THE SECURITIES  EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED,  ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A  REGISTRATION  STATEMENT  UNDER SUCH ACT AND LAWS  COVERING
SUCH  SECURITIES  OR THE ISSUER  RECEIVES  AN OPINION OF COUNSEL OR A  NO-ACTION
LETTER FROM THE UNITED STATES  SECURITIES AND EXCHANGE  COMMISSION  STATING THAT
SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT,  HYPOTHECATION OR OFFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.


              -----------------------------------------------------

                       Brookdale Living Communities, Inc.
                               Warrant Certificate
                                    Issued to
                       Banc One Capital Partners IV, Ltd.
                                     in the
                            Purchase of Common Stock
                                       of
                       Brookdale Living Communities, Inc.

             -------------------------------------------------------


                          Dated as of October 23, 1998






                                        1

<PAGE>




                                TABLE OF CONTENTS

                                                                            Page

Section 1.        Definitions..................................................1

Section 2.        Duration and Exercise of Warrant.............................6
                  2.1      Number of Shares of Common Stock.   ................6
                  2.2      Warrant Exercise Period.  ..........................6
                  2.3      Manner of Exercise.   ..............................6
                  2.4      When Exercise Effective.   .........................6
                  2.5      Delivery of Stock Certificates,
                             New Warrant Certificate, etc......................6

Section 3.        Anti-dilution Adjustment.....................................6
                  3.1      Adjustment Event.  .................................6
                  3.2      Reorganization Event.  .............................7
                  3.3      Other Event.  ......................................7
                  3.4      Rights Offering.  ..................................7
                  3.5      Preemptive Rights.  ................................8

Section 4.        Restrictions on Transfer.....................................8
                  4.1      Restrictive Legends.................................8
                  4.2      Notice of Proposed Transfer; Opinion of Counsel.....9

Section 5.        Availability of Information.................................10

Section 6.        Reservation of Stock, Etc...................................10

Section 7.        Capitalization..............................................10

Section 8.        Ownership; Registration of Transfer; Exchange and Substitution
                  of Warrant..................................................10
                  8.1      Ownership of Warrant...............................10
                  8.2      Registration of Transfers..........................11
                  8.3      Replacement of Warrant Certificate.................11
                  8.4      Expenses...........................................11

Section 9.        No Rights as Stockholder....................................11

Section 10.       Demand Registration Rights .................................11
                  10.1     Demand for Registration............................11
                  10.2     Registration Statement Form........................12


                                        i

<PAGE>

                  10.3     Effective Registration Statement...................12
                  10.4     Expenses...........................................12
                  10.5     Underwritten Offerings.............................12
                  10.6     Priority in Requested Registrations................12

Section 11.       "Piggyback" Registration Rights.............................13
                  11.1     Participation in Registration......................13
                  11.2      Expenses..........................................13
                  11.3     Underwritten Offerings.............................13
                  11.4     Priority in Registrations..........................14

Section 12.       Registration Procedures.....................................14

Section 13.       Indemnification.............................................17
                  13.1     Indemnification by the Company.....................17
                  13.2     Indemnification by the Holder......................17
                  13.3     Procedures for Claims..............................18

Section 14.       Rule 144....................................................18

Section 15.       Termination of Registration Rights..........................18

Section 16.       Miscellaneous...............................................19
                  16.1     Amendment..........................................19
                  16.2     Choice of Law......................................19
                  16.3     Headings...........................................19

Form of Warrant Certificate..................................................A-1

Form of Assignment of Warrant................................................B-1


                                       ii

<PAGE>




                               Warrant Certificate

                                                    Dated as of October 23, 1998

         This Warrant Certificate  ("Warrant  Certificate")  certifies that, for
value received,  Banc One Capital  Partners IV, Ltd., an Ohio limited  liability
company  (the  "BOCP  IV"),  is  entitled  to  purchase  from  Brookdale  Living
Communities,  Inc., a Delaware corporation (the "Company"),  up to 33,163 shares
of the Common Stock of the Company as  hereinafter  provided,  in the manner and
subject to the terms and conditions set forth herein.

         The Warrant  evidenced by this Warrant  Certificate  is being issued by
the Company to the Holder as additional  consideration with respect to a certain
loan  transaction  entered into between AH Illinois  Subordinated,  LLC, an Ohio
limited liability company (the "Borrower"),  as borrower, and Holder, as lender,
effective the date hereof, wherein Holder is making loans to the Borrower in the
aggregate principal amount of $8,497,766 (collectively, the "Loan"). The Company
has issued a limited  recourse  guarantee in  connection  with the Loan and will
derive significant benefits from the Loan.

         Section 1.        Definitions.

                  1.1      "Affiliate"  of any specified  Person means any other
Person  directly or indirectly  controlling,  controlled  by, or under direct or
indirect common control with, such specified Person. A Person shall be deemed to
control a corporation  if such Person  possesses,  directly or  indirectly,  the
power  to vote 10% or more of the  Voting  Power of a  Person,  or the  power to
direct or cause the  direction  of the  management  and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.

                  1.2      "Applicable  Law" means,  with respect to any Person,
any and all federal,  national,  state,  regional,  local,  municipal or foreign
laws, statutes, rules, regulations,  guidelines,  ordinances, licenses, permits,
judicial  or  administrative   decisions  of  any  country,   or  any  political
subdivision,  agency, commission,  official or court thereof having jurisdiction
over such Person or its business.

                  1.3      "Adjustment Event" means any of the following events:

                         (i)        the  Company  declares a dividend or makes a
                                    distribution  with  respect  to  outstanding
                                    shares of its Capital Stock,  which dividend
                                    or  distribution is paid entirely or in part
                                    in  shares of  Common  Stock or  Convertible
                                    Securities; or

                        (ii)        the   Company   subdivides,    combines   or
                                    reclassifies   outstanding   shares  of  its
                                    Common Stock or Convertible Securities.

                                       1

<PAGE>





         In no event shall an offering  described in Section 3.5 also constitute
an Adjustment Event.

                  1.4      "BOCP IV" means Banc One Capital  Partners  IV, Ltd.,
an Ohio limited liability company, together with its successors.

                  1.5      "Borrower" has the definition set forth in the second
grammatical paragraph of this Warrant Certificate.

                  1.6      "Business  Day" means any day other than a  Saturday,
Sunday or day on which banking institutions are authorized or required by law or
executive  order to be  closed in the City of  Columbus,  Ohio or in the City of
Chicago, Illinois.

                  1.7      "Capital  Stock"  of any  Person  means  any  and all
shares,  interests,  participations or other equivalents (however designated) of
corporate stock  (including  each class of common stock and preferred  stock) or
partnership or membership interests of such Person.

                  1.8      "Charter  Documents"  mean a  Person's  formation  or
other  governing  documents,  including but not limited to, as  applicable,  its
certificate or articles of incorporation, by-laws, code of regulations, articles
of organization,  operating  agreement,  certificate of limited  partnership and
partnership agreement.

                  1.9      "Commission"  means the United States  Securities and
Exchange  Commission or any other federal agency at the time  administering  the
Securities Act.

                  1.10     "Common Shares" or "Common Stock" means the shares of
common  stock,  $0.01 par value per share,  of the Company,  treated as a single
class of stock, at any time outstanding.

                  1.11     "Company" means Brookdale Living Communities, Inc., a
Delaware  corporation,  and includes any Person which shall succeed to or assume
the obligations of the Company, through restructuring or otherwise.

                  1.12     "Convertible    Securities"    means   evidences   of
indebtedness,  shares of stock or other  securities that are convertible into or
exchangeable for, with or without payment of additional consideration in cash or
property, or options,  warrants or other rights that are exercisable for, Common
Shares, whether or not the right to convert, exchange or exercise is at the time
exercisable.

                  1.13     "Formation  Registration Rights Agreement" means that
certain Registration Rights Agreement, dated as of May 7, 1997, by and among the
Company, The Prime Group, Inc., Prime Group Limited Partnership, and Prime Group
VI, L.P., as amended.


                                        2

<PAGE>





                  1.14     "Formation Holders" means the "Holders" as defined in
the Formation Registration Rights Agreement.

                  1.15     "Holder" means BOCP IV,  together with its successors
and permitted assigns.

                  1.16     "Loan"  has the  definition  set forth in the  second
grammatical paragraph of this Warrant Certificate.

                  1.17     "Notice" has the meaning set forth in ss.4.2.

                  1.18     "Person" means any individual,  corporation,  limited
liability company, partnership, joint venture, association, joint stock company,
trust, unincorporated organization,  governmental authority or any other form of
entity.

                  1.19     "Preemption  Offering"  means any  offering of Common
Shares,  Convertible  Securities or other shares of Capital Stock of the Company
by or on behalf of the Company other than:

                         (i)        any Rights Offering;

                        (ii)        the issuance of the Warrant Shares subject
                                    to this Warrant Certificate;

                       (iii)        the issuance of Common  Shares to the holder
                                    of any other warrant  certificates issued to
                                    BOCP IV by the  Company in  exercise of such
                                    warrant certificate;

                        (iv)        the issuance of Common  Shares to the holder
                                    of any other warrant  certificates issued to
                                    any of BOCP IV's  Affiliates  (including but
                                    not    limited   to   those   two    warrant
                                    certificates  dated June 17,  1998 for 5,000
                                    shares  each  issued  to  Banc  One  Capital
                                    Markets, Inc.) by the Company in exercise of
                                    such warrant certificate;

                         (v)        the  issuance  or  sale  of  Common   Shares
                                    pursuant   to  any   employee,   officer  or
                                    director  stock option plan  approved by the
                                    board of directors of the Company; provided,
                                    that  (a)  options  are  granted  only  with
                                    respect to Common  Shares,  (b) the  minimum
                                    exercise  price  per  Common  Share for such
                                    shares   is  not  less   than   the   market
                                    determined  value per share on the date such
                                    options  were  granted,   as  determined  in
                                    accordance    with   the   Company's   stock
                                    incentive  plans,  and  (c) no  options  are
                                    granted  to  Persons  other  than  officers,
                                    directors  and  employees  of the Company or
                                    any Subsidiary; and

                                       3

<PAGE>


                                    

                        (vi)        the  sale and  issuance  of  Common  Shares,
                                    Convertible   Securities  or  other  Capital
                                    Stock  pursuant  to  any  Qualified   Public
                                    Offering.

                  1.19  "Qualified  Public  Offering"  means the first offer and
sale to the public by the Company or any holders of shares of any Common Shares,
Convertible Securities or other Capital Stock, after the dated hereof,  pursuant
to a registration statement that has been declared effective by the Commission.

                  1.20     "Reorganization Event" means:

                         (i)        any      capital      reorganization      or
                                    reclassification  or recapitalization of any
                                    shares  of  Capital  Stock  of  the  Company
                                    (other  than an event  described  in Section
                                    1.3);

                        (ii)        any merger or  consolidation  of the Company
                                    with or into any  other  Person in which the
                                    Company  is not  the  surviving  entity,  or
                                    which   effects   a   reclassification    or
                                    recapitalization  of any  shares of  Capital
                                    Stock of the Company; or

                       (iii)        the sale,  exchange  or  transfer  of all or
                                    substantially  all  of the  property  of the
                                    Company to any other Person.

                  1.21     "Restricted Securities" means (a) any Warrant bearing
the  applicable  legend set forth in such Warrant,  (b) any Warrant Shares which
are  evidenced by a certificate  or  certificates  bearing such legend,  and (c)
unless the context otherwise  requires,  any Common Shares which are at the time
issuable  upon the  exercise of any Warrant and which,  when so issued,  will be
evidenced by a certificate or certificates bearing such legend.

                  1.22     "Rights Offering" means any offering of Capital Stock
or  Convertible  Securities  of the  Company  or any  distribution  of rights to
purchase  Capital  Stock or  Convertible  Securities of the Company that is made
substantially  on a pro rata basis  among the  holders  of Capital  Stock of the
Company.

                  1.23     "Securities" means collectively, the Warrant and the 
Warrant Shares.

                  1.24     "Securities Act" means the Securities Act of 1933, as
amended,  or any similar federal  statute,  and the rules and regulations of the
Commission  thereunder,  all as of the same  shall  be in  effect  at the  time.
References to a particular section of the Securities Act of 1933 shall include a
reference  to the  comparable  section,  if any, of any such  similar  successor
federal statute.


                                        4

<PAGE>



                  1.25     "Securities   Exchange  Act"  means  the   Securities
Exchange Act of 1934, as amended, or any similar federal statute,  and the rules
and  regulations  of the Commission  thereunder,  all as of the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934 shall include a reference to the comparable  section, if any, of any
similar successor federal statute.

                  1.26     "Subsidiary"  means any entity of which more than 50%
of the  Voting  Power is  owned  or  controlled  by the  Company  at any date of
determination, either directly or through Subsidiaries.

                  1.27     "Tax(es)" means any federal,  state, local or foreign
income,  gross  receipts,  license,  franchise,  payroll,  employment,   excise,
unemployment,  personal property,  severance,  disability, real property, sales,
use,  transfer,  value  added,  alternative,  estimated or other tax of any kind
whatsoever,  including  any  interest,  penalty  or  addition  thereto,  whether
disputed or not.

                  1.28     "Transfer",  "Transferred" means, with respect to any
item,  the sale,  exchange,  pledge  (except with respect to ss.8),  conveyance,
lease, transfer or other disposition of such item or any interest therein.

                  1.29     "Voting Power" means with respect to any entity,  the
power to vote for or  designate  members  of the board of  directors  or similar
group, whether exercised by virtue of the record ownership of securities,  under
a close corporation or similar agreement or under an irrevocable proxy.

                  1.30     "Warrant"  means the warrant issued by the Company to
the Holder evidenced by this Warrant Certificate.

                  1.31     "Warrant  Certificate" means this warrant certificate
or any replacement warrant certificate issued to the Holder.

                  1.32     "Warrant   Exercise  Price"  means $------------- per
Warrant Share, which is equal to 110% the average of the daily per share closing
prices of the Common Stock on NASDAQ for the ten (10)  consecutive  trading days
prior to the date hereof.

                  1.33     "Warrant    Expiration   Date"   means   the   fourth
anniversary of the date hereof.

                  1.34     "Warrant  Shares"  means the Common  Shares  issuable
upon exercise of the Warrant.


                                        5

<PAGE>




         Section 2.        Duration and Exercise of Warrant.

                  2.1      Number  of Shares of  Common  Stock.  Subject  to the
terms and conditions set forth in this Warrant Certificate,  Holder may purchase
up to 33,163  shares of Common  Stock of Company.  The number of Warrant  Shares
that  may  be  purchased  by  the  Holder   pursuant  to  this  Section  2.1  in
consideration  of the  payment  of the  Warrant  Exercise  Price is  subject  to
adjustment as provided for in Section 3.

                  2.2      Warrant  Exercise   Period.   The  Warrant  shall  be
exercisable  in a single or partial  exercise  at any time after the date hereof
but on or before the Warrant Expiration Date.

                  2.3      Manner of  Exercise.  The Warrant may be exercised by
the Holder in a single  exercise upon surrender of this Warrant  Certificate and
the  delivery  of the Notice of Exercise  attached  hereto  duly  completed  and
executed on behalf of the Holder,  at the principal office of the Company (or at
such other office or agency of the Company as it may  designate by notice to the
Holder at the address of the Holder appearing on the books of the Company), upon
payment of an amount  equal to the  Warrant  Exercise  Price  multiplied  by the
number of Warrant  Shares to be  purchased  pursuant  to such  exercise  by wire
transfer or  delivery of a certified  or  cashier's  check to the  Company.  Any
exercise of a Warrant  pursuant to this  Warrant  Certificate  shall be for only
full Warrant Shares and shall not be for partial Warrant Shares.

                  2.4      When Exercise Effective.  The exercise of the Warrant
shall be deemed to have been effected immediately prior to the close of business
on the  Business  Day on which  (a) the  Notice  of  Exercise  shall  have  been
delivered  to  the  Company,  (b)  this  Warrant  Certificate  shall  have  been
surrendered to the Company,  and (c) the Company shall have received  payment of
the Warrant  Exercise Price for the Warrant Shares to be purchased in connection
with such  exercise as provided in Section  2.3,  and  immediately  prior to the
close of business on such Business Day the Holder shall be deemed to have become
the holder of record of the Warrant Shares.

                  2.5      Delivery   of   Stock   Certificates,   New   Warrant
Certificate,  etc. As soon as  practicable  after the effective  exercise of the
Warrant,  the Company at its expense (including any applicable issue taxes) will
cause to be issued in the name of and delivered to the Holder a  certificate  or
certificates  for the  number of  Warrant  Shares to which the  Holder  shall be
entitled upon such exercise.

         Section 3.        Anti-dilution Adjustment.

                  3.1      Adjustment   Event.   Upon  the   occurrence  of  any
Adjustment  Event,  the number of Warrant  Shares shall be adjusted  immediately
after the  applicable  record  date with  respect  to such  Adjustment  Event as
follows.  The adjusted  number of Warrant  Shares shall be a number equal to the
number of Warrant Shares issuable upon exercise of the Warrant immediately prior
to

                                        6

<PAGE>




such record date  multiplied  by a fraction  (i) the  numerator  of which is the
number of outstanding Common Shares immediately after such Adjustment Event, and
(ii) the  denominator  of which  is the  number  of  outstanding  Common  Shares
immediately prior to the record date. Any such adjustment shall be calculated to
the nearest whole Warrant  Share.  Notwithstanding  any other  provision of this
Section 3.1, no adjustment  shall be made with respect to the issuance of Common
Shares, Convertible Securities or other Capital Stock after the date hereof when
such issuance constitutes a Preemption Offering.

                  3.2      Reorganization   Event.  Upon  the  occurrence  of  a
Reorganization  Event,  there shall  thereafter be issuable upon the exercise of
the Warrant  (in lieu of the  Warrant  Shares),  as  appropriate,  the number of
shares of stock,  other  securities  or property to which the Holder  would have
been  entitled  had the Holder  exercised  the Warrant and  received the Warrant
Shares immediately prior to the record date for such Reorganization Event.

         Prior to and as a condition of the  consummation of any  Reorganization
Event,  the Company  shall cause  effective  provisions to be made to effect the
purposes of this Section 3.2, including, if appropriate,  an agreement among the
Company, any successor to the Company and the Holder.


                  3.3      Other  Event.  In case any  event  shall  occur as to
which the other provisions of this Section 3 are not strictly applicable but the
failure to make any  adjustment  would not fairly  protect the  purchase  rights
represented  by  the  Warrant  in  accordance  with  the  essential  intent  and
principles  hereof,  then the Holder may  request in writing  within one hundred
twenty (120) days after the  occurrence  of such event that the Company  examine
the  propriety of an adjustment  to the number of Warrant  Shares  issuable upon
exercise of the Warrant.  Unless the Company and the Holder shall have  mutually
agreed upon an adjustment, or that no adjustment is required, within thirty (30)
days after the  receipt of such  request,  the Company  shall  appoint a firm of
independent  certified public accountants of recognized national standing (which
may be the regularly  engaged  accountants  of the Company),  to give an opinion
upon the adjustment, if any, on a basis consistent with the essential intent and
principles  established  in this  Section 3,  necessary to preserve the purchase
rights  represented  by the Warrant.  Upon receipt of such opinion,  the Company
will promptly mail a copy thereof to the Holder and shall make the  adjustments,
if any,  described  therein.  If such opinion states that no such  adjustment is
necessary,  the Holder shall  reimburse  the Company for the cost and expense of
such opinion, and if an adjustment is necessary,  the Company shall pay the cost
and expense of such opinion. Notwithstanding any other provision of this Section
3.3, no adjustment  shall be made with respect to the issuance of Common Shares,
Convertible  Securities  or other  Capital Stock after the date hereof when such
issuance constitutes a Preemption Offering.

                  3.4      Rights  Offering.  In the  event  the  Company  shall
effect a Rights Offering,  the Holder shall be entitled, at its option, to elect
to  participate  in each and every  such  offering  as if the  Warrant  had been
exercised and the Holder was, at the time of any such rights offering, then


                                        7

<PAGE>




a holder of that number of Common Shares to which the Holder is then entitled on
the exercise of the Warrant.

                  3.5      Preemptive  Rights.  In the  event of any  Preemption
Offering,  (i) the Company  shall  notify the Holder in writing of the number of
Common  Shares,  Convertible  Securities  or other Capital Stock subject to such
Preemption  Offering and the cash or cash equivalent  purchase price (determined
by the Company in good faith) thereof,  and (ii) the Holder shall have the right
for a period of thirty (30) days  following such notice to purchase prior to the
exercise  of the  Warrant  up to  that  number  of  Common  Shares,  Convertible
Securities  or other  Capital  Stock that is  sufficient to permit the Holder to
maintain the  percentage of  outstanding  Common Shares which the Holder owns or
would be entitled to purchase upon exercise of the Warrant,  after giving effect
to the  Holder's  purchase  under  this  Section  3.5 and the sale of the Common
Shares subject to such Preemption Offering.

         The Holder shall have the right, during the period specified herein, to
purchase any or all of the new Common Shares or Convertible  Securities  that it
is entitled to purchase  under this  provision at the purchase  price and on the
terms  stated  in  the  Preemption  Offering.   Notice  by  the  Holder  of  its
participation,  in whole  or in part,  in the  Preemption  Offering  shall be in
writing and signed by the Holder and shall be delivered to the Company  prior to
the end of the period specified  herein,  setting forth the number of new Common
Shares or Convertible Securities the Holder elects to purchase.  With respect to
any of the new Common  Shares or  Convertible  Securities  not  purchased by the
Holder hereunder, the Company may during the period one hundred and eighty (180)
days  following the date of expiration  of the  Preemption  Offering sell to any
other  Person or Persons  all or any part of such Common  Shares or  Convertible
Securities,  but only on terms and conditions that are no more favorable to such
Person or Persons or less  favorable  to the Company than those set forth in the
Preemption Offering.

         Section 4.        Restrictions on Transfer.

                  4.1      Restrictive Legends. Except as otherwise permitted by
this Section 4, the Warrant, each Warrant issued in exchange or substitution for
any  Warrant,  each  Warrant  issued  upon the  registration  of Transfer of any
Warrant,  each certificate  representing the Warrant Shares and each certificate
issued upon the registration of Transfer of any Warrant Shares, shall be stamped
or otherwise imprinted with a legend in substantially the following form:

         "THE SECURITIES  EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
         ANY STATE,  AND MAY NOT BE DISTRIBUTED,  SOLD,  TRANSFERRED,  ASSIGNED,
         HYPOTHECATED  OR  OFFERED  UNLESS  THERE IS IN  EFFECT  A  REGISTRATION
         STATEMENT  UNDER  SUCH ACT AND LAWS  COVERING  SUCH  SECURITIES  OR THE
         ISSUER

                                       8
<PAGE>




         RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OR
         A  NO-ACTION  LETTER FROM THE UNITED  STATES  SECURITIES  AND  EXCHANGE
         COMMISSION STATING THAT SUCH DISTRIBUTION,  SALE, TRANSFER, ASSIGNMENT,
         HYPOTHECATION  OR OFFER IS EXEMPT FROM THE  REGISTRATION AND PROSPECTUS
         DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS."

                  4.2      Notice of  Proposed  Transfer;  Opinion  of  Counsel.
Prior to any Transfer of any Restricted Securities, the Holder will give written
notice  ("Notice")  to the  Company of the  Holder's  intention  to effect  such
Transfer.  Each such Notice of a proposed Transfer (a) shall describe the manner
and  circumstances  of the  proposed  Transfer  in  sufficient  detail to enable
counsel to render the opinion referred to below, and (b) shall designate counsel
for the  Holder.  The Holder  will  submit a copy of such  Notice to the counsel
designated  in such Notice and the Company  will  promptly  submit a copy of the
Notice to its counsel. The following provisions shall then apply:

                         (i)        If in the  opinion of counsel to the Company
                                    the   proposed   Transfer  may  be  effected
                                    without   registration  of  such  Restricted
                                    Securities  under the  Securities  Act,  the
                                    Company will promptly  notify the Holder and
                                    the Holder  shall  thereupon  be entitled to
                                    Transfer  such   Restricted   Securities  in
                                    accordance  with  the  terms  of the  Notice
                                    delivered by the Holder to the Company. Each
                                    Warrant or certificate  for Warrant  Shares,
                                    if any,  issued upon or in  connection  with
                                    such  Transfer  shall  bear  the  applicable
                                    restrictive legend set forth in Section 4.1,
                                    unless in the opinion of such counsel,  such
                                    legend, ----------- requires modification or
                                    is no longer  required to ensure  compliance
                                    with the Securities  Act. If for any reason,
                                    counsel for the Company  (after  having been
                                    furnished with the  information  required by
                                    this  Section  4.2) shall fail to deliver an
                                    opinion to the Company,  or the  -----------
                                    Company  shall  fail to notify the Holder as
                                    aforesaid,  within  sixty  (60)  days  after
                                    receipt of Notice of the Holder's  intention
                                    to effect a Transfer,  then for all purposes
                                    of the  Warrant,  the opinion of counsel for
                                    the Holder shall be  sufficient to authorize
                                    the proposed Transfer,  provided the opinion
                                    is issued by counsel  recognized  as experts
                                    in security law matters,  and the opinion of
                                    counsel  for  the   Company   shall  not  be
                                    required in  connection  with such  proposed
                                    Transfer; or

                        (ii)        If,  in  the   opinion  of  counsel  to  the
                                    Company,  the  proposed  Transfer may not be
                                    effected   without   registration   of  such
                                    Restricted  Securities  under the Securities
                                    Act, the Company will promptly so notify the
                                    Holder and the Holder  shall not be entitled
                                    to Transfer such Restricted Securities until
                                    receipt of a further Notice from the

                                        9

<PAGE>




                                    Company  under  clause  (i)  above  or until
                                    registration of such  Restricted  Securities
                                    under   the   Securities   Act  has   become
                                    effective.

         Section 5.        Availability of Information.

         To the extent they are  applicable  to the  Company,  the Company  will
comply  with  the  reporting  requirements  of  Sections  13  and  15(d)  of the
Securities Exchange Act and all other public information reporting  requirements
of the Commission  (including the  requirements  of Rule 144  promulgated by the
Commission  under the Securities  Act) from time to time in effect.  The Company
will cooperate with the Holder at the Holder's  expense to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the  availability of an exemption from the Securities Act for the
Transfer of any Restricted  Securities or the Transfer of Restricted  Securities
by Affiliates of the Company.

         Section 6.        Reservation of Stock, Etc.

         The  Company  will at all times prior to the  Warrant  Expiration  Date
reserve and keep  available,  solely for issuance and delivery upon the exercise
of the Warrant and free from preemptive rights, a sufficient number of shares of
Common  Stock to cover the  Warrant  Shares  issuable or  exchangeable  upon the
exercise of the Warrant.  All such shares  shall be duly  authorized  and,  when
issued upon such exercise  against  payment  therefor as provided for in Section
2.3, shall be validly issued, fully paid and non-assessable.

         Section 7.        Capitalization.

         The Company  represents and warrants that its authorized  Capital Stock
as of the date hereof consists solely of (i) 75,000,000  shares of Common Stock,
of which  9,572,082  shares  are issued and  outstanding  and 50,000  shares are
reserved for issuance upon the exercise or conversion of outstanding Convertible
Securities,  and 982,918  shares are reserved for issuance  upon the exercise of
options under the Company's Stock Incentive Plans, and (ii) 20,000,000 shares of
preferred  stock of which zero (0) shares are issued and outstanding and that it
has no other Capital Stock authorized, issued or outstanding.

         Section 8.        Ownership; Registration of Transfer; Exchange and 
                           Substitution of Warrant.

                  8.1      Ownership  of  Warrant.  Until  due  presentment  for
Transfer,  the  Company  may  treat  the  Person in whose  name the  Warrant  is
registered on the register kept at the Company's  principal  office as the owner
and holder hereof for all purposes,  notwithstanding any notice to the contrary,
provided that when the Warrant has been properly Transferred,  the Company shall
treat  such   transferee   as  the  owner  of  the  Warrant  for  all  purposes,
notwithstanding any Notice to the

                                       10

<PAGE>




contrary.  Subject to the foregoing provisions and to Section 4, the Warrant, if
properly Transferred,  may be exercised by the transferee without first having a
new Warrant Certificate issued.

                  8.2      Registration  of  Transfers.  Subject  to  Section  4
hereof,  the Company shall register the Transfer of the Warrant  permitted under
the terms hereof upon records to be  maintained  by the Company for that purpose
upon  surrender  of this  Warrant  Certificate  to the Company at the  Company's
principal  office,  together  with the Form of Assignment  attached  hereto duly
completed and executed.  Upon any such  registration of Transfer,  a new Warrant
Certificate  in  substantially  the form of this Warrant  Certificate,  shall be
issued to the transferee.

                  8.3      Replacement of Warrant  Certificate.  Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft,  destruction
or mutilation of this Warrant  Certificate and of an indemnification  reasonably
satisfactory  to the  Company,  or,  in the  case of any such  mutilation,  upon
surrender  of  this  Warrant  Certificate  for  cancellation  at  the  Company's
principal office,  the Company at the Holder's expense will promptly execute and
deliver, in lieu thereof, a new Warrant Certificate of like tenor.

                  8.4      Expenses.  Except as  otherwise  provided for herein,
the Company will pay all expenses,  Taxes (other than transfer and income Taxes)
and other charges in connection with the preparation, issuance and delivery from
time to time of this Warrant Certificate or the Warrant Shares.

         Section 9.        No Rights as Stockholder.

         Nothing  contained  in this Warrant  Certificate  shall be construed as
conferring  upon the Holder any rights as a stockholder  of the Company prior to
the exercise  hereof or as imposing any obligation on the Holder to purchase any
Capital Stock of the Company.

         Section 10.       Demand Registration Rights.

                  10.1     Demand  for   Registration.   At  anytime  after  the
exercise of the Warrant,  and subject to the conditions set forth below,  if the
Company  shall  receive a written  request from the Holder  requesting  that the
Company effect the registration  under the Securities Act of all of the Holder's
and its Affiliate's  Warrant  Shares,  the Company shall use its reasonable best
efforts  to effect  such  registration  as soon as  practicable.  Subject to the
provisions  of  Section  10.6,  the  Company  may  register  for  sale  in  such
registration  other securities which the Company has been requested or otherwise
desires to register by the holders thereof (which may include Common Shares held
by the Formation  Holders and/or their permitted  assigns);  provided,  however,
that  no  securities  other  than  Warrant  Shares  shall  be  included  in such
registration if the managing  underwriter  advises the Holder that the inclusion
of such other  securities would adversely affect such offering unless the Holder
shall have consented in writing to the inclusion of such other  securities.  The
Company shall

                                       11

<PAGE>




not be required to effect more than one  registration  pursuant to requests made
pursuant  to  this  Section  10,  and  shall  not  be  required  to  effect  any
registration  pursuant to this Section 10 unless any registration can be made on
Form S-3.

                  10.2     Registration Statement Form. Registrations under this
Section 10 shall be on such appropriate  registration forms as shall be selected
by the Company,  provided that such forms permit the  disposition of the Warrant
Shares in accordance with the Holder's intended method or methods of disposition
as specified in its request for such registration.  The Company shall include in
any  such  registration   statement  all  information  which  the  Holder  shall
reasonably request.

                  10.3     Effective  Registration   Statement.  A  registration
requested  pursuant to this Section 10 shall not be deemed to have been effected
(i) unless a registration  statement with respect  thereto has become  effective
under the Securities  Act, (ii) if such  registration  is not kept  continuously
effective in accordance with Section 12, (iii) if such registration  becomes the
subject of any stop  order,  injunction  or other  order or  requirement  of the
Commission  or other  governmental  agency or court for any reason other than an
act or  omission  of the  Holder  and the  effectiveness  or  such  registration
statement  is  not  re-instituted  within  ninety  (90)  days,  or  (iv)  if any
conditions  to closing  specified  in the  purchase  agreement  or  underwriting
agreement  entered into in connection with such  registration  are not satisfied
for any reason other than an act or omission of the Holder.

                  10.4     Expenses.  The  Company  shall  pay all  registration
expenses in connection with any registration  requested pursuant to this Section
10. The Holder shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or other disposition of its Warrant Shares.

                  10.5     Underwritten   Offerings.   Only  if  a  registration
pursuant  to this  Section 10 involves  any Capital  Stock of the Company or any
other  securities  other  than the  Warrant  Shares  held by the  Holder and its
Affiliates,  may the Holder at its option, request an underwritten offering. The
underwriter  or  underwriters  thereof shall be selected by the Company.  To the
extent  customary  for  transactions  similar to the  transactions  contemplated
hereby,  the  Holder  may,  at  its  option,  require  that  any  or  all of the
representations  and warranties by, and the other agreements on the part of, the
Company to and for the  benefit of such  underwriters  shall also be made to and
for the  benefit  of the  Holder.  Holder  shall  not be  required  to make  any
representations  and  warranties  to or  agreements  with  the  Company  or  the
underwriters other than representations,  warranties or agreements regarding the
Holder,  the Holder's  intended method of  distribution,  any other  information
provided by the Holder for inclusion in the registration statement or prospectus
and  any  other  representation  required  by law or by  customary  practice  of
underwritten secondary offerings.

                  10.6     Priority in Requested  Registrations.  If a requested
registration pursuant to this Section 10 involves an underwritten  offering, and
if the managing  underwriter  shall advise the Company in writing  that,  in its
opinion, the number of securities of any class requested to be

                                       12

<PAGE>




included in such registration exceeds the number which can be sold in (or during
the time of) such offering  without  delaying or jeopardizing the success of the
offering,  then the Company will include in such  registration (i) first, all of
the Holder's  Warrant  Shares that the Company is so advised can be sold in such
offering,  (ii) second,  to the extent  permitted  by the managing  underwriter,
securities to be  registered by the Company for its own account  and/or by other
holders of  securities  (which may include the  Formation  Holders  and/or their
permitted  assigns)  in  such  manner  and  amounts  required  by the  Formation
Registration Rights Agreement, if applicable, or as the Company shall determine.

         Section 11.       "Piggyback" Registration Rights.

                  11.1     Participation in Registration.  If the Company at any
time proposes to register any securities under the Securities Act (other than by
a  registration  on Form S-4 or Form S-8 or any  successor  or similar  form and
other than pursuant to Section 10), whether or not for sale for its own account,
it will each such time,  promptly  give notice to the  Holder.  Upon the written
request of the Holder made within thirty (30) days after the receipt of any such
Notice (which request shall specify the Warrant  Shares  intended to be disposed
of and the  intended  method of  disposition),  the Holder shall have the right,
subject  to  the  prior  registration   rights  of  the  Formation  Holders,  to
participate in such registration on the terms and conditions thereof. If, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the  registration  statement  filed in connection
with such  registration,  the  Company  shall  determine  for any  reason not to
register or to delay  registration of such  securities,  the Company may, at its
election,  give  written  notice  of  such  determination  to  the  Holder  and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Warrant Shares in connection  with
such registration (but not from its obligation to pay any registration  expenses
in  connection  therewith),  without  prejudice,  however,  to the rights of the
Holder to request that such  registration  be effected as a  registration  under
Section 10, and (ii) in the case of a determination to delay  registration,  the
Company shall be permitted to delay  registering any Warrant Shares for the same
period  as the delay in  registering  such  other  securities.  No  registration
effected  under this Section 11 shall  relieve the Company of its  obligation to
effect any registration under Section 10.

                  11.2     Expenses.  The  Company  will  pay  all  registration
expenses  in  connection  with each  registration  of Warrant  Shares  requested
pursuant to this Section 11. The Holder shall pay all underwriting discounts and
commissions  and  transfer  taxes,  if  any,  relating  to  the  sale  or  other
disposition of its Warrant Shares.

                  11.3     Underwritten Offerings. If a registration pursuant to
this  Section 11 involves  an  underwritten  offering,  the  Company  shall,  if
requested  by the Holder,  and subject to the prior  registration  rights of the
Formation Holders, arrange for such underwriters to include the Holder's Warrant
Shares among the  securities to be  distributed  by such  underwriters.  In such
case, the Holder shall be a party to the underwriting  agreement and may, at its
option, require that any or

                                       13

<PAGE>




all of the  representations  and warranties by, and the other  agreements on the
part of, the Company to and for the benefit of such  underwriters  shall also be
made to and for the benefit of the Holder.  Holder shall not be required to make
any  representations  and  warranties to or  agreements  with the Company or the
underwriters other than representations,  warranties or agreements regarding the
Holder,  the Holder's  intended method of  distribution,  any other  information
provided by the Holder for inclusion in the registration statement or prospectus
and any other representation  required by law or by customary practices for such
transactions.

                  11.4     Priority in Registrations. If a registration pursuant
to this  Section 11  involves  an  underwritten  offering,  and if the  managing
underwriter shall advise the Company in writing that, in its opinion, the number
of securities of any class requested to be included in such registration exceeds
the number  which can be sold in (or during the time of) such  offering  without
delaying,  jeopardizing  or  otherwise  adversely  affecting  the success of the
offering,  then the Company will include in such registration,  to the extent to
which the Company is advised can be sold in such offering, first, all securities
proposed by the Company to be sold for its own account,  and second, such Common
Shares held by the Formation Holders and/or their permitted assigns requested by
the  Formation  Holders  and/or their  permitted  assigns to be included in such
registration pursuant to the Formation Registration Rights Agreement, and third,
such Warrant Shares requested to be included in such  registration and all other
securities  proposed  to be sold by  other  holders  shall be  included  in such
registration  pro rata on the basis of the  number of shares so  proposed  to be
sold.

         Section 12.       Registration Procedures.

          If the Company is required to effect the  registration  of any Warrant
Shares as provided herein (subject to the minimum number of Warrant Shares to be
registered pursuant to Section 10.1), the Company shall proceed in the following
manner:

                         (i)        prepare  and as  expeditiously  as  possible
                                    file (and in any event  within  one  hundred
                                    and twenty (120) days of receipt of Holder's
                                    request   under   Section   10)   with   the
                                    Commission  the  registration  statement  to
                                    effect   such   registration   and  use  its
                                    reasonable   best   efforts  to  cause  such
                                    Registration Statement to become effective;

                        (ii)       prepare  and file  with the  Commission  such
                                   amendments    and    supplements    to   such
                                   registration  statement  and  the  prospectus
                                   used  in  connection   therewith  as  may  be
                                   necessary to keep such registration statement
                                   effective  and to comply with the  provisions
                                   of the  Securities  Act with  respect  to the
                                   disposition of all securities covered by such
                                   registration statement until such time as all
                                   Warrant  Shares  have  been  disposed  of  in
                                   accordance  with  the  intended   methods  of
                                   disposition  by the Holder,  but, in no event
                                   longer than two (2) years;

                                       14
<PAGE>





                       (iii)       furnish to Holder such number of prospectuses
                                   (including   preliminary   prospectuses)  and
                                   copies  of  each   amendment  and  supplement
                                   thereto  and such other  documents  as Holder
                                   may reasonably request in order to facilitate
                                   the disposition of the Warrant Shares;

                        (iv)       use its  reasonable  best efforts to register
                                   or qualify all Warrant Shares covered by such
                                   registration  statement  under the securities
                                   or blue sky laws of such jurisdictions as the
                                   Holder shall reasonably request, to keep such
                                   registration or  qualification  in effect for
                                   so  long  as  such   registration   statement
                                   remains in effect,  and take any other action
                                   which   may  be   reasonably   necessary   or
                                   desirable to enable the Holder to  consummate
                                   the disposition of its Warrant Shares in such
                                   jurisdictions in accordance with the intended
                                   method  of  disposition,  provided,  however,
                                   that the  Company  shall not be  required  to
                                   register  or  qualify to the  Warrant  Shares
                                   under the  securities or blue sky laws of any
                                   jurisdiction  if so qualifying or registering
                                   the Warrant  Shares would require the Company
                                   to  qualify  to do  business,  to  consent to
                                   general service of process, or to register as
                                   a broker or dealer in any such jurisdiction;

                         (v)        enter into and perform its obligations under
                                    any underwriting or placement agreement, and
                                    take all  reasonable  actions in  connection
                                    therewith in order to expedite or facilitate
                                    the disposition of the Warrant Shares;

                        (vi)        notify the Holder in writing of (i) any stop
                                    order or the commencement of any proceedings
                                    for that purpose, (ii) any suspension of the
                                    qualification of the Warrant Shares for sale
                                    in any  jurisdiction or the  commencement of
                                    any proceedings  for that purpose,  or (iii)
                                    any  notification  received  by the  Company
                                    regarding the necessity or  desirability  of
                                    filing any  supplement  or  amendment to the
                                    registration statement;

                       (vii)        in any underwritten offering, furnish to the
                                    Holder (a) an  opinion  of  counsel  for the
                                    Company,  dated the  effective  date of such
                                    registration    statement,   in   form   and
                                    substance   as  is   customarily   given  to
                                    underwriters,  and  (b)  a  comfort  letter,
                                    dated   the    effective    date   of   such
                                    registration   statement,   signed   by  the
                                    Company's  independent public accountants in
                                    form and substance as is  customarily  given
                                    to


                                       15

<PAGE>




                                   underwriters,  in each case  addressed to the
                                   underwriters and the Holder;

                      (viii)       notify Holder upon discovery of the happening
                                   of  any  event  as  a  result  of  which  the
                                   prospectus   included  in  such  registration
                                   statement includes an untrue statement of any
                                   material  fact or omits to state any material
                                   fact   required  to  be  stated   therein  or
                                   necessary to make the statements  therein not
                                   misleading in the light of the  circumstances
                                   then existing,  or any other event that would
                                   cause the registration statement to no longer
                                   be current as required by the Securities Act,
                                   and at the  request  of the  Holder  promptly
                                   prepare,   file  and   furnish  to  Holder  a
                                   reasonable  number of copies of a  supplement
                                   or an amendment to such prospectus  which may
                                   be  required on account of such event and use
                                   its  reasonable  best  efforts  to cause such
                                   supplement or amendment to become effective;

                        (ix)        cause to be maintained a transfer  agent for
                                    its  securities  from  and  after a date not
                                    later  than  the  effective   date  of  such
                                    registration statement;

                         (x)        use its reasonable  best efforts to list all
                                    Warrant Shares covered by such  registration
                                    statement  on  any  securities  exchange  on
                                    which  any  of the  Common  Shares  is  then
                                    listed; and

                        (xi)        enter  into  such  agreements  and take such
                                    other actions as the Holder shall reasonably
                                    request in order to expedite  or  facilitate
                                    the disposition of such Warrant Shares.

         The Holder shall furnish to the Company such information  regarding the
Holder and the  distribution  of the Warrant Shares as the Company may from time
to time reasonably request in writing.

         Upon  receipt of any Notice  from the Company of the  happening  of any
circumstance  or event of the  kind  described  in  subdivision  (viii)  of this
Section 12, the Holder shall  forthwith  discontinue  the disposition of Warrant
Shares  pursuant to the  registration  statement until it receives copies of the
supplemented or amended  prospectus or other  notification that such disposition
may be resumed,  and, if so directed by the  Company,  will  destroy all copies,
other than permanent file copies,  then in Holder's possession of the prospectus
relating to such  Warrant  Shares.  The  Company  will use its  reasonable  best
efforts to effect such amendment or supplement as promptly as possible.


                                       16

<PAGE>




         Section 13.       Indemnification.

                  13.1     Indemnification  by the Company.  In the event of any
registration  pursuant to Section 11 or 12, the Company  will,  and hereby does,
indemnify and hold harmless the Holder,  its  directors,  partners,  members and
officers,  any underwriter acting on behalf of the Holder and each other Person,
if any, who controls any such Person  within the meaning of the  Securities  Act
(individually,  an  "Indemnified  Party",  and,  collectively  the  "Indemnified
Parties"),  against any losses, claims, damages,  expenses (including reasonable
legal fees and expenses) or liabilities,  joint or several,  to which any one of
them may  become  subject  under  the  Securities  Act or  otherwise;  provided,
however, that the Company shall not be so liable (i) to the extent that any such
loss,  claim,  damage,  liability or expense  arises out of or is based upon the
Company's  reliance  upon  written  information  furnished to the Company by any
Indemnified  Party  expressly  stating  that it is for  use in the  registration
statement,  (ii) to the extent that any such loss, claim,  damage,  liability or
expense arise out of such  Indemnified  Party's failure to provide a copy of the
final  prospectus,  as the  same may be then  supplemented  or  amended,  to the
purchaser at or prior to the written  confirmation of the sale of Warrant Shares
and (iii) to the extent that any such loss, claim, damage,  liability or expense
arise from an act or omission in a violation of the  Securities Act by Holder or
such Indemnified Party or from the gross negligence or willful misconduct of the
Holder or such Indemnified  Party. Such indemnity shall remain in full force and
effect  regardless  of any  investigation  made by or on behalf of the Holder or
other Person and shall survive the transfer of the Warrant Shares by the Holder.

                  13.2     Indemnification  by the Holder. As a condition to the
Company's obligation to include any Warrant Shares in any registration statement
filed pursuant to Section 11 or 12, the Holder shall indemnify and hold harmless
(in the same  manner  and to the same  extent  as the  Company  is  required  to
indemnify  and hold  harmless  the  Indemnified  Parties as set forth in Section
13.1) the Company,  each director and officer of the Company and any underwriter
acting on behalf of the Company and each other Person,  if any, who controls any
such  Person  within the  meaning of the  Securities  Act,  against  any losses,
claims,  damages,  expenses  (including  reasonable  legal fees and expenses) or
liabilities, joint or several, to which any one of them may become subject under
the  Securities Act or otherwise,  (i) to the extent that any such loss,  claim,
damage,  liability  or  expense  arises  out of or is based  upon the  Company's
reliance  upon  written  information  furnished  to the  Company by such  Person
expressly  stating that it is for use in the registration  statement;  provided,
however,  that the  Holder  shall not be so liable to the  extent  that any such
loss, claim, damage, liability or expense arise out of such Person's (other than
the Holder's or any Indemnified  Party's) failure to provide a copy of the final
prospectus, as the same may be then supplemented or amended, to the purchaser at
or prior to the written confirmation of the sale of any securities;  (ii) to the
extent that any such loss, claim, damage,  liability or expense arise out of the
Holder's failure to provide a copy of the final  prospectus,  as the same may be
then  supplemented  or  amended,  to the  purchaser  at or prior to the  written
confirmation  of the sale of Warrant  Shares;  and (iii) to the extent  that any
such loss, claim, damage,  liability or expense arise from an act or omission in
a violation of the


                                       17

<PAGE>




Securities Act by Holder or from the gross  negligence or willful  misconduct of
the Holder. Such indemnity shall remain in full force and effect,  regardless of
any  investigation  made by or on behalf of the  Company or any such  Person and
shall survive the transfer of such  Registrable  Securities or Warrant Shares by
the Holder.

                  13.3     Procedures  for  Claims.  Promptly  after  receipt of
notice  of the  commencement  of any  action  or  proceeding  involving  a claim
referred to in this Section 13, an indemnified party will, if a claim in respect
thereof  is to be  made  against  an  indemnifying  party,  give  Notice  to the
indemnifying  party of the  commencement of such action.  Failure to give prompt
Notice shall not relieve the  indemnifying  party of its  obligation  under this
Section  13,  except  to the  extent  that the  indemnifying  party is  actually
prejudiced  by such  failure.  The  indemnifying  party  shall  be  entitled  to
participate in and to assume the defense of such action at its expense,  jointly
with any other indemnifying  party, with counsel reasonably  satisfactory to the
indemnified party;  provided,  however, that an indemnified party shall have the
right to retain its own counsel,  with fees and  expenses  thereof to be paid by
the indemnifying  party, if in such indemnified  party's reasonable  judgment an
actual  or  potential   conflict  of  interest   between  such  indemnified  and
indemnifying  party may exist in respect of such claim.  No  indemnifying  party
shall,  without the consent of the  indemnified  party,  consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof a release from all  liability by the  plaintiff to the  indemnified
party.  The amount paid or payable by an  indemnifying  party shall  include any
legal  or  other  expenses  reasonably  incurred  by the  indemnified  party  in
connection with the investigation or defense of any such action or claim.

         Section 14.       Rule 144.

         If the Company shall have filed a registration  statement,  the Company
will file the reports  required to be filed by it under the  Securities  Act and
the  Securities  Exchange  Act and the  rules  and  regulations  adopted  by the
Commission  thereunder.  The Company shall,  upon the reasonable  request of the
Holder,  provide the Holder and any  institutional  investor  designated by such
Holder  such  financial  and other  information  as the  Holder  may  reasonably
determine to be necessary in order to permit the Holder's  compliance  with Rule
144A under the  Securities  Act in  connection  with the  resale of any  Warrant
Shares,  except  at  such  time  as the  Company  is  subject  to the  reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act.

         Section 15.       Termination of Registration Rights.

         The registration rights granted herein shall terminate on the date that
neither the Holder nor any Affiliate of the Holder owns any Warrant Shares.


                                       18

<PAGE>




         Section 16.       Miscellaneous.

                  16.1     Amendment.  This  Warrant  and any term hereof may be
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed by the party against which enforcement of such change, waiver,  discharge
or termination is sought.

                  16.2     Choice  of  Law.  This  Warrant  Certificate  and the
Warrant evidenced thereby shall be governed by the laws of the State of Delaware
without regard to conflict of laws principles.

                  16.3     Headings.  The Headings in this  Warrant  Certificate
are inserted for  convenience  only and shall not be deemed to constitute a part
hereof.

                                         BROOKDALE  LIVING COMMUNITIES,
                                         INC.

                                          By:----------------------------------
                                          Name:--------------------------------
                                          Its:---------------------------------



                                       19

<PAGE>





                                     FORM OF
                          NOTICE OF EXERCISE OF WARRANT


         The  undersigned  is the holder of, and hereby elects to exercise,  the
Warrant evidenced by that certain Warrant  Certificate,  dated as of October 23,
1998  issued  to  Banc  One  Capital  Partners  IV,  Ltd.  by  Brookdale  Living
Communities,  Inc. ( the  "Warrant  Certificate"),  and to purchase  the Warrant
Shares issuable  pursuant to the Warrant  Certificate and herewith makes payment
in full  therefor by delivery of a certified  check  payable to the order of the
Company in the  amount of the  Warrant  Exercise  Price or by wire  transfer  of
immediately  available  funds in the amount of the  Warrant  Exercise  Price and
requests that  certificate(s)  for such Warrant  Shares be issued in the name of
and  delivered  to  -----------------------------------------------,  or in such
denominations  as  requested  by the  undersigned  in  writing  to  the  Company
concurrently  herewith.  Capitalized  terms used  herein  which are not  defined
herein,  but  which are  defined  in the  Warrant  Certificate,  shall  have the
meanings given such terms in the Warrant Certificate.

                                      Name of
                                      Holder (Print):--------------------------

                                      Dated:-----------------------------------

                                      By:--------------------------------------

                                      Title:-----------------------------------






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<PAGE>



                          FORM OF ASSIGNMENT OF WARRANT


         FOR VALUED  RECEIVED,  ------------------- hereby  sells,  assigns  and
transfers to -------------------- all of the rights of the undersigned in and to
this Warrant and in and to that certain  Warrant  Certificate  dated October 23,
1998, issued by Brookdale Living Communities, Inc.
to Banc One Capital Partners IV, Ltd.

                                      Name of
                                      Holder (Print):--------------------------

                                      Dated:-----------------------------------

                                      By:--------------------------------------

                                      Title:-----------------------------------




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