurred if:

                    (a) the Corporation fails to pay on any Dividend Payment
     Date the full amount of dividends then accrued on the Preferred Stock,
     whether or not such payment is legally permissible or is prohibited by any
     agreement to which the Corporation is subject;

                    (b) the Corporation breaches or otherwise fails to perform
     or observe any other material covenant or agreement set forth herein, in
     the Purchase Agreement or in the Stockholders Agreement and such breach or
     failure continues uncured for a period of 30 days;

                    (c) the Corporation or any material Subsidiary makes an
     assignment for the benefit of creditors or admits in writing its inability
     to pay its debts generally as they become due; or an order, judgment or
     decree is entered adjudicating the Corporation or any material Subsidiary
     bankrupt or insolvent; or any order for relief with respect to the
     Corporation or any material Subsidiary is entered

                                       15
<PAGE>
     under the Federal Bankruptcy Code; or the Corporation or any material
     Subsidiary petitions or applies to any tribunal for the appointment of a
     custodian, trustee, receiver or liquidator of the Corporation or any
     material Subsidiary or of any substantial part of the assets of the
     Corporation or any material Subsidiary, or com mences any proceeding (other
     than a proceeding for the voluntary liquidation and dissolution of a
     Material Subsidiary) relating to the Corporation or any material Subsidiary
     under any bankruptcy, reorganization, arrangement, insolvency, readjustment
     of debt, dissolution or liquidation law of any jurisdiction; or any such
     petition or application is filed, or any such proceeding is commenced,
     against the Corporation or any material Subsidiary and either (a) the
     Corporation or any such material Subsidiary by any act indicates its
     approval thereof, consent thereto or acquiescence therein or (b) such
     petition, application or proceeding is not dismissed within 60 days;

                    (d) the Corporation or any material Subsidiary defaults in
     the performance of any obligation or agreement if the effect of such
     default is to cause an amount exceeding $500,000 to become due prior to its
     stated maturity or to permit the holder or holders of any obligation to
     cause an amount exceeding $500,000 to become due prior to its stated
     maturity and such default continues uncured and is not waived for a period
     of 30 days.

               (ii) Consequences of Events of Noncompliance.

                    (a) If an Event of Noncompliance has occurred, the dividend
     rate on the Preferred Stock shall increase immediately by an increment of
     one percentage point. Thereafter, until such time as no Event of
     Noncompliance exists, the dividend rate shall increase automatically at the
     end of each succeeding 90-day period by an additional increment of one
     percentage point (but in no event shall the dividend rate exceed the
     greater of (i) 12% or (ii) the prime rate announced from time to time by
     the U.S. Bank of Oregon plus 300 basis points). Any increase of the
     dividend rate resulting from the operation of this subparagraph shall
     terminate as of the close of business on the date on which no Event of
     Noncompliance exists, subject to subsequent increases pursuant to this
     paragraph.

                    (b) If any Event or Events of Noncompliance has occurred and
     has continued for 730 days, the number of directors constituting the
     Corporation's Board of Directors shall, at the request of the holders of a
     majority of the Preferred Stock then outstanding, be increased by such
     number which shall constitute a minimum majority of the Board of Directors
     (including the directors designated by the holder(s) of the Preferred Stock
     pursuant to the Stockholders Agreement), and the holders of Preferred Stock
     shall have the special right, voting separately as a single class (with
     each share being entitled to one vote) and to the exclusion of all other
     classes of the Corporation's stock, to elect individuals to fill such newly
     created directorships, to remove any individuals elected to such
     directorships and to fill any

                                       16
<PAGE>
     vacancies in such directorships. The special right of the holders of
     Preferred Stock to elect members of the Board of Directors may be exercised
     at the special meeting called pursuant to this subparagraph (b), at any
     annual or other special meeting of stockholders and, to the extent and in
     the manner permitted by applicable law, pursuant to a written consent in
     lieu of a stockholders meeting. Such special right shall continue until
     such time as there is no longer any Event of Noncompliance in existence, at
     which time such special right shall terminate subject to revesting upon the
     occurrence and continuation of any Event of Noncompliance which gives rise
     to such special right hereunder.

               At any time when such special right has vested in the holders of
Preferred Stock, a proper officer of the Corporation shall, upon the written
request of the holder of at least 10% of the Preferred Stock then outstanding,
addressed to the secretary of the Corporation, call a special meeting of the
holders of Preferred Stock for the purpose of electing directors pursuant to
this subparagraph. Such meeting shall be held at the earliest legally
permissible date at the principal office of the Corporation, or at such other
place as first designated by the holders of at least 10% of the Preferred Stock
then outstanding. If such meeting has not been called by a proper officer of the
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Preferred Stock then outstanding may designate in writing one
of their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Preferred Stock then outstanding. Any holder of Preferred Stock so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
subparagraph.

               At any meeting or at any adjournment thereof at which the holders
of Preferred Stock have the special right to elect directors, the presence, in
person or by proxy, of the holders of a majority of the Preferred Stock then
outstanding shall be required to constitute a quorum for the election or removal
of any director by the holders of the Preferred Stock exercising such special
right. The vote of a majority of such quorum shall be required to elect or
remove any such director.

               Any director so elected by the holders of Preferred Stock shall
continue to serve as a director until the expiration of the lesser of (a) a
period of six months following the date on which there is no longer any Event of
Noncompliance in existence or (b) the remaining period of the full term for
which such director has been elected. After the expiration of such six-month
period or when the full term for which such director has been elected ceases
(provided that the special right to elect directors has terminated), as the case
may be, the number of directors constituting the Board of Directors of the
Corporation shall decrease to such number as constituted the whole Board of
Directors of the Corporation

                                       17
<PAGE>
immediately prior to the occurrence of the Event or Events of Noncompliance
giving rise to the special right to elect directors.

                    (c) If any Event of Noncompliance exists, each holder of
     Preferred Stock shall also have any other rights which such holder is
     entitled to under any contract or agreement at any time and any other
     rights which such holder may have pursuant to applicable law.

          Section 8. Registration of Transfer.

          The Corporation shall keep at its principal office a register for the
registration of Preferred Stock. Upon the surrender of any certificate
representing shares of Preferred Stock at such place, the Corporation shall, at
the request of the record holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares of Preferred Stock
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of shares of Preferred
Stock as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance (but not including any transfer
taxes).

          Section 9. Replacement.

          Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of Preferred Stock
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.

          Section 10. Definitions.

          "Common Stock" means the Common Stock, no par value, of the
Corporation, and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of any stated value
in respect to the rights of the holders thereof to participate in dividends or
in the distribution of assets upon any liquidation, dissolution or winding up of
the Corporation.

                                       18
<PAGE>
          "Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock issuable upon exercise of any Option or conversion of any
Convertible Securities granted or issued by the Corporation prior to the
effective date hereof, plus the number of shares of Common Stock deemed to be
outstanding pursuant to paragraphs 4D(i) and (ii) hereof whether or not the
Options or Convertible Securities are actually exercisable at such time.

          "Conversion Stock" means shares of Common Stock; provided that if
there is a change such that the securities issuable upon conversion of either
series of Preferred Stock are issued by an entity other than the Corporation or
there is a change in the class of securities so issuable, then the term
"Conversion Stock" shall mean one share of the security issuable upon conversion
of the such series of Preferred Stock if such security is issuable in shares, or
shall mean the smallest unit in which such security is issuable if such security
is not issuable in shares.

          "Convertible Securities" means any stock or securities convertible
into or exchangeable for Common Stock.

          "Fundamental Change" shall mean any of the following transactions: (a)
the consolidation or merger of the Corporation with or into another entity or
entities (other than any merger in which the Corporation is the surviving entity
and immediately after the merger the holder(s) of the Preferred Stock, the
Original Stockholder and his Permitted Transferees and affiliates collectively
are both (i) the record owners of capital stock of the Corporation possessing
the voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors and (ii) the record and beneficial owners of at
least 50% of the Corporation's issued and outstanding Common Stock, including
the Preferred Stock on an as-if-converted basis); (b) the sale or transfer by
the Corporation of all or substantially all of its assets (determined for the
Corporation either alone or on a consolidated basis); and (c) the sale, transfer
or issuance or series of sales, transfers and/or issuances of shares of the
Corporation's capital stock by the Corporation or any holder thereof which
results in the holder(s) of the Preferred Stock, the Original Stockholder and
his Permitted Transferees and affiliates ceasing to be collectively either (i)
the record owners of capital stock of the Corporation possessing the voting
power (under ordinary circumstances) to elect a majority of the Corporation's
Board of Directors or (ii) the record and beneficial owners of at least 50% of
the Corporation's issued and outstanding Common Stock, including the Preferred
Stock on an as-if-converted basis.

          "Junior Securities" means any of the Corporation's capital stock or
other equity securities other than the Preferred Stock.

          "Liquidation Value" of any share of Preferred Stock as of any
particular date shall be equal to $6.00 (as such amount is equitably adjusted
for subsequent stock splits, stock combinations, stock dividends and
recapitalizations affecting the Preferred Stock).

                                       19
<PAGE>
          "Market Price" of any security means the average of the closing prices
of such security's sales on all securities exchanges on which such security may
at the time be listed, or, if there has been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which "Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" shall be the fair value thereof determined jointly by the
Corporation and the holders of a majority of the Preferred Stock. If such
parties are unable to reach agreement within a reasonable period of time, such
fair value shall be determined by an independent appraiser experienced in
valuing securities jointly selected by the Corporation and the holders of a
majority of the Preferred Stock. The determination of such appraiser shall be
final and binding upon the parties, and the Corporation shall pay the fees and
expenses of such appraiser.

          "Options" means any rights or options to subscribe for or purchase
Common Stock or Convertible Securities.

          "Original Stockholder" has the meaning set forth in the Stockholders
Agreement.

          "Permitted Transferee" has the meaning set forth in the Stockholders
Agreement.

          "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

          "PPEI" means Prudential Private Equity Investors III, L.P., a Delaware
limited partnership.

          "Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933, as then in effect, or any comparable statement under
any similar federal statute then in force; provided that for purposes of
paragraph 4J hereof, a Public Offering shall not include an offering made in
connection with a business acquisition or combination or an employee benefit
plan.

                                       20
<PAGE>
          "Purchase Agreement" means the Preferred Stock and Warrant Purchase
Agreement dated as of December 12, 1996, between the Corporation and PPEI.

          "Qualified Public Offering" means a Public Offering of the
Corporation's Common Stock which is underwritten by a nationally recognized
investment banking firm having an aggregate offering value of at least $30
million in which the price per share to be paid by the public shall be at least
equal to $15.00 per share (as such price per share is appropriately adjusted for
any combination or subdivision of shares, stock dividend, stock split or other
recapitalizations).

          "Stockholders Agreement" means the Stockholders Agreement dated as of
December 12, 1996, among the Corporation, PPEI and the Original Stockholder.

          "Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
limited liability company, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the time owned
or controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a partnership,
limited liability company, association or other business entity if such Person
or Persons shall be allocated a majority of partnership, limited liability
company, association or other business entity gains or losses or shall be or
control the managing general partner of such partnership, limited liability
company, association or other business entity.

          "Weighted Average Market Price" of the Common Stock means (i) the sum
of the product of the Share Price multiplied by the Daily Volume for each day of
any period of 90 consecutive calendar days (the "Trading Period"), divided by
(ii) the Aggregate Daily Volume for the Trading Period, where

                    "Share Price" means the closing price on each day of the
     Trading Period of sales of the Common Stock on the securities exchange on
     which the Common Stock may be listed, or if on any day the Common Stock is
     not listed on any securities exchange, the last bid price quoted in the
     NASDAQ System as of 4:00 P.M., New York time on such day, or if on any day
     the Common Stock is not quoted in the NASDAQ System, the last bid price on
     such day in the domestic over-the-counter market as reported by the
     National Quotation Bureau, Incorporated, or any similar successor
     organization, or if there has been no sales on such day, the Share Price
     shall equal zero, and

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                    "Daily Volume" means the total number of shares of Common
     Stock traded on any securities exchange on any day during the Trading
     Period, or if on any day the Common Stock is not listed on any securities
     exchange, the total number of shares of Common Stock traded on the NASDAQ
     System on any day during the Trading Period, or if on any day the Common
     Stock is not quoted in the NASDAQ System, the total number of shares of
     Common Stock traded on any day during the Trading Period in the domestic
     over-the-counter market as reported by the National Quotation Bureau,
     Incorporated, or any similar successor organization, and

                    "Aggregate Daily Volume" means the sum of the Daily Volume
     for each day of the Trading Period.

          Section 11. Notices.

          Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).

          Section 12. Amendment and Waiver.

          No amendment, modification or waiver hereof shall be binding or
effective with respect to any provision hereof without the prior written consent
of the holders of at least 66-2/3% of the Preferred Stock, in each case
outstanding at the time such action is taken; provided that no change in the
terms hereof may be accomplished by merger or consolidation of the Corporation
with another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of the applicable percentage of the Preferred
Stock then outstanding."

     3. These articles of amendment were adopted on December 10, 1996.

     4. Shareholder action was not required to adopt these articles of
amendment. The articles of amendment were adopted by the Corporation's Board of
Directors without shareholder action.

     5. The person to contact about this filing is:

                                  Peter Bragdon
                                  (503) 294-9517

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         Dated:  December 12, 1996

                                       REGENT ASSISTED LIVING, INC.


                                       By: WALTER C. BOWNE
                                           -------------------------------------
                                           Walter C. Bowen, President and
                                             Chief Executive Officer

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