<PAGE>
MANAGEMENT AGREEMENT
     This Management Agreement made effective this 1st day of August, 1997,
between Savannah Square of Weatherford, Inc., a Corporation (hereinafter
called "Owner") and Sterling House Corporation, a Corporation (hereinafter
called "Operator").
WITNESSETH:
     WHEREAS, Owner has entered into an Option Agreement with LTC for the
sale of the real property, improvements and equipment used in the operation of
Savannah Square Assisted Living Suites located in Weatherford, Oklahoma (the
"Facility"); and
     WHEREAS, it is anticipated that LTC will enter into a lease arrangement
for the lease of the Facility to the Operator; and
     WHEREAS, it is the purpose of this Agreement to allow the Operator to
operate the Facility prior to the actual closing of the sale of the facility
by the Owner to LTC.
     NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the parties agree as follows:
     1.  Appointment as Manager.
     1.1 Appointment of Operator.  The Owner hereby remains the services of
Operator and Operator hereby accepts such engagement on the terms and
conditions hereinafter provided for the operation and management of Savannah
Square Assisted Living Suites in Weatherford, Oklahoma.  Operator shall deal
in good faith with Owner.  Operator shall, at all times, operate and manage
the Facility in accordance with the standards then being achieved for
comparable facilities in the area, subject to the authority, limits and
Owner's approval set forth in this Agreement.
<PAGE>
     1.2 Operating of Facility.  Operator shall manage the Facility
consistent with the standards with applicable local, state and federal laws
and regulations.
     1.3 Marketing Activities.  Without limiting the obligations of the
Operator under Section 1.2 hereof, Operator shall conduct such marketing
activities as Operator may desire at Operator's sole cost and expense.
     2.  Services to be Performed by Operator.
     2.1 Expense of Owner.  All obligations or expenses except those
marketing expenses identified in paragraph 1.3 of this Agreement, incurred by
Operator on behalf of Owner under this Agreement shall be at the expense of
Owner and paid by Owner according to this Agreement.  Operator shall obtain
approval of Owner for all expenditures not recurring or in the ordinary course
of business in the operation of the Facility, except as otherwise specifically
provided in this Agreement.  Provided, however, owner shall not be obligated
to pay or reimburse for the following expenses:
(a) Cost of wages, payroll taxes, insurance, workers' compensation
insurance and other benefits of Operator's personnel, except those employees
who work directly on site at the Facility;
(b) Cost of forms, papers, ledgers and other supplies, equipment and
computer services used by Operator except those used directly for the
Facility's benefit;
(c) Cost attributable for non-insurable losses arising from gross
negligence and fraud on the part of Operator, Operator's agents or Operator's
employees; and
(d) Any overhead and general expenses of Operator.
<PAGE>
     2.2 Employment of Personnel.
(a) The Operator shall hire in the Owner's name, on site personnel
necessary for the full and efficient performance of the Operator's duties
under this Agreement at wages and benefits competitive in the market. 
Employees shall work directly on the site at the Facility.
(b) In the performance of its obligation under the Agreement, the
Operator will comply with provisions of federal, state or local law
prohibiting discrimination in housing on the grounds of race, color, sex,
religion, natural origin or handicap.
     2.3 Service Contracts.  Operator shall not make any contracts for
services to be provided to the Facility in Owner's name without Owner's
approval except continuing or renewable contracts presently in force.  Owner
shall not be liable after the closing date with LTC for any such contract
continuing past said closing date.
     2.4 Maintenance and Repair of Property.  Operator shall use its best
efforts to maintain the building premises and grounds of the Facility as
currently maintained by Owner including within such maintenance without
limitation thereof, interior and exterior cleaning, decorating, plumbing,
carpentry, prevented HVAC maintenance and such other normal repair work as may
be necessary and desirable.  Operator shall not make any improvements which
would be considered capital improvements to the Facility including changes in
design, structure or appearance of the Facility without the consent of Owner.
     2.5 Insurance.  Owner shall cause to be placed and kept in force all
forms of insurance required by law or needed adequately to protect Owner or
Operator including (but not limited to) workers' compensation insurance, 

<PAGE>
public liability insurance, professional liability insurance, employee theft,
fire and extended coverage insurance for all property comprising the Facility
including personal property of the Owner and Operator, burglary and theft
insurance.  All of the foregoing at Owner's sole cost and expense.  All
insurance coverage shall be placed with such companies in such amounts and
such beneficial interest thereon as shall be acceptable to Owner.  Owner shall
provide Operator with evidence that all insurance coverage is in force. 
Operator shall promptly investigate and make a written report to Owner and the
insurance company as to all accidents, claims for damage relating to the
ownership, operation and maintenance of the Facility or any damage or
destruction thereto.  Further, Operator shall investigate the estimated cost
to repair thereof and shall prepare any and all reports required by any
insurance company in connection therewith.  All such reports shall be timely
filed with the insurance company as required under the terms of the insurance
policy after approval by Owner.  Owner shall direct the placement of all
insurance to be maintained pursuant to this Section 2.5.
     2.6 Collection of Monies.  Operator shall use its best effort to collect
all rent and other charges due from residents of the Facility and any
subtenants or concessionaires herein in the Facility.  Owner authorizes
Operator to request, demand, collect, receive and recede for all such rent and
other charges and to institute legal proceedings in the name of the owner and
as an expense reimbursable by Owner for the collection thereof and for the
deposition of residents and other persons from the Facility and such expenses
may include the engaging of counsel approved by Owner for such matters.  All
monies collected by Operator shall forthwith be deposited in the bank accounts 

<PAGE>
designated by Owner pursuant to Section 3.3 hereof.
     2.7 Records and Reporting.
     (a) Records.  Operator shall maintain at the Facility such records,
leases, correspondence, receipts and papers routinely maintained at the
Facility pertaining directly to the Facility or the operation thereof.  Such
records and other information shall constitute the property of the Owner and
shall be opened during reasonable business hours and for periodic inspection
and examination by the Owner and/or its authorized representatives.
     (b) In Compliance with Legal Requirements.  Operator shall take such
action as may be necessary to comply with any and all orders affecting the
operation of the Facility by any federal, state, county or municipal authority
having jurisdiction thereof.  Provided however, Operator shall not be
responsible for matters relating to the design or construction of the building
or improvements.
     (c) Legal Notices.  Operator shall furnish to Owner within forty-eight
(48) hours after receipt by Operator, any and all legal notice received by
Operator effecting the Facility including, without limitation, notices from
taxing or other governmental authorities by any governmental authority or any
board or fire underwriters or similar body.
     3.  Relationship of Operator and Owner.
     3.1 Compensation of Operator.  During the operating term (and
proportionally for any fraction of a month), Owner shall pay monthly to
Operator for services rendered under this Agreement a management fee of One
Hundred and 00/100 ($100.00) Dollars.
     3.1 Use and Maintenance of Premises.  Operator agrees that it will not 

<PAGE>
knowingly permit the use of the Facility for any other purpose which might
void any policy of insurance held by Owner or which might render any loss
thereunder uncollectible, or which would be in violation of any government
restriction.  Operator shall use its best efforts to secure full compliance by
the residents within the terms and conditions of their respective agreements. 
Operator shall be expected to perform such other acts as are reasonably
necessary and proper in the discharge of its duties under this Agreement.  All
cost of collecting or complying with and all fines payable in connection with
any orders or violations effecting the Facility placed thereon by any
governmental authority or board of fire underwriters or other similar body
shall be at the cost and expense of Owner unless caused by Operator's
malfeasance, gross negligence or willful failure or refusal to perform its
obligations hereunder in which case and to the extent such cost shall be borne
by Operator.
     3.3 Bank Accounts.  All rent, revenue and other monies received by
Operator for the operation of the Facility from any resident shall be
forwarded immediately to Owner for deposit in an account established by Owner. 
All expenses for the operating of the Facility shall be paid by Owner from
such account.
     3.4 Operating Term.  This Agreement shall commence on the date hereof
("Commencement Date") and shall thereafter continue until terminated at
midnight on the 31st day of August, 1997, unless renewed or extended
thereafter by written agreement of the parties to this Agreement ("Operating
Term").  In the event of termination provided for herein, Operator will
immediately remit all collections to Owner and records, contracts, leases, 

<PAGE>
receipts for deposits and unpaid bills within thirty (30) days after
termination.  Operator shall remit all proceeds, if any, to the Owner and all
records, contracts, leases and receipts for deposits, unpaid bills and other
papers and documents which pertain to the Facility.
     3.5 No Assignment By Operator.  Operator may not assign, transfer or
convey any of its right, title or interest hereunder, nor shall it have the
right to delegate any of the obligations or duties required to be kept by it
hereunder without the prior written consent of Owner.
     3.6 Indemnity by Owner and Operator.  From and after the date hereof,
each party hereby agrees to indemnify the other against acts committed by the
other from and against any and all claims, demands, expense or legal
proceeding (including cost, expenses and attorney's fees) relative to any
claims for any personal injury, disease, loss of use, advertising injury or
property damage on the part of any third party (including employees and agents
or either of them) or relative to any loss or damage or both in the Facility
from any cause whatever which may be made or brought against them and arising
out of the intentional torts, crimes, gross negligence or willful and wanton
acts of each of them, its officers, employees and agents and operating the
Facility, which are not covered by insurance to be obtained and all times
maintained pursuant to paragraph 2.5 of this Agreement.  In addition, Owner
also agrees to indemnify and hold Operator harmless against any claims arising
before the Commencement Date.  Owner and Operator further agree to exert all
reasonable efforts in good faith to cause their individual insurance contracts
to be so endorsed to acknowledge that in fact, prior to the time any insurance
loss or damage has incurred, each has waived the right of recovery against the 

<PAGE>
other.
     3.7 Notices.  All notices, demands, consents, approvals and requests
given by either party hereunder shall be in writing and shall be sent first
class mail, postage prepaid, to the parties at the following addresses:
     If to Owner:
     Savannah Square of Weatherford, Inc.
     c/o ERC Properties, Inc.
     Attn: Bob Fikes
     P.O. Box 3945
     Barling, AR 72913

     If to Operator:

     Sterling House Corporation
     Attn: Gail Knott
     453 S. Webb Road, Suite 500
     Wichita, KS 67207

     3.8 Miscellaneous.
     (a) In the event that any one or more of the phrases, sentences, clauses
or paragraphs contained in this Agreement shall be declared invalid or
unenforceable by order, decree or judgment of any court having jurisdiction,
or shall be or become invalid or unenforceable by virtue of any duly
promulgated law, rule or regulation, the remainder of this Agreement shall be
construed as if such phrases, sentences, clauses or paragraph has not been
inserted except when such construction (a) would operate as an undue hardship
on either party or (b) would constitute a substantial deviation from the
general intent and purposes of the parties as reflected herein.  In the event
of either (a) or (b) above, the parties will use their best efforts to
negotiate a mutually satisfactory amendment to this Agreement to circumvent
the inequity.

<PAGE>
     (b) No failure to exercise, and no delay in exercising on the part of
Owner or
Operator, any right, power or privilege hereunder or under applicable law
shall preclude other or further exercise thereof of such or any other right,
power or privilege or Owner or Operator.  The rights and remedies herein
provided are cumulative and not exclusive of any other rights or remedies
provided by law.
     (c) Operator shall devote such of its time, attention and business
capacity to the management and operation of the Facility as may be necessary
in order for Operator to comply with the terms of this Agreement.
     (d) Neither this Agreement nor any part hereof nor any service,
relationship, or other matter alluded to herein shall inure to the benefit of
any third party, to any trustee in bankruptcy, to any assignee for the benefit
or creditors, to any receiver by reason of insolvency, to any insolvent estate
of either party, or to the creditors or claimants of such estate.
     (e) Owner and Operator shall execute and deliver all appropriate
agreements or other instruments supplemental to this Agreement and shall take
whatever action may be desirable to evidence that this Agreement is fully and
legally effective, binding and enforceable as between then and as against
third parties.
     (f) The heading or the title to the general articles and paragraphs of
this Agreement are inserted for convenience of reference only and are not
intended to affect the meaning of any of the provisions.
     (g) This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of Owner or Operator.

<PAGE>
     (h) This Agreement shall be construed, interpreted and applied in 
accordance with and shall be governed by the laws of the State of Kansas.
(I) This Agreement constitutes the entire agreement between Owner and
Operator which respect to their relationship in respect to their relationship
in respect to the management of the Facility.  This Agreement may be amended
only by an instrument in writing executed by Owner and Operator.
(j) This Agreement may be executed simultaneously in two or more
duplicates, each of which duplicate shall be deemed an original.  In approving
this Agreement it shall not be necessary to produce or account for more than
one of the duplicates.  This Agreement may be executed in counterparts, all of
which taken together shall constitute one Agreement binding on all parties
notwithstanding that all the parties are no signatories to the same
counterpart.
     IN WITNESS WHEREOF, the parties have executed this Agreement the day and
date first above written.

                                    SAVANNAH SQUARE OF WEATHERFORD, INC.

                                    By: /s/ Ernest R. Coleman           
                                    By: /s/ Robert L. Fikes, EVP               
                                        8/4/97

                                    STERLING HOUSE CORPORATION

                                    By: /s/ Steven L. Vick              
<PAGE>
ACKNOWLEDGMENT
STATE OF ARKANSAS      )
                                               )ss
COUNTY OF CRAWFORD )

     On this 1st day of August, 1997, before me, a Notary Public, duly
qualified, commissioned and acting within and for the County of Crawford,
appeared in person Ernest R. Coleman of Savannah Square of Weatherford, Inc.,
to me personally well known as the person whose name appears upon the above
and foregoing and states that he has executed the same for the consideration
and purpose therein mentioned and set forth, and do hereby so certify.

     In Testimony Whereof, I have hereunto set my hand and seal as such
Notary Public this 1st day of August, 1997.

                                    /s/ Carla Kelley            
                                    Notary Public
My Commission Expires:

    10/01/05                     
SEAL
ACKNOWLEDGMENT

STATE OF KANSAS           )
                                               )ss
COUNTY OF SEDGWICK  )

     On this 4th day of August, 1997, before me, a Notary Public, duly
qualified, commissioned and acting within and for the County of Sedgwick,
appeared in person Steven L. Vick of Sterling House Corporation, to me
personally well known as the person whose name appears upon the above and
foregoing and states that he has executed the same for the consideration and
purpose therein mentioned and set forth, and do hereby so certify.

     In Testimony Whereof, I have hereunto set my hand and seal as such
Notary Public this 4th day of August, 1997.

                                    /s/ T. Sue Anderson            
                                    Notary Public

My Commission Expires:

    7/10/99                     
SEAL




<PAGE>

ACKNOWLEDGMENT

STATE OF Arkansas            )
                                               )ss
COUNTY OF Crawford        )

     On this 4th day of August, 1997, before me, a Notary Public, duly
qualified, commissioned and acting within and for the County of Crawford,
appeared in person Robert L. Fikes, Sr. Executive Vice President of Savannah
Square of Weatherford, Inc. to me personally well known as the person whose
name appears upon the above and foregoing and states that he has executed the
same for the consideration and purpose therein mentioned and set forth, and do
hereby so certify.

     In Testimony Whereof, I have hereunto set my hand and seal as such
Notary Public this 4th day of August, 1997.

/s/ Carla Kelley               
Notary Public

My Commission Expires:

    10/01/05                     
SEAL

<PAGE>
<PAGE>
MANAGEMENT AGREEMENT
     This Management Agreement made effective this 1st day of August, 1997,
between Savannah Square of Edmond, Inc., a Corporation (hereinafter called
"Owner") and Sterling House Corporation, a Corporation (hereinafter called
"Operator").
WITNESSETH:
     WHEREAS, Owner has entered into an Option Agreement with LTC for the
sale of the real property, improvements and equipment used in the operation of
Savannah Square Assisted
Living Suites located in Edmond, Oklahoma (the "Facility"); and
     WHEREAS, it is anticipated that LTC will enter into a lease arrangement
for the lease of the Facility to the Operator; and
     WHEREAS, it is the purpose of this Agreement to allow the Operator to
operate the Facility prior to the actual closing of the sale of the facility
by the Owner to LTC.
     NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the parties agree as follows:
     1.  Appointment as Manager.
     1.1 Appointment of Operator.  The Owner hereby remains the services of
Operator and Operator hereby accepts such engagement on the terms and
conditions hereinafter provided for the operation and management of Savannah
Square Assisted Living Suites in Edmond, Oklahoma.  Operator shall deal in
good faith with Owner.  Operator shall, at all times, operate and manage the
Facility in accordance with the standards then being achieved for comparable
facilities in the area, subject to the authority, limits and Owner's approval
set forth in this Agreement.
<PAGE>
     1.2 Operating of Facility.  Operator shall manage the Facility
consistent with the standards with applicable local, state and federal laws
and regulations.
     1.3 Marketing Activities.  Without limiting the obligations of the
Operator under Section 1.2 hereof, Operator shall conduct such marketing
activities as Operator may desire at Operator's sole cost and expense.
     2.  Services to be Performed by Operator.
     2.1 Expense of Owner.  All obligations or expenses except those
marketing expenses identified in paragraph 1.3 of this Agreement, incurred by
Operator on behalf of Owner under this Agreement shall be at the expense of
Owner and paid by Owner according to this Agreement.  Operator shall obtain
approval of Owner for all expenditures not recurring or in the ordinary course
of business in the operation of the Facility, except as otherwise specifically
provided in this Agreement.  Provided, however, owner shall not be obligated
to pay or reimburse for the following expenses:
   (a) Cost of wages, payroll taxes, insurance, workers' compensation
insurance and other benefits of Operator's personnel, except those employees
who work directly on site at the Facility;
   (b) Cost of forms, papers, ledgers and other supplies, equipment and
computer services used by Operator except those used directly for the
Facility's benefit;
   (c) Cost attributable for non-insurable losses arising from gross
negligence and fraud on the part of Operator, Operator's agents or Operator's
employees; and
   (d) Any overhead and general expenses of Operator.
<PAGE>
     2.2 Employment of Personnel.
     (a) The Operator shall hire in the Owner's name, on site personnel
necessary for the full and efficient performance of the Operator's duties
under this Agreement at wages and benefits competitive in the market. 
Employees shall work directly on the site at the Facility.
     (b) In the performance of its obligation under the Agreement, the
Operator will comply with provisions of federal, state or local law
prohibiting discrimination in housing on the grounds of race, color, sex,
religion, natural origin or handicap.
     2.3 Service Contracts.  Operator shall not make any contracts for
services to be provided to the Facility in Owner's name without Owner's
approval except continuing or renewable contracts presently in force.  Owner
shall not be liable after the closing date with LTC for any such contract
continuing past said closing date.
     2.4 Maintenance and Repair of Property.  Operator shall use its best
efforts to maintain the building premises and grounds of the Facility as
currently maintained by Owner including within such maintenance without
limitation thereof, interior and exterior cleaning, decorating, plumbing,
carpentry, prevented HVAC maintenance and such other normal repair work as may
be necessary and desirable.  Operator shall not make any improvements which
would be considered capital improvements to the Facility including changes in
design, structure or appearance of the Facility without the consent of Owner.
     2.5 Insurance.  Owner shall cause to be placed and kept in force all
forms of insurance required by law or needed adequately to protect Owner or
Operator including (but not limited to) workers' compensation insurance, 

<PAGE>
public liability insurance, professional liability insurance, employee theft,
fire and extended coverage insurance for all property comprising the Facility
including personal property of the Owner and Operator, burglary and theft
insurance.  All of the foregoing at Owner's sole cost and expense.  All
insurance coverage shall be placed with such companies in such amounts and
such beneficial interest thereon as shall be acceptable to Owner.  Owner shall
provide Operator with evidence that all insurance coverage is in force. 
Operator shall promptly investigate and make a written report to Owner and the
insurance company as to all accidents, claims for damage relating to the
ownership, operation and maintenance of the Facility or any damage or
destruction thereto.  Further, Operator shall investigate the estimated cost
to repair thereof and shall prepare any and all reports required by any
insurance company in connection therewith.  All such reports shall be timely
filed with the insurance company as required under the terms of the insurance
policy after approval by Owner.  Owner shall direct the placement of all
insurance to be maintained pursuant to this Section 2.5.
     2.6 Collection of Monies.  Operator shall use its best effort to collect
all rent and other charges due from residents of the Facility and any
subtenants or concessionaires herein in the Facility.  Owner authorizes
Operator to request, demand, collect, receive and recede for all such rent and
other charges and to institute legal proceedings in the name of the owner and
as an expense reimbursable by Owner for the collection thereof and for the
deposition of residents and other persons from the Facility and such expenses
may include the engaging of counsel approved by Owner for such matters.  All
monies collected by Operator shall forthwith be deposited in the bank accounts 

<PAGE>
designated by Owner pursuant to Section 3.3 hereof.
     2.7 Records and Reporting.
     (a) Records.  Operator shall maintain at the Facility such records,
leases, correspondence, receipts and papers routinely maintained at the
Facility pertaining directly to the Facility or the operation thereof.  Such
records and other information shall constitute the property of the Owner and
shall be opened during reasonable business hours and for periodic inspection
and examination by the Owner and/or its authorized representatives.
     (b) In Compliance with Legal Requirements.  Operator shall take such
action as may be necessary to comply with any and all orders affecting the
operation of the Facility by any federal, state, county or municipal authority
having jurisdiction thereof.  Provided however, Operator shall not be
responsible for matters relating to the design or construction of the building
or improvements.
     (c) Legal Notices.  Operator shall furnish to Owner within forty-eight
(48) hours after receipt by Operator, any and all legal notice received by
Operator effecting the Facility including, without limitation, notices from
taxing or other governmental authorities by any governmental authority or any
board or fire underwriters or similar body.
     3.  Relationship of Operator and Owner.
     3.1 Compensation of Operator.  During the operating term (and
proportionally for any fraction of a month), Owner shall pay monthly to
Operator for services rendered under this Agreement a management fee of One
Hundred and 00/100 ($100.00) Dollars.
     3.1 Use and Maintenance of Premises.  Operator agrees that it will not 

<PAGE>
knowingly permit the use of the Facility for any other purpose which might
void any policy of insurance held by Owner or which might render any loss
thereunder uncollectible, or which would be in violation of any government
restriction.  Operator shall use its best efforts to secure full compliance by
the residents within the terms and conditions of their respective agreements. 
Operator shall be expected to perform such other acts as are reasonably
necessary and proper in the discharge of its duties under this Agreement.  All
cost of collecting or complying with and all fines payable in connection with
any orders or violations effecting the Facility placed thereon by any
governmental authority or board of fire underwriters or other similar body
shall be at the cost and expense of Owner unless caused by Operator's
malfeasance, gross negligence or willful failure or refusal to perform its
obligations hereunder in which case and to the extent such cost shall be borne
by Operator.
     3.3 Bank Accounts.  All rent, revenue and other monies received by
Operator for the operation of the Facility from any resident shall be
forwarded immediately to Owner for deposit in an account established by Owner. 
All expenses for the operating of the Facility shall be paid by Owner from
such account.
    3.4 Operating Term.  This Agreement shall commence on the date hereof
("Commencement Date") and shall thereafter continue until terminated at
midnight on the 31st day of August, 1997, unless renewed or extended
thereafter by written agreement of the parties to this Agreement ("Operating
Term").  In the event of termination provided for herein, Operator will
immediately remit all collections to Owner and records, contracts, leases, 

<PAGE>
receipts for deposits and unpaid bills within thirty (30) days after
termination.  Operator shall remit all proceeds, if any, to the Owner and all
records, contracts, leases and receipts for deposits, unpaid bills and other
papers and documents which pertain to the Facility.
     3.5 No Assignment By Operator.  Operator may not assign, transfer or
convey any of its right, title or interest hereunder, nor shall it have the
right to delegate any of the obligations or duties required to be kept by it
hereunder without the prior written consent of Owner.
     3.6 Indemnity by Owner and Operator.  From and after the date hereof,
each party hereby agrees to indemnify the other against acts committed by the
other from and against any and all claims, demands, expense or legal
proceeding (including cost, expenses and attorney's fees) relative to any
claims for any personal injury, disease, loss of use, advertising injury or
property damage on the part of any third party (including employees and agents
or either of them) or relative to any loss or damage or both in the Facility
from any cause whatever which may be made or brought against them and arising
out of the intentional torts, crimes, gross negligence or willful and wanton
acts of each of them, its officers, employees and agents and operating the
Facility, which are not covered by insurance to be obtained and all times
maintained pursuant to paragraph 2.5 of this Agreement.  In addition, Owner
also agrees to indemnify and hold Operator harmless against any claims arising
before the Commencement Date.  Owner and Operator further agree to exert all
reasonable efforts in good faith to cause their individual insurance contracts
to be so endorsed to acknowledge that in fact, prior to the time any insurance
loss or damage has incurred, each has waived the right of recovery against the 

<PAGE>
other.
     3.7 Notices.  All notices, demands, consents, approvals and requests
given by either party hereunder shall be in writing and shall be sent first
class mail, postage prepaid, to the parties at the following addresses:
     If to Owner:
     Savannah Square of Edmond, Inc.
     c/o ERC Properties, Inc.
     Attn: Bob Fikes
     P.O. Box 3945
     Barling, AR 72913

     If to Operator:

     Sterling House Corporation
     Attn: Gail Knott
     453 S. Webb Road, Suite 500
     Wichita, KS 67207

     3.8 Miscellaneous.
     (a) In the event that any one or more of the phrases, sentences, clauses
or paragraphs contained in this Agreement shall be declared invalid or
unenforceable by order, decree or judgment of any court having jurisdiction,
or shall be or become invalid or unenforceable by virtue of any duly
promulgated law, rule or regulation, the remainder of this Agreement shall be
construed as if such phrases, sentences, clauses or paragraph has not been
inserted except when such construction (a) would operate as an undue hardship
on either party or (b) would constitute a substantial deviation from the
general intent and purposes of the parties as reflected herein.  In the event
of either (a) or (b) above, the parties will use their best efforts to
negotiate a mutually satisfactory amendment to this Agreement to circumvent
the inequity.
<PAGE>
     (b) No failure to exercise, and no delay in exercising on the part of
Owner or 
Operator, any right, power or privilege hereunder or under applicable law
shall preclude other or further exercise thereof of such or any other right,
power or privilege or Owner or Operator.  The rights and remedies herein
provided are cumulative and not exclusive of any other rights or remedies
provided by law.
     (c) Operator shall devote such of its time, attention and business
capacity to the management and operation of the Facility as may be necessary
in order for Operator to comply with the terms of this Agreement.
     (d) Neither this Agreement nor any part hereof nor any service,
relationship, or other matter alluded to herein shall inure to the benefit of
any third party, to any trustee in bankruptcy, to any assignee for the benefit
or creditors, to any receiver by reason of insolvency, to any insolvent estate
of either party, or to the creditors or claimants of such estate.
     (e) Owner and Operator shall execute and deliver all appropriate
agreements or other instruments supplemental to this Agreement and shall take
whatever action may be desirable to evidence that this Agreement is fully and
legally effective, binding and enforceable as between then and as against
third parties.
     (f) The heading or the title to the general articles and paragraphs of
this Agreement are inserted for convenience of reference only and are not
intended to affect the meaning of any of the provisions.
     (g) This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of Owner or Operator.

<PAGE>
     (h) This Agreement shall be construed, interpreted and applied in 
accordance with and shall be governed by the laws of the State of Kansas.
     (I) This Agreement constitutes the entire agreement between Owner and
Operator which respect to their relationship in respect to their relationship
in respect to the management of the Facility.  This Agreement may be amended
only by an instrument in writing executed by Owner and Operator.
     (j) This Agreement may be executed simultaneously in two or more
duplicates, each of which duplicate shall be deemed an original.  In approving
this Agreement it shall not be necessary to produce or account for more than
one of the duplicates.  This Agreement may be executed in counterparts, all of
which taken together shall constitute one Agreement binding on all parties
notwithstanding that all the parties are no signatories to the same
counterpart.
     IN WITNESS WHEREOF, the parties have executed this Agreement the day and
date first above written.

                                    SAVANNAH SQUARE OF EDMOND, INC.

                                    By: /s/ Ernest R. Coleman           
                                    By: /s/ Robert L. Fikes, EVP        
                                        8/4/97

                                    STERLING HOUSE CORPORATION

                                    By: /s/ Steven L. Vick              
<PAGE>
ACKNOWLEDGMENT
STATE OF ARKANSAS      )
                                               )ss
COUNTY OF CRAWFORD )

     On this 1st day of August, 1997, before me, a Notary Public, duly
qualified, commissioned and acting within and for the County of Crawford,
appeared in person Ernest R. Coleman of Savannah Square of Edmond, Inc., to me
personally well known as the person whose name appears upon the above and
foregoing and states that he has executed the same for the consideration and
purpose therein mentioned and set forth, and do hereby so certify.

     In Testimony Whereof, I have hereunto set my hand and seal as such
Notary Public this 1st day of August, 1997.

                                    /s/ Carla Kelley            
                                    Notary Public
My Commission Expires:

    10/01/05                     
SEAL
ACKNOWLEDGMENT

STATE OF KANSAS           )
                                               )ss
COUNTY OF SEDGWICK  )

     On this 4th day of August, 1997, before me, a Notary Public, duly
qualified, commissioned and acting within and for the County of Sedgwick,
appeared in person Steven L. Vick of Sterling House Corporation, to me
personally well known as the person whose name appears upon the above and
foregoing and states that he has executed the same for the consideration and
purpose therein mentioned and set forth, and do hereby so certify.

     In Testimony Whereof, I have hereunto set my hand and seal as such
Notary Public this 4th day of August, 1997.

                                    /s/ T. Sue Anderson            
                                    Notary Public

My Commission Expires:

    7/10/99                     
SEAL





<PAGE>
ACKNOWLEDGMENT

STATE OF Arkansas            )
                                               )ss
COUNTY OF Crawford        )

     On this 4th day of August, 1997, before me, a Notary Public, duly
qualified, commissioned and acting within and for the County of Crawford,
appeared in person Robert L. Fikes, Sr. Executive Vice President of Savannah
Square of Edmond, Inc. to me personally well known as the person whose name
appears upon the above and foregoing and states that he has executed the same
for the consideration and purpose therein mentioned and set forth, and do
hereby so certify.

     In Testimony Whereof, I have hereunto set my hand and seal as such
Notary Public this 4th day of August, 1997.

                                    /s/ Carla Kelley               
                                    Notary Public

My Commission Expires:

    10/01/05                     
SEAL



















ADDENDUM TO LETTER AGREEMENT DATED AUGUST 4, 1997
BETWEEN STERLING HOUSE CORPORATION AND
SAVANNAH SQUARE OF WAUTAUGA, INC.

ADDENDUM

     SHC agrees to provide to Savannah Square evidence of public liability
and workers' compensation insurance with Savannah Square named as additional
insured on the public liability insurance.  SHC agrees to indemnify and hold
harmless Savannah Square from any and all claims arising out of the activities
and conduct of business by SHC at the Wautauga, Texas property.
     Dated this 4th day of August, 1997.

                                    STERLING HOUSE CORPORATION


                                    By:____________________________________



                                    SAVANNAH SQUARE OF WAUTAUGA, INC.


                                    By: /s/ Robert L. Fikes                   
                                    Executive Vice President
                                    8/4/97