<PAGE>

                                                                   EXHIBIT 2.1

                                                                [EXECUTION COPY]




                              AMENDED AND RESTATED
                               OPERATING AGREEMENT

                                       OF

                   SUNRISE FIRST ASSISTED LIVING HOLDINGS, LLC

                                 BY AND BETWEEN

                   SUNRISE ASSISTED LIVING INVESTMENTS, INC.,

                             AS THE MANAGING MEMBER,

                                       AND

                       US ASSISTED LIVING FACILITIES, INC.

                             AS THE INVESTOR MEMBER




                           DATED AS OF MARCH 22, 2002




<PAGE>


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                          PAGE
<S>                                                                                      <C>


SECTION 1.     DEFINITIONS...................................................................1


SECTION 2.     CONTINUATION OF COMPANY......................................................15


SECTION 3.     NAME AND PRINCIPAL OFFICE....................................................15

        SECTION 3.1.  NAME..................................................................15

        SECTION 3.2.  PRINCIPAL OFFICE AND PLACE OF BUSINESS; REGISTERED AGENT..............15

SECTION 4.     PURPOSE OF COMPANY...........................................................15


SECTION 5.     TERM.15


SECTION 6.     PERCENTAGE INTERESTS.........................................................16


SECTION 7.     CAPITAL......................................................................16

        SECTION 7.1.  FIRST CLOSING.........................................................16
        SECTION 7.2.  SECOND CLOSING........................................................16
        SECTION 7.3.  SUBSEQUENT CLOSINGS AND CONDITIONS APPLICABLE TO  CERTAIN ..............
                      FACILITIES............................................................17
        SECTION 7.4.  ADDITIONAL CAPITAL CONTRIBUTIONS AND OTHER CAPITAL MATTERS............18
        SECTION 7.5.  CAPITAL ACCOUNTS......................................................21
        SECTION 7.6.  INTEREST OR EARNINGS ON RETURNED CAPITAL..............................22
        SECTION 7.7.  NO THIRD PARTY RIGHTS.................................................22
        SECTION 7.8.  DEEMED CAPITAL CONTRIBUTIONS..........................................22

SECTION 8.     ALLOCATION OF PROFITS AND LOSSES.............................................22

        SECTION 8.1.  NET PROFIT............................................................22
        SECTION 8.2.  NET LOSS..............................................................23
        SECTION 8.3.  DISPOSITION GAIN AND DISPOSITION LOSS.................................23
        SECTION 8.4.  SPECIAL ALLOCATIONS...................................................25
        SECTION 8.5.  CURATIVE ALLOCATIONS..................................................27
        SECTION 8.6.  OTHER ALLOCATION RULES................................................27
        SECTION 8.7.  TAX ALLOCATIONS: CODE SECTION 704(c)..................................27

SECTION 9.     DISTRIBUTIONS................................................................28

        SECTION 9.1.  IN GENERAL............................................................28
        SECTION 9.2.  SHORTFALL PAYMENT.....................................................29
        SECTION 9.3.  CONSENT TO DISTRIBUTIONS..............................................30
        SECTION 9.4.  TAX WITHHOLDING.......................................................30

SECTION 10.    MANAGEMENT OF COMPANY........................................................30

        SECTION 10.1. AUTHORITY OF MANAGING MEMBER..........................................30
        SECTION 10.2. GRANT OF SPECIAL AUTHORITY............................................32

</TABLE>

                                        i

<PAGE>
<TABLE>
<S>                                                                                      <C>
        SECTION 10.3. OPERATING BUDGET AND CERTAIN RESERVES.................................33
        SECTION 10.4. LIMITATIONS ON AUTHORITY OF MANAGING MEMBER...........................34
        SECTION 10.5. COMPENSATION FOR SERVICES; FEES TO MANAGING MEMBER....................36
        SECTION 10.6. INVESTOR MEMBER MANAGEMENT RIGHTS.....................................37
        SECTION 10.7. LIABILITY OF MANAGING MEMBER..........................................37
        SECTION 10.8. INDEMNITIES...........................................................37
        SECTION 10.9. OTHER ACTIVITIES OF MEMBERS; NON-COMPETE..............................38
        SECTION 10.10.RELEASE AND SALE OF FACILITIES........................................39
        SECTION 10.11.ADDITIONAL ACQUISITIONS OF NEW FACILITIES.............................40
        SECTION 10.12.LICENSE HELD BY SUNRISE AFFILIATES....................................42

SECTION 11.    REPRESENTATIONS AND WARRANTIES OF THE MEMBERS................................42

        SECTION 11.1. INVESTMENT INTENT.....................................................42
        SECTION 11.2. UNREGISTERED COMPANY INTERESTS........................................42
        SECTION 11.3. NATURE OF INVESTMENT..................................................42
        SECTION 11.4. GENERAL REPRESENTATIONS AND WARRANTIES OF SUNRISE.....................43
        SECTION 11.5. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF INVESTOR
                      MEMBER................................................................43

SECTION 12.    POWER OF ATTORNEY............................................................44


SECTION 13.    BANKING......................................................................45


SECTION 14.    ACCOUNTING...................................................................45

        SECTION 14.1. BOOKS OF ACCOUNT......................................................45
        SECTION 14.2. METHOD OF ACCOUNTING..................................................45
        SECTION 14.3. FINANCIAL AND OPERATING STATEMENTS....................................45
        SECTION 14.4. TAX INFORMATION.......................................................46
        SECTION 14.5. TAX MATTERS PARTNER...................................................46
        SECTION 14.6. TAX TREATMENT OF LEASE FINANCING......................................46

SECTION 15.    ADMISSION OF ADDITIONAL MEMBERS..............................................46


SECTION 16.    TRANSFER OF COMPANY INTERESTS................................................46

        SECTION 16.1. COVENANTS REGARDING TRANSFERS.........................................46
        SECTION 16.2. PERMITTED TRANSFERS BY INVESTOR MEMBER................................47
        SECTION 16.3. PERMITTED TRANSFERS BY MANAGING MEMBER................................48
        SECTION 16.4. SUBSTITUTED MEMBERS...................................................50
        SECTION 16.5. RECORDATION TAX.......................................................50
        SECTION 16.6. TRANSFERS RESULTING IN CORPORATION STATUS; TRANSFERS THROUGH
                      ESTABLISHED SECURITIES OR SECONDARY MARKETS...........................50
        SECTION 16.7. HOLDERS OF INVESTOR MEMBER INTERESTS..................................51

SECTION 17.    WITHDRAWALS..................................................................52


SECTION 18.    DEFAULTING EVENTS............................................................52

        SECTION 18.1. CONVERSION OF DEFAULTING OR DISABLED MANAGING MEMBER'S INTEREST.......52
</TABLE>

                                     ii
<PAGE>
<TABLE>
<S>                                                                                      <C>
        SECTION 18.2. ADDITIONAL REMEDIES...................................................52

SECTION 19.    DISABILITY OR DEFAULT OF THE INVESTOR MEMBER.................................53


SECTION 20.    BUY-SELL AGREEMENT FOR ENTIRE PORTFOLIO......................................53

        SECTION 20.1. BUY-SELL OPTION.......................................................53
        SECTION 20.2. BUY-SELL VALUE........................................................54
        SECTION 20.3. OFFEREE DECISION......................................................54
        SECTION 20.4. BUY-SELL PRICE........................................................54
        SECTION 20.5. EARNEST MONEY; DEFAULT................................................55
        SECTION 20.6. BUY-SELL CLOSING......................................................55
        SECTION 20.7. REMEDIES..............................................................56
        SECTION 20.8. DISABLED OR DEFAULTING MEMBER.........................................56
        SECTION 20.9. SUSPENSION OF MARKETING RIGHT.........................................56

SECTION 21.    BUY-SELL OPTION FOR INDIVIDUAL FACILITIES....................................57

        SECTION 21.1. BUY-SELL OPTION.......................................................57
        SECTION 21.2. OFFEREE DECISION......................................................57
        SECTION 21.3. LEASE TRANSACTION RELEASE.............................................57
        SECTION 21.4. BUY-SELL PRICE........................................................58
        SECTION 21.5. EARNEST MONEY; DEFAULT................................................58
        SECTION 21.6. BUY-SELL CLOSING......................................................58
        SECTION 21.7. REMEDIES..............................................................61
        SECTION 21.8. SUSPENSION OF MARKETING RIGHT.........................................61

SECTION 22.    MARKETING RIGHT..............................................................62

        SECTION 22.1. INVESTOR MEMBER'S MARKETING RIGHT.....................................62
        SECTION 22.2. MANAGING MEMBER'S PURCHASE RIGHT......................................62
        SECTION 22.3. MANAGING MEMBER'S RIGHT TO MARKET/PURCHASE............................63
        SECTION 22.4. FMV...................................................................63
        SECTION 22.5. FAILURE TO SELL FACILITY..............................................64
        SECTION 22.6. MANAGING MEMBER PURCHASE OF FACILITY OWNER............................64
        SECTION 22.7. SUSPENSION OF BUY-SELL OPTION.........................................64

SECTION 23.    TERMINATION OF COMPANY.......................................................64

        SECTION 23.1. DISSOLVING EVENTS.....................................................64
        SECTION 23.2. METHOD OF LIQUIDATION.................................................65
        SECTION 23.3. REASONABLE TIME FOR LIQUIDATING.......................................65
        SECTION 23.4. DATE OF DISSOLUTION...................................................65

SECTION 24.    GENERAL PROVISIONS...........................................................66

        SECTION 24.1. WAIVER OF RIGHT OF PARTITION..........................................66
        SECTION 24.2. NOTICES...............................................................66
        SECTION 24.3. MODIFICATIONS.........................................................67
        SECTION 24.4. AUTHORIZED PERSONS....................................................67
        SECTION 24.5. AMENDMENTS............................................................67
        SECTION 24.6. BINDING EFFECT........................................................67
</TABLE>

                                      iii
<PAGE>
<TABLE>
<S>                                                                                      <C>
        SECTION 24.7. VALIDITY..............................................................67
        SECTION 24.8. NO WAIVER.............................................................68
        SECTION 24.9. DUPLICATE ORIGINALS...................................................68
        SECTION 24.10.GOVERNING LAW; CONSTRUCTION...........................................68
        SECTION 24.11.CONSENT TO JURISDICTION AND VENUE.....................................68
        SECTION 24.12.INDEPENDENT INVESTMENT DECISION.......................................68
        SECTION 24.13.ENTIRE AGREEMENT......................................................68
        SECTION 24.14.FURTHER ASSURANCES....................................................69
        SECTION 24.15.USE OF SUNRISE TRADE NAME.............................................69
        SECTION 24.16.PRESS RELEASES........................................................69
        SECTION 24.17.LIABILITY OF MEMBERS..................................................69

</TABLE>

<TABLE>
<CAPTION>
SCHEDULES
<S>    <C>    <C>

1       -       Facility Descriptions and Gross Asset Values
2       -       Contribution Amounts
3       -       Operating Budget
4       -       Reporting Procedures
5       -       Islamic Operating Guidelines
6       -       Internal Rate of Return Calculation
7       -       Authorized Representatives
8       -       Minimum Gross Facility Revenues
9       -       Non Compete Areas
10      -       Anti-Money Laundering Policy

</TABLE>

                                       iv

<PAGE>

                    AMENDED AND RESTATED OPERATING AGREEMENT
                                       OF
                   SUNRISE FIRST ASSISTED LIVING HOLDINGS, LLC


        THIS AMENDED AND RESTATED OPERATING AGREEMENT (this "AGREEMENT"), made
and entered into as of this 22nd day of March, 2002, by and among SUNRISE
ASSISTED LIVING INVESTMENTS, INC., a Virginia corporation ("SUNRISE") having an
address at 7902 Westpark Drive, McLean, Virginia 22102 (hereinafter referred to
as the "MANAGING MEMBER"); and US ASSISTED LIVING FACILITIES, INC., a Delaware
corporation having an address at 75 Fourteenth Street, Atlanta, Georgia 30309
(the "INVESTOR MEMBER") (the Managing Member and the Investor Member are
hereinafter sometimes referred to collectively as the "MEMBERS" and individually
as a "MEMBER").

                              W I T N E S S E T H:

        WHEREAS, Sunrise formed the Company as a limited liability company on
January 31, 2002 and, immediately before giving effect to this Agreement, is the
sole member of the Company;

        WHEREAS, the parties hereto desire to continue the Company as a limited
liability company under the provisions of the Delaware Limited Liability Company
Act for the purposes hereinafter described; and

        WHEREAS, the parties hereto desire to set forth herein their respective
rights, duties and responsibilities with respect the Company;

        NOW, THEREFORE, in consideration of the premises hereof, and of the
mutual promises, obligations and agreements contained herein, the parties
hereto, intending to be legally bound, do hereby agree as follows:

        SECTION 1.  DEFINITIONS.

        For purposes of this Agreement, each of the following terms shall have
the meaning hereinafter provided:

               "ACQUISITION FEE" means a fee payable by the Company to SALMI, or
        an Affiliate designated by SALMI, for the acquisition of each Facility
        purchased pursuant to Section 10.11 from any Entity other than the
        Managing Member or an Affiliate of the Managing Member, which fee shall
        equal .75% of the purchase price of such Facility, and which shall be
        payable at the time the Company purchases such Facility.

               "ACT" has the meaning set forth in Section 2 hereof.

               "ADJUSTED CAPITAL ACCOUNT DEFICIT" of any Member means, as of any
        particular date, the deficit balance, if any, in such Member's Capital
        Account as of such date, as determined in the manner provided in Section
        7.5 hereof and by then adjusting such Capital Account as so determined
        as follows:


<PAGE>
                                                                               2


               (i) Such Capital Account shall be increased to reflect any
               amounts which such Member is obligated to restore to the Company
               under any provision of this Agreement or is deemed to be
               obligated to restore pursuant to Sections 1.704-2(g) and
               1.704-2(i)(5) of the Regulations; and

               (ii) Such Capital Account shall be reduced to reflect any items
               described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
               Regulations.

               "AFFILIATE" means, with respect to a specified Entity, any Entity
        that directly or indirectly, through one or more intermediaries,
        controls, is controlled by or is under common control with, the
        specified Entity. For purposes of this definition, "control" shall mean,
        with respect to any Entity, the possession of the power to direct or
        cause the direction of the policies and management of such Entity,
        whether through ownership of voting securities, by contract or
        otherwise.

               "AGREEMENT" means this Amended and Restated Operating Agreement
        and the schedules hereto, as the same may be amended and in effect from
        time to time.

               "AL FUNDING" has the meaning specified in Section 7.1.

               "ANCILLARY REVENUES" means revenues generated by the conduct of
        activities at the Facilities by Affiliates of the Company or SALMI or by
        third parties, other than the provision of assisted living services,
        room rentals, food service and care with activities of daily life. Such
        activities may include, but not be limited to, the sale of products and
        providing financial advice and services.

               "APPROVE," "APPROVED" or "APPROVAL" means, as to the subject
        matter thereof and as the context may require or permit, an express
        approval contained in a written statement signed by an approving Entity
        or any Authorized Representative thereof.

               "AUTHORIZED REPRESENTATIVE" shall mean, with respect to the
        Managing Member and with respect to the Investor Member, the persons set
        forth on Schedule 7 hereto, any one of which shall have the authority to
        bind the Member it represents. Any Member may change its Authorized
        Representative or appoint additional Authorized Representatives by
        giving written notice thereof to the other Members.

               "BANKRUPTCY" of any Entity means: (i) a general assignment by the
        Entity for the benefit of creditors; (ii) the appointment of a receiver,
        trustee or custodian for all or any substantial part of the Entity's
        property and assets; (iii) the entry of any "order for relief" against
        the Entity in, or the commencement by the Entity of, any voluntary
        proceeding under present or future federal bankruptcy laws or under any
        other bankruptcy, insolvency or other laws respecting debtor's rights;
        or (iv) the entry against the Entity of any "order for relief" or any
        other judgment or decree by any court of competent jurisdiction in any
        involuntary proceeding against the Entity under present or future
        federal bankruptcy laws or under any other bankruptcy, insolvency or
        other laws respecting debtor's rights, or the commencement of any such
        involuntary proceeding against the Entity and the continuation of such
        proceeding without dismissal or stay for a period of ninety (90) days
        after such commencement.

<PAGE>
                                                                               3


               "BONA FIDE DISPUTE" means a dispute among the Members relating to
        a Major Decision regarding the operation of the Portfolio or any
        Facility; provided, however, that such dispute shall not be construed as
        a Bona Fide Dispute for purposes of Section 20.1(i) hereto, unless one
        Member has provided the other Member with written notice stating that it
        believes the dispute to be a Bona Fide Dispute, and the other Member is
        provided with ten (10) Business Days in which to cure such dispute;
        provided, further, that only a dispute pursuant to subsections 10.4 (a),
        (d), (e), (h), (n), (o), (p), (r) and (s) shall constitute a Bona Fide
        Dispute for purposes of Section 20.1(i).

               "BUSINESS DAY" means any day other than a Saturday, Sunday or
        other day that is a legal holiday under the laws of the State of New
        York or is a day on which banking institutions located in such state are
        authorized or required by law or other governmental action to close.

               "BUYING MEMBER" has the meaning set forth in Section 20 hereof.

               "BUY-SELL CLOSING DATE" has the meaning set forth in Section 20
        hereof.

               "BUY-SELL OFFER" has the meaning set forth in Section 20 hereof.

               "BUY-SELL PRICE" has the meaning set forth in Section 20 hereof.

               "BUY-SELL VALUE" has the meaning set forth in Section 20 hereof.

               "CAP AMOUNT" shall mean the amount of $1,900,000.

               "CAPITAL ACCOUNT" means, with respect to each Member, the account
        established and maintained for such Member pursuant to Section 7.5
        hereof.

               "CAPITAL CONTRIBUTION" means a capital contribution made by a
        Member in accordance with Section 7 hereof. Any Capital Contribution of
        property other than cash shall be valued at the Gross Asset Value of
        such property, as reduced by the amount of liabilities assumed by the
        Company with respect to such property.

               "CODE" means the Internal Revenue Code of 1986, as amended from
        time to time. All references herein to specific sections of the Code
        shall be deemed to refer also to any corresponding provisions of
        succeeding law.

               "COMPANY" means the limited liability company formed by the
        Members pursuant to this Agreement.

               "CONSUMABLES" means food, beverages, medical supplies, soaps,
        shampoos or any other similar consumable product.

               "CONTRIBUTION ACCOUNT" means an account to be maintained with
        respect to each Member equal, as of any relevant date, to the amount of
        each Member's First Capital Contribution, its Second Capital
        Contribution, any Mandatory Additional Contributions and Voluntary
        Additional Contributions, as set forth in Sections 7.1, 7.2, 7.3 and 7.4

<PAGE>
                                                                               4


        hereof, and any deemed Capital Contribution, as set forth in Section
        7.8, in excess of the aggregate amount of distributions made to such
        Member prior to such relevant date pursuant to subsection 9.1(b)(i)
        hereof.

               "CONVERSION DATE" has the meaning set forth in Section 18.1
        hereof.

               "CPI" means the Seasonally Adjusted National Consumer Price Index
        for All Items, All Urban Consumers, as published by the Bureau of Labor
        Statistics of the U.S. Department of Labor.

               "DEFAULT PURCHASE PRICE" has the meaning set forth in Section
        20.5 hereof.

               "DEFAULTING BUYER" has the meaning set forth in Section 20.5
        hereof.

               "DEFAULTING EVENT" means (i) the failure of a Member to make its
        First Capital Contribution or its Second Capital Contribution as set
        forth in Section 7 hereof; (ii) a Member's withdrawal or retirement from
        the Company in breach of the covenant contained in Section 17 hereof,
        (iii) the disposition (whether voluntary or by operation of law) by a
        Member of all or any part of such Member's interest in the Company (or
        such Member's right to receive distributions of Company property or
        assets) in breach of the covenant contained in Section 16.1 hereof, (iv)
        with respect to any Member which is a corporation, partnership or trust,
        the liquidation or dissolution of such Entity, except in connection with
        a reorganization, merger, consolidation or business combination in which
        there is a surviving Entity, subject to the Investor Member's rights set
        forth in Section 16.3 hereof, or (v) any Uncured Major Default of such
        Member. In the case of the Managing Member, in addition to any of the
        events described in the preceding clauses (i) through (v), the Managing
        Member shall have suffered a Defaulting Event in the event of a breach
        by the Managing Member of the covenant contained in Section 16.3 hereof.
        In the case of the Investor Member, in addition to any of the events
        described in the preceding clauses (i) through (v), the Investor Member
        shall have suffered a Defaulting Event in the event of a breach by the
        Investor Member of the covenant contained in Section 16.2 hereof.

               "DEFAULTING MEMBER" means a Member who commits or suffers a
        Defaulting Event.

               "DELINQUENCY ADVANCE" has the meaning set forth in Section 7.4
        hereof.

               "DEPRECIATION" means, for each Fiscal Year or other period, an
        amount equal to the depreciation, amortization, or other cost recovery
        deduction allowable with respect to an asset for such Fiscal Year or
        other period for federal income tax purposes, except that if the Gross
        Asset Value of an asset differs from its adjusted basis for federal
        income tax purposes at the beginning of such Fiscal Year or other
        period, Depreciation shall be an amount which bears the same ratio to
        such beginning Gross Asset Value as the federal income tax depreciation,
        amortization, or other cost recovery deduction for such year or other
        period bears to such beginning adjusted tax basis; provided, however,
        that if the federal income tax depreciation, amortization, or other cost
        recovery deduction for such

<PAGE>
                                                                               5


        year is zero, Depreciation shall be determined with reference to such
        beginning Gross Asset Value using any reasonable method selected by the
        Managing Member.

               "DESIGNATED FACILITIES" has the meaning set forth in Section
        22.3(a) hereof.

               "DISABLED MEMBER" means a Member who suffers a Disabling Event.

               "DISABLING EVENT" with respect to a Member means the Bankruptcy
        of such Member, the liquidation or dissolution of any such Member which
        is a corporation, partnership, or trust (other than in connection with a
        reorganization, merger, consolidation or business combination in which
        there is a surviving Entity), or the death or any other legal
        incapacitation of any such Member who is a natural person.

               "DISCOUNTED OFFER" has the meaning set forth in Section 22.1(b)
        hereof.

               "DISPOSITION FEE" means a fee payable to SALMI, or an Affiliate
        designated by SALMI, in connection with a sale or disposition of the
        Facilities in the Portfolio in an amount equal to one percent (1%) of
        the gross sale price or prices of such Facilities reflected in the
        applicable sale contract or contracts entered into by the applicable
        Facility Owner (inclusive of any indebtedness if such Facility Owner
        does not prepay such indebtedness prior to the sale or disposition);
        provided, that the Disposition Fee shall be reduced by any disposition
        or marketing fee payable to any third party selected by the Managing
        Member to market one or more of such Facilities if the Managing Member
        is permitted hereunder to select such third party to market the
        Facility.

               "18% RETURN AMOUNT" means an amount computed like compounding
        interest at a rate of 18% per annum on the balance standing from time to
        time in the Investor Member's Contribution Account. The 18% Return
        Amount shall be computed using the same compounding, accrual period and
        other assumptions that are used in computing the Investor Member's
        Internal Rate of Return, taking into account the proviso in Section
        9.1(b)(iii), if applicable.

               "ENTITY" means any person, corporation, partnership (general or
        limited), limited liability company, joint venture, association, joint
        stock company, trust or other business entity or organization.

               "EXCHANGE ACT" has the meaning assigned to it in Section 16.6.

               "EXTRAORDINARY EVENT" means any sale, cancellation, release or
        termination of any Lease Transaction, or any exchange, financing,
        condemnation, conversion, damage or destruction of, or relating to, all
        or any portion of the Portfolio (other than of any such events relating
        to the Company's tangible property and fixtures that, individually,
        involves property having a book value to the Company as shown on the
        Company financial statements of less than $250,000).

               "EXTRAORDINARY PROCEEDS" means all cash proceeds (including,
        without limitation, the amount of any rent credits provided under any
        Lease Transaction as a result of the receipt by the lessor thereunder of
        title insurance or condemnation proceeds, insurance

<PAGE>
                                                                               6


        proceeds, recoveries, damages and awards, but excluding insurance
        proceeds for rental loss) realized by the Company from any Extraordinary
        Event, decreased by the sum of (i) the amount of such proceeds applied
        by the Company to pay debts and liabilities encumbering the relevant
        Facility, including, without limitation, the amount of any release
        prices paid by the Company to the Facility Owner under the Lease
        Transaction in connection with a sale of any Facility or the release of
        any Facility from the Lease Transaction; (ii) the amount of such
        proceeds used by the Company for restoration and repair (including any
        developer's or similar fees) in the event of damage or destruction to or
        partial condemnation of any Facility; (iii) any incidental or ancillary
        expenses, costs, or liabilities incurred by the Company in effecting or
        obtaining any such Extraordinary Proceeds (including, without
        limitation, attorneys' and accountants' fees, court costs, recording
        fees, transfer taxes and fees, appraisal costs, brokerage fees, and the
        like), all of which expenses, costs, and liabilities shall be paid from
        the gross amount of such cash proceeds to the extent thereof; (iv) the
        amount thereof applied to fund any deficit in Company reserves Approved
        by the Members; and (v) the payment of such other Company debts and
        liabilities as the Members shall unanimously Approve.

               "FACILITY" means each assisted living facility (including the
        real property and related improvements thereon) included in the
        Portfolio. The name by which each Facility is known and referred to
        herein is specified in Schedule 1 hereto.

               "FACILITY BUYING MEMBER" has the meaning set forth in Section 21
        hereto.

               "FACILITY BUY-SELL CLOSING DATE" has the meaning set forth in
        Section 21 hereto.

               "FACILITY BUY-SELL OFFER" has the meaning set forth in Section 21
        hereto.

               "FACILITY BUY-SELL PRICE" has the meaning set forth in Section 21
        hereto.

               "FACILITY BUY-SELL VALUE" has the meaning set forth in Section 21
        hereto.

               "FACILITY DEFAULT PURCHASE PRICE" has the meaning set forth in
        Section 21 hereto.

               "FACILITY DEFAULTING BUYER" has the meaning set forth in Section
        21 hereto.

               "FACILITY OFFER TO SELL" has the meaning set forth in Section 21
        hereto.

               "FACILITY OFFER TO PURCHASE" has the meaning set forth in Section
        21 hereto.

               "FACILITY OWNER" has the meaning specified in Section 7.1.

               "FACILITY SELLING MEMBER" has the meaning set forth in Section 21
        hereto.

               "FACILITY SUBSTITUTED BUYER" has the meaning set forth in Section
        21 hereto.

               "FAILING MEMBER" has the meaning set forth in Section 7.4 hereof.

               "FEDERAL ACT" has the meaning set forth in Section 11.2 hereof.

<PAGE>
                                                                               7



               "FF&E" means furniture, fixtures, furnishings, soft goods,
        computer equipment, hardware, and wiring, case goods, vehicles and
        equipment located in or at the Facilities or used exclusively in
        connection with the operation of the Facilities, but shall not include
        Consumables, Household Replacements or Software.

               "FIFTEEN DAY PERIOD" has the meaning assigned to it in Section 21
        hereof.

               "FIRST CLOSING DATE" means the date of this Agreement.

               "FISCAL YEAR" means the fiscal year of the Company, which shall
        be the calendar year. The first Fiscal Year shall commence on the date
        hereof, and each subsequent Fiscal Year shall commence on the date
        immediately following the last day of the immediately preceding Fiscal
        Year. Each Fiscal Year shall end on the earliest to occur after the
        commencement of such Fiscal Year of (i) December 31, (ii) the day
        immediately preceding the date on which a distribution is made to the
        Members under Section 23.2 hereof, (iii) the day immediately preceding
        the date of the "liquidation" of a Member's interest in the Company
        (within the meaning of Treasury Regulation Section
        1.704-1(b)(2)(ii)(g)), or (iv) the date on which the Company is
        terminated under Section 23.4 hereof.

               "GAAP" means the generally accepted accounting principles in the
        United States of America, as promulgated or adopted by the Financial
        Accounting Standards Board and its predecessors and successors from time
        to time.

               "GROSS ASSET VALUE" means, with respect to any asset, the asset's
        adjusted basis for federal income tax purposes, except as follows:

               (a) The initial Gross Asset Value of any asset contributed by a
        Member to the Company shall be the gross fair market value of such
        asset, as determined and Approved by all of the Members (the Gross Asset
        Value of each Facility that is expected to become a part of the
        Portfolio is set forth on Schedule 1);

               (b) The Gross Asset Values of all Company assets shall be
        adjusted to equal their respective gross fair market values, as
        determined by the Members, as of the following times: (i) the
        acquisition of an additional interest in the Company by any new or
        existing Member in exchange for more than a de minimus capital
        contribution; (ii) the distribution by the Company to a Member of more
        than a de minimus amount of property as consideration for an interest in
        the Company; and (iii) the liquidation of the Company within the meaning
        of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however that
        adjustments pursuant to clauses (i) and (ii) above shall be made only if
        the Managing Member reasonably determines that such adjustments are
        necessary or appropriate to reflect the relative economic interests of
        the Members in the Company;

               (c) The Gross Asset Value of any Company asset distributed to any
        Member shall be the gross fair market value of such asset on the date of
        distribution; and

               (d) The Gross Asset Values of Company assets shall be increased
        (or decreased) to reflect any adjustments to the adjusted basis of such
        assets pursuant to Code
<PAGE>
                                                                               8


        Section 734(b) or Code Section 743(b), but only to the extent that such
        adjustments are taken into account in determining capital accounts
        pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 8.4(g)
        hereof; provided, however, that Gross Asset Values shall not be adjusted
        pursuant to this clause (d) to the extent the Managing Member determines
        that an adjustment pursuant to clause (b) of this definition is
        necessary or appropriate in connection with a transaction that would
        otherwise result in an adjustment pursuant to this clause (d).

        If the Gross Asset Value of an asset has been determined or adjusted
pursuant to clauses (a), (b) or (d) of this definition, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Net Profit and Net Loss.

               "GROSS FACILITY REVENUE" means all revenue (other than Ancillary
        Revenues) derived from a Facility, determined in accordance with GAAP,
        including, but not limited to, income (from both cash and credit
        transactions, net of any fee therefor) from community fees, monthly
        occupancy fees, health care fees and any and all other fees and payments
        whatsoever received from Residents; income from food and beverage and
        catering sales other than from sales of Restricted Foods; and income
        from laundry, maid service, parking, phone systems, internet, cable,
        utility reimbursements and vending machines; all determined in
        accordance with GAAP; provided, however, that Gross Facility Revenue
        shall not include (i) gratuities to employees at the Facilities; (ii)
        federal, state or municipal excise, sales or use taxes or similar taxes
        imposed at the point of sale and collected directly from the Residents
        or guests of the Facilities or included as part of the sales price of
        any goods or services; (iii) returns received from investment in
        Shari'ah compliant accounts (iv) proceeds of any financing or
        refinancing of any Facility or any portion thereof; (v) proceeds of any
        insurance policy or condemnation or other taking; (vi) any cash refunds,
        rebates or discounts to Residents or cash discounts and credits of a
        similar nature given, paid or returned in the course of obtaining Gross
        Facility Revenue or components thereof; (vii) proceeds from any sale of
        any Facility, from any other capital transaction or from any
        Extraordinary Event; (viii) Resident funds on deposit or security
        deposits until such time as the same are applied to current fees due for
        services rendered from the Facility; (ix) awards of damages, settlement
        proceeds and other payments received by the Company in respect of any
        litigation other than litigation to collect fees due for services
        rendered from the Facility; (x) payments under any policy of title
        insurance; (xi) Capital Contributions of the Members; and (xii) Working
        Capital. Any community fees or deposits that are refunded to a Resident
        shall be credit against Gross Facility Revenue during the month in which
        such refunds are made, if previously included in Gross Facility Revenue.

               "HOUSEHOLD REPLACEMENTS" means supply items including linen,
        china, glassware, silver, uniforms, and similar items, but excluding
        Consumables.

               "INTERNAL RATE OF RETURN" or "IRR" means for each Member the
        annual discount rate, compounded monthly, that results in a net present
        value equal to zero (0) when the discount rate is applied to all amounts
        contributed or deemed contributed by each of the Members to the capital
        of the Company pursuant to Sections 7.1, 7.2, 7.3, 7.4 or 7.8

<PAGE>
                                                                               9


        hereof and all distributions made by the Company to such Member pursuant
        to Section 9.1 hereof. "Internal Rate of Return" or "IRR" means with
        respect to the Company's investment in the Portfolio the annual discount
        rate, compounded monthly, that results in a net present value equal to
        zero (0) when the discount rate is applied to all amounts invested by
        the Company in the Portfolio and all cash receipts of the Company with
        respect to the Portfolio. The Internal Rate of Return shall be
        calculated as shown on Schedule 6 hereto.

               "INVESTMENT YIELD" has the meaning set forth in Section 10.11.


               "INVESTOR MEMBER" means US Assisted Living Facilities, Inc., a
        Delaware corporation and its permitted successors and assigns.

               "INVESTOR MEMBER CONTRIBUTION AMOUNT" means the amount for each
        Facility listed on Schedule 2 hereto under the column labeled "Investor
        Member Contribution Amount".

               "INVESTOR MEMBER'S FIRST CAPITAL CONTRIBUTION" means the Investor
        Member's initial capital contribution to the Company, which shall be
        contributed to the Company pursuant to Section 7.1 hereof, in an amount
        equal to the aggregate amount of Investor Member Contribution Amounts
        for each of the Facilities that become part of the Portfolio on the
        First Closing Date.

               "INVESTOR MEMBER'S MARKETING RIGHT" has the meaning set forth in
        Section 22.1(a) hereof.

               "INVESTOR MEMBER'S SECOND CAPITAL CONTRIBUTION" means the
        Investor Member's second capital contribution to the Company, which
        shall be contributed to the Company pursuant to Section 7.2 hereof, in
        an amount equal to the aggregate amount of Investor Member Contribution
        Amounts for each of the Facilities that become part of the Portfolio on
        the Second Closing Date.

               "ISLAMIC OPERATING GUIDELINES" shall mean the principles and
        operational guidelines set forth in Schedule 5 hereto.

               "LEASE AGREEMENT" shall mean each of the Master Lease and Finance
        Facility Agreements entered into by a Facility Owner and either the
        Company or a wholly-owned subsidiary of the Company.

               "LEASE FINANCING" means the lease financing provided in relation
        to a Facility pursuant to the Lease Transaction applicable to such
        Facility.

               "LEASE TRANSACTION" means the lease financing transactions
        between a Facility Owner and either the Company or a wholly-owned
        subsidiary of the Company, each of which transactions shall be governed
        and evidenced by, collectively, a Lease Agreement, a Call Option Letter,
        a Put Option Letter, a Supplemental Agreement and a Tax Matters
        Agreement, including any amendments or supplements thereto.

<PAGE>
                                                                              10



               "LEGAL REQUIREMENTS" means any license, certificate, law, code,
        rule, ordinance, regulation or order of any federal, state or local
        governmental authority, court, department, commission, board or office,
        Board of Fire Underwriters or any body similar to any of the foregoing
        having jurisdiction over the Company, SALMI or the business or operation
        of the Facilities or the matters that are the subject of this Agreement,
        including, without limitation, any laws, ordinances, regulations, orders
        or rules concerning resident care, health care, building, zoning, use,
        environmental protection, Resident funds on deposit or security
        deposits, environmental protection and fire safety.

               "LETTER OF INTENT" has the meaning set forth in Section 10.10
        hereof.

               "MAJOR DECISION" has the meaning set forth in Section 10.4
        hereof.

               "MANAGEMENT AGREEMENT" means the Management Agreement pertaining
        to each Facility between SALMI and either the Company or a wholly-owned
        subsidiary of the Company.

               "MANAGEMENT FEE" shall mean a monthly payment made by the Company
        to SALMI under each Management Agreement as consideration for SALMI's
        management of the relevant Facility.

               "MANAGING MEMBER" means Sunrise Assisted Living Investments,
        Inc., and its permitted successors and assigns.

               "MANAGING MEMBER CONTRIBUTION AMOUNT" means the amount for each
        Facility listed on Schedule 2 hereto under the column labeled "Managing
        Member Contribution Amount", which amount equals the net amount deemed
        to have been contributed by the Managing Member to the Company for such
        Facility.

               "MANAGING MEMBER'S FIRST CAPITAL CONTRIBUTION" means the Managing
        Member's initial capital contribution to the Company, which shall be
        deemed to be contributed to the Company pursuant to Section 7.1 hereof,
        in an amount equal to the aggregate amount of Managing Member
        Contribution Amounts for each of the Facilities that become part of the
        Portfolio on the First Closing Date.

               "MANAGING MEMBER'S MARKETING RIGHT" has the meaning set forth in
        Section 22.3(a) hereof.

               "MANAGING MEMBER'S SECOND CAPITAL CONTRIBUTION" means the
        Managing Member's second capital contribution to the Company, which
        shall be deemed to be contributed to the Company pursuant to Section 7.2
        hereof, in an amount equal to the aggregate amount of Managing Member
        Contribution Amounts for each of the Facilities that become part of the
        Portfolio on the Second Closing Date.

               "MANDATORY ADDITIONAL CONTRIBUTIONS" has the meaning set forth in
        Section 7.4 hereof.

<PAGE>
                                                                              11



               "MEMBERS" means the Managing Member and the Investor Member,
        collectively, and any successor member admitted pursuant to Section 16
        hereof.

               "NET CASH FLOW" means, for any given period, any amounts released
        from Company reserves in accordance with the applicable Operating Budget
        or as otherwise Approved by all of the Members, together with all
        receipts from the conduct of the business of the Company for such period
        (specifically excluding any Extraordinary Proceeds) which are available
        for distribution by the Company following (i) the payment of all
        operating and capital expenses of the Company (including without
        limitation the Management Fee) for such period or any prior period if
        due and unpaid with respect to which no reserves have been established
        and which have not been paid out of Extraordinary Proceeds or cash
        proceeds realized by the Company from capital contributions of the
        Members, (ii) the payment of rent and all other payments required to be
        paid pursuant to the Lease Transaction during any such period, and (iii)
        the establishment or replenishment of reserves, if any, for taxes, debt
        service, maintenance, repairs and other expenses and other working
        capital requirements of the Company or for contingent and unforeseen
        liabilities of the Company.

               "NET OPERATING INCOME" has the meaning set forth in Section 10.11
        hereof.

               "NET PROFIT" or "NET LOSS" means, for each Fiscal Year, the
        Company's taxable income or taxable loss for such Fiscal Year, as
        determined under Section 703(a) of the Code, and Section 1.703-1 of the
        Regulations (for this purpose, all items of income, gain, loss or
        deduction required to be stated separately pursuant to Section 703(a)(1)
        of the Code shall be included in taxable income or taxable loss), but
        with the following adjustments:

               (a) Any tax-exempt income, as described in Section 705(a)(1)(B)
        of the Code, realized by the Company during such Fiscal Year shall be
        taken into account in computing such taxable income or taxable loss as
        if it were taxable income;

               (b) Any expenditures of the Company described in Section
        705(a)(2)(B) of the Code for such Fiscal Year, including any items
        treated under Section 1.704-1(b)(2)(iv)(i) of the Regulations as items
        described in Section 705(a)(2)(B) of the Code, shall be taken into
        account in computing such taxable income or taxable loss as if they were
        deductible items;

               (c) In the event the Gross Asset Value of any Company asset is
        adjusted pursuant to clauses (b) or (c) of the definition of "Gross
        Asset Value," the amount of such adjustment shall be taken into account
        as gain or loss from the disposition of such asset for purposes of
        computing Net Profit or Net Loss;

               (d) Gain or loss resulting from any disposition of property with
        respect to which gain or loss is recognized for federal income tax
        purposes shall be computed by reference to the Gross Asset Value of the
        property disposed of, notwithstanding that the adjusted tax basis of
        such property differs from its Gross Asset Value;
<PAGE>
                                                                              12


               (e) In lieu of the depreciation, amortization, and other cost
        recovery deductions taken into account in computing such taxable income
        or loss, there shall be taken into account Depreciation for such Fiscal
        Year or other period; and

               (f) Any items which are specially allocated pursuant to Section
        8.4 or Section 8.5 hereof shall not be taken into account in computing
        Net Profit or Net Loss.

If the Company's taxable income or taxable loss for such Fiscal Year, as
adjusted in the manner provided above in clauses (a) through (f) above, is a
positive amount, such amount shall be the Company's Net Profit for such Fiscal
Year; and if negative, such amount shall be the Company's Net Loss for such
Fiscal Year.

               "NON-CONTROLLABLE EXPENSES" means all costs and expenses of the
        Company incurred (whether incurred by the Company or by the Managing
        Member on behalf of the Company for which the Managing Member is
        entitled to reimbursement pursuant to this Agreement) in connection with
        the payment of (i) fees for utility services or insurance coverage for
        the Company or the Portfolio and other similar recurring expenses, (ii)
        real estate taxes with respect to the Portfolio, (iii) the Management
        Fee, (iv) personal property taxes, business and professional license
        taxes and similar taxes and fees for the Company or the Portfolio, and
        (v) rent under the Lease Agreements.

               "NON-FAILING MEMBER" has the meaning set forth in Section 7.4
        hereof.

               "NON-U.S. LAWS" means any law, regulation or rule (including
        without limitation all securities laws and regulations) applicable in
        any jurisdiction outside of the United States that regulates or affects
        the sale of any direct or indirect interest in the Company and/or the
        Investor Member.

               "OFFER TO PURCHASE" has the meaning set forth in Section 20.2
        hereof.

               "OFFER TO SELL" has the meaning set forth in Section 20.2 hereof.

               "OFFERED FACILITIES" has the meaning set forth in Section 22.1(a)
        hereof.

               "OFFEREE" has the meaning set forth in Section 20.1 hereof.

               "OFFEROR" has the meaning set forth in Section 20.1 hereof.

               "OPERATING BUDGET" has the meaning set forth in subsection 10.3
        hereof.

               "PERCENTAGE INTERESTS" has the meaning set forth in Section 6
        hereof.

               "PERMITTED EXPENSES" means all costs and expenses of the Company
        incurred (whether incurred by the Company or by the Managing Member on
        behalf of the Company) in connection with the Company's affairs, and
        which are (i) Non-Controllable Expenses, (ii) line item expenditures in
        an Operating Budget, provided, that the amount of a line item
        expenditure in the Operating Budget for a Fiscal Year may be exceeded by
        the greater of 10% of such amount or $10,000 and , provided, further,
        that the aggregate


<PAGE>
                                                                              13


        amount by which line item amounts in an Operating Budget are exceeded
        pursuant to this clause (ii) shall not exceed 5% of the total of all
        line item expenditures in such Operating Budget, or (iii) are
        expenditures immediately required by law, are necessary without delay in
        order to protect the Portfolio, or are made under other circumstances
        which the Managing Member reasonably believes to be an emergency,
        provided that notice of the making of such expenditures is given to all
        Members within five (5) business days of the making of such required or
        emergency expenditures.

               "PORTFOLIO" means those Facilities that are or become subject to
        a Lease Agreement. The Facilities that are expected to become part of
        the Portfolio are listed in Schedule 1 hereto.

               "REGULATIONS" means the income tax regulations promulgated under
        the Code, as such regulations may be amended from time to time. All
        references herein to specific Sections of the Regulations shall be
        deemed to refer also to corresponding provisions of any succeeding
        regulations.

               "REGULATORY ALLOCATIONS" has the meaning set forth in Section 8.5
        hereof.

               "RESIDENT" means an individual occupying a unit in a Facility.

               "RESIDENT AGREEMENT" means an agreement between SALMI and a
        Resident for the occupancy of a unit.

               "RESTRICTED FOODS" means certain food products (including, but
        not limited to, pork and alcoholic beverages) that cannot be provided by
        the Company at the Facilities.

               "SALMI" means Sunrise Assisted Living Management, Inc.

               "SECOND CLOSING DATE" has the meaning set forth in Section 7.2
        hereof.

               "SELLING MEMBER" has the meaning set forth in Section 20.4
        hereof.

               "SENIOR FINANCING" means the financing provided to a Facility
        Owner and secured by a first priority mortgage or deed of trust on the
        Facility of such Facility Owner.

               "SOFTWARE" means all computer software and accompanying
        documentation (including all future upgrades, enhancements, additions,
        substitutions and modifications thereof) which are owned or leased by
        SALMI and used in connection with its management and operation of the
        Facilities.

               "STATE ACT" has the meaning set forth in Section 11.2 hereof.

               "SUBSTITUTED BUYER" has the meaning set forth in Section 20.5
        hereof.

               "SUNRISE" has the meaning set forth in the Preamble.

<PAGE>
                                                                              14



               "SUNRISE STANDARDS" means both the operational standards
        (including, but not limited to, staffing levels, compensation plans,
        Resident care and health care policies and procedures, and accounting
        and financial reporting policies and procedures) and the physical
        standards (including, but not limited to, amounts and quality of FF&E
        and frequency of FF&E replacements) that are from time to time then
        generally and consistently (but not necessarily absolutely or without
        exception) applied at or to assisted living communities (but not nursing
        homes or other acute care facilities) in the Sunrise System, which are
        of comparable type, size, age and market orientation as the Facility,
        all in accordance with Legal Requirements, provided, that the Sunrise
        Standards shall at all times be at a level consistent with those of a
        premier owner or manager of premier or first class assisted
        living/dementia care facilities.

               "SUNRISE SYSTEM" means, at any time, the entire system or group
        of Sunrise assisted living communities then owned and/or operated or
        managed by SALMI (or one or more of its Affiliates) under the "Sunrise"
        name.

               "TAXES" has the meaning set forth in Section 21.6 hereof.

               "13% RETURN AMOUNT" means an amount computed like compounding
        interest at a rate of 13% per annum on the balance standing from time to
        time in the Investor Member's Contribution Account. The 13% Return shall
        be computed using the same compounding, accrual period and other
        assumptions that are used in computing the Investor Member's Internal
        Rate of Return, taking into account the proviso in Section 9.1(b)(ii),
        if applicable.

               "THIRTY DAY PERIOD" has the meaning set forth in Section 20.3
        hereof.

               "TITLE COMPANY" means First American Title Insurance Company.

               "TRANSACTION AGREEMENT" means the Amended and Restated
        Transaction Agreement, dated as of January 30, 2002, as amended from
        time to time, by and among (i) Sunrise Bloomingdale Assisted Living,
        L.L.C., (ii) Sunrise Smithtown A.L., L.L.C., (iii) Sunrise Alexandria
        Assisted Living, L.P., (iv) Sunrise Assisted Living Limited Partnership
        III, (v) Sunrise Riverside Assisted Living, L.P., (vi) Sunrise Fleetwood
        A.L., L.L.C., (vii) Sunrise Buffalo Grove Assisted Living, L.L.C.,
        (viii) Sunrise Beach Cities Assisted Living, L.P., (ix) Sunrise
        Northville Assisted Living, L.L.C., (x) Sunrise Pacific Palisades
        Assisted Living, L.P., (xi) Sunrise Sterling Canyon Assisted Living,
        Limited Partnership, (xii) AL Investments, L.L.C., (xiii) Sunrise
        Mission Viejo Assisted Living, L.L.C., (xiv) the Managing Member, (xv)
        Sunrise Development, Inc., (xvi) Sunrise Assisted Living, Inc. and
        (xvii) US Assisted Living Facilities, Inc.

               "TRIGGERING TRANSFER" has the meaning set forth in Section 16.3
        hereof.

               "UNCURED MAJOR DEFAULT" means the commission of an act of
        negligence, gross negligence, fraud or willful misconduct by a Member in
        the course of such Member carrying out its activities hereunder,
        following which written notice is provided by the other Member to the
        defaulting Member of such other Member's intention to exercise its
        remedies hereunder as a result of such default; and such default and the
        damages, if any,


<PAGE>
                                                                              15


        resulting from such default have not been cured within thirty (30) days
        after the provision of such written notice (or within such reasonably
        longer time period as the other Member may provide the defaulting Member
        if such default is not susceptible to cure within thirty (30) days).

               "VOLUNTARY ADDITIONAL CONTRIBUTIONS" has the meaning set forth in
        Section 7.4 hereof.

               "WORKING CAPITAL" means the working capital deposited by the
        Company with SALMI under the Management Agreements for use as set forth
        therein.

        SECTION 2   CONTINUATION OF COMPANY.

        The parties do hereby agree to and do hereby continue the Company under
the Delaware Limited Liability Company Act (as amended from time to time and any
successor statute thereto, the "ACT"). The managing member of the Company shall
be the Managing Member and the non-managing member shall be the Investor Member.

        SECTION 3.  NAME AND PRINCIPAL OFFICE.

        SECTION 3.1 NAME.

        The name of the Company is "SUNRISE FIRST ASSISTED LIVING HOLDINGS,
LLC".

        SECTION 3.2   PRINCIPAL OFFICE AND PLACE OF BUSINESS; REGISTERED AGENT.

        The principal office of the Company shall be located at 7902 Westpark
Drive, McLean, Virginia 22102. The initial registered agent of the Company for
service of process shall be Corporation Trust Company, and the address of the
registered agent shall be 1209 Orange Street, Wilmington, Delaware. The address
of the registered office of the Company shall be the same as the address of the
registered agent of the Company.

        SECTION 4. PURPOSE OF COMPANY.

        The purpose of the Company shall be to own, operate, hold, lease,
manage, finance, acquire, sell, substitute and dispose of, or otherwise deal
with or provide services with respect to, the Facilities. The Members
acknowledge and agree that the goal of the Company is to maximize the Members'
return on their investment. Except as otherwise provided herein, the Company
shall not engage in any other activities and businesses unless Approved by all
Members.

        SECTION 5. TERM.

        The term of the Company commenced on January 31, 2002 and shall continue
until the Company is terminated, liquidated and dissolved pursuant to Section 23
hereof.

<PAGE>
                                                                              16


        SECTION 6.  PERCENTAGE INTERESTS.

        The percentage interests (the "PERCENTAGE INTERESTS") of each of the
Members at all times (unless modified as provided in Section 7 hereof) shall be
as follows:

                MEMBER                           PERCENTAGE INTEREST

                Managing Member                           20   %
                Investor Member                           80   %

        SECTION 7. CAPITAL.

        SECTION 7.1   FIRST CLOSING.

        On the First Closing Date, the Investor Member shall, for each Facility
that is to become part of the Portfolio on the First Closing Date, make the
Investor Member's First Capital Contribution to the capital of the Company and
the Managing Member shall, for each Facility that is to become part of the
Portfolio on the First Closing Date, be deemed to have made the Managing
Member's First Capital Contribution to the capital of the Company. A Facility
shall become part of the Portfolio as a result of the Managing Member, or an
Affiliate of the Managing Member, (i)(A) transferring 81% of its ownership
interests in the entity holding title to, or a ground lessee's interest in, such
Facility (such entity being the "FACILITY OWNER") to AL Funding Inc. and/or AL
Subfunding LLC (together, "AL FUNDING") and arranging for such Facility Owner to
enter into a Lease Transaction with the Company or a wholly-owned limited
liability company subsidiary of the Company or (B) transferring its fee interest
in the Rochester Facility to Sunrise Rochester Assisted Living, LLC (which, upon
such transfer shall become a Facility Owner for all purposes hereunder) and
arranging for such Facility Owner to enter into a Lease Transaction with the
Company or a wholly-owned subsidiary of the Company, (ii) transferring to the
Company the reserves for FF&E and capital improvements held by the Managing
Member for each Facility, which reserves equal $100 per unit and (iii) causing
the Facility Owner to use the initial payment made by the Company to a Facility
Owner under the Lease Transaction to satisfy certain debt obligations associated
with the Facilities. As a condition to the contribution by the Investor Member
of the Investor Member's First Capital Contribution to the capital of the
Company, the Investor Member requires that the Company direct the Managing
Member to make (or to arrange for its Affiliates to make) the transfers
described in clauses (i) and (ii) of the immediately preceding sentence, and the
Company does hereby direct the Managing Member to make such transfers. The
Members agree that no Facility shall become part of the Portfolio on the First
Closing Date unless on such date such Facility is or becomes subject to Lease
Financing in an amount not less than the amount for such Facility specified in
Schedule 2 hereto and the terms of which are satisfactory to the Investor
Member.

        SECTION 7.2   SECOND CLOSING.

        On March 27, 2002, or such other date as may be Approved by all of the
Members (the "SECOND CLOSING DATE"), the Investor Member shall, for each
Facility that is to become part of the Portfolio on the Second Closing Date,
make the Investor Member's Second Capital Contribution to the Company, and the
Managing Member shall, for each Facility that is to


<PAGE>
                                                                              17


become part of the Portfolio on the Second Closing Date, be deemed to have made
the Managing Member's Second Capital Contribution to the Company. Each Facility
that is not made a part of the Portfolio on the First Closing Date shall be made
a part of the Portfolio on the Second Closing Date (in the manner described in
Section 7.1), provided that no Facility shall become part of the Portfolio on
the Second Closing Date unless on such date such Facility is subject to Lease
Financing that is in an amount not less than the amount for such Facility
specified in Schedule 2 hereto and the terms of which are satisfactory to the
Investor Member.

        SECTION 7.3   SUBSEQUENT CLOSINGS AND CONDITIONS APPLICABLE TO  CERTAIN
                      FACILITIES.

            (a) If by the Second Closing Date the Canyon Crest Facility or the
        Buffalo Grove Facility is not, or will not become, subject to Lease
        Financing in the minimum amount specified on Schedule 2 hereto and on
        terms acceptable to the Investor Member, the Managing Member shall
        continue to be obligated to arrange Lease Financing for each such
        Facility in the minimum amount specified on Schedule 2 hereto and on
        terms acceptable to the Investor Member. The Members agree that (i) the
        Investor Member's acceptance of the terms of the Lease Financing for the
        Buffalo Grove Facility will include the review and acceptance of the
        terms of any credit support or other financial support provided by the
        Managing Member or its Affiliates in connection with the Lease
        Financing, and (ii) the Managing Member is not entitled to any credit or
        compensation hereunder as a result of providing any such credit or other
        financial support. If such Lease Financing has been arranged by July 31,
        2002 for either of such Facilities, the Managing Member shall notify the
        Investor Member, and the Investor Member shall have the right, on notice
        to the Managing Member, to require each such Facility for which such
        Lease Financing has been arranged to be made part of the Portfolio (in
        the manner described in Section 7.1) and to require the Members to make
        capital contributions to the Company in the amounts specified for each
        such Facility in Schedule 1 hereto. If such Lease Financing has not been
        arranged for any such Facility by July 31, 2002, the Investor Member
        shall have the right, on notice to the Managing Member, to terminate any
        remaining obligation of the Company or the Members to make such Facility
        a part of the Portfolio and to make capital contributions in relation to
        such Facility.

            (b) The Members acknowledge that the Pacific Palisades Facility is
        not subject to permanent Lease Financing, and that permanent Lease
        Financing will not be sought until after the Pacific Palisades Facility
        reaches stabilization, which is expected to occur mid-2002.
        Notwithstanding the absence of permanent Lease Financing for the Pacific
        Palisades Facility, but subject to the conditions set forth in this
        Section 7.3(b), the Members intend to have such Facility become part of
        the Portfolio at the First Closing in accordance with Section 7.1. The
        Managing Member agrees that it will use its best efforts to obtain
        short-term lease financing in an amount equal to approximately 50% of
        the Gross Asset Value of the Pacific Palisades Facility and will
        provide, or will cause one of its Affiliates to provide, additional
        financing equal to approximately 15% of the Gross Asset Value of such
        Facility. The additional short-term lease financing provided by the
        Managing Member or its Affiliate will be subordinate to the short-term
        lease financing obtained for such Facility. All such short-term lease
        financing shall be provided in an Islamically-compliant structure and
        shall have a market rate of return. The Members agree to seek permanent,
        fixed rate lease financing for the Pacific Palisades Facility after


<PAGE>
                                                                              18


        such Facility reaches stabilization. It is the intention of the Members
        that such lease financing will have a rental rate of 7.5% per annum, an
        acquisition cost of not less than 60% of the Gross Asset Value of the
        Pacific Palisades Facility and a term acceptable to the Members. If the
        Company determines that it is unable to obtain lease financing for the
        Pacific Palisades Facility satisfying such criteria, then the marketing
        right of the Investor Member set forth in Section 22.1 shall commence as
        to the Pacific Palisades Facility on such date of determination and the
        marketing right of the Managing Member set forth in Section 22.3 shall
        commence as to the Pacific Palisades Facility on the date one year after
        such date of determination.

                (c) The Members acknowledge that the Canyon Crest Facility
        includes undeveloped land that may be used for the expansion of the
        Canyon Crest Facility, and the Members agree to undertake such expansion
        on the following terms and conditions. The Managing Member may at any
        time recommend the expansion of the Canyon Crest Facility, provided that
        at the time of such recommendation the Canyon Crest Facility has had an
        average occupancy level for at least the six consecutive months then
        ended of at least 93%. Any such recommendation of the Managing Member
        shall include complete information as to the proposed expansion and
        shall be subject to the approval of the Investor Member. If the Members
        agree to proceed with such expansion, they will seek the consent of the
        Facility Owner (which consent may be subject to the Facility Owner
        obtaining the consent of any mortgage holder). If such consent is
        obtained, the Company will hire the Managing Member to serve as the
        development manager of the expansion and will pay to the Managing Member
        a reasonable fee for such services. Such expansion will be financed with
        construction financing obtained by the Facility Owner of the Canyon
        Crest Facility and will be subject to (i) receiving all necessary
        construction and operation permits and licenses and (ii) obtaining
        construction financing in an amount not less than 70% of the cost of
        construction. The Members agree to make capital contributions to the
        Company as needed to provide the remaining funds needed for such
        construction. The terms and structure of such construction arrangements
        and the financing thereof shall be subject to the approval of the
        Investor Member to confirm that they comply or are otherwise consistent
        with the Islamic Operating Guidelines and other Shari'ah principles
        applicable to the Company. Upon completion of construction, the Company
        will request that the Facility Owner obtain permanent financing for the
        Canyon Crest Facility. If the Company determines that the Facility Owner
        is unable to arrange such permanent financing on acceptable terms, then
        the marketing right of the Investor Member set forth in Section 22.1
        shall commence as to the Canyon Crest Facility on such date of
        determination and the marketing right of the Managing Member set forth
        in Section 22.3 shall commence as to the Canyon Crest Facility on the
        date one year after such date of determination.

        SECTION 7.4.  ADDITIONAL CAPITAL CONTRIBUTIONS AND OTHER
                      CAPITAL MATTERS.

                (a) MANDATORY AND VOLUNTARY ADDITIONAL CONTRIBUTIONS.

                        (i)   Pursuant to the Management Agreement for each
                Facility, the Company has agreed to establish and maintain a
                reserve account for each Facility in which the Company shall
                collect and hold funds to cover the FF&E and capital


<PAGE>
                                                                              19


                improvement costs specified in Sections 10.02 and 10.03 of each
                such Management Agreement. The amounts held in the reserve
                accounts for the Facilities may be aggregated by the Company
                into a single account (the "CENTRAL ACCOUNT"), notwithstanding
                the provisions of the Management Agreements. The reserve account
                for each Facility shall be funded initially with the $100 per
                unit referenced in Section 7.1(ii) hereof and $300 per unit from
                the capital of the Company. Commencing in April, 2002 and
                continuing each month thereafter, the Company will add to the
                reserve account for each Facility the amount of $33.33 per unit
                of such Facility, such amount to be derived from the Gross
                Facility Revenue of such Facility. The amount to be funded per
                unit of a Facility is subject to adjustment as set forth in the
                Management Agreement for such Facility. The Members agree that
                the aggregate of the amounts held in the Central Account are to
                be used by the Company and the Manager to pay the expenses
                incurred in maintaining the FF&E of the Facilities in good
                condition and repair in a manner consistent with the Sunrise
                Standards and to pay the cost of capital improvements of the
                Facilities, subject to the Management Agreement and the Approved
                Operating Budget for each Facility. If at any time after the
                First Closing Date, the aggregate FF&E and capital improvement
                costs in a Fiscal Year for all of the Facilities, as set forth
                in the Approved Operating Budgets for the Facilities, plus the
                aggregate FF&E and capital improvement costs incurred for all of
                the Facilities as a result of emergencies at the Facilities (as
                described in Section 10.4(a)), exceed or are reasonably expected
                to exceed the aggregate of the funds held in the reserve
                accounts, then the Managing Member may, in its sole discretion,
                call for the Members to make Capital Contributions to the
                Company in proportion to their respective Percentage Interests,
                in an aggregate cumulative amount not to exceed the Cap Amount
                ("MANDATORY ADDITIONAL CONTRIBUTIONS"). The Managing Member
                agrees that in calling for such Mandatory Additional
                Contributions, it shall take into consideration the amounts then
                held in the reserve accounts, the monthly deposits being made
                into the reserve accounts and the timing of the FF&E and capital
                improvement costs to be incurred at the Facilities during such
                Fiscal Year. The Managing Member shall provide the Investor
                Member with thirty (30) days advance notice of the date on which
                such contributions are required to be made. Following receipt of
                such notice, the Managing Member and the Investor Member shall
                make their respective Mandatory Additional Contributions as and
                when requested in such notice. To assure the Company that the
                Investor Member will contribute its proportionate share of such
                Mandatory Additional Contributions, not later than thirty (30)
                days after the Approval of the Operating Budgets for the
                Facilities, the Investor Member will fund its proportionate
                share (based on its Percentage Interest) of the amount of the
                projected Mandatory Additional Contributions for such Fiscal
                Year, as reasonably determined by the Managing Member. Such
                funded amount will be held by the Company in a separate reserve
                account. If and when the Managing Member calls on the members to
                make Mandatory Additional Contributions pursuant hereto, the
                Managing Member shall draw on the funds in such reserve account
                in satisfaction of the Investor Member's proportionate share of
                such Mandatory Additional Contributions.
<PAGE>
                                                                              20


                        (ii) If the Mandatory Additional Contributions made by
                the Members are determined by the Managing Member to be
                insufficient, then the Managing Member may propose, as a Major
                Decision, that the Members make further Capital Contributions
                ("VOLUNTARY ADDITIONAL CONTRIBUTIONS") to the Company in
                proportion to their respective Percentage Interests in an amount
                determined to be necessary by the Managing Member. If the
                Members agree, as a Major Decision, to make such Voluntary
                Additional Contributions, the Managing Member shall provide the
                Investor Member with thirty (30) days advance notice of the date
                on which such contributions are required to be made. Following
                receipt of such notice, the Managing Member and the Investor
                Member shall make their respective Voluntary Additional
                Contributions as and when requested in such notice.

                        (iii) If all of the Members do not agree to make
                Voluntary Additional Contributions requested by the Managing
                Member, then any Member may promptly thereafter make all (but
                not less than all) of the requested Voluntary Additional
                Contributions. The amount of the Voluntary Additional
                Contributions made by such Member shall be credited to the
                Capital Account of such Member for all purposes of this
                Agreement and treated as a Capital Contribution for all purposes
                of this Agreement, and the Members' Percentage Interests shall
                be recalculated by reference to their relative cumulative
                Capital Contributions.

                        (iv) If a Member fails to fund its proportionate share
                of any Mandatory Additional Contribution or any Voluntary
                Additional Contribution specifically agreed to by such Member in
                accordance with Sections 7.4(a)(i) or 7.4(a)(ii) hereof as and
                when required, and the other Member shall have funded its
                proportionate share of such Mandatory Additional Contribution or
                Voluntary Additional Contribution, then such other Member shall
                have the rights specified in Section 7.4(c), in addition to any
                remedy provided in Section 18.

                (b) ADJUSTMENT AND RETURN OF CAPITAL CONTRIBUTIONS. If the Gross
        Revenue of a Facility during any of the four consecutive fiscal quarters
        commencing with the first quarter of 2002 (January 1 through March 31,
        2002) is less than the Gross Revenue amount specified in Schedule 8
        hereto for such Facility for such fiscal quarter, then the aggregate
        Capital Contributions made by the Members in relation to such Facility
        shall be reduced by the adjustment amount specified in Schedule 8, and
        the Managing Member shall distribute to the Members their proportionate
        share of such reduction. Such distribution shall be made by the Managing
        Member within sixty (60) days after the fiscal quarter in which such
        Facility failed to generate the required Gross Revenue, as specified in
        Schedule 8. The amount of any such reduction shall be allocated against
        the value of such Facility as shown on Schedule 8 hereto. Such
        allocation shall be made promptly after the end of the fiscal quarter in
        which such shortfall occurred. Except as and to the extent provided in
        this Section 7.4, in Section 9 and in Section 23, no portion of a
        Member's Capital Contribution will be returned to such Member, no Member
        shall have the right to demand or receive the return of any portion of
        its Capital Contribution, and no Member shall have the right to receive
        the distribution of any property other than cash.


<PAGE>
                                                                              21


                (c) FAILURE TO MAKE CAPITAL CONTRIBUTIONS. If a Member (the
        "FAILING MEMBER") fails to contribute on a timely basis its full
        proportionate share of a Mandatory Additional Contribution pursuant to
        Section 7.4(a)(i) or a Voluntary Additional Contribution agreed upon by
        the Members as a Major Decision pursuant to Section 7.4(a)(ii), and if
        the other Member (the "NON-FAILING MEMBER") contributes on a timely
        basis its full proportionate share of such Mandatory Additional
        Contribution or Voluntary Additional Contribution, then the Non-Failing
        Member may provide written notice to the Failing Member of the Failing
        Member's default. If the Failing Member fails to contribute its full
        proportionate share of such Mandatory Additional Contribution or
        Voluntary Additional Contribution within ten (10) days of such written
        notice, then the Non-Failing Member shall have the following rights and
        options, none of which shall be exclusive of the other or of any other
        right or remedy available to the Non-Failing Member hereunder or at law
        or equity:

                        (i) the Non-Failing Member may, but need not, require
                the Company to repay immediately to the Non-Failing Member all
                or any portion of the amount contributed by the Non-Failing
                Member that is disproportionately (based on the required
                percentage contribution) in excess of the amount (if any) the
                Failing Member contributed to the Company pursuant to the
                relevant notice, together with actual earnings thereon accruing
                to the benefit of the Company, if any, until such amount is
                repaid;

                        (ii) the Non-Failing Member may, but need not, make an
                additional Capital Contribution to the Company (a "DELINQUENCY
                ADVANCE") not in excess of the amount the Failing Member failed
                to contribute. If the Non-Failing Member makes such Delinquency
                Advance, the amount thereof shall be credited to the Capital
                Account of the Non-Failing Member for all purposes of this
                Agreement and treated as a Capital Contribution for all purposes
                of this Agreement, and the Members' Percentage Interests shall
                be recalculated by reference to their relative cumulative
                Capital Contributions; and

                        (iii) the Non-Failing Member may, but need not, make a
                Buy-Sell Offer under Section 20.

        SECTION 7.5. CAPITAL ACCOUNTS.

        A separate Capital Account shall be maintained for each Member in
accordance with the following provisions:

                (a) To each Member's Capital Account there shall be added (i)
        the amount of money and the initial Gross Asset Value of any property
        other than money contributed to the capital of the Company by such
        Member, (ii) such Member's distributive share of Net Profit and any
        items in the nature of income or gain that are specially allocated to
        such Member pursuant to Section 8.4 and Section 8.5, and (iii) the
        amount of any Company liabilities assumed by such Member or that are
        secured by any property distributed to such Member.

<PAGE>
                                                                              22



                (b) From each Member's Capital Account there shall be subtracted
        (i) the amount of money and the Gross Asset Value of any property
        distributed by the Company to such Member, (ii) such Member's
        distributive share of Net Loss and any items in the nature of expense or
        loss that are specially allocated to such Member pursuant to Section 8.4
        and Section 8.5, and (iii) the amount of any liabilities of such Member
        assumed by the Company or that are secured by any property contributed
        by such Member to the Company.

                (c) In the event all or a portion of an interest in the Company
        is transferred in accordance with the terms of this Agreement, the
        transferee shall succeed to the Capital Account of the transferor to the
        extent it relates to the transferred interest.

                (d) In determining the amount of any liability for purposes of
        (a) and (b) hereof, there shall be taken into account Code Section
        752(c) and any other applicable provisions of the Code and Regulations.

The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.

        SECTION 7.6. INTEREST OR EARNINGS ON RETURNED CAPITAL.

        Except as provided in Section 7.4(c)(i), no Member shall be entitled to
any interest or earnings on such Member's Capital Account or on such Member's
contributions to the capital of the Company.

        SECTION 7.7. NO THIRD PARTY RIGHTS.

        Neither this Section 7 nor any other provision of this Agreement shall
be construed to create any rights or benefits in any Entity other than the
Company and the Members, and their respective legal representatives,
transferees, successors and assigns, subject to the limitations on transfer
contained herein.

        SECTION 7.8. DEEMED CAPITAL CONTRIBUTIONS.

        Any reduction in the "Acquisition Cost" to be paid under any Lease
Agreement and related agreement resulting from the utilization of funds of a
Member shall be treated, as of the time of such reduction, as a Capital
Contribution of cash to the Company by such Member that increases such Member's
Capital Account and Contribution Account, and the Members' Percentage Interests
shall be recalculated by reference to their relative Capital Contributions.

        SECTION 8. ALLOCATION OF PROFITS AND LOSSES.

        SECTION 8.1. NET PROFIT.

        After giving effect to the special allocations set forth in Sections 8.4
and 8.5 (but before making any special allocations of Disposition Gain or
Disposition Loss under Section 8.3), Net

<PAGE>
                                                                              23




Profit for each Fiscal Year shall be allocated to the Members in accordance with
their respective Percentage Interests.

        SECTION 8.2. NET LOSS.

                (a) After giving effect to the special allocations set forth in
        Sections 8.4 and 8.5 (but before making any special allocations of
        Disposition Gain or Disposition Loss under Section 8.3), Net Loss for
        each Fiscal Year shall be allocated to the Members in accordance with
        their respective Percentage Interests.

                (b) If the amount of Net Loss for any Fiscal Year that otherwise
        would be allocated to a Member under Section 8.2(a) would cause or
        increase an Adjusted Capital Account Deficit of such Member as of the
        last day of such Fiscal Year (after all other allocations have been made
        pursuant to this Section 8), then such Member shall be allocated that
        amount of Net Loss which does not cause or increase such Adjusted
        Capital Account Deficit, and the remainder of such Net Loss that would
        have been allocated to such Member shall be allocated to the other
        Members.

        SECTION 8.3. DISPOSITION GAIN AND DISPOSITION LOSS.

                (a) DISPOSITION GAIN. In the event that, in any Fiscal Year, the
        Company realizes, or is deemed to realize gain (determined by reference
        to Gross Asset Value immediately prior to the event triggering such
        gain) from an Extraordinary Event or from an adjustment to the Gross
        Asset Value of any assets of the Company, such gain ("DISPOSITION GAIN")
        shall be allocated (as of the end of such Fiscal Year, but after making
        all special allocations pursuant to Sections 8.4 and 8.5 and all
        allocations of Net Profit or Net Loss under Section 8.1 or 8.2 for such
        Fiscal Year) in the following order and priority:

                        (i) First, to the Members, in proportion to and to the
                extent of, the excess, if any, of (A) the sum of cumulative
                allocations of Net Loss to each Member pursuant to Section
                8.2(a) for the current and all prior Fiscal Years and the
                cumulative allocations of Disposition Loss to each Member
                pursuant to Sections 8.3(b)(iv) and 8.3(b)(v) for the current
                and all prior Fiscal Years, over (B) the sum of the cumulative
                allocations of Net Profit to such Member pursuant to Section 8.1
                for the current and all prior Fiscal Years and the cumulative
                allocations of Disposition Gain to such Member under this
                Section 8.3(a)(i) for the current and all prior Fiscal Years;

                        (ii) Second, to the Members in accordance with their
                Percentage Interests, until the sum of (A) the cumulative
                Disposition Gain allocated to the Investor Member under Section
                8.3(a)(i) and this Section 8.3(a)(ii) for the current and all
                prior Fiscal Years, and (B) the cumulative Profits allocated to
                the Investor Member under Section 8.1 for the current and all
                prior Fiscal Years (net of the cumulative Disposition Loss
                allocated to the Investor Member under Sections 8.3(b)(iii),
                8.3(b)(iv) and 8.3(b)(v) and the cumulative Net Loss allocated
                to the Investor Member under Section 8.2(a) for the current and
                all prior Fiscal Years) is


<PAGE>
                                                                              24


                equal to the 13% Return Amount that has accrued on the Investor
                Member's Contribution Account from the date of its first Capital
                Contribution through the end of the current Fiscal Year;

                                (iii) Third, 30% to the Managing Member and 70%
                        to the Investor Member, until the sum of (A) the
                        cumulative Disposition Gain allocated to the Investor
                        Member under Sections 8.3(a)(i) and 8.3(a)(ii) and this
                        Section 8.3(a)(iii) for the current and all prior Fiscal
                        Years, and (B) the cumulative Profits allocated to the
                        Investor Member under Section 8.1 for the current and
                        all prior Fiscal Years (net of the cumulative
                        Disposition Loss allocated to the Investor Member under
                        Sections 8.3(b)(ii), 8.3(b)(iii), 8.3(b)(iv) and
                        8.3(b)(v) and the cumulative Net Loss allocated to the
                        Investor Member under Section 8.2(a) for the current and
                        all prior Fiscal Years) is equal to the 18% Return
                        Amount that has accrued on the Investor Member's
                        Contribution Account from the date of its first Capital
                        Contribution through the end of the current Fiscal Year;
                        and

                                (iv) Thereafter, 35% to the Managing Member and
                        65% to the Investor Member.

                (b) DISPOSITION LOSS. In the event that, in any Fiscal Year, the
        Company realizes, or is deemed to realize, loss (determined by reference
        to Gross Asset Value immediately prior to the event triggering such
        loss) from an Extraordinary Event or from an adjustment to the Gross
        Asset Value of any assets of the Company, such loss ("DISPOSITION LOSS")
        shall be allocated (as of the end of such Fiscal Year, but after making
        all special allocations pursuant to Sections 8.4 and 8.5 and all
        allocations of Net Profit or Net Loss under Section 8.1 or 8.2 for such
        Fiscal Year) in the following order and priority:

                        (i) First, to the Members, in proportion to and to the
                extent of the excess, if any, of (A) the cumulative amount of
                Disposition Gain allocated to each Member pursuant to Section
                8.3(a)(iv) for the current and all prior Fiscal Years, over (B)
                the sum of (i) the cumulative distributions to such Member
                pursuant to Section 9.1(b)(iv) for the current and all prior
                Fiscal Years, and (ii) the cumulative allocations of Disposition
                Loss under this Section 8.3(b)(i) for the current and all prior
                Fiscal Years;

                        (ii) Second, to the Members, in proportion to and to the
                extent of the excess, if any, of (A) the cumulative amount of
                Disposition Gain allocated to each Member pursuant to Section
                8.3(a)(iii) for the current and all prior Fiscal Years, over (B)
                the sum of (i) the cumulative distributions to such Member
                pursuant to Section 9.1(b)(iii) for the current and all prior
                Fiscal Years, and (ii) the cumulative allocations of Disposition
                Loss under this Section 8.3(b)(ii) for the current and all prior
                Fiscal Years;

                        (iii) Third, to the Members, in proportion to and to the
                extent of the excess, if any, of (A) the cumulative amount of
                Disposition Gain allocated to each Member pursuant to Section
                8.3(a)(ii) for the current and all prior Fiscal Years,

<PAGE>
                                                                              25


                over (B) the sum of (i) the cumulative distributions to such
                Member pursuant to Section 9.1(b)(ii) for the current and all
                prior Fiscal Years, and (ii) the cumulative allocations of
                Disposition Loss under this Section 8.3(b)(iii) for the current
                and all prior Fiscal Years;

                        (iv) Fourth, to the Members, in proportion to and to the
                extent of the excess, if any, of (A) the cumulative allocations
                of Net Profit to each Member pursuant to Section 8.1 for the
                current and all prior Fiscal Years, over (B) the sum of (i) the
                cumulative distributions to such Member pursuant to Section
                9.1(a) for the current and all prior Fiscal Years, (ii) the
                cumulative allocations of Net Loss to such Member pursuant to
                Section 8.2(a) for the current and all prior Fiscal Years, and
                (iii) the cumulative allocations of Disposition Loss under this
                Section 8.3(b)(iv) for the current and all prior Fiscal Years;

                        (v) Thereafter, to the Members in accordance with their
                respective Percentage Interests.

        Notwithstanding the foregoing provisions, if any allocation of
Disposition Gain or Disposition Loss pursuant to this Section 8.3 would result
in the Members having Capital Account balances which are not equal to the
amounts which would be distributed to the Members pursuant to Section 9.1 if the
Company were to liquidate immediately following such allocation, then such
Disposition Gain or Disposition Loss (as the case may be) shall be allocated in
a manner that causes the Capital Account balances of the Members (taking into
account any other allocations required to be made upon liquidation of the
Company) to equal the amounts that would be so distributed to the Members
pursuant to Section 9.1.

        SECTION 8.4. SPECIAL ALLOCATIONS.

        The following special allocations shall be made in the following order:

                (a) MINIMUM GAIN CHARGEBACK. If there is a net decrease in
        "company minimum gain" (as that term is defined in Sections
        1.704-2(b)(2) and 1.704-2(d) of the Regulations) during any Company
        Fiscal Year, each Member shall be specially allocated items of Company
        income and gain for such Fiscal Year in an amount equal to that Member's
        share of the net decrease in partnership minimum gain. Allocations
        pursuant to the previous sentence shall be made in accordance with
        Section 1.704-2(f)(6) of the Regulations. This subsection 8.4(a) is
        intended to comply with the minimum gain chargeback requirement in
        Section 1.704-2(f) of the Regulations and shall be interpreted
        consistently therewith.

                (b) MEMBER MINIMUM GAIN CHARGEBACK. If there is a net decrease
        in "partner nonrecourse debt minimum gain" (as that term is defined in
        Sections 1.704-2(i)(2) and (3) of the Regulations) during any Company
        Fiscal Year, each Member who has a share of that partner nonrecourse
        debt minimum gain as of the beginning of the Fiscal Year shall, to the
        extent required by Section 1.704-2(i)(4) of the Regulations, be
        specially allocated items of Company income and gain for such year (and,
        if necessary, subsequent years) equal to that Member's share of the net
        decrease in partner nonrecourse debt
<PAGE>
                                                                              26


        minimum gain. Allocations pursuant to the previous sentence shall be
        made in accordance with Section 1.704-2(i)(4) of the Regulations. This
        subsection 8.4(b) is intended to comply with the requirement in Section
        1.704-2(i)(4) of the Regulations and shall be interpreted consistently
        therewith.

                (c) QUALIFIED INCOME OFFSET. If any Member unexpectedly receives
        any adjustments, allocations, or distributions described in Sections
        1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
        1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and
        gain shall be specially allocated to each such Member in an amount and
        manner sufficient to eliminate, to the extent required by the
        Regulations, the Adjusted Capital Account Deficit of such Member as
        quickly as possible, provided that an allocation pursuant to this
        subsection 8.4(c) shall be made only if and to the extent that such
        Member would have an Adjusted Capital Account Deficit after all other
        allocations provided for in this Section 8 have been tentatively made as
        if this subsection 8.4(c) were not in the Agreement.

                (d) GROSS INCOME ALLOCATION. In the event any Member has a
        deficit Capital Account at the end of any Fiscal Year which is in excess
        of the sum of (i) the amount such Member is obligated to restore
        pursuant to any provision of this Agreement, and (ii) the amount such
        Member is obligated to restore pursuant to the penultimate sentences of
        Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such
        Member shall be specially allocated items of Company income and gain in
        the amount of such excess as quickly as possible, provided that an
        allocation pursuant to this Section 8.4(d) shall be made only if and to
        the extent that such Member would have a deficit Capital Account in
        excess of such sum after all allocations provided for in this Section 8
        have been made as if Section 8.4(c) and this Section 8.4(d) were not in
        the Agreement.

                (e) NONRECOURSE DEDUCTIONS. "Nonrecourse deductions" (as that
        term is defined in Sections 1.704-2(b)(1) and (c) of the Regulations)
        for any Fiscal Year or other period shall be specially allocated to the
        Members in proportion to their respective Percentage Interests in the
        Company.

                (f) MEMBER NONRECOURSE DEDUCTIONS. Any Member "nonrecourse
        deductions" (as that term is defined in Section 1.704-2(i) of the
        Regulations) for any Fiscal Year or other period shall be specially
        allocated to the Member who bears the economic risk of loss with respect
        to the "partner nonrecourse debt" (as that term is defined in Section
        1.704-2(b)(4) of the Regulations) to which such Member nonrecourse
        deductions are attributable, in accordance with Regulations Section
        1.704-2(i)(1).

                (g) SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
        adjusted tax basis of any Company asset pursuant to Code Section 734(b)
        or Code Section 743(b) is required, pursuant to Regulations Section
        1.704-1(b)(2)(iv)(m), to be taken into account in determining capital
        accounts, the amount of such adjustment to capital accounts shall be
        treated as an item of gain (if the adjustment increases the basis of the
        asset) or loss (if the adjustment decreases such basis) and such gain or
        loss shall be specially allocated to the Member in a manner consistent
        with the manner in which their Capital Accounts are required to be
        adjusted pursuant to such Section of the Regulations.

<PAGE>
                                                                              27

                (h)     DEDUCTION FOR CERTAIN PAYMENTS. The deductions
        attributable to the NOI Payment, as defined in Section 9.1(c), and the
        Shortfall Payment, as defined in Section 9.2, shall be allocated solely
        to the Managing Member. The Members intend that, for federal income tax
        purposes, the NOI Payment and the Shortfall Payment shall be treated as
        "guaranteed payments" under Section 707(c) of the Code and not as
        distributions.

        SECTION 8.5. CURATIVE ALLOCATIONS.

        The allocations set forth in subsections 8.2(b), 8.4(a), 8.4(b), 8.4(c),
8.4(d), 8.4(e), 8.4(f) and 8.4(g) hereof (the "REGULATORY ALLOCATIONS") are
intended to comply with certain requirements of the Regulations. It is the
intent of the Members that, to the extent possible, all Regulatory Allocations
that are made be offset either with other Regulatory Allocations or with special
allocations pursuant to this Section 8.5. Therefore, notwithstanding any other
provision of this Section 8 (other than the Regulatory Allocations), the
Managing Member, shall make such offsetting special allocations in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal to
the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of the Agreement and all Company items were allocated
pursuant to Sections 8.1 and 8.2(a). Provided it acts in good faith in making a
special allocation pursuant to this Section 8.5, the Managing Member shall not
be liable to the Company or any Member in the event the Internal Revenue Service
overturns any such allocation on audit. In exercising its discretion under this
Section 8.5, the Managing Member shall take into account future Regulatory
Allocations under subsections 8.4(a) and 8.4(b) that, although not yet made, are
likely to offset other Regulatory Allocations previously made under subsections
8.4(e) and 8.4(f).

        SECTION 8.6. OTHER ALLOCATION RULES.

                (a) For purposes of determining the Net Profit, Net Loss, or any
        other items allocable to any period, Net Profit, Net Loss, and any such
        other items shall be determined on a daily, monthly, or other basis, as
        determined by the Managing Member with the consent of the Investor
        Member using any permissible method under Code Section 706 and the
        Regulations thereunder.

                (b) Except as otherwise provided in this Agreement, all items of
        Company income, gain, loss, deduction, and any other allocations not
        otherwise provided for shall be divided among the Members in the same
        proportions as they share Net Profit or Net Loss, as the case may be,
        for the Fiscal Year.

        SECTION 8.7. TAX ALLOCATIONS: CODE SECTION 704(c).

        In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any property contributed to
the capital of the Company shall, solely for tax purposes, be allocated among
the Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its initial
Gross Asset Value. Such allocations shall be made using the "remedial allocation
method," as such term is defined in Regulations Section 1.704-3(d).


<PAGE>
                                                                              28



        In the event the Gross Asset Value of any Company asset is adjusted
pursuant to clause (b) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.

        Allocations pursuant to this Section 8.7 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Net Profit,
Net Loss, other items, or distributions pursuant to any provision of this
Agreement.

        SECTION 9. DISTRIBUTIONS.

        SECTION 9.1. IN GENERAL.

                (a) NET CASH FLOW. All Net Cash Flow for any Fiscal Year shall
        be distributed to the Members in accordance with their Percentage
        Interests.

                (b) EXTRAORDINARY PROCEEDS. All Extraordinary Proceeds shall be
        distributed to the Members in the following manner and in the following
        order of priority:

                        (i)     First, to the Members in proportion to, and to
                the extent of, the balances standing in their respective
                Contribution Accounts;

                        (ii)    Second, to the Investor Member and to the
                Managing Member according to their Percentage Interests, until
                the Investor Member has received cumulative distributions
                pursuant to Section 9.1 sufficient to yield a thirteen percent
                (13%) IRR (determined in accordance with the definition of IRR
                as illustrated on Schedule 6 hereto); provided that if the
                Investor Member has suffered a reduction in its Percentage
                Interest as a result of being a Failing Member, the
                determination of whether the Investor Member has received a
                thirteen percent (13%) IRR shall be made on a pro forma basis
                assuming the Investor Member received the distribution of
                Extraordinary Proceeds it would have received had its Percentage
                Interest not been so reduced;

                        (iii)   Third, 30% to the Managing Member and 70% to the
                Investor Member until the Investor Member has received
                cumulative distributions pursuant to Section 9.1 sufficient to
                yield an eighteen percent (18%) IRR to the Investor (determined
                in accordance with the definition of IRR as illustrated on
                Schedule 6 hereto); provided that if the Investor Member has
                suffered a reduction in its Percentage Interest as a result of
                being a Failing Member, the determination of whether the
                Investor Member has received an eighteen percent (18%) IRR shall
                be made on a pro forma basis assuming the Investor Member
                received the distribution of Extraordinary Proceeds it would
                have received had its Percentage Interest not been so reduced;
                and

                        (iv)    Fourth, 35% to the Managing Member and 65% to
                the Investor Member.

<PAGE>
                                                                              29


                (c) DISTRIBUTIONS WITH RESPECT TO BUFFALO GROVE FACILITY AND
        PACIFIC PALISADES FACILITY. For each calendar month from the date that
        the Buffalo Grove Facility and the Pacific Palisades Facility,
        respectively, become part of the portfolio through March 31, 2003, the
        Company shall determine the amount, if any, by which (i) the Net
        Operating Income for the Buffalo Grove Facility for such month is less
        than $116,445 (the "BUFFALO GROVE NOI SHORTFALL AMOUNT"), and (ii) the
        Net Operating Income for the Pacific Palisades Facility for such month
        is less than $148,629 (the "PACIFIC PALISADES NOI SHORTFALL AMOUNT" and
        collectively with the Buffalo Grove NOI Shortfall Amount, the "AGGREGATE
        NOI SHORTFALL AMOUNT."). For each such calendar month, the Company shall
        make a payment to the Investor Member, out of the Net Cash Flow for such
        calendar month that would otherwise be distributable to the Managing
        Member under Section 9.1(a) from any of the Facilities, an amount (the
        "NOI PAYMENT") equal to 80% of the Aggregate NOI Shortfall Amount;
        provided, however, (A) that in determining the Net Operating Income from
        the Buffalo Grove Facility and from the Pacific Palisades Facility for a
        calendar month for purposes of this Section 9.1(c), the Company shall
        gross up the Net Operating Income for each such Facility for such
        calendar month by the amount of any Resident payments due and payable,
        but not paid, at such Facility during such month, and (B) in no event
        shall a payment to the Investor Member out of the Net Cash Flow
        otherwise distributable to the Managing Member result in the Managing
        Member receiving less than one percent (1%) of such Net Cash Flow.

        The Managing Member shall make distributions of the Net Cash Flow of the
Company within twenty (20) days of the end of each calendar month in the order
set forth above and as available for such monthly distributions after retainage
of such reserves as are provided for in the then effective Operating Budget. At
such time as the Company's Net Cash Flow is finally determined with respect to a
Fiscal Year, the Company shall distribute to the Members their respective
undistributed shares, if any, of the Company's Net Cash Flow for such Fiscal
Year, and if monthly distributions to a Member exceed such Member's distributive
share of such Net Cash Flow for such Fiscal Year, as finally determined, such
Member shall immediately repay to the Company the amount of such excess;
provided however, that nothing herein shall be construed as creating an
obligation for the Investor Member to repay any of the NOI Payment it received
during such Fiscal Year. The Managing Member shall distribute Extraordinary
Proceeds to the Members within thirty (30) days after receipt thereof in the
order and priority prescribed above.

        SECTION 9.2. SHORTFALL PAYMENT.

        As a result of certain environmental liability risks relating to the
Rochester Facility, the Members agree that, notwithstanding the provisions of
Section 9.1 to the contrary, at the time the Company disposes of its interest in
all but one of the Facilities, the Company shall not distribute the proceeds of
such disposition but shall instead retain such proceeds for distribution as part
of the final distribution of Extraordinary Proceeds pursuant to Section 9.1(b)
and this Section 9.2. Promptly after the Company disposes of its interest in all
Facilities (including dispositions of Facilities pursuant to Section 21 but not
the disposition of a Member's interest in the Company pursuant to Section 20),
the Investor Member shall compute the IRR of the Company for the Rochester
Facility and the average IRR of the Company for all of the Facilities other than
the Rochester Facility (the "AVERAGE IRR"). Both such calculations shall not
take into consideration


<PAGE>
                                                                              30



any Senior Financing affecting the Facilities, and the Average IRR calculation
shall be weighted based on the relative initial Gross Asset Values of the
Facilities involved in such calculation. If the Average IRR is higher than the
IRR of the Company for the Rochester Facility, then the Investor Member shall
also compute the amount (the "SHORTFALL AMOUNT") which, if added to the proceeds
received from the disposition of the Company's interest in the Rochester
Facility, would have resulted in an IRR of the Company for the Rochester
Facility equal to the Average IRR, provided, that the Shortfall Amount shall be
subject to a limit of $1,000,000. At the time of the final distribution of
Extraordinary Proceeds pursuant to Section 9.1(b), the Company shall,
notwithstanding the provisions of Section 9.1(b), make a payment to the Investor
Member, out of the amounts that would otherwise be distributed to the Managing
Member under Section 9.1(b) at such time, an amount (the "SHORTFALL PAYMENT")
equal to the Investor Member's proportionate share of the Shortfall Amount, such
proportionate share to be based on the distribution percentages under Section
9.1(b) applicable at such time, and the amount otherwise distributable to the
Managing Member under Section 9.1(b) shall be reduced by an amount equal to the
Shortfall Payment. For Shari'ah purposes only, the Shortfall Payment will be
deemed to be an adjustment to the Gross Asset Value of the Rochester Facility.

        SECTION 9.3. CONSENT TO DISTRIBUTIONS.

        Each of the Members does hereby consent to the distributions provided
for herein.

        SECTION 9.4. TAX WITHHOLDING.

        If the Managing Member determines that the Code or Regulations require
the Company to withhold with respect to any Member's distributive share of
income or share of distributions, it shall do so. Such withheld amounts shall be
from cash otherwise distributable to such Member, which shall be deemed to have
been distributed hereunder to such Member. The Managing Member shall be
authorized to take such other actions as shall be necessary or appropriate for
the Managing Member to comply with its obligations under the Code and
Regulations. In the event any such payment made by the Managing Member to the
Internal Revenue Service exceeds the amount of cash otherwise then distributable
to such Member, the amount of such payment equal to such excess shall constitute
an advance by the Company to such Member for which such Member shall have
personal liability, and such Member shall immediately repay such advance to the
Company, together with interest thereon from the date when such payment is made
to the date of repayment, at an annual rate equal to the interest rate which
Citicorp or its successor designates as its "prime rate" from the date such
payment was made.

        SECTION 10. MANAGEMENT OF COMPANY.

        SECTION 10.1. AUTHORITY OF MANAGING MEMBER.

        Subject to the limitations set forth herein, the Managing Member shall
be responsible for the management of the Company's business and affairs and
shall devote such time and effort to the Company as is appropriate in light of
all facts and circumstances, provided, however, that all decisions and actions
described in Section 10.3 and 10.4 shall require the Approval of the Investor
Member. Except as provided in this Agreement, the Managing Member shall have all

<PAGE>
                                                                              31



the rights and powers to manage the Company as are permitted under the Act, and
it shall be the duty and responsibility of the Managing Member to manage and
control the day-to-day affairs of the Company, including, without limitation,
the following:

                (a) Establish and maintain, or cause to be established and
        maintained, programs to promote the most effective and profitable
        utilization of the services provided by the Facilities;

                (b) Provide, or cause to be provided, quality services to
        Residents at the Facilities in the manner required by the Resident
        Agreements for such Residents and consistent with the Sunrise Standards
        and the Operating Budget;

                (c) Establish, or cause to be established, appropriate marketing
        programs for the Facilities and maintain a public image of excellence
        and first-class operation for the Facilities, all in accordance with the
        Sunrise Standards and the Operating Budget;

                (d) Maintain, or cause to be maintained, well trained,
        adequately supervised, quality staff, in sufficient number, at the
        Facilities in a manner consistent with the Sunrise Standards and the
        Operating Budget;

                (e) Operate the Facilities, or cause the Facilities to be
        operated, prudently, and in a manner consistent with the Sunrise
        Standards and the Operating Budget;

                (f) Establish and maintain, or cause to be maintained, a sound
        financial accounting system for the Company and each Facility;

                (g) Institute and maintain, or cause to be instituted and
        maintained, adequate internal fiscal controls for the Company and each
        Facility through proper budgeting, accounting procedures, and timely
        financial reporting in a manner consistent with the Operating Budget;

                (h) Institute and maintain, or cause to be instituted and
        maintained, sound billing and collection procedures and methods for the
        Company and the Facilities;

                (i) Maintain and increase gross revenues and cash flow at the
        Facilities;

                (j) Conform the operations at the Facilities to, or cause the
        operations of the Facilities to be conformed to, and comply or cause
        compliance with, all applicable Legal Requirements, including without
        limitation, those pertaining to licensing, and take all steps necessary
        to ensure that all licenses and certificates necessary to operate the
        Facilities are maintained at all times, without interruption;

                (k) Take such other steps as are necessary to provide high
        quality care to the Residents, consistent with the Sunrise Standards and
        the Operating Budget;

                (l) Prepare or cause to be prepared for execution by the Company
        all forms, reports and returns, if any, required to be filed by the
        Company under applicable federal,

<PAGE>
                                                                              32




        state or local laws, including tax laws, provided that the Managing
        Member shall not be obligated to prepare any of the Company's federal,
        state or local income tax returns; and

                (m) Use all reasonable efforts to maintain the Facilities as a
        safe and secure environment, notify the Company of any security risks or
        issues related to any Facility that become known to the Managing Member,
        and attempt to rectify or remedy such risks or issues if funds are
        available for such purpose.

Subject to Section 10.3 with respect to the Operating Budget, Section 10.4 with
respect to Major Decisions and any other provision hereof that requires the
Approval of all Members, any action taken by the Managing Member on behalf of
the Company shall constitute the act of, and serve to bind, the Company. In no
event shall any Entity dealing with the Managing Member with respect to the
conduct of the affairs of the Company be obligated to ascertain that the terms
of this Agreement have been complied with, or be obligated to inquire into the
necessity or expediency of any action of the Managing Member. The Managing
Member may delegate certain of its responsibilities for management and control
of the Facilities and affairs of the Company to any Entity as may be Approved by
all of the Members and to no other Entity, provided, that such delegation shall
not relieve the Managing Member of any of its obligations hereunder. The Members
hereby Approve the Management Agreement for each Facility.

        SECTION 10.2. GRANT OF SPECIAL AUTHORITY.

        Notwithstanding any limitation on the authority of the Managing Member
imposed by this Agreement, the Investor Member does hereby authorize and direct
and hereby Approves in advance the following actions to be taken by the Managing
Member, for and on behalf of the Company, subject in all cases to the Islamic
Operating Guidelines:

                (a) Subject to subsection 10.4(c), to authorize SALMI to enter
        into Resident Agreements with Residents at the Facilities.

                (b) Subject to the Investor Member's right under Section 10.4 to
        Approve the form and substance of the documents governing and evidencing
        the Lease Transactions (and any amendments or modifications thereto), to
        perform and discharge all of the Company's duties and obligations with
        respect to the closing, consummation of, and performance under the Lease
        Transactions, including, without limitation, the execution and delivery
        of the Call Option Letters and the Put Option Letters and the
        Supplemental Agreements that comprise the Lease Transactions, and such
        other documents required by the Facility Owner to consummate the Lease
        Transactions.

                (c) Subject to the Investor Member's rights of Approval under
        Section 10.4 hereof, to disburse the Capital Contributions of the
        Members to pay all of the reasonable costs and expenses incurred by the
        Company in closing and consummating the Lease Transactions, including,
        without limitation, legal fees, transfer taxes, intangibles taxes,
        appraisal fees, recording fees, survey costs, title insurance commitment
        fees and premiums, and title examination charges and abstract costs.

                (d) Subject to any restrictions contained in the Lease
        Agreements, to acquire and enter into any contract of insurance that the
        Managing Member deems necessary or


<PAGE>
                                                                              33



        appropriate for the protection of the Company, for the conservation of
        its assets or for any purpose convenient or beneficial to the Company;

                (e) To pay any and all Permitted Expenses;

                (f) Subject to the terms and conditions of this Agreement,
        including without limitation Section 10.1, to employ, when and if
        required, such accountants, agents and attorneys as the Managing Member
        may from time to time determine to be necessary;

                (g) Subject to the terms and conditions of this Agreement,
        including without limitation Section 10.1, to execute any and all
        agreements, contracts, documents, certifications and instruments
        necessary or convenient in connection with the management, maintenance
        and ownership of the Facilities;

                (h) Subject to any restrictions contained in the Lease
        Agreements and the applicable Operating Budget, to construct, alter,
        improve, repair, rehabilitate, raze, rebuild or replace any building or
        other improvement on all or any portion of any Facility; and

                (i) Subject to the terms and conditions of this Agreement,
        including without limitation Section 10.1, to engage in any kind of
        activity and perform and carry out contracts of any kind necessary or
        incidental to or in connection with the accomplishment of the purposes
        of the Company as may be lawfully carried out or performed by a limited
        liability company under the laws of the State of Delaware and, to the
        extent applicable, the laws of each state in which the Company is
        registered or qualified to do business.

        SECTION 10.3. OPERATING BUDGET AND CERTAIN RESERVES.

        On or before each November 20, the Managing Member shall prepare or
cause to be prepared and submit to the Investor Member a proposed annual
operating budget for each Facility for the next following Fiscal Year. Each
proposed operating budget shall include projections, in reasonable detail, of
the Company's anticipated cash receipts from such Facility and required cash
expenditures for such Facility, including without limitation Class I Capital
Expenditures and Class II Capital Expenditures, together with an explanation of
anticipated changes to Resident charges, payroll rates and positions, nonwage
cost increases, and all other factors differing from the current fiscal year.
Each proposed operating budget may also provide for Company financing in
relation to such Facility on an Islamically-compliant basis and for the creation
of, addition to, or reduction in, any reserves maintained by the Company. Each
such proposed operating budget shall be considered by the Investor Member and,
in consultation with the Managing Member and SALMI, the Manager will prepare or
cause to be prepared the operating budget for each Facility for the ensuing
Fiscal Year, with the final contents of such budget to be determined mutually by
the Investor Member and the Managing Member. Any Approved operating budget,
including any Approved modification of any such budget, is herein called an
"OPERATING BUDGET." The Operating Budget shall be accompanied by a narrative
description of management objectives and assumptions, together with the other
components, of such Operating Budget. The Operating Budget through December 31,
2002 is set forth on Schedule 3 attached hereto. All Operating Budgets shall
reflect any reserves created thereunder


<PAGE>
                                                                              34



or pursuant to this Agreement. The Managing Member may amend an Operating Budget
only with the Approval of the Investor Member. Until final Approval of the
proposed operating budget for a Facility has been given, the Managing Member
shall be authorized to operate such Facility on the basis of the previous
Approved Operating Budget for the last month of the preceding Fiscal Year,
adjusted to reflect the then-current charges, to the extent known, and if not
known, increased by the greater (i) of 103.5% or (ii) the increase in the CPI
from the first day of the current Fiscal Year compared to the CPI on the first
day of the previous Fiscal Year; provided, however, that aggregate of the line
items for FF&E and for capital improvements set forth in the previous Approved
Operating Budget for such Facility shall be replaced with an amount equal to the
aggregate of the amounts for such line items set forth in the previous Approved
Operating Budgets for all Facilities divided by the number of Facilities in the
Portfolio, which amount shall then be adjusted as provided in foregoing clauses
(i) or (ii). The Managing Member shall use its best efforts to operate each
Facility or cause each Facility to be operated so that the Gross Facility
Revenues and the expenses of such Facility during any applicable period of the
Company's Fiscal Year shall be consistent with the Operating Budget, provided
that the foregoing agreement of the Managing Member shall not limit the
authority of the Managing Member under Sections 10.2(e) and 10.4(h). All
expenses must be charged to the proper account on a basis consistent with the
Operating Budget classifications. No expense may be reclassified except as
needed to correct an inadvertent error. During the Fiscal Year, the Managing
Member shall inform the Investor Member promptly of any major increases or
decreases in costs, expenses or income that were not reflected in the Operating
Budget.

        SECTION 10.4. LIMITATIONS ON AUTHORITY OF MANAGING MEMBER.

        Notwithstanding the other provisions of Section 10 hereof, the Managing
Member shall not have the authority on behalf of the Company to take any action,
make any decision, expend any sum or undertake or suffer any obligation if to do
so would constitute a Major Decision without first obtaining the Approval of the
Investor Member. As used herein, "MAJOR DECISION" means any decision proposed by
the Managing Member that the Company (or in the case of (s) below, the Members)
do or take any of the following actions:

                (a) OPERATING BUDGET AMENDMENTS OR VARIATIONS. Amend or modify
        any Operating Budget or vary from the limitations set forth therein,
        except in the case of emergency repairs or other emergency actions with
        respect to any Facility (i.e., repairs which are necessary to reduce the
        threat of material injury to any Facility, to the Company, to any
        Residents or to any other persons or property, or are necessary to avoid
        the suspension of necessary services to any Facility);

                (b) SALES. Except for entering into Resident Agreements with
        Residents at the Facilities pursuant to subsection 10.2(a), and except
        for the release of Facility in accordance with Section 10.10, sell,
        exchange or otherwise transfer all or any portion of a Facility or any
        interest therein or any other property of the Company; provided,
        however, that without any such Approval, the Managing Member may make
        incidental sales, exchanges, conveyances or transfers of Company
        tangible personality or fixtures in the ordinary course of business if
        such transactions, together with all other such transactions in such
        Fiscal Year, involve property having a value or sales price of less than
        $75,000 in the aggregate, and the Managing Member may grant, or request
        the Facility Owner to


<PAGE>
                                                                              35



        grant, utility and other similar easements to serve any Facility or any
        adjoining property as the Managing Member shall determine to be
        necessary or advisable;

                (c) RESIDENT AGREEMENTS. Authorize SALMI to enter into any
        Resident Agreement with any Resident at any Facility except in
        accordance with the Approved Operating Budget for such Facility and any
        guidelines as to Resident Agreements set forth therein.

                (d) ENCUMBRANCES. Except (i) for liens arising by operation of
        law and securing Company debts which are not then currently due or
        payable; (ii) for Approved financing, which shall be in compliance with
        the Islamic Operating Guidelines; (iii) in connection with the Lease
        Transactions; or (iv) for the grant of utility and other similar
        easements or licenses to serve a Facility or any adjoining property for
        the purpose of providing utilities, cable television, internet access or
        other necessary or desirable services to a Facility or adjoining
        property, subject all or any portion of a Facility to any mortgage, lien
        or other encumbrance or pledge any Company assets;

                (e) FINANCINGS. Except in connection with the Lease
        Transactions, effect any financing (excluding trade debt, accounts
        payable or equipment leases incurred in the ordinary course of the
        Company's business) or execute any promissory note, evidence of
        indebtedness, guaranty or the like not authorized and duly Approved in
        an Operating Budget, or the prepayment, modification or refinancing of
        any Company debt (including the Lease Transactions);

                (f) LEGAL ACTIONS. Prosecute, waive, settle or compromise any
        claims or causes of action of the Company against any third party (or
        parties) (other than actions in the ordinary course to enforce Resident
        Agreements and other claims of less than $100,000 each), or agree on
        behalf of the Company to pay any claim or cause of action against the
        Company if the portion of such claim or cause of action not covered by
        insurance and to be paid by the Company exceeds $100,000;

                (g) BUSINESS OF COMPANY. Except as otherwise provided herein, do
        any act which would make it impossible to carry on the ordinary business
        of the Company;

                (h) CAPITAL EXPENDITURES. Except as permitted in an Operating
        Budget or in the case of an emergency as described in Section 10.4(a),
        (i) make any capital expenditures in excess of $15,000 for any Facility
        in any Fiscal Year, provided that the aggregate amount of such capital
        expenditures shall not exceed $50,000 in the aggregate in any Fiscal
        Year of the Company, or (ii) undertake an expansion or substantial
        renovation of any Facility;

                (i) EMPLOYEES. Employ any people for the Company;

                (j) REZONING OR SUBDIVISION. Initiate a re-zoning or subdivision
        of any Facility or convert any Facility to a condominium, cooperative or
        similar form of ownership;

                (k) CONFESS JUDGMENTS. Confess a judgment against the Company;


<PAGE>
                                                                              36


                (l) ASSIGNMENTS. Assign the rights of any Member in any
        Facility, other than for a Company purpose;

                (m) ACTS IN CONTRAVENTION. Perform any act in contravention of
        this Agreement;

                (n) NEW MEMBERS. Admit additional Members to the Company;

                (o) MERGER. Merge the Company with any Entity;

                (p) LEASE TRANSACTION DOCUMENTATION. Enter into or, thereafter,
        modify or amend, the definitive documentation with respect to the Lease
        Transactions;

                (q) PROFESSIONAL SERVICES CONTRACTS. Except for the Management
        Agreement for each Facility or as permitted in an Operating Budget,
        enter into, or thereafter modify or amend, any contract or arrangement
        for routine and non-routine professional services to be rendered to the
        Company (including, without limitation, legal, accounting and consulting
        services) that is reasonably anticipated to obligate the Company to
        expend more than $30,000 in any Fiscal Year;

                (r) TAX ELECTIONS. Make any election under the Code or
        Regulations, including without limitation any election under Section
        301.7701-3 of the Regulations to classify the Company for federal income
        tax purposes as anything other than a partnership; or

                (s) VOLUNTARY ADDITIONAL CONTRIBUTIONS. Obligate the Members to
        make any Voluntary Additional Contributions pursuant to Section
        7.4(a)(ii).

                (t) AUDITORS. Replace the Company's auditors pursuant to Section
        14.3.

        With respect to all matters submitted to the Investor Member for
Approval (including, without limitation, the decisions and actions described in
this Section 10.4, but excluding Approval of proposed operating budgets pursuant
to Section 10.3), the Investor Member agrees that it will respond within ten
(10) Business Days after a written request for such Approval (and fewer than ten
(10) Business Days if such written notice is with reference to an emergency as
reasonably determined by the Managing Member, but in no event less than two (2)
Business Days) and, to the extent the Investor Member disapproves of any such
matter, the Investor Member's notice of disapproval shall set forth in
reasonable detail the basis for such disapproval. The failure of the Investor
Member to provide a timely response to a request for Approval or to provide in
reasonable detail the basis for its disapproval shall not be deemed or construed
to be an Approval by the Investor Member.

        SECTION 10.5. COMPENSATION FOR SERVICES; FEES TO MANAGING MEMBER.

        Except as expressly provided in this Agreement, no Member or any
Affiliate thereof shall receive any compensation from the Company for services
to the Company without having first obtained the Approval of all other Members,
which may be given or withheld in each Member's sole discretion. The Company is
authorized to pay to SALMI or an Affiliate designated by SALMI (other than the
Managing Member) the Acquisition Fee and the Disposition Fee, and to pay to
SALMI the Management Fee pursuant to the Management Agreement. Costs relating to


<PAGE>
                                                                              37



the formation of the Company, including senior financing arrangement fees,
transfer taxes, legal fees of counsel to the Members associated with preparing
Company-related documentation and other expenses associated therewith (which do
not include the costs of formation and maintenance of the Investor Member and
its owners but which do include the costs associated with the Company's
structuring of and entering into the Lease Transactions), shall be borne by the
Managing Member and the Investor Member in accordance with their Percentage
Interests. The Members shall otherwise pay their own expenses associated with
the Company's formation.

        SECTION 10.6. INVESTOR MEMBER MANAGEMENT RIGHTS.

        The Investor Member, subject to its right of Approval expressly set
forth in this Agreement, shall not participate in the management and control of
the Company's business and shall not have any right or authority to act for or
to bind the Company, provided, however, that the Investor Member shall, at no
cost to the Company, provide oversight of the management of the Company to
ensure compliance with the Islamic Operating Guidelines. The Investor Member
hereby appoints the Managing Member as the manager of the Company, with sole and
exclusive right to manage the Company's business and to act for and bind the
Company, subject to its right of Approval expressly set forth in this Agreement.

        SECTION 10.7. LIABILITY OF MANAGING MEMBER.

        So long as the Managing Member in good faith reasonably believes that it
is acting in the Company's best interest with respect to the conduct of the
business and affairs of the Company, the Managing Member shall not be liable or
accountable to the Company or to the Investor Member, in damages or otherwise,
for any error of judgment, for any mistake of fact or of law, or for any other
act or thing which it may do or refrain from doing in connection with the
business and affairs of the Company, provided that the Managing Member shall be
responsible for all costs, expenses, claims or damages arising from the Managing
Member's willful misconduct, gross negligence or negligence. Nothing contained
in this Section 10.7 shall be construed as excusing the Managing Member from
making any contribution to the capital of the Company which is required to be
made by the Managing Member, in its capacity as a Member, under any provision of
this Agreement.

        SECTION 10.8. INDEMNITIES.

                (a) The Company does hereby agree to indemnify and to hold
        harmless the Managing Member and its Affiliates and the directors,
        trustees, officers, employees, members and owners of each of them
        (collectively, "COMPANY INDEMNIFIED PERSONS") from and against any loss,
        claim, cost, expense or damage suffered by the Company Indemnified
        Persons (excluding any liability of the Managing Member to make
        additional capital contributions to the Company as required under this
        Agreement) by reason of anything the Managing Member or its Affiliates
        may do or refrain from doing hereafter for and on behalf of the Company
        and in furtherance of its best interests to the extent within the
        Managing Member's authority hereunder and by reason of any amounts paid
        by the Managing Member or its Affiliates pursuant to any "non-recourse
        carve out" guaranty delivered in connection with any Facility; provided,
        however, that the Company shall not be required to indemnify any Company
        Indemnified Person to the extent any


<PAGE>
                                                                              38



        loss, expense or damage which any of them might suffer (including any
        such guaranty payment) results from any Company Indemnified Person's
        willful misconduct, gross negligence, negligence or bad faith. The
        Investor Member shall not be deemed to have incurred any liability with
        respect to the Company's indemnity obligations contained in this Section
        10.8 beyond its interest in the Company.

                (b) The Managing Member does hereby agree to indemnify and to
        hold harmless the Company, the Investor Member and the shareholders,
        directors, officers and employees of the Investor Member and its
        Affiliates (collectively, "MANAGING MEMBER INDEMNIFIED PERSONS") from
        and against any loss, claim, cost, expense or damage suffered by the
        Managing Member Indemnified Persons resulting from any and all claims
        and causes of action brought by any third party, including without
        limitation by past or present Residents or by persons employed at the
        Facilities, relating to any Facility and arising from any occurrence
        prior to the date on which such Facility became a part of the Portfolio.

                (c) The Managing Member represents and warrants that all
        certificates, licenses, permits or approvals required by any
        governmental authority in connection with the ownership, use, occupancy,
        operation, management or maintenance of the Facility were valid and in
        full force and effect at all times prior to and on the date on which
        such Facility became part of the Portfolio. The Managing Member does
        hereby agree to indemnify and to hold harmless the Managing Member
        Indemnified Persons from and against any loss, claim, cost, expense or
        damage suffered by the Managing Member Indemnified Persons resulting
        from the foregoing representation and warranty being untrue, incomplete
        or incorrect.

        SECTION 10.9. OTHER ACTIVITIES OF MEMBERS; NON-COMPETE.

        Subject to Section 10.10 hereto, each Member, in such Member's
individual capacity or otherwise, shall be free to engage in, to conduct or to
participate in any business or activity whatsoever, without any accountability,
liability or obligation to the Company or to any other Member, even if such
business or activity competes with or is enhanced by the business of the
Company. Notwithstanding the previous sentence, neither the Managing Member nor
any of its Affiliates may invest in, operate, manage, develop, participate in or
have an interest in any senior housing or assisted living facility located
within the geographic areas (the "NON-COMPETE AREA") specified for each Facility
on Schedule 9; provided, that the Managing Member or its Affiliates may invest
in a facility located in the Non-Compete Area if such facility is part of a
larger portfolio of facilities in which the Managing Member or its Affiliate is
investing, and at least 75% of the fair market value of such portfolio of
facilities is located outside of the Non-Compete Area; provided, further, that
the Managing Member or its Affiliates may manage a facility located in the
Non-Compete Area if the Managing Member and its Affiliates collectively own,
directly and indirectly, less than 20% of the ownership interests in such
facility. If the Managing Member or its Affiliates are permitted under this
Section 10.9 to invest in or manage a facility located in the Non-Compete Area,
then the Managing Member or such Affiliate shall not be permitted use the name
"Sunrise" in promoting, operating or managing such facility, provided, however,
that the Managing Member or such Affiliate may state in promoting, operating or
managing such facility that such facility is "managed by" a Sunrise affiliate.


<PAGE>
                                       39


        SECTION 10.10. RELEASE AND SALE OF FACILITIES.

                (a) NOTICE OF INTENT. At any time after the date of this
        Agreement, the Managing Member may provide the Investor Member with
        written notice of its desire to exercise a Call Option (as defined in
        the Lease Agreements) and to concurrently sell one or more of the
        Facilities. Such notice shall include the Managing Member's best good
        faith estimate of the sale price to be obtained for such Facility and a
        calculation of the projected distribution of the Extraordinary Proceeds
        that would result from such release and sale.

                (b) INVESTOR MEMBER APPROVAL/MARKETING. Within ten (10) days
        after receipt of such notice, the Investor Member shall notify the
        Managing Member whether or not it Approves the sale on the terms
        proposed by the Managing Member. The failure of the Investor Member to
        respond within this time period shall be deemed to be a disapproval by
        the Investor Member of the proposed sale and the Managing Member shall
        discontinue efforts to sell the Facility. If the Investor Member
        Approves the request, the Managing Member shall begin to market the
        Facility and may, subject to the Investor Member's Approval (including ,
        without limitation, Approval by the Investor Member of the fees and
        commission to be paid and the form of brokerage or supplemental agency
        agreement), retain agents or brokers to market the Facility.

                (c) LETTER OF INTENT/PURCHASE AND SALE CONTRACT.

                        (i) LETTER OF INTENT. If a prospective buyer is located,
                the Managing Member shall negotiate a non-binding letter of
                intent (the "LETTER OF INTENT") to sell the Facility which
                contains the basic business terms for the sale. The Letter of
                Intent shall be submitted to the Investor Member, which shall
                have ten (10) days to grant or withhold its Approval. The
                failure of the Investor Member to respond within this time
                period shall be deemed to be a disapproval by the Investor
                Member of the Letter of Intent, and the Investor Member shall
                discontinue efforts to sell the Facility.

                        (ii) PURCHASE AND SALE. If the Investor Member Approves
                the Letter of Intent, the Managing Member shall negotiate a
                binding sales contract with the prospective buyer and shall have
                full authority to complete the sale on terms substantially
                similar to those contained in the Letter of Intent; provided,
                however, that any material change from the terms set forth in
                the Letter of Intent shall require the Approval of the Investor
                Member. Any such binding sales contract shall be subject to the
                final Approval of the Investor Member solely to ensure
                compliance with the Islamic Operating Guidelines, which shall be
                given or withheld within ten (10) days after submission by the
                Managing Member. If final Approval by the Investor Member is
                withheld pursuant to this 10.10(c)(ii), the Investor Member
                shall provide an explanation of why such contract does not
                comply with the Islamic Operating Guidelines and, if alternative
                means for such contract to comply with the Islamic Operating
                Guidelines are possible, shall provide the Managing Member,
                within the such ten (10) day period, with a description of the
                changes required to be made to the contract to have it comply
                with the Islamic Operating Guidelines.

<PAGE>
                                                                              40


                (d) PAYMENT OF EXTRAORDINARY PROCEEDS. Unless such proceeds are
        reinvested under Section 10.11, the Managing Member shall distribute the
        Extraordinary Proceeds of any sale made under this Section 10.10 under
        Section 9.1(b) hereof.

        SECTION 10.11. ADDITIONAL ACQUISITIONS OF NEW FACILITIES.

                (a) IDENTIFICATION AND PRESENTMENT OF NEW FACILITIES. The
        Managing Member may, but shall not be obligated to, seek to identify new
        assisted living facilities (which may, but need not, come from the
        Managing Member's portfolio) that satisfy the investment criteria set
        forth by the Company (and Approved by the Investor Member). If the
        Managing Member identifies a facility that it proposes to have the
        Company acquire, the Managing Member shall prepare and deliver to
        Investor Member an investment summary for such facility. Such summary
        will include an historical cash flow statement, a five-year projected
        cash flow statement, a five-year projected capital expenditure budget,
        and an Investment Yield calculation. For purposes of this Section,
        "INVESTMENT YIELD" means the 12-month budgeted Net Operating Income for
        a facility divided by the aggregate acquisition cost of such facility,
        including transaction costs, and "NET OPERATING INCOME" means the Gross
        Facility Revenue attributable to such facility, less all operating
        expenses of such facility, including the Management Fee. The Investor
        Member shall have thirty (30) days after receipt of the investment
        summary to grant or withhold its initial Approval of the proposed
        transaction pending a due diligence investigation. The failure of the
        Investor Member to respond within this time period shall be deemed to be
        a disapproval by the Investor Member of the proposed transaction, and
        the Managing Member shall discontinue efforts to acquire the facility
        for the Company.

                (b) TRANSACTION PROCEDURE.

                        (i) NOTICES AND PURCHASE AND SALE. If and when the
                Managing Member receives the Approval of the Investor Member, it
                shall provide all notices required pursuant to the Lease
                Agreements and take all steps required under Section 10.11(d) to
                add the identified facility to the Portfolio. The Managing
                Member shall then negotiate a binding purchase and sale
                agreement. Any such binding sales agreement shall be subject to
                the Approval of the Investor Member in order to ensure
                compliance with the Islamic Operating Guidelines, which Approval
                shall be given or withheld within ten (10) days after submission
                by the Managing Member. If the purchase and sale agreement
                contains a due diligence "out" provision, the Managing Member
                shall not waive such provision without the Approval of the
                Investor Member.

                        (ii) DUE DILIGENCE. The Managing Member shall be
                responsible for coordinating all property due diligence
                (including retention of attorneys, accountants and other third
                party consultants), and shall provide the Investor Member with
                copies of all material reports obtained for the purpose of such
                acquisition including, but not limited to, financial, title,
                survey, physical/mechanical, environmental and demographic. The
                cost of performing such due diligence review shall be borne by
                the Company. Any due diligence investigation conducted by the
                Investor Member shall take place

<PAGE>
                                                                              41



                contemporaneously with that of the Managing Member, provided,
                however, that any issues arising out of the Investor Member's
                due diligence investigation shall promptly be reported to the
                Managing Member.

                        (iii) FINAL ACQUISITION. After execution of the binding
                purchase and sale agreement and the final Approval of the
                Investor Member described above, the Managing Member shall have
                full authority to complete the applicable acquisition on behalf
                of the Company.

                (c) ADDITIONAL CAPITAL.

                        (i) DOWN PAYMENTS. The Managing Member may either (A)
                make a request for a Voluntary Additional Contribution under
                Section 7.4(a)(ii) hereof (which Voluntary Additional
                Contribution shall be deemed to have been Approved by all of the
                Members) or (B) with the prior Approval of the Investor Member,
                use undistributed Net Cash Flow to post required down payments.
                In the event the Managing Member shall request a Voluntary
                Additional Contribution, the Members shall contribute their
                Percentage Interests of such additional capital within ten (10)
                days of receipt of such request from the Managing Member;
                provided, however, that the Managing Member may make the full
                down payment required, which payment shall be subsequently
                reimbursed to the Managing Member upon the contribution of the
                Investor Member of its Percentage Interest of such Voluntary
                Additional Contribution.

                        (ii) CLOSING FUNDS. At least five (5) Business Days
                prior to the scheduled closing, the Members shall contribute
                their Percentage Interests of the required additional capital
                and/or authorize the Managing Member to use undistributed
                Extraordinary Proceeds to effect the acquisition.

                (d) LEASE TRANSACTION. The Managing Member shall arrange for any
        facility acquired under this Section 10.11 to be made subject to a Lease
        Agreement and related documentation with AL Funding or an Affiliate
        thereof. The Managing Member shall satisfy and perform all conditions
        pursuant to such Lease Agreement and shall direct AL Funding or its
        Affiliate to satisfy all conditions of its debt financing.

                (e) CLOSING. The Managing Member shall coordinate the closing of
        the new facility. The Managing Member will provide a set of all closing
        documents to the Investor Member within a reasonable time after the
        closing, and shall provide copies of any closing documents requested by
        the Investor Member as they become available to the Managing Member.

                (f) ACQUISITION FEE. In the event a facility is acquired under
        this Section 10.11 from an Entity other than the Managing Member or an
        Affiliate of the Managing Member, then an Affiliate designated by SALMI
        (other than the Managing Member) shall be entitled to an Acquisition Fee
        equal to 0.75% of the purchase price of such facility, which fee shall
        be payable at the time of closing.


<PAGE>
                                                                              42


        SECTION 10.12. LICENSE HELD BY SUNRISE AFFILIATES.

        The Investor Member acknowledges that Dignity Home Care, Inc., a New
York corporation and an Affiliate of the Managing Member ("DIGNITY") holds an
operating license issued by the State of New York pursuant to which Dignity is
authorized to provide personal and health care services to persons in need of
home care, including residents of the Smithtown Facility and the Fleetwood
Facility. The Managing Member covenants and agrees that neither Dignity nor any
other Affiliate of the Managing Member that subsequently provides home care
services at the Smithtown Facility or the Fleetwood Facility will realize any
net profit in connection with or as a result of providing such personal or home
care services.

        SECTION 11. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS.

        SECTION 11.1. INVESTMENT INTENT.

        Except as set forth in Section 16.2 herein, the Members do hereby
represent and warrant to the Company and to each other that they have acquired
their interest in the Company for investment solely for their own account with
the intention of holding such interest for investment, without any intention of
participating directly or indirectly in any distribution of any portion of such
interest, and without the financial participation of any other person in
acquiring such interest.

        SECTION 11.2. UNREGISTERED COMPANY INTERESTS.

        The Members do hereby acknowledge that they are aware that their
interests in the Company have not been registered under the Securities Act of
1933, as amended (the "FEDERAL ACT"), or under any state securities laws (a
"STATE ACT"). The Members further understand and acknowledge that their
representations and warranties contained in this Section 11 are being relied
upon by the Company as the basis for the exemption of the Members' interests in
the Company from the registration requirements of the Federal Act and from the
registration requirements under any applicable State Act. The Members further
acknowledge that the Company will not, and has no obligation to, recognize any
sale, transfer or assignment of all or any part of their respective interests in
the Company to any person unless and until the provisions of Section 16 hereof
have been fully satisfied.

        SECTION 11.3. NATURE OF INVESTMENT.

        The Members do hereby acknowledge that they are thoroughly familiar with
the terms of this Agreement, and that they are familiar with the Company's plans
to own, operate, hold, lease, manage, finance, acquire, sell, substitute and
dispose of, or otherwise deal with or provide services with respect to the
Facilities, and that they do not desire any further information or data relating
to the Facilities, the Company or the Managing Member. Furthermore, the Members
do hereby acknowledge that they understand that their interests in the Company
are a speculative investment involving a high degree of risk of financial
exposure and do hereby represent that they have a net worth sufficient to bear
the economic risk of their investment in the Company and to justify their
investing in a highly speculative venture of this type.


<PAGE>
                                                                              43


        SECTION 11.4. GENERAL REPRESENTATIONS AND WARRANTIES OF SUNRISE.

        Sunrise hereby represents and warrants to the Investor Member as
follows, which representations and warranties shall be deemed to have been made
and shall be true and correct as of the date of this Agreement:

                (a) Sunrise is a corporation duly formed and validly existing
        under the laws of the Commonwealth of Virginia with all requisite power
        and authority to own, lease and operate its properties and to carry on
        its business as now being conducted. Sunrise has all requisite power and
        authority to enter into this Agreement and the other agreements
        contemplated to be entered into by it in connection herewith and to
        carry out the transactions contemplated hereby and thereby.

                (b) The execution and delivery of this Agreement and the other
        agreements to be entered into by it in connection herewith and the
        consummation of the transactions contemplated hereby and thereby have
        been duly authorized by all necessary action on the part of Sunrise.
        This Agreement and such other agreements have been executed and
        delivered by a duly authorized officer of Sunrise and constitute the
        valid and binding obligations of Sunrise, enforceable against Sunrise in
        accordance with the terms hereof and thereof, subject as to enforcement,
        to bankruptcy, insolvency, reorganization and other laws of general
        applicability relating to or effecting creditor's rights and to general
        principles of equity.

                (c) The execution, delivery and performance of this Agreement
        and all other agreements contemplated hereby by Sunrise do not (i)
        violate any decree or judgment of any court or governmental authority
        which may be applicable to Sunrise; (ii) violate any law (or regulation
        promulgated under any law); (iii) violate or conflict with, or result in
        a breach of, or constitute a default under (or an event with or without
        notice or lapse of time or both would constitute a default) under any
        contract or agreement to which Sunrise is a party; or (iv) violate or
        conflict with any provision of the organizational documents of Sunrise.

                (d) No broker, finder, agent or other intermediary has been
        employed by or on behalf of Sunrise in connection with the negotiation
        or consummation of this Agreement or any of the transactions
        contemplated hereby, and no such party has any claim for any commission,
        finder's fee or similar amount payable as a result of any engagement of
        such party by Sunrise; provided, that Sunrise may pay a consulting fee
        to Macquarie Capital Partners LLC.

        SECTION 11.5. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
INVESTOR MEMBER.

        The Investor Member hereby represents and warrants to Sunrise as
follows, which representations and warranties shall be deemed to have been made
and shall be true and correct as of the date of this Agreement:

                (a) The Investor Member is a corporation duly incorporated and
        validly existing under the laws of Delaware with all requisite power and
        authority to carry on its business

<PAGE>
                                                                              44



        as now being conducted. The Investor Member has all requisite power and
        authority to enter into this Agreement and to carry out the transactions
        contemplated hereby.

                (b) The execution and delivery of this Agreement and the
        consummation of the transactions contemplated hereby have been duly
        authorized by all necessary action on the part of the Investor Member.
        This Agreement has been executed and delivered by a duly authorized
        officer of the Investor Member and constitutes the valid and binding
        obligation of the Investor Member, enforceable against the Investor
        Member in accordance with the terms hereof, subject as to enforcement,
        to bankruptcy, insolvency, reorganization and other laws of general
        applicability relating to or effecting creditors' rights and to general
        principles of equity.

                (c) The execution, delivery and performance of this Agreement by
        the Investor Member do not (i) violate any decree or judgment of any
        court or governmental authority which may be applicable to the Investor
        Member; (ii) violate any law (or regulation promulgated under any law);
        (iii) violate or conflict with, or result in a breach of, or constitute
        a default under (or an event with or without notice or lapse of time or
        both would constitute a default) under any contract or agreement to
        which the Investor Member is a party; or (iv) violate or conflict with
        any provision of the organizational documents of the Investor Member.

                (d) No broker, finder, agent or other intermediary has been
        employed by or on behalf of the Investor Member in connection with the
        negotiation or consummation of this Agreement or any of the transactions
        contemplated hereby, and no such party has any claim for any commission,
        finder's fee or similar amount payable as a result of any engagement of
        such party by the Investor Member.

                (e) The Investor Member has conducted its own due diligence with
        respect to the Portfolio and, except as set forth in the Transaction
        Agreement, the Investor Member has not received any representations and
        warranties from the Managing Member or any of its Affiliates in
        connection therewith.

        SECTION 12. POWER OF ATTORNEY.

        Investor Member (including any permitted assignee thereof) does hereby
irrevocably constitute and appoint Managing Member as Investor Member's true and
lawful attorney, in Investor Member's name, place and stead, to make, execute,
consent to, swear to, acknowledge, record and file any certificate or other
instrument which may be required to be filed by the Company or by the Members
under the laws of the State of Delaware and/or under the applicable laws of any
other jurisdiction to the extent Managing Member deems such filing to be
necessary or desirable, including, but not limited (i) this Agreement and any
amendment to this Agreement adopted by the Members in accordance with this
Agreement; (ii) the Certificate of Formation of the Company and all amendments
thereto required or permitted by law or the provisions of this Agreement; (iii)
all certificates and other instruments deemed advisable by Managing Member to
carry out the provisions of this Agreement and applicable law or to permit the
Company to become or to continue as a limited liability company in any
jurisdiction where the Company may be doing business; and (iv) all fictitious or
assumed name certificates required or permitted to be

<PAGE>
                                                                              45



filed on behalf of the Company; provided, however, that any such document is
consistent with the terms of this Agreement and, provided, further, that
Investor Member shall be provided with a copy of such certificate or instrument
promptly following the filing thereof. It is expressly understood, intended and
agreed by Investor Member, and for and on behalf of its successors and assigns,
that the grant of the power of attorney to Managing Member pursuant to this
Section 12 is coupled with an interest, is irrevocable and shall survive the
death or legal incompetency of each of the Members and the transfer of their
interest in the Company.

        SECTION 13. BANKING.

        All cash and other monies received by the Company or the Manager in
relation to a Facility shall be deposited in a separate non-interest bearing
bank account established in the name of the Company for such Facility, such
account to be in form and with an institution Approved by the Investor Member.
Each month, the funds in each such account will be transferred into a central
non-interest bearing account established in the name of the Company in a form
and with an institution Approved by the Investor Member. Withdrawals from such
central account shall be made on such signature or signatures as may from time
to time be Approved by all of the Members. The Members agree that if
non-interest bearing bank accounts in relation to a Facility or for the Company
are unavailable or otherwise impracticable, such accounts may be interest
bearing, provided that in such event the Investor Member will contribute to
charity its share of any interest received by the Company on funds in such
accounts.

        SECTION 14. ACCOUNTING.

        SECTION 14.1. BOOKS OF ACCOUNT.

        The Managing Member shall maintain true and accurate books of account
for the Company at the principal office of the Company specified in Section 3.2
or such other location or locations as may be Approved by the Investor Member,
and the Investor Member shall at all reasonable times have access thereto and
shall have the right, at the Investor Member's expense, to have the books and
records of the Company audited by a firm of independent accountants selected by
the Investor Member.

        SECTION 14.2. METHOD OF ACCOUNTING.

        The Company's books of account shall be maintained, and its income,
gains, losses expenses, contributions and distributions and deductions shall be
determined and accounted for in accordance with GAAP.

        SECTION 14.3. FINANCIAL AND OPERATING STATEMENTS.

        The Managing Member shall, at the expense of the Company, have financial
statements of the Company for each Fiscal Year audited by an accounting firm
which shall initially be Ernst & Young, but which may be replaced with a
different nationally recognized accounting firm Approved by all of the Members.
The Managing Member shall have prepared and delivered to the Investor Member the
annual audited financial statements and tax returns in accordance with Schedule
4 attached hereto. Also, the Managing Member shall have prepared and delivered
to the Investor Member in accordance with Schedule 4 an unaudited operating
statement, which

<PAGE>
                                                                              46



shall be prepared in accordance with the accrual method of accounting, and which
shall include, without limitation, full trial balances and a comparison to the
applicable Operating Budget of the cash flow, income and expenses of the Company
through the end of each fiscal quarter, together with a written narrative
explaining all material variances.

        SECTION 14.4. TAX INFORMATION.

        Promptly after the close of each taxable year of the Company, the
Managing Member shall cause to be prepared and delivered to the Members, at the
Company's expense, information with respect to the business transactions of the
Company for such Fiscal Year in sufficient detail to enable the accounting firm
performing the audit of the Company's financial statements to prepare the
Company's federal, state and local income tax returns in accordance with all
then applicable laws, rules and regulations. The Managing Member shall also
cause to be prepared by the accounting firm performing the audit, at the expense
of the Company, all federal, state and local income tax returns required of the
Company. The Managing Member shall also cause such accounting firm to file the
tax returns and to furnish to the Members all necessary information concerning
the Members' distributive share of the Company items shown on the Company's tax
returns to enable the Members to prepare their federal, state and local income
tax returns, with such information for each Fiscal Year to be furnished to the
Members pursuant to Schedule 4 attached hereto.

        SECTION 14.5. TAX MATTERS PARTNER.

        Pursuant to Section 6231(a)(7)(A) of the Code, the Members hereby
designate the Managing Member as the Company's "tax matters partner." The
Managing Member is authorized, empowered, and required to make such filings with
the Internal Revenue Service, at the Company's expense, as may be required to
designate the Managing Member as the tax matters partner.

        SECTION 14.6. TAX TREATMENT OF LEASE FINANCING.

        Each Member hereby agrees for all tax and accounting purposes to report
the Lease Transactions in the manner specified in the Tax Matters Agreement.

        SECTION 15. ADMISSION OF ADDITIONAL MEMBERS.

        Except as otherwise provided in Section 16 hereof, no Entity shall be
admitted to the Company without the Approval of each Member, which may be given
or withheld in such Member's sole discretion.

        SECTION 16. TRANSFER OF COMPANY INTERESTS.

        SECTION 16.1. COVENANTS REGARDING TRANSFERS.

        Each of the Members hereby covenants and agrees that such Member will
not at any time sell, assign, transfer, convey, mortgage, pledge, encumber,
hypothecate or otherwise dispose of all or any part of such Member's interest
(including such Member's right to distributions hereunder) in the Company to any
Entity, other than pursuant to the following provisions of this


<PAGE>
                                                                              47



Section 16, without (except as otherwise expressly provided herein) first having
obtained the Approval to any such proposed disposition from all other Members
and without having complied with the Federal Act or any applicable State Acts or
Non-U.S. Laws. Furthermore, no voluntary or involuntary transfer of a Member's
interest in the Company may be made unless each other Member has received
reasonable assurances from the transferring Member that such transfer will not
require registration of such Member's interest to be transferred or of the
Company under the Federal Act and all applicable State Acts. Any transfer by any
Member of all or any portion of such Member's interest in the Company in
violation of this covenant shall be null and void and of no effect whatsoever,
and shall be a Defaulting Event for purposes of Section 18.

        SECTION 16.2. PERMITTED TRANSFERS BY INVESTOR MEMBER.

        Notwithstanding the terms of Section 16.1 to the contrary, but subject
to the second sentence of Section 16.1 and to Section 16.6, the interests of the
Investor Member in the Company may be sold, assigned, or transferred in their
entirety, or direct or indirect ownership or beneficial interests in the
Investor Member may be sold, assigned or transferred, or the Investor Member may
issue shares in the Investor Member in each case, without the consent (except in
the case of (d) below) of the Managing Member, to any of the following:

                (a) to any Affiliate of the Investor Member, provided that no
        such transfer shall result in the initial record owners of the voting
        stock of the Investor Member owning less than 51% of such voting stock;

                (b) to any Entity which may result from a reorganization,
        merger, consolidation or business combination by or with the Investor
        Member or to any Entity to which the Investor Member is selling all or
        substantially all of its assets, provided that no such reorganization,
        merger, consolidation or business combination shall result in the
        initial record owners of the voting stock of the Investor Member owning
        less than 51% of such voting stock;

                (c) to any Entity that is not a United States citizen or, in the
        case of Entities that are not natural persons, that is formed in a
        jurisdiction outside the United States, in either case pursuant to the
        private placement of shares of, or indirect beneficial interests in, the
        Investor Member undertaken by an Affiliate of the Investor Member,
        provided that no such transfer shall result in the initial record owners
        of the voting stock of the Investor Member owning less than 51% of such
        voting stock; and

                (d) with the prior consent of the Managing Member, which consent
        may be granted or withheld in the Managing Member's sole discretion,
        fifty percent (50%) or less of the Investor Member's interest in the
        Company may be transferred to any Entity, provided the Investor Member
        has the power and authority to, and as a condition to such transfer
        covenants and agrees to, act for and on behalf of such transferee in
        relation to such transferee's interest in the Company, and the Managing
        Member shall be entitled to treat the Investor Member as such
        transferee's Authorized Representative.

        Without limiting Section 16.2(a), (b) or (c) above, any transfer of all
or any part of the Investor Member's interest in the Company or any shares of
the Investor Member shall not be

<PAGE>
                                                                              48



permitted (and any attempted transfer shall be null and void and of no force and
effect) unless and until the Investor Member delivers to the Company and the
Managing Member at least five (5) days advance written notice of any such
transfer and the identity of the transferee together with such assurances as the
Managing Member may reasonably request to ensure that such transfer is in
compliance with the Federal Act and all applicable State Acts, this Section 16.2
and the provisions of Section 16.7 regarding permitted transferees. In addition,
promptly following the consummation of any such transfer, the Investor Member
shall provide the Managing Member with copies of the documents executed to
effect such transfer, modified as necessary to preserve the confidentiality of
any confidential information contained therein.

        SECTION 16.3. PERMITTED TRANSFERS BY MANAGING MEMBER.

        Notwithstanding the terms of Section 16.1 to the contrary, but subject
to Section 16.6, the interests of the Managing Member in the Company may be
sold, assigned, or transferred in their entirety, without the consent of the
Investor Member, to any of the following:

                (a) to any Entity which may result from a reorganization,
        merger, consolidation or business combination by or with the Managing
        Member, regardless of whether the Managing Member is the surviving
        entity;

                (b) to any Affiliate of the Managing Member; and

                (c) to any Entity to which the Managing Member is selling all or
        substantially all of its assets;

provided, however, that if, pursuant to a transfer under this Section 16.3, a
Change of Control other than a Permitted Change of Control shall occur (such
transfer being a "TRIGGERING TRANSFER"), then the Investor Member shall have the
right to initiate the buy-sell option pursuant to Section 20 of this Agreement.
Such option shall remain in place for a period of ninety (90) days after such
transfer, at which point, if not exercised, it shall be deemed waived by the
Investor Member. A "CHANGE OF CONTROL" shall be deemed to occur if, at any time
after the date of this Agreement, (i) any Entity (or one or more Entities acting
in concert as a group) directly or indirectly acquires (A) more than fifty
percent (50%) of the outstanding capital stock of the Managing Member or (B)
such percentage of the outstanding common stock of the Managing Member or such
other rights as would entitle such Entity (or such group) to (x) exercise
control over the day-to-day management of the Managing Member or (y) appoint or
determine the vote for a majority of the board of directors of the Managing
Member, and in the case of (y) such Entity or group actually exercises such
right and elects a majority of the board members who were not members prior to
such time; (ii) a merger exchange, consolidation, recapitalization or other
business combination (a "BUSINESS COMBINATION") occurs in which the beneficial
holders of the outstanding capital stock of the Managing Member immediately
prior to the Business Combination beneficially own immediately following such
Business Combination less than fifty-one percent (51%) of the aggregate equity
interests of the surviving entity or less than fifty-one percent (51%) of the
securities of the Managing Member having the power to elect a majority of the
board of directors of the Managing Member; or (iii) all or substantially all of
the assets of the Managing Member are sold or otherwise disposed of, directly,
indirectly, voluntarily, involuntarily, by operation of law or otherwise. A
"PERMITTED CHANGE OF CONTROL" is a Change

<PAGE>
                                                                              49



of Control pursuant to which any applicable Entity or group acquiring beneficial
ownership of the stock of the Managing Member (in the case of clause (i) of the
preceding sentence), the surviving entity of any applicable Business Combination
(in the case of clause (ii) of the preceding sentence), or the Entity that
purchases all of substantially all of the assets of the Managing Member (in the
case of clause (iii) of the preceding sentence) (each such Entity being referred
to herein as the "NEW ENTITY") satisfies all of the following requirements:

        (i)     The tangible net worth of the New Entity, computed in accordance
with GAAP, as of the date of the Change in Control is not less than the greater
of (A) the tangible net worth of the Managing Member as of the date of this
Agreement or (B) the tangible net worth of the Managing Member on the day prior
to the date of the Change of Control;

        (ii)    Neither the New Entity nor any Entity directly or indirectly
controlling the New Entity, or any of the New Entity's operational subsidiaries
shall, at any time (A) have filed a petition in bankruptcy or sought the
protection of any bankruptcy or similar insolvency laws, or had a petition under
any bankruptcy or creditors rights laws filed against it; or (B) had any
assisted living/dementia care or skilled nursing license or certification denied
or revoked by any governmental authority due to any actual or alleged fault or
failure by, or the negative reputation of, the New Entity or any of its
Affiliates;

        (iii)   The New Entity, or its operational subsidiary or subsidiaries,
shall (A) be licensed or certified for the operation of assisted living/dementia
care facilities in the states in which the Facilities are located, and (B) have
a good reputation in the industry and have at least five (5) years experience
in, the operation of a substantial number of premier first-class assisted
living/dementia care facilities containing no less than an average of 50 units
each and located in metropolitan markets substantially similar to the markets in
which the Facilities are located; and (C) operate such facilities in a manner
comparable to the Sunrise Standards, in each case as determined by the Investor
Member in its reasonable judgment; and

        (iv)    The New Entity or its operational subsidiary or subsidiaries
must have in place or adopt as of the date of the Change of Control, hiring,
training and quality assurance programs and operating and management standards
that are equivalent to or higher in quality than the Sunrise Standards.

        Without limiting Section 16.3(a), (b) or (c) above, any transfer of all
or any part of the Managing Member's interest in the Company or any shares of
the Managing Member shall not be permitted (and any attempted transfer shall be
null and void and of no force and effect) unless and until the Managing Member
delivers to the Company and the Investor Member at least five (5) days advance
written notice of any such transfer and the identity of the transferee together
with such assurances as the Investor Member may reasonably request to ensure
that such transfer is in compliance with the Federal Act and all applicable
State Acts and this Section 16.3. In addition, promptly following the
consummation of any such transfer, the Managing Member shall provide the
Investor Member with copies of the documents executed to effect such transfer,
modified as necessary to preserve the confidentiality of any confidential
information contained therein.



<PAGE>
                                                                              50


        SECTION 16.4. SUBSTITUTED MEMBERS.

        In the event a Member transfers all or any part of its membership
interest in the Company in compliance with the provisions of Sections 16.2 or
16.3 above, the transferee of such Member shall not have the right to become a
substituted Member of the Company unless the transferring Member has given such
transferee such right and unless:

                (a) such Member and such transferee execute and deliver such
        instruments as the other Member reasonably deems necessary or desirable
        to effect such substitution;

                (b) such transferee accepts and agrees in writing to be bound by
        all of the terms and provisions of this Agreement;

                (c) such transferee pays all reasonable expenses connected with
        such substitution; and

                (d) the other Member, in its sole discretion, consents to the
        substitution of such transferee (only if such transferee is not already
        a Member of the Company) as a substituted Member.

        SECTION 16.5. RECORDATION TAX.

        In the event any permitted transfer or sale of an interest pursuant to
this Section 16 results in the imposition of a state or local transfer,
recordation or similar tax on transfers of economic interests (or any similar
tax), the Member whose transfer or sale triggers such imposition shall be
responsible for the payment of such transfer and recordation tax or similar tax.

        SECTION 16.6. TRANSFERS RESULTING IN CORPORATION STATUS; TRANSFERS
THROUGH ESTABLISHED SECURITIES OR SECONDARY MARKETS.

        Notwithstanding anything to the contrary in this Agreement, no transfer
by a Member of its interest in the Company (or any economic or other interest,
right or attribute therein) may be made to any Entity if (i) in the opinion of
legal counsel for the Company, it would result in the Company being treated as
an association taxable as a corporation, or (ii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the Code.
Notwithstanding anything to the contrary in this Agreement, (A) no interests in
the Company shall be issued in a transaction that is (or transactions that are)
registered or required to be registered under the Federal Act, and to the extent
such interests were not required to be registered under the Federal Act by
reason of Regulation S (17 CFR 230.901 through 230.904) or any successor
thereto, such issuances would not have been required to be registered under the
Federal Act if the interests so offered or sold had been offered and sold within
the United States, (B) any admission (or purported admission) of a Member and
any transfer or assignment (or purported transfer or assignment) of all or part
of a Member's interest (or any interest or right or attribute therein) in the
Company, whether to another Member or to a third party, shall not be effective,
and any such transfer or assignment (or purported transfer or assignment) shall
be void ab initio, and no person shall otherwise become a Member if (1) at the
time of such transfer or assignment (or purported transfer or assignment) any
interest in the Company (or economic interest therein) is traded on an



<PAGE>
                                                                              51

established securities market or readily tradable on a secondary market or the
substantial equivalent thereof or (2) after such transfer or assignment (or
purported transfer or assignment) the Company would have more than 100 Members.
For purposes of clause (1) of the preceding sentence and clause (ii) above, an
established securities market is a national securities exchange that is either
registered under Section 6 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") or exempt from registration because of the limited volume
of transactions, a foreign securities exchange that, under the law of the
jurisdiction where it is organized, satisfies regulatory requirements that are
analogous to the regulatory requirements of the Exchange Act, a regional or
local exchange, or an interdealer quotation system that regularly disseminates
firm buy or sell quotations by identified brokers or dealers by electronic means
or otherwise. For purposes of such clause (1) and clause (ii) above, interests
in the Company (or interests therein) are readily tradable on a secondary market
or the substantial equivalent thereof if (i) interests in the Company (or
interests therein) are regularly quoted by any person, such as a broker or
dealer, making a market in the interests; (ii) any person regularly makes
available to the public (including customers or subscribers) bid or offer quotes
with respect to interests in the Company (or interests therein) and stands ready
to effect buy or sell transactions at the quoted prices for itself or on behalf
of others; (iii) the holder of an interest in the Company has a readily
available, regular, and ongoing opportunity to sell or exchange such interest
(or interests therein) through a public means of obtaining or providing
information of offers to buy, sell, or exchange such interests; or (iv)
prospective buyers and sellers otherwise have the opportunity to buy, sell, or
exchange interests in the Company (or interests therein) in a time frame and
with the regularity and continuity that is comparable to that described in
clauses (i), (ii) and (iii) of this sentence. For purposes of determining
whether the Company will have more than 100 Members, each person indirectly
owning an interest in the Company through a partnership (including any entity
treated as a partnership for federal income tax purposes), a grantor trust or an
S corporation (each such entity a "FLOW-THROUGH ENTITY") shall be treated as a
Member unless the Managing Member determines in its sole and absolute discretion
that less than substantially all of the value of the beneficial owner's interest
in the flow-through entity is attributable to the flow-through entity's interest
(direct or indirect) in the Company.

        SECTION 16.7. HOLDERS OF INVESTOR MEMBER INTERESTS.

        The Managing Member acknowledges that indirect ownership interests in
the Investor Member will be syndicated to various offshore parties pursuant to a
private placement memorandum to be prepared by representatives of the Investor
Member. Such parties may trade their indirect ownership interests. Personnel who
have been identified to the Managing Member ("IDENTIFIED PERSONNEL") will
initially control and manage the Investor Member and the offshore parties which
hold shares in the Investor Member. The Managing Member will have the right to
receive a copy of the foregoing private placement memorandum. The trading of the
indirect ownership interests in the Investor Member shall not impact the
operations of the Company or the relationship between the Members under this
Agreement. Identified Personnel and the Investor Member will provide sufficient
information to enable the Managing Member and the Facility Owners to confirm
that none of the parties owning indirect ownership interests in the Investor
Member are on the United States Treasury Department's Office of Foreign Asset
Control Restricted List, or subject to economic sanctions imposed by acts, laws
or regulations and/or executive orders issued thereunder. The Investor Member
shall adhere to the anti-money laundering policy attached hereto as Schedule 10.
The Investor Member shall be responsible for

<PAGE>
                                                                              52



obtaining and providing to the Managing Member from time to time reasonably
sufficient information to enable the Managing Member to satisfy itself as to the
identity of the beneficial owners of the Investor Member, and to enable the
Members to execute any certifications required to be submitted by any Facility
Owner to the provider of the Senior Financing applicable to its Facility.

        SECTION 17. WITHDRAWALS.

        Each of the Members does hereby covenant and agree that such Member will
not withdraw or retire from the Company except as the result of a permitted
transfer of such Member's entire interest in the Company pursuant to Section 16
hereof, and that such Member will carry out such Member's duties and
responsibilities hereunder until the Company is terminated, liquidated and
dissolved under Section 23 hereof. A withdrawing Member shall not be entitled to
receive any amount from the Company in connection with such withdrawal except to
the extent specifically provided in this Agreement.

        SECTION 18. DEFAULTING EVENTS.

        SECTION 18.1. CONVERSION OF DEFAULTING OR DISABLED MANAGING MEMBER'S
INTEREST.

        If the Managing Member suffers a Defaulting Event or a Disabling Event,
and if the Investor Member elects under Section 23.1 hereof to continue the
Company notwithstanding the happening of such Defaulting Event or Disabling
Event, then the Investor Member may elect, by delivery of written notice thereof
to the Managing Member, to become the Managing Member or to admit an Affiliate
of the Investor Member as the Managing Member (but in no event shall such
admission dilute the Percentage Interest of the Managing Member who suffered the
Defaulting Event or Disabling Event), and the Managing Member's entire interest
in the Company as a Managing Member shall be converted into the interest of a
non-managing Member (entitled to all of the rights of the non-managing Member
hereunder, including all rights of Approval) effective as of the date of the
occurrence of such Defaulting Event or Disabling Event (the "CONVERSION DATE").
As a result of such conversion, the Managing Member shall cease to be a managing
member of the Company as of the Conversion Date and shall become solely a
non-managing member as of such Conversion Date. In the event the Managing Member
becomes a Defaulting Member or Disabled Member, and such Managing Member's
interest in the Company is required to be converted hereunder into the interest
of a non-managing member, such Defaulting Member or Disabled Member or its
successor-in-interest, as the case may be, shall promptly upon demand of the
Investor Member execute and deliver to the Company all documents that may be
necessary or appropriate, in the opinion of counsel for the Company, to effect
such conversion. Notwithstanding such conversion and removal, such Disabled
Member or Defaulting Member shall remain liable for all liabilities, duties and
obligations of such Managing Member arising prior to the conversion of such
Managing Member to a non-managing Member.

        SECTION 18.2. ADDITIONAL REMEDIES.

        Except as otherwise expressly provided in this Agreement, the rights and
remedies of the Members under this Agreement shall not be mutually exclusive and
shall be cumulative of all

<PAGE>
                                                                              53



rights or remedies available at law, in equity, or under this Agreement. Each
Member confirms that damages at law may be an inadequate remedy for a breach or
a threatened breach of this Agreement and agrees that, without prejudice to the
right of a Member in an appropriate case to pursue a remedy at law or otherwise,
in the event of a breach or threatened breach of any provision hereof, the
respective rights and obligations hereunder shall be enforceable by specific
performance, injunction, or other equitable remedy.

        SECTION 19. DISABILITY OR DEFAULT OF THE INVESTOR MEMBER.

        In the event the Investor Member suffers a Disabling Event, such
Disabling Event shall not terminate the Company, and in the event such Disabled
Member's interest in the Company passes to a successor-in-interest, such
successor-in-interest shall succeed to such Disabled Member's entire interest in
the Company and shall have the same Percentage Interest in the Company, the same
obligations with respect to contributions to the capital of the Company and with
respect to the obligations of the Company, the same rights in and to all
distributions made by the Company, in liquidation or otherwise, and the same
share of the Company's Net Profit, Net Loss, and specially allocated items for
both financial accounting and income tax purposes as such Disabled Member had
with respect to its interest in the Company. Upon admission to the Company of
such Disabled Member's successor-in-interest, such successor shall promptly,
upon demand of the Company, execute and deliver to the Company, and does hereby
irrevocably constitute and appoint the Managing Member as such successor's true
and lawful attorney-in-fact to execute and to deliver to the Company for and on
such successor's behalf, all documents that may be necessary or appropriate, in
the opinion of counsel for the Company, to reflect such successor's admission to
the Company as a non-managing member and such successor's agreement to be bound
by all of the terms and conditions of this Agreement. The Disabled Member shall
be deemed to have given its successor or successors in interest the right to
become a substituted non-managing member. Upon and during the continuance of a
Defaulting Event by the Investor Member, the Investor Member (including its
successor in interest) shall have no further rights of Approval.

        SECTION 20. BUY-SELL AGREEMENT FOR ENTIRE PORTFOLIO.

        SECTION 20.1. BUY-SELL OPTION.

        If at any time after the date of this Agreement one of the following
events occurs:

                (i)     the occurrence and continuance of a Bona Fide Dispute;

                (ii)    the Investor Member exercises its rights of conversion
        under Section 18 hereto; or

                (iii)   the Investor Member suffers a Disabling Event pursuant
        to Section 19;

then the Managing Member and the Investor Member shall each have the right to
make an offer (the "BUY-SELL OFFER") in writing to the other Member (the
"OFFEREE"), which shall state an amount in cash (the "BUY-SELL VALUE"),
determined in the sole and absolute discretion of the Member making the Buy-Sell
Offer (the "OFFEROR"), to be used in determining the Buy-Sell Price

<PAGE>
                                                                              54



pursuant to Section 20.4. In addition, if a Member fails to make a Capital
Contribution required to be made by it under this Agreement (including a
Voluntary Additional Contribution Approved by such Member) the Non-Failing
Member shall thereafter be permitted to make a Buy-Sell Offer as provided in the
preceding sentence, provided, however, that, if a Buy-Sell Offer is triggered by
such failure, then the Thirty Day Period specified in Section 20.3 hereto shall
be reduced to ten (10) days, and provided, further, that the ninety (90) days
specified in Section 20.6 (within which a Buy-Sell Closing Date shall be
designated) shall be reduced to thirty (30) days. Further, if a Triggering
Transfer described under Section 16.3 hereto with respect to the Managing Member
occurs, the Investor Member shall, within ninety (90) days after such Triggering
Transfer, be permitted to make a Buy-Sell Offer as provided in the preceding
sentence.

        SECTION 20.2. BUY-SELL VALUE.

        The Buy-Sell Value shall be the amount that the Offeror chooses to be
the net value of the Company's assets as of the Buy-Sell Closing Date
(hereinafter defined) after distribution of all Net Cash Flow to the Members and
net of any amounts required to be paid to fully satisfy and obtain a release of
the Lease Transaction. The Buy-Sell Value shall not be adjusted as a result of
distributions of Net Cash Flow occurring after the date on which the Buy-Sell
Offer is given, but shall be reduced by the amount of Extraordinary Proceeds
distributed after the date on which the Buy-Sell Offer is given. The Buy-Sell
Offer shall constitute an irrevocable offer by the Offeror to the Offeree either
(i) to sell to the Offeree all, but not less than all, of the Offeror's interest
in the Company in consideration for the payment of a Buy-Sell Price determined
pursuant to Section 20.4 (the "OFFER TO SELL") or (ii) to purchase all, but not
less than all, of the Offeree's interest in the Company in consideration for the
payment of a Buy-Sell Price determined pursuant to Section 20.4 (the "OFFER TO
PURCHASE").

        SECTION 20.3. OFFEREE DECISION.

        Unless a shorter time period is specified in Section 20.1, the Offeree
shall have thirty (30) days (the "THIRTY DAY PERIOD") after receipt of the
Buy-Sell Offer to respond to either, but not both, the Offer to Sell or the
Offer to Purchase, by giving the Offeror notice of such response within the
Thirty Day Period. If the Offeree fails to accept either the Offer to Sell or
the Offer to Purchase within the Thirty Day Period, then the Offeree shall be
deemed to have accepted the Offeror's Offer to Purchase.

        SECTION 20.4. BUY-SELL PRICE.

        The price (the "BUY-SELL PRICE") payable to the Member whose interest in
the Company is being sold pursuant to this Section 20 (the "SELLING MEMBER") by
the Member who is purchasing such interest of the Selling Member pursuant to
this Section 20 (the "BUYING MEMBER") shall be an amount equal to the amount of
cash which the Selling Member would have received pursuant to Section 9 hereof
on the Buy-Sell Closing Date if the Company had distributed to the Members in
accordance with Section 9 a cash amount equal to the Buy-Sell Value as stated in
the Buy-Sell Offer.


<PAGE>
                                                                              55


        SECTION 20.5. EARNEST MONEY; DEFAULT.

        Within five (5) Business Days after the date of the exercise of the
election by the Offeree or five (5) Business Days after the expiration of the
Thirty Day Period, whichever is earlier, the Buying Member shall deposit in cash
an amount equal to 10% of Buy-Sell Price (the "EARNEST MONEY") with an
independent and neutral party reasonably satisfactory to the Selling Member. The
earnest money shall be applied against the purchase price at the closing
referenced below, or shall be paid to the Selling Member as liquidated damages
in the event of default by the Buying Member. In the event Buying Member fails
to deposit timely such earnest money as provided above (such Buying Member being
then referred to as a "DEFAULTING BUYER"), the Selling Member shall have the
option (i) within thirty (30) days thereafter, unless the Defaulting Buyer has
earlier cured such default by depositing the required earnest money as provided
above, of substituting itself as the Buying Member (such Selling Member being
then referred to as a "SUBSTITUTED BUYER") under this Section 20.5 at a purchase
price (the "DEFAULT PURCHASE PRICE") equal to the price that would be obtained
pursuant to Section 20.4 if an amount equal to 90% of the Buy-Sell Value were
used to determine the Buy-Sell Price, by giving notice to the Defaulting Buyer
of its intention to do so and by depositing, within five (5) Business Days after
such notice, earnest money equal to 10% of the Default Purchase Price with an
independent and neutral party reasonably selected by the Substituted Buyer,
whereupon, for purposes this Section 20, the Substituted Buyer shall become the
Buying Member and the Defaulting Buyer shall become the Selling Member; or (ii)
at any time after default by the Defaulting Buyer in depositing the earnest
money, of seeking from the Defaulting Buyer by judicial proceedings or as
otherwise permitted by law, as liquidated damages for its default in its
obligations under this Section 20, an amount of money equal to the amount of
earnest money the Defaulting Buyer was required to deposit pursuant to this
Section 20.5.

        SECTION 20.6. BUY-SELL CLOSING.

        The sale of the Selling Member's interest in the Company and the
withdrawal of the Selling Member from the Company shall be closed and
consummated on that date (the "BUY-SELL CLOSING DATE") designated by the Buying
Member in a notice to the Selling Member, which date shall be within ninety (90)
days after the expiration of the Thirty Day Period (unless otherwise specified
under Section 20.1 hereto); provided, however, that such date shall be within
one hundred eighty (180) days after the expiration of the Thirty Day Period if
this Section 20 is being initiated pursuant to a Triggering Transfer under
Section 16.3 hereto. All Net Cash Flow, if any (after establishment of a
reasonable liability reserve), shall be distributed to the Members in accordance
with the applicable provisions of Section 9 on the Buy-Sell Closing Date and
prior to consummation of the purchase and sale pursuant to this Section 20 as if
such distribution date were the last day of a Fiscal Year. Effective as of the
Buy-Sell Closing Date, the Selling Member shall cease to be a Member of the
Company and the provisions of this Section 20.6 shall apply. The Buy-Sell Price
shall be paid to the Selling Member by the Buying Member or its designee in cash
on the Buy-Sell Closing Date. Simultaneously with the receipt of such payment,
the Selling Member shall execute, seal, swear to, and deliver for and on its
behalf, all documents that may be necessary or appropriate, in the reasonable
opinion of counsel to the Buying Member, to effect such sale free and clear of
all liens and encumbrances, other than the Selling Member's share of Company
liabilities (excluding any liability arising out of any negligent or grossly
negligent act or omission, willful misconduct or fraud by the Selling

<PAGE>
                                                                              56



Member for which the Selling Member shall remain liable), which shall thereby be
assumed by the Buying Member, and the Buying Member shall thereafter indemnify,
hold harmless and defend the Selling Member from and against any and all such
liabilities, other than any liability arising out of any negligent or grossly
negligent act or omission, willful misconduct, or fraud by the Selling Member.
The Buying Member shall arrange for the release of the Selling Member and its
Affiliates from any guaranties or other liabilities by or of the Selling Member
or its Affiliates in relation to any Senior Financing that is not being
satisfied in connection with the contemplated sale of the Selling Member's
interest in the Company. The Selling Member shall have no further obligations
with respect to Capital Contributions. In the event either the Buying Member or
the Selling Member defaults in the performance of its obligations under the
buy-sell procedure described in this Section 20, the non-defaulting Member shall
have the right to exercise all rights and remedies against the defaulting Member
available at law or in equity, including, without limitation, the remedy of
specific performance. The Selling Member shall pay all closing costs incurred in
connection with the implementation of the buy-sell procedure normally and
customarily paid by a seller of a real property interest and the Buying Member
shall pay all closing costs incurred in connection with the implementation of
the buy-sell procedure normally and customarily paid by a buyer of a real
property interest; provided, however, that the Buying Member and the Selling
Member shall each pay the fees and expenses of its own legal counsel.

        SECTION 20.7. REMEDIES.

        Without limiting the remedies available to either Member as a result of
the breach of the other Member's obligations described above, the Selling Member
shall have the option, within sixty (60) days of default by the Buying Member in
its obligation to purchase under this Section 20 (such Buying Member being then
referred to as the Defaulting Buyer), of retaining the escrow deposit and
substituting itself as Buying Member under this Section 20 (such Selling Member
being then referred to as a Substituted Buyer) at a purchase price equal to the
price that would have been obtained pursuant to Section 20.4 by using the
Buy-Sell Value to determine the Buy-Sell Price (such purchase price being then
referred to as the Default Purchase Price). Such option shall be exercised by
giving notice to the Defaulting Buyer of such exercise and by depositing, within
five days after such notice, earnest money equal to 10% of the Default Purchase
Price with an independent and neutral party reasonably selected by the
Substituted Buyer, whereupon, for purposes of this Section 20, the Substituted
Buyer shall become the Buying Member and the Defaulting Buyer shall become the
Selling Member.

        SECTION 20.8. DISABLED OR DEFAULTING MEMBER.

        Notwithstanding anything in this Agreement to the contrary, a Member
shall not have the right to make a Buy-Sell Offer under this Section 20 if such
Member is at such time a Disabled Member or Defaulting Member.

        SECTION 20.9. SUSPENSION OF MARKETING RIGHT.

        If either Member exercises its rights under this Section 20, then each
Member's marketing rights under Section 22 hereto shall be deemed suspended
until the Buy-Sell Closing


<PAGE>
                                                                              57



Date or, if such closing does not occur, for ninety (90) days after the
expiration of the Thirty Day Period.

        SECTION 21. BUY-SELL OPTION FOR INDIVIDUAL FACILITIES.

        SECTION 21.1. BUY-SELL OPTION.

        At any time after the date of this Agreement, during the continuance of
a Bona Fide Dispute over a proposed Major Decision concerning a proposed
Voluntary Additional Contribution pursuant to Section 7.4(a)(ii) hereof, either
the Managing Member or the Investor Member (as the Offeror) shall have the right
to make an offer (the "FACILITY BUY-SELL OFFER") in writing to the other Member
(as the Offeree) solely with respect to the Facility or Facilities that are the
subject of the dispute over Voluntary Additional Contributions, which shall
state an amount in cash (the "FACILITY BUY-SELL VALUE"), determined in the sole
and absolute discretion of the Offeror. The Facility Buy-Sell Offer shall
constitute an irrevocable offer by the Offeror to the Company and the Offeree
either (i) to cause the Company to sell the Facility or Facilities identified in
such Facility Buy-Sell Offer to the Offeree in consideration for the payment of
a Facility Buy-Sell Price determined pursuant to Section 21.4 (the "FACILITY
OFFER TO SELL") or (ii) to purchase the Facility from the Company in
consideration for the payment of a Facility Buy-Sell Price determined pursuant
to Section 21.4 (the "FACILITY OFFER TO PURCHASE"). Such Facility Buy-Sell Offer
shall be made subject to the conditions of the Lease Agreement applicable to the
Facility or Facilities subject to such Facility Buy-Sell Offer; if such
conditions are unable to be met, then the Offeror shall have the option, but not
the obligation, to trigger the buy-sell provisions of Section 20 hereto.

        SECTION 21.2. OFFEREE DECISION.

        The Offeree shall have thirty (30) days (a "THIRTY DAY PERIOD") after
receipt of the Facility Buy-Sell Offer to respond to either, but not both, the
Facility Offer to Sell or the Facility Offer to Purchase, by giving the Offeror
notice of such response within the Thirty Day Period. If the Offeree fails to
accept either the Facility Offer to Sell or the Facility Offer to Purchase
within the Thirty Day Period, then the Offeree shall be deemed to have caused
the Company to accept the Offeror's Facility Offer to Purchase.

        SECTION 21.3. LEASE TRANSACTION RELEASE.

        The Facility Buying Member (as defined in Section 21.4) under this
Section 21 shall be responsible for representing the Company with respect to the
exercise of the Call Option (as defined in the Lease Agreements) on the Facility
Buy-Sell Closing Date, and with respect to overseeing the release procedure
under the Lease Transactions, including without limitation compliance with any
notice provisions, and shall be responsible for the payment of any release
premiums or yield maintenance costs under the Lease Agreements. The Facility
Buying Member is expressly authorized to act on behalf of the Company under this
Section 21.3


<PAGE>
                                                                              58



        SECTION 21.4. BUY-SELL PRICE.

        The price (the "FACILITY BUY-SELL PRICE") payable to the Company by the
Member who is purchasing the Facility pursuant to Section 21.2 (the "FACILITY
BUYING MEMBER") shall be an amount equal to the Facility Buy-Sell Value as
stated in the Facility Buy-Sell Offer.

        SECTION 21.5. EARNEST MONEY; DEFAULT.

        Within five (5) Business Days after the date of the exercise of the
election by the Offeree or five (5) Business Days after the expiration of the
Thirty Day Period, whichever is earlier, the Facility Buying Member shall
deposit in cash an amount equal to 10% of the Facility Buy-Sell Price (the
"EARNEST MONEY") with an independent and neutral party reasonably satisfactory
to the Facility Selling Member (as defined below). The earnest money shall be
applied against the purchase price at the closing referenced below, or shall be
paid to the other Member (the "FACILITY SELLING MEMBER") as liquidated damages
in the event of default by the Facility Buying Member. In the event Facility
Buying Member fails to deposit timely such earnest money as provided above (such
Facility Buying Member being then referred to as a "FACILITY DEFAULTING BUYER"),
the Facility Selling Member shall have the option (i) within fifteen (15) days
thereafter, unless the Facility Defaulting Buyer has earlier cured such default
by depositing the required earnest money as provided above, of substituting
itself as the Facility Buying Member (such Facility Selling Member being then
referred to as a "FACILITY SUBSTITUTED BUYER") under this Section 21.5 at a
purchase price (the "FACILITY DEFAULT PURCHASE PRICE") equal to 90% of the
Facility Buy-Sell Value, by giving notice to the Facility Defaulting Buyer of
its intention to do so and by depositing, within five (5) Business Days after
such notice, earnest money equal to 10% of the Facility Default Purchase Price
with an independent and neutral party reasonably selected by the Facility
Substituted Buyer, whereupon, for purposes this Section 21, the Facility
Substituted Buyer shall become the Facility Buying Member and the Facility
Defaulting Buyer shall become the Facility Selling Member; or (ii) at any time
after default by the Facility Defaulting Buyer in depositing the earnest money,
of seeking from the Facility Defaulting Buyer by judicial proceedings or as
otherwise permitted by law, as liquidated damages for its default in its
obligations under this Section 21, an amount of money equal to the amount of
earnest money the Facility Defaulting Buyer was required to deposit pursuant to
this Section 21.

        SECTION 21.6. BUY-SELL CLOSING.

                (a) The sale of the Facility by the Company shall be closed and
        consummated on that date (the "FACILITY BUY-SELL CLOSING DATE")
        designated by the Facility Buying Member in a notice to the Facility
        Selling Member, which date shall be within ninety (90) days after the
        expiration of the Thirty Day Period. The Facility Buying Member may
        elect, at any time within the ninety-day period, to assign its right to
        purchase the Facility or Facilities to a third party, which party shall
        then become the Facility Buying Member, provided, however, that such
        sale shall be for the same price and on the same terms as if it were
        being made to the Facility Buying Member, and the Facility Buying Member
        shall remain responsible for any default in the purchase by such third
        party as if no such assignment had taken place. The Facility Buy-Sell
        Price shall be paid to the Company by the Facility Buying Member or its
        assignee in cash on the Facility Buy-Sell Closing Date. On such Facility
        Buy-Sell Closing Date, the Company and the Facility Selling Member


<PAGE>
                                                                              59



        shall deliver to a title company selected by the Facility Buying Member
        (the "TITLE COMPANY") the following items:

                        (i) DEED. A Special Warranty Deed in form and substance
                reasonably acceptable to the Facility Buying Member executed and
                acknowledged by the Company, conveying to the Facility Buying
                Member good, marketable and indefeasible fee simple title to the
                applicable Facility or Facilities, free and clear of all liens
                and encumbrances, security interests and adverse claims relating
                to the Lease Agreement financing applicable to such Facility or
                Facilities, subject to matters of record reasonably acceptable
                to the Facility Buying Member, provided, however, that if the
                Facility Buying Member is the Managing Member, then it shall
                have the right, but not the obligation, to assume any or all
                liens relating to such Lease Agreement financing.

                        (ii) BILL OF SALE. A Bill of Sale, in form reasonable
                acceptable to the Facility Buying Member with full warranty of
                title for all tangible personal property relating to the
                applicable Facility or Facilities owned by the Company or the
                Facility Owner, which Bill of Sale shall convey good title to
                such personal property to the Facility Buying Member free and
                clear of all liens, encumbrances, security interests and adverse
                claims.

                        (iii) ASSIGNMENT OF RESIDENT AGREEMENTS, CONTRACTS AND
                PERMITS. Original executed copies of all Resident Agreements and
                leases then in effect, together with an assignment of such
                Resident Agreements and leases, all service contracts, and all
                intangible property rights of the Company relating to the
                applicable Facility or Facilities in form and substance
                acceptable to the Facility Buying Member

                        (iv) FIRPTA. A Foreign Investment in Real Property Tax
                Act affidavit executed by the Company. If the Company fails to
                provide the necessary affidavit and/or documentation of
                exemption on the Buy-Sell Closing Date, the Facility Buying
                Member may proceed with withholding provisions as provided by
                law.

                        (v) AUTHORITY. Evidence of existence and organization of
                the Company and the authority of the person executing documents
                on behalf of the Company reasonably satisfactory to the Facility
                Buying Member and the Title Company.

                        (vi) OTHER DOCUMENTS. A release of the Facility Selling
                Member and its Affiliates from any guaranties or other
                liabilities by or of the Facility Selling Member or its
                Affiliates in relation to any Senior Financing for the relevant
                Facility that is not being satisfied in connection with the
                contemplated sale of such Facility, and any additional documents
                that the Facility Buying Member or the Title Company may
                reasonably require for the proper consummation of the
                transaction contemplated by this Section.


<PAGE>
                                                                              60



                (b) Also at such closing, the Facility Buying Member shall
        deliver to the Title Company the following items:

                        (i) PURCHASE PRICE. The amount of the Facility Buy-Sell
                Price or Facility Default Purchase Price payable at closing,
                plus or minus applicable prorations.

                        (ii) AUTHORITY. Evidence of existence and organization
                of the Facility Buying Member and the authority of the person
                executing documents on behalf of the Facility Buying Member
                reasonably satisfactory to the Company, the Facility Selling
                Member and the Title Company.

                        (iii) OTHER DOCUMENTS. Any additional documents that the
                Company, the Facility Selling Member or the Title Company may
                reasonably require for the proper consummation of the
                transaction contemplated by this Section 21.

                (c) The following items shall be apportioned between the Company
        and the Facility Buying Member as of the date of such closing, with the
        date of such closing belonging to the Facility Buying Member:

                        (i) TAXES AND ASSESSMENTS. General real estate taxes and
                assessments imposed by governmental authority and any
                assessments imposed by private covenant constituting a lien or
                charge on the applicable Facility or Facilities for the then
                current calendar year or other current tax period (collectively,
                "TAXES") not yet due and payable shall be prorated. If such
                closing occurs prior to the receipt by the Company of the tax
                bill for the calendar year or other applicable tax period in
                which such closing occurs, the Company and Facility Buying
                Member shall prorate Taxes for such calendar year or other
                applicable tax period based upon the most recent ascertainable
                assessed values and tax rates.

                        (ii) RENT. All rent and other income (and any applicable
                state or local tax on rent) under leases in effect on the
                closing date, whether collected or uncollected, but net of
                expected delinquencies on an historical basis, shall be
                prorated. Any prepaid rents for the period following the closing
                date shall be paid over by the Company to the Facility Buying
                Member.

                        (iii) UTILITIES. Utilities, including water, sewer,
                electric, and gas, based upon the last reading of meters prior
                to such closing shall be prorated. The Company shall endeavor to
                obtain meter readings on the day before such closing date, and
                if such readings are obtained, there shall be no proration of
                such items. The Company shall pay at such closing the bills
                therefor for the period to the day preceding such closing, and
                the Facility Buying Member shall pay the bills therefor for the
                period subsequent thereto. If the utility company will not issue
                separate bills, the Facility Buying Member will receive a credit
                for the Company's portion and will pay the entire bill prior to
                delinquency after such closing. If the Company has paid any
                utilities no more than thirty (30) days in

<PAGE>
                                                                              61



                advance in the ordinary course of business, then the Facility
                Buying Member shall be charged its portion of such payment at
                such closing.

                        (iv) OTHER. All other charges, escrows, inventories,
                deposits and fees customarily prorated and adjusted in similar
                transactions shall be so prorated and adjusted. In the event
                that accurate prorations and other adjustments cannot be made at
                such closing because current bills are not obtainable, the
                Company and Facility Buying Member shall prorate on the best
                available information, subject to adjustment upon receipt of the
                final bills.

In the event either the Facility Buying Member or the Facility Selling Member
defaults in the performance of its obligations under the buy-sell procedure
described in this Section 21, the non-defaulting Member shall have the right to
and, if applicable, to cause the Company to, exercise all rights and remedies
against the defaulting Member available at law or in equity, including, without
limitation, the remedy of specific performance. The Company shall pay all
closing costs incurred in connection with the implementation of the buy-sell
procedure normally and customarily paid by a seller of a real property interest
and the Facility Buying Member shall pay all closing costs incurred in
connection with the implementation of the buy-sell procedure normally and
customarily paid by a buyer of a real property interest; provided, however, that
the Facility Buying Member and the Facility Selling Member shall each pay the
fees and expenses of its own legal counsel.

        SECTION 21.7. REMEDIES.

        Without limiting the remedies available to either Member as a result of
the breach of the other Member's obligations described above, the Facility
Selling Member shall have the option, within sixty (60) days of default by the
Facility Buying Member in its obligation to purchase under this Section 21 (such
Facility Buying Member being then referred to as the Facility Defaulting Buyer)
of retaining the escrow deposit for its own account and substituting itself as
Facility Buying Member under this Section 21 (such Facility Selling Member being
then referred to as a Facility Substituted Buyer) at a purchase price equal to
the Facility Buy-Sell. Such option shall be exercised by giving notice to the
Facility Defaulting Buyer of such exercise and by depositing, within five days
after such notice, earnest money equal to 10% of the Facility Buy-Sell Price
with an independent and neutral party reasonably selected by the Facility
Substituted Buyer, whereupon, for purposes of this Section 21, the Facility
Substituted Buyer shall become the Facility Selling Member and the Facility
Defaulting Buyer shall become the Facility Selling Member.

        SECTION 21.8. SUSPENSION OF MARKETING RIGHT.

        If either Member exercises its rights under this Section 21, then each
Member's marketing rights under Section 22 hereto shall be deemed suspended
until the Facility Buy-Sell Closing Date, or, if such closing does not occur,
for ninety (90) days after the expiration of the Thirty Day Period.


<PAGE>
                                                                              62


        SECTION 22. MARKETING RIGHT.

        SECTION 22.1. INVESTOR MEMBER'S MARKETING RIGHT.

                (a) INVESTOR MEMBER'S MARKETING RIGHT. On and after the fifth
        (5th) anniversary of the date of the First Closing Date, the Investor
        Member shall have the right to market the Portfolio, in whole or in part
        (the "INVESTOR MEMBER'S MARKETING RIGHT") which election shall be made
        by written notice given to the Managing Member. Within seventy-five (75)
        days after the date of such notice, fair market value (the "FMV") shall
        be established for each Facility (the "OFFERED FACILITIES"). FMV shall
        be determined as set forth in Section 22.4 herein.

                (b) MARKETING PROCEDURE. If the Managing Member does not elect
        to purchase all of the Offered Facilities pursuant to its Purchase
        Right, as set forth in Section 22.2 below, the Investor Member may
        require the Managing Member to market the remaining Offered Facilities
        to third parties; provided, that, if the Investor Member accepts an
        offer to purchase the Offered Facilities that is less than ninety-seven
        percent (97%) of the FMV for the Offered Facilities, the Investor Member
        shall again offer such Facilities to the Managing Member in accordance
        with Section 22.2, but at the lower purchase price (the "DISCOUNTED
        OFFER"). Upon receipt by the Managing Member of the Discounted Offer, it
        shall have ten (10) Business Days to elect to purchase the Offered
        Facilities at the Discounted Offer. If the Managing Member elects to
        purchase the Offered Facilities, or the Managing Member fails to so
        elect, the Investor Member shall then follow the procedure set forth in
        Section 10.10 hereof (as if the Investor Member were acting as the
        Managing Member and provided that if the Managing Member fails to elect
        to purchase such Facility, the Managing Member shall have no further
        right to grant or withhold its Approval to such sale and release) to
        obtain the necessary releases and approvals to sell such Facilities. The
        Managing Member shall retain the exclusive right to negotiate and
        execute on behalf of the Company the sale agreement related to the
        marketing and sale of the Offered Facilities under this Section 22.1,
        unless the sale is to the Managing Member or an Affiliate of the
        Managing Member, in which case the sale agreement shall be subject to
        the Approval of the Investor Member.

        SECTION 22.2. MANAGING MEMBER'S PURCHASE RIGHT.

        If the Investor Member exercises its right under Section 22.1, the
Managing Member shall have the right to purchase the Portfolio, in whole or in
part, at the FMV established in accordance with Section 22.4 herein. Once FMV
has been established for the Offered Facilities, Managing Member shall have
twenty (20) Business Days to elect to purchase some or all of the Offered
Facilities. If the Managing Member elects to purchase the Offered Facilities at
FMV, it shall have one hundred and twenty (120) days from the date of such
election to close said purchase, pursuant to the procedures and mechanisms set
forth in Section 21.6 hereof (as if, under Section 21.6, the Managing Member
were acting as the Facility Buying Member and the Investor Member were acting as
the Facility Selling Member).


<PAGE>
                                                                              63


        SECTION 22.3. MANAGING MEMBER'S RIGHT TO MARKET/PURCHASE.

                (a) MANAGING MEMBER'S MARKETING RIGHT. On and after the sixth
        (6th) anniversary of the date of this Agreement, the Managing Member
        shall have the right to market the Portfolio in whole or in part (the
        "MANAGING MEMBER'S MARKETING RIGHT"), which election shall be made by
        written notice given to the Investor Member. Within seventy-five (75)
        days after the date of such notice, the FMV shall be established for the
        Designated Facilities (as defined hereafter). If the Managing Member
        elects to exercise its Marketing Right, then the Portfolio, in whole or
        in part (the "DESIGNATED FACILITIES"), shall be marketed pursuant to
        Section 22.3(b) below.

                (b) MARKETING PROCEDURE. Once the Managing Member has elected to
        market the Designated Facilities, the Managing Member shall select
        either (i) an Affiliate of the Managing Member or (ii) a third party to
        act as the broker to market the Designated Facilities; provided, that,
        if the Managing Member elects to use a third party, the Managing Member
        shall consult with the Investor Member in the selection of such third
        party. The Managing Member shall have the right to negotiate and Approve
        any sales agent or broker agreement, except that the compensation of
        such sales agent or broker and any fee to be paid to the party selected
        to market the Designated Facilities shall be deducted from the Company's
        payment of the Disposition Fee. Notwithstanding the foregoing, the
        Managing Member shall retain the exclusive right to negotiate and
        execute on behalf of the Company the sale agreement related to the
        marketing and sale of the Designated Facilities under this Section 22.3,
        unless the sale is to the Managing Member or an Affiliate of the
        Managing Member, in which case the manner of closing shall comply with
        the provisions set forth in Section 21.6 hereto (as if, under Section
        21.6, the Investor Member were acting as the Facility Selling Member and
        the Managing Member were acting as the Facility Buying Member).

                (c) MANAGING MEMBER'S RIGHT TO PURCHASE. If the Managing Member
        exercises its Marketing Right, the Managing Member or an Affiliate may
        bid on the Designated Facilities on the terms and conditions as such
        other third party purchasers. Nothing shall limit the Investor Member or
        an Affiliate of the Investor Member from likewise bidding on such
        Designated Facilities.

                (d) SALE PROCEDURE. The Managing Member shall follow the
        procedure in Section 10.10 hereof to effectuate the sale and release of
        the Designated Facilities; provided, however, that if the Managing
        Member is selected to purchase the Designated Facilities, then the
        manner of closing shall comply with the provisions set forth in Section
        21.6 hereto (as if, under Section 21.6, the Investor Member were acting
        as the Facility Selling Member and the Managing Member were acting as
        the Facility Buying Member).

        SECTION 22.4. FMV.

        For purposes of Section 22.1, Section 22.2 and Section 22.3 above, FMV
shall be determined by mutual agreement of the Investor Member and the Managing
Member. If the parties are unable to agree to FMV within seventy-five (75) days
after the initial notice given under Section 22.1 or 22.3, then each party shall
obtain a broker's opinion of value of the

<PAGE>
                                                                              64



Offered Facilities or Designated Facilities and the two opinions of value shall
be averaged together to obtain FMV; provided, that if the opinions of value vary
in value by more than five percent (5%), a third broker shall be selected by
mutual agreement of the parties, and the three opinions of value shall be
average together to obtain FMV; provided, further, that if one of the three
opinions of value is more than 110% or less than 90% of the average of the other
two opinions of value, FMV shall be the average of the other two opinions of
value. The Company shall pay the cost of all opinions of value required under
this Section 22.4.

        SECTION 22.5. FAILURE TO SELL FACILITY.

        If a definitive contract (which contract may be subject to due diligence
contingencies and other conditions as agreed to by the Managing Member) for the
sale of the Offered Facilities or Designated Facilities is not entered into
pursuant to this Section 22 within one hundred twenty (120) days after the
Investor Member or the Managing Member, as the case may be, makes its marketing
election under this Section 22, the Offered Facilities or Designated Facilities
shall be removed from the market. Once an Offered Facility or a Designated
Facility is removed from the market, either the Investor Member or the Managing
Member may elect to remarket the Offered Facility or Designated Facility
pursuant to the terms of Section 22.1 and 22.3 respectively.

        SECTION 22.6. MANAGING MEMBER PURCHASE OF FACILITY OWNER.

        If the Managing Member exercises its right pursuant to this Section 22
to purchase a Facility, then it may, in lieu of taking title to such Facility
from the Facility Owner, request that the Company, in connection with the
exercise of the Call Option (as defined in the relevant Lease Agreement),
arrange for the ownership interests of the Facility Owner that owns such
Facility to be transferred to the Managing Member. The Managing Member will pay
the purchase price for the Facility to the Company, which will use such amount
to satisfy its obligations under the Call Option. Any balance shall be retained
by the Company, and in such an instance, the Investor Member shall receive the
amount of cash which it would have received pursuant to Section 9 hereof on the
closing date for the sale of such Facility if the Company had distributed to the
Members in accordance with Section 9.1(b) a cash amount equal to the
Extraordinary Proceeds that would have resulted from a sale of such Facility at
their FMV or at the Discounted Offer, as applicable.

        SECTION 22.7. SUSPENSION OF BUY-SELL OPTION.

        If either Member exercises its rights under this Section 22, then each
Member's rights to exercise its buy-sell option under Sections 20 and 21 hereto
shall be deemed suspended until the closing of the Offered Facilities, or, if
such closing does not occur, for ninety (90) days after such Member's exercise
of its rights under this Section 22.

        SECTION 23. TERMINATION OF COMPANY.

        SECTION 23.1. DISSOLVING EVENTS.

        The Company shall be terminated, liquidated and dissolved in the manner
hereinafter provided upon the happening of any of the following events or dates:

<PAGE>
                                                                              65


                (a) the Approval of all of the Members to terminate the Company;

                (b) the permitted sale of all of the Company's interest in the
        Portfolio and the receipt of all sales proceeds in full and in cash;

                (c) the happening of a Defaulting Event or a Disabling Event if,
        at the time of the happening of such event, the Member suffering or
        causing such event is the Managing Member of the Company, unless all of
        the remaining Members unanimously agree in writing to continue the
        Company within the ninety (90) day period immediately succeeding the
        happening of such Defaulting Event or Disabling Event and within said
        ninety (90) day period elect and admit a new managing member of the
        Company effective as of the date of such Defaulting Event or Disabling
        Event; or

                (d) if not previously terminated, no later than the fifth (5th)
        anniversary of the First Closing Date; provided, however, that such date
        may be extended twice upon Approval of all of the Members, each such
        extension to be for a one-year period.

        SECTION 23.2. METHOD OF LIQUIDATION.

        Upon the happening of any of the events specified in Section 23.1 above
which require the Company to be terminated, liquidated and dissolved, the
Company, notwithstanding any provisions to the contrary in the Act, shall
liquidate its assets in a manner that is consistent with avoiding undue loss and
apply and distribute its assets in the following manner and in the following
order of priority:

                (a) To the payment of the debts and liabilities of the Company
        (other than the Capital Accounts of the Members) and to the expenses of
        liquidation in the order of priority as provided by law; then

                (b) To the repayment of any debts or liabilities of the Company
        to the Members, and

                (c) Then in the order of priority set forth in Section 9.1(b)
        hereof;

        SECTION 23.3. REASONABLE TIME FOR LIQUIDATING.

        A reasonable time shall be allowed for the orderly liquidation of the
Company's assets pursuant to Section 23.2 above in order to reduce the risk of
losses which might be attendant upon such a liquidation.

        SECTION 23.4. DATE OF DISSOLUTION.

        The Company shall be terminated and dissolved when all of its assets
shall have been applied and distributed in accordance with the provisions of
Section 23.2 above.


<PAGE>
                                                                              66


        SECTION 24. GENERAL PROVISIONS.

        SECTION 24.1. WAIVER OF RIGHT OF PARTITION.

        Each of the Members does hereby agree to and does hereby waive any right
such Member may otherwise have to cause any of the Company's assets to be
partitioned among the Members or to file any complaint or to institute any
proceeding at law or in equity seeking to have any such assets partitioned.

        SECTION 24.2. NOTICES.

        Any notice, request for Approval, election or other communication
provided for or required by this Agreement shall be in writing and shall be
delivered by hand, by air courier service, by certified or registered mail,
return receipt requested, postage prepaid, or by facsimile transmission followed
by delivery of the hard copy of such communication by air courier service or
mail as aforesaid, addressed to the person to whom such notice is intended to be
given at such address as such person may have previously furnished in writing to
the Company or to such person's last known address. In the case of any request
for Approval or other communication which requires a response within a specified
period of time pursuant to the terms of this Agreement, the time period in which
such response must be given shall commence upon the date of actual receipt of a
hard copy of any such communication. Delivery to any officer, partner, agent or
employee of a party at the designated address of such party shall constitute
actual receipt for purposes hereof. Until receipt of written notice to the
contrary, the Members' addresses for notices shall be:

               MANAGING MEMBER:     Sunrise Assisted Living, Inc.
                                    7902 Westpark Drive
                                    McLean, Virginia 22102
                                    Attention:  Daniel B. Gorham
                                    Executive Vice President
                                    Telephone: (703) 744-1632
                                    Facsimile: (703) 744-1645

               with copies to:      Sunrise Assisted Living, Inc.
                                    7902 Westpark Drive
                                    McLean, Virginia 22102
                                    Attention:  Susan L. Timoner, Esq.
                                    Telephone: (703) 744-1878
                                    Facsimile: (703) 744-1885

               and:                 Watt, Tieder, Hoffar & Fitzgerald, L.L.P.
                                    7929 Westpark Drive, Suite 400
                                    McLean, Virginia 22102
                                    Attention:  Wayne Tatusko, Esq.
                                    Telephone: (703) 749-1088
                                    Facsimile: (703) 356-5388

<PAGE>
                                                                              67


               INVESTOR MEMBER:     US Assisted Living Facilities, Inc.
                                    75 Fourteenth Street - Suite 2400
                                    Atlanta, Georgia 30309
                                    Attention:  MacLaine Kenan
                                    Telephone:  (404) 920-9046
                                    Facsimile:  (404) 920-9001

               with a copy to:      King & Spalding
                                    1185 Avenue of the Americas
                                    New York, New York  10036
                                    Attention:  Isam Salah, Esq.
                                    Telephone: (212) 556-2140
                                    Facsimile: (212) 556-2222


        SECTION 24.3. MODIFICATIONS.

        No change or modification of this Agreement shall be valid or binding
upon the Members, nor shall any term or condition of this Agreement be
considered waived by a Member, unless such change or modification or waiver
shall be in writing and signed by the Member to be charged.

        SECTION 24.4. AUTHORIZED PERSONS.

        For purposes of this Agreement, all Approvals and other necessary
representations shall be deemed valid and binding if given by any of the
Authorized Representatives of each of the Managing Member and the Investor
Member set forth in Schedule 7 hereto; provided that the Members may designate
replacements for the individuals set forth on Schedule 7 upon prior written
notice to the other Member.

        SECTION 24.5. AMENDMENTS.

        This Agreement may be amended from time to time by Approval of all
Members.

        SECTION 24.6. BINDING EFFECT.

        This Agreement shall inure to the benefit of and shall be binding upon
the Members, their legal representatives, transferees, heirs, permitted
successors and assigns.

        SECTION 24.7. VALIDITY.

        If any provision of this Agreement or the application of such provision
to any Entity or circumstance shall be held invalid, the remainder of this
Agreement or the application of such provision to Entities or circumstances
other than those with respect to which it is held invalid, shall not be affected
thereby and shall continue to be binding and in force.


<PAGE>
                                                                              68


        SECTION 24.8. NO WAIVER.

        The waiver by any party hereto of the breach of any term, covenant,
agreement or condition herein contained shall not be deemed a waiver of any
subsequent breach of the same or any other term, covenant, agreement or
condition herein, nor shall any custom, practice or course of dealings arising
among the parties hereto in the administration hereof be construed as a waiver
or diminution of the right of any party hereto to insist upon the strict
performance by any other party hereto of the terms, covenants, agreements and
conditions herein contained.

        SECTION 24.9. DUPLICATE ORIGINALS.

        For the convenience of the Members, any number of counterparts hereof
may be executed, and each such counterpart shall be deemed to be an original
instrument.

        SECTION 24.10. GOVERNING LAW; CONSTRUCTION.

        This Agreement shall be interpreted and construed in accordance with the
laws of the State of Delaware. The titles of the sections and subsections herein
have been inserted as a matter of convenience of reference only and shall not
control or affect the meaning or construction of any of the terms or provisions
herein. Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the masculine or the neuter gender shall include the
masculine, feminine and neuter.

        SECTION 24.11. CONSENT TO JURISDICTION AND VENUE.

        The parties hereto agree that any and all disputes, claims, actions or
proceedings arising directly, indirectly or otherwise in connection with, out
of, related to or from this Agreement and any related agreements may be
litigated in the state courts of, and the Federal courts for, the State of
Delaware, and the parties hereto consent to the non-exclusive jurisdiction of
such state and federal courts.

        SECTION 24.12. INDEPENDENT INVESTMENT DECISION.

        Each Member hereby covenants, represents and warrants to the other that
its decision to invest in this Company and in the Facility is its decision alone
and the other Member shall have no responsibility or liability whatsoever on
account of such investment decision or any of the consequences thereof.

        SECTION 24.13. ENTIRE AGREEMENT.

        Except as otherwise provided in this Section, this Agreement represents
the entire Agreement of the parties hereto with respect to the subject matter
hereof and all prior agreements and understandings of the parties hereto,
whether written or oral, shall be superseded hereby. The parties agree that if
the Transaction Agreement and this Agreement address the same issue (i) in a
conflicting manner, the relevant provision or provisions of this Agreement shall
control to the exclusion of the conflicting provision or provisions of the
Transaction Agreement, or (ii) in a manner that is consistent and completely or
partially overlapping, the relevant provision or

<PAGE>
                                                                              69





provisions of this Agreement shall control to the exclusion of the conflicting
provision or provisions of the Transaction Agreement. The Transaction Agreement
shall continue in full force and effect as to those provisions that are not
excluded pursuant to the immediately preceding sentence.

        SECTION 24.14. FURTHER ASSURANCES.

        The Members agree to execute such further documents, instruments and
other agreements as may be reasonably requested by the other Members as may be
reasonably necessary to carry out and implement the intent hereof.

        SECTION 24.15. USE OF SUNRISE TRADE NAME.

        If any other Entity acquires the interest of Sunrise as a result of the
implementation of the buy/sell rights under Section 20 hereof or otherwise, or,
if Sunrise is removed as the Managing Member for any reason, then the substitute
Managing Member shall cause the Company to cease to use the name "Sunrise"
within thirty (30) days of any such events, unless Sunrise agrees in writing to
allow the Company to continue to use such name beyond such thirty-day period. At
all times while any Facility is operated under the "Sunrise" name, such Facility
will be managed in accordance with the quality standards and management policies
(including with respect to education, training, trips, seminars, awards,
newsletters, resident satisfaction surveys and technology) as are used by
Sunrise and its Affiliates in operating residential apartment communities which
are wholly-owned by Sunrise.

        SECTION 24.16. PRESS RELEASES.

        Each Member agrees that, prior to issuing any press releases or other
marketing items, such items shall be presented to and subject to the Approval of
the other Member, such Approval not to be unreasonably withheld, provided,
however, that such restriction shall not apply to any regular reports that the
Investor Member provides to its investors.

        SECTION 24.17. LIABILITY OF MEMBERS.

        Anything contained above or elsewhere herein to the contrary
notwithstanding, no personal liability or personal deficiency judgment shall be
asserted or enforced against the trustees, officers, advisors, employees,
agents, partners, shareholders or principals of the Managing Member or the
Investor Member, or against the assets of any such parties, for payment of any
amount hereunder or for observance or performance of any of the obligations of
the Managing Member, the Investor Member or the Company; provided, however, that
nothing contained hereunder shall eliminate the obligations of any Entity under
any other agreement.



                            [signature page follows]





<PAGE>
                                                                             S-1




        IN WITNESS WHEREOF, this Amended and Restated Operating Agreement is
executed under seal effective as of the date first set forth above.

                                MANAGING MEMBER:

                                SUNRISE ASSISTED LIVING INVESTMENTS, INC.



                                By: /s/ Daniel B. Gorham
                                   ---------------------------------------
                                   Name: Daniel B. Gorham
                                   Title: Vice President


                                INVESTOR MEMBER:

                                US ASSISTED LIVING FACILITIES, INC.



                                By: /s/ Henry Thompson
                                   ---------------------------------------
                                   Name: Henry Thompson
                                   Title: President