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                                                                  EXHIBIT 10.102


                              DEVELOPMENT AGREEMENT
                                  (STUDIO CITY)

        This DEVELOPMENT AGREEMENT (the "Agreement") is executed as of December
23, by and between SUNRISE DEVELOPMENT, INC., a Virginia corporation
("Developer") and AL U.S./STUDIO CITY SENIOR HOUSING, L.P., a California limited
partnership ("Owner").

                                    RECITALS

        A. Owner desires to own and develop an assisted living project (the
"Facility") to be located in LaPalma, California, as more particularly described
on Exhibit A (the "Site");

        B. Owner wishes to engage Developer for certain acquisition, zoning,
site plan approval, development, design and construction management services
with respect to the Facility and Developer desires to provide such services,
pursuant to the terms set forth herein.

        C. The costs of construction of the Facility will be paid in part from
the proceeds of a construction loan (the "Loan") made to Owner by GMAC
Commercial Mortgage Corporation ("Construction Lender"). The Loan will be made
pursuant to a Loan Agreement by and between Owner and Construction Lender (the
"Loan Agreement"), will be evidenced by a certain Promissory Note of even date
therewith, and will be secured by a certain Deed of Trust encumbering the Site.

        NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I
              APPOINTMENT OF DEVELOPER; TERM; AUTHORITY; PERSONNEL

        1.01 Appointment of Developer. Owner hereby appoints Developer and
Developer hereby accepts appointment, subject to the terms and conditions of
this Agreement, as development agent to provide certain acquisition, zoning,
site plan approval, development, design and construction management services
with respect to the Facility, and to develop the Facility in accordance with the
"Development Plan" (as defined in Section 2.04 below), within the time specified
in the "Progress Schedule" (described in Section 2.04 below) and the terms and
conditions of this Agreement. Developer shall exercise commercially reasonable
and diligent and good faith efforts, skill and judgment in the performance of
its obligations. Developer shall act as Owner's representative with respect to
all aspects of the development of the Facility and shall use reasonable and
diligent efforts to comply with and perform all obligations of Owner under any
agreements affecting the Facility (excluding funding obligations, other than as
set forth in Section 2.07) and, generally, to execute and implement the
activities and directions contemplated in the Development Plan.


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        1.02 Term. This Agreement shall begin upon execution by the parties and
continue until Developer completes its services hereunder and is paid in full
therefor (the "Term"), unless this Agreement is sooner terminated pursuant to
the terms hereof.

        1.03 Authority of Developer; Evidence of Authority.

                (a) Developer shall have full power and authority, acting alone
or through others, in the exercise of its reasonable business judgment, to take
all actions on behalf of Owner necessary or appropriate to perform its duties
under this Agreement, but only to the extent consistent with this Agreement and
confirmed and authorized in an applicable approved Development Plan, related
"Development Budget" (as defined in Section 2.04(b)) or as otherwise
specifically approved or directed in writing by Owner.

                (b) Owner shall execute and provide Developer with such written
confirmation of Developer's authority as Developer may from time to time request
of Owner. Developer is authorized and empowered by Owner to execute and deliver
in the name and on behalf of Owner all documents and instruments necessary in
order to perform its duties with respect to the development, construction and
management of the Facility in accordance with this Agreement.

        1.04 Employees. All persons employed by Developer in connection with the
services to be rendered hereunder shall be Developer's employees or independent
contractors, and shall not be the employees or agents of Owner. Developer shall
be solely responsible for the salaries of its employees and any employee
benefits, including, without limitation, wages, worker's compensation benefits,
employment and social security taxes and fringe benefits, to which Developer's
employees may claim to be entitled. Developer shall fully comply with all
applicable laws and regulations having to do with worker's compensation, social
security, unemployment insurance, hours of labor, wages, working conditions, and
other employer-employee related subjects. Developer represents that it is and
will continue to be an equal opportunity employer.

        1.05 Personnel. Developer shall at all times provide such experienced
personnel as are reasonably required to carry out the obligations of Developer
under this Agreement, including, without limitation, (a) the services of William
D. Shields, Mark Owens (in the Eastern portion of the U.S.) and Chris Tatum (in
the Western portion of the U.S.) and/or their respective successors with
Developer, which successors shall be reasonably satisfactory to AEW Senior
Housing Company, LLC ("AEW")(acting on behalf of Owner), and (b) the active
participation of management and financial personnel necessary and qualified to
perform Developer's obligations under this Agreement.

        1.06 Compliance. Developer shall at all times exercise reasonably
diligent efforts to ensure that the acquisition, development and construction of
the Facility and all activities with respect to the Facility shall be conducted
in material compliance with all applicable laws and regulations. Developer shall
maintain in good standing during the term of this Agreement any and all material
licenses required to perform its obligations under this Agreement.


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        1.07 Overall Standard of Care. Developer shall at all times perform the
duties and undertake the responsibilities set forth in this Agreement,
exercising its commercially reasonable skill and judgment in furthering the
interests of Owner and using diligent efforts at all times in the performance of
obligations. Developer shall exercise diligent efforts to ensure the proper
protection of and accounting for the Facility and all proceeds thereof, shall
deal at "arms-length" with all third parties and, except with the prior written
approval of Owner or otherwise as authorized under the provisions of this
Agreement (including the Development Budget approved hereby), shall not make any
payment to or enter into any arrangement with any "Affiliate" (defined below)
(except on commercially reasonable terms, with an Affiliate possessing
competitive skills and qualifications) and shall otherwise serve the best
interests of Owner at all times. Notwithstanding the foregoing, Owner
acknowledges that Developer shall not be liable for any failure to perform under
this Agreement if and to the extent that Developer is unable to perform based
upon Owner's unwillingness or inability to advance required funds or execute
required documents for such purposes. For purposes of this Agreement, the term
"Affiliate" shall mean with respect to any person, (i) any person who directly
or indirectly through one or more intermediaries controls, is controlled by, or
is under common control with such person, or (ii) any person in which such
person has a twenty-five percent (25%) or more beneficial interest or as to
which such person serves as trustee or general partner or in a similar fiduciary
capacity. A person shall be deemed to control a person if it owns, directly or
indirectly, at least twenty-five percent (25%) of the ownership interest in such
person or otherwise has the power to direct the management, operations or
business of such person. The term "beneficial owner" is to be determined in
accordance with Rule 13d promulgated by the SEC under the Securities Exchange
Act of 1934.

        1.08 CalPERS Responsible Contractor Program Policy. Notwithstanding
anything to the contrary in this Agreement, Developer, in contracting for goods
and services on behalf of Owner, shall comply with CalPERS' objectives and
then-current policies regarding the selection of responsible contractors.
Developer shall also use reasonable efforts to insure that any
developer/contractor of the Facility complies with CalPERS' objectives and
then-current policies regarding the selection of responsible contractors. A copy
of CalPERS' current objectives and policies regarding responsible contractors is
attached hereto as Exhibit D. In each instance, such compliance shall include,
but not be limited to, complying with CalPERS' reporting requirements regarding
such efforts.


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                                   ARTICLE II
                         DUTIES AND RIGHTS OF DEVELOPER

        2.01 Approval of Site. Prior to the execution hereof, Developer has
presented the Site to Owner for approval. Developer presented to Owner
information that Owner required to make a determination whether to grant
preliminary approval. The materials included financial projections, market
analysis, a development cost budget, pro forma operating budget and other
materials deemed necessary by Owner. In addition, Developer made available to
Owner all appropriate employees as needed during Owner's investment review.
Owner granted preliminary approval prior to the date hereof. The Facility has
obtained all necessary zoning approvals, permits and entitlements; an
environmental site assessment has been obtained and submitted to Owner, and all
major contracts (such as construction contracts) are either executed or in final
form. Owner has reviewed the additional information and hereby gives its final
approval of the Facility. Nothing contained in this Section 2.01 shall derogate
from, alter or amend in any way, or be deemed a waiver by AEW of, any of the
representations and warranties made by Sunrise Assisted Living Investments, Inc.
("SALII"), an Affiliate of Developer, in that certain Limited Liability Company
Agreement of even date herewith, by and between AEW and SALII (the "LLC
Agreement"), and to the extent that any of such representations and warranties
address any of the matters addressed in this Section 2.01, such representations
and warranties shall control.

        2.02 Ownership of Site. Developer caused title to the Site to be
conveyed to Owner.

        2.03 Site Development Services. As of the date hereof, the Site has
received final zoning approval for the construction of the Facility. Such
approval was the result of Developer's efforts to obtain the required rezoning
of the Site to a zoning classification (or approved special exception or similar
waiver) such that the Facility may lawfully be constructed on the Site. In
addition, Developer shall exercise reasonable and diligent efforts to make all
requisite arrangements with public and/or private utilities to ensure that
water, sewer, electric, gas and other utilities, in appropriate capacities, will
be available to serve the Facility. Developer shall maintain and preserve all
entitlements required for the intended occupancy, use and operation of the
Facility.

        2.04 Required Plans; Budgets and Reports.

                (a) Developer's Responsibility. Developer shall be responsible
for the preparation of plans, budgets and reports as specified in this Section
2.04.

                (b) Development Plan.

                        (i) Developer has prepared and Owner has approved with
respect to the Facility the final development plan (the "Development Plan")
described herein.

                        (ii) The Development Plan includes (A) building and site
plan drawings in their state of development as of the date hereof, (B) a
construction and development


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budget (the "Development Budget") for the Facility setting forth in detail on a
line item basis the "hard" and "soft" cost of constructing the contemplated
improvements for the Facility (the "Project Costs"), a copy of which is attached
hereto as Exhibit C, which includes, among other things, reserves for
construction period interest and for operating deficits, and (C) a "Progress
Schedule" for the Facility which sets forth the anticipated dates for starting
and completing the various stages of development, construction and leasing of
the Facility, attached hereto as Exhibit F. Owner hereby acknowledges receipt of
the Development Plan. If the Construction Lender requires any revisions to the
Development Budget, Owner and Developer shall cooperate in making such revisions
and shall mutually approve the modification required.

                        (iii) Developer shall provide supportive information
with respect to the Development Plan as Owner may reasonably request. Developer
may propose modifications to the Development Plan and submit such modifications
to Owner from time to time. There shall be no material changes to the
Development Plan without the prior written approval of Owner, nor shall there be
any increases in the Development Budget or extensions of the Progress Schedule
except to the extent such increase or extension is directly attributable to a
modification to the Development Plan approved by Owner (provided that if Owner
directs Developer to modify the Development Plan to correct a failure of the
Development Plan to comply with all applicable laws or to include all items
necessary for the proper execution and completion of the Facility by the
Contractor pursuant to the construction contract, then no increase to the
Development Budget or extension of the Progress Schedule shall result). A
"material change" is one that substantially changes the design, appearance,
operation or the unit count of the Facility, or the revenues to be derived
therefrom. Developer shall have the right, without further consent or approval
but subject to the terms of this Agreement, to delay construction if such delay
is not greater than fourteen (14) days and shall not affect the scheduled date
for the completion of improvements or any commitment to the lender or other
third party. Developer shall not otherwise revise the Progress Schedule except
as specifically set forth in this subsection. Developer shall not be liable to
Owner for any loss, cost or expense arising out of modifications to the
Development Plan, including changes in the Development Budget or the Progress
Schedule, unless and to the extent that such changes were the result of
Developer's failure to perform its obligations in the manner required in this
Agreement.

                        (iv) Developer shall use reasonable and diligent efforts
to avoid causing total actual costs to exceed the Development Budget in total.
All expenses shall be charged to the proper budget line item or accounting
category. Developer shall provide monthly reports, as set forth herein, of
actual costs on a line item basis. Developer shall have the right to
re-categorize expenses within the Development Budget due to Developer's overall
guaranty provided in Section 2.07 below.

                (c) Reports. Developer shall prepare and furnish to Owner
periodic reports as set forth on Exhibit H.

                (d) Additional Support. Developer shall, at Owner's request,
provide copies of disbursement records, copies of invoices, copies of all paid
bills and such other supporting documentation as Owner may reasonably require.


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        2.05 Design and Construction Management Services. Developer shall
provide the following design and construction management services to Owner:

                a.      Make available at the architect's office for Owner's
                        review and approval, overall design plans and drawings
                        in their current state of development. After approval of
                        such plans and drawings, Developer shall oversee the
                        preparation of final architectural and construction
                        plans, which shall be made available to Owner for its
                        review. Owner's approval of the final plans and
                        specifications shall not be required if such plans and
                        specifications reflect the drawings previously approved
                        by Owner and are for a typical Sunrise facility.
                        Promptly following review of such plans, specifications
                        and drawings, Owner shall provide its written approval
                        (if required) of such plans, specifications and drawings
                        which, thereafter, shall be referred to herein as the
                        "Approved Plans." If Owner's approval is required, and
                        Owner does not provide specific objections to the final
                        plans and specifications within thirty (30) days of
                        Owner's receipt thereof, then Owner shall be deemed to
                        have approved the same. There shall not be a material
                        change (as defined in Section 2.04(b)(iii)) to the
                        Approved Plans without the prior written consent of
                        Owner. Owner and Developer acknowledge that changes to
                        the Approved Plans are likely to be required as the
                        development of the Facility proceeds; provided, however,
                        that Owner's prior approval of any material changes
                        shall be required.

                b.      Provide and/or coordinate with third-party architects
                        and engineers all necessary architectural services for
                        the Facility, including architectural, structural,
                        mechanical, electrical and plumbing/fire protection
                        engineering services.

                c.      Coordinate preparation of all design development
                        documents, including all architectural, structural,
                        electrical, mechanical and plumbing plans and
                        specifications necessary for the construction of the
                        Facility.

                d.      Coordinate all civil engineering services required for
                        the Facility as well as all services necessary for
                        approval, acceptance and securing construction permits
                        from appropriate federal, state and/or local
                        governmental authorities having jurisdiction over the
                        site.

                e.      Prepare all construction bid documents, secure bids from
                        the general contractor, and negotiate the terms of the
                        construction contract. Owner has reviewed and approved
                        Developer's standard form of construction contract.
                        After Owner has approved the terms of the construction
                        contract, Developer shall have the authority to execute
                        the construction contract as agent for Owner. Owner's
                        approval shall not be required if the


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                        proposed construction contract is on Developer's
                        standard form, without material revisions and the
                        business terms are within the budget limitations
                        contained in the Development Budget. The construction
                        contract shall obligate the Contractor to provide
                        materials and performance of all trades for the Facility
                        (including all on and offsite improvements) customarily
                        included within an inclusive general contractor's
                        agreement for a "fixed price" or "guaranteed maximum
                        price" not in excess of that set forth in the
                        Development Budget. If the architect's contract and
                        general construction contract have not been executed
                        prior to the date hereof, or if the architect or general
                        contractor has not been retained by Developer on at
                        least three (3) projects substantially similar to the
                        Facility within the previous twenty-four (24) month
                        period, such architect or contractor and/or the
                        applicable contract, as the case may be, shall be
                        subject to Owner's reasonable approval.

                f.      Develop and review critical path schedules and updates
                        and assist the general contractor in developing the
                        project schedule and updates.

                g.      Discuss and review with the general contractor its means
                        and methods of construction.

                h.      Discuss and review with the general contractor
                        permitting, approval and licensing issues and
                        requirements necessary to complete and open the
                        Facility, and obtain (or cause the general contractor to
                        obtain) all required permits.

                i.      Perform construction management and cost control
                        services, including assisting Owner in approving the
                        prices for construction, equipment, finishes and
                        furnishings, and making recommendations to Owner
                        regarding change orders, extensions of time and
                        increases or decreases in the contract sum.

                j.      Inspect, approximately every two (2) weeks, the progress
                        of the construction of the Facility, and request the
                        inspecting architect to certify once each month those
                        matters covered by a standard AIA Request for Payment
                        form. Developer shall advise Owner if any condition
                        becomes known to Developer that would cause the Facility
                        not to be in compliance with the foregoing.

                k.      Request that the architect confirm that such
                        construction is or is not being carried out
                        substantially in accordance with the Approved Plans.

                l.      Confirm that construction is being carried out
                        consistent with the final approved Development Plan and
                        within the time allocated under the Progress Schedule.


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                m.      Document and process changes, review and scrutinize
                        costs for changes.

                n.      Direct the architect to monitor percentage of completion
                        of the construction to enable Owner to calculate that at
                        each stage of the construction process there are
                        sufficient remaining funds within the Development Budget
                        to complete the Facility in accordance with the
                        Development Plan.

                o.      Evaluate all submissions for payment by the general
                        contractor, and monitor and evaluate construction
                        progress and make recommendations to the general
                        contractor and Owner as deemed necessary.

                p.      Assist in the resolution of critical issues impacting
                        the progress of work, and monitor architectural
                        supplemental instructions and requirements for
                        information.

                q.      With assistance from the project architect, provide
                        quality control and the early detection of defects in
                        workmanship.

                r.      Review punch list items and assist in the close-out of
                        the project.

                s.      Coordinate the opening date for the Facility with the
                        contractor and the Facility's manager (the "Manager").

                t.      Provide updates to Owner and obtain updates (or such
                        certifications as Developer is contractually entitled
                        to) from the Contractor and/or the architect, at Owner's
                        reasonable request from time to time, as to any of the
                        above matters.

Developer's engagement hereunder shall be as an independent contractor only, and
except as expressly set forth herein, Developer shall have no right or authority
to commit or obligate Owner in any manner whatsoever. Owner acknowledges that
Developer's inspection and monitoring obligations required pursuant to this
Section 2.05 do not constitute or otherwise result in Developer being a
guarantor of the design or installation of work conducted in connection with the
construction of the Facility and/or the cost thereof, provided, however, such
acknowledgment by Owner does not in any way relieve, release or otherwise
exonerate Contractor from obligations under the construction contract or
Developer from performing its obligations hereunder or Developer's liabilities
for failing to perform its obligations in the manner required hereunder.

        2.05A Draw Requests. Developer shall review and submit to Construction
Lender (with a copy to Owner), on a monthly basis, all requests for payment made
under any contracts or agreements with respect to the development and
construction of the Facility, or for any labor, materials or services furnished
to the Facility in connection with the construction of


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improvements, all of which requests for payment shall be made on the standard
form AIA Construction Draw Request or such other form of draw request approved
by Construction Lender. All such documents for payment shall include lien
releases in any statutorily required form and otherwise in form and content
satisfactory to Construction Lender. The architect shall determine whether such
labor, materials or services have been supplied and completed in accordance, and
otherwise consistent, with the Approved Plans, and with the contract or
agreement pursuant to which such labor, materials or services were supplied. The
architect shall certify to Owner that the amounts due pursuant to the
construction contract or relevant agreement relate to the labor, materials,
services and work for which payment has been sought and that such work has been
completed in accordance with such governing contract or agreement. Developer
shall provide such evidence as Owner deems reasonably necessary to confirm that
the requested payment is due. To the extent Construction Lender is not obligated
to advance funds, Owner shall provide the funds requested in each monthly draw
request within ten (10) business days following receipt of the request and all
accompanying documents described above. When the Facility has been substantially
completed in accordance with all plans and specifications, permits, laws, rules
and regulations and is ready for occupancy by residents (other than any punch
list items and subject to appropriate licensing, which is Manager's
responsibility), regardless of whether any residents have actually entered into
leases or are in occupancy, Developer shall obtain, on behalf of Owner, a
Certificate of Substantial Completion from the Facility design architect or the
architectural consultant designated by Owner (which certification Owner may
secure should Developer fail to do so). During the course of construction and
following such substantial completion, Developer shall, subject to the prior
written approval of Owner, negotiate final settlements with the general
contractor and, if any mechanic's, materialmen's or similar lien is filed with
respect to all or any portion of the Facility, take (or cause the general
contractor to take) such action as is necessary or appropriate to contest or
settle and discharge such lien or to remove the same by bonding or otherwise
removing such lien with funds provided by Owner (or, if applicable, by Developer
pursuant to Section 2.07) in accordance with this Agreement. Developer shall
enforce all warranties, representations and guarantees of the architect,
contractor and subcontractors, suppliers and materialmen, and all other persons
furnishing supplies, materials, equipment, or services in connection with the
construction or equipping of the Facility, with respect to any defects in the
construction of improvements or the installation or operation of any fixture or
equipment therein known or discovered by Developer after diligent investigation
in accordance with the standards of this Agreement. Developer shall institute,
commence and prosecute all such legal actions and suits as may be necessary or
required in connection with the construction of the Facility and cause Owner to
be defended in connection with any legal action or suit commenced against Owner
with funds provided by Owner. Any and all decisions with respect to the
prosecution and defense of such actions shall be made by Owner; provided,
however, that if Developer has paid any funds pursuant to its guaranty under
Section 2.07, then to the extent any such legal action may result in recovery of
any such guaranty payments, Developer shall bear the expense of such litigation,
Developer shall be solely in control of such litigation, and Developer shall be
entitled to all the proceeds recovered in such litigation, unless the Owner has
been named as a defendant in such suit, and more than $100,000 is claimed in
damages against Owner (in which case Owner and Developer shall cooperate in such
litigation). If the net recovery, after all costs incurred in


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connection with such litigation, exceeds the guaranty payments, then Owner shall
be entitled to such excess.

        2.06 Expenses. It is expressly understood that it is Owner's
responsibility to provide any and all funds needed for Developer to perform the
development, design and construction management services described in Section
2.05, as set forth in the Development Budget. Owner shall also be solely
responsible for payment to all third-parties (i.e. engineers, attorneys and
consultants) as set forth in the Development Budget.

        2.07 Guaranty of Cost and Completion.

                (a) In consideration of the Development Guaranty Fee to be paid
to Developer pursuant to Section 3.03 below, Developer hereby absolutely and
unconditionally guarantees to Owner that (i) the actual total cost of the
completed Facility (including fees, soft costs and construction period interest
but excluding construction period interest, if any, computed at a rate in excess
of seven percent (7%) per annum except to the extent that such excess is due to
any default under the Loan arising from or relating to any default by Developer
or any of its Affiliates under this Agreement or the Loan Agreement, will not
exceed the total amount of Project Costs stated in the Development Budget (as
the same may be amended with the mutual consent of the parties and (ii) on or
before the final completion date set forth in the Progress Schedule, the
Facility will be fully completed (as evidenced by an Architect's Certificate of
Substantial Completion, together with the completion of any punchlist items)
without any mechanics' or materialmen's liens by any contractor or other party
supplying labor or materials to the Facility (the "Guaranteed Obligations").
Developer's Guaranteed Obligations with respect to construction period interest
shall terminate and its Guaranteed Obligations with respect to the scheduled
completion date shall be satisfied upon the issuance of a certificate of
occupancy (sufficient to permit the occupancy, use and operation of the
Facility) for the Facility (although the foregoing in no way diminishes
Developer's obligations to fully complete all work and to make payment in full
therefor). Subject to Section 2.07(g) below, if the actual total cost incurred
to complete the Facility (as determined above) exceeds the total Project Costs
set forth in the Development Budget, Developer shall, upon ten (10) days written
notice from Owner, pay over such excess to Owner. Owner acknowledges that the
costs of paying salaries of employees of the Facility prior to its opening to
the public are included in the Development Budget. If Manager determines that it
is in Owner's best interests to hire certain employees earlier than contemplated
by the Development Budget, then excess costs incurred by such early hiring shall
be excluded for purposes of calculating total Project Costs. Likewise, any
increased costs due to Owner-requested changes to the Approved Plans shall not
be included in actual Project Costs for purposes of this guaranty. In addition,
the completion date set forth in the Progress Schedule may be extended on a
day-to-day basis, not to exceed thirty (30) days, due to delays caused by third
parties which are beyond Developer's reasonable control (for example, delays in
local governmental inspections which result in construction delays). Developer
shall document such delays promptly after they occur. Any payments made by
Developer in satisfaction of its obligations under this completion guaranty
shall be made by Developer to Owner free of any obligation by Owner to repay
such amounts. If and to the extent that construction of the Facility is delayed
or prevented, or the costs of construction are increased, as a result of an
event of Force


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Majeure (as defined in Section 8.04 below), Developer shall not be liable for
loss, damage, increased costs or delay by reason thereof. In such case, the
excess costs so incurred for performance of the Guaranteed Obligations shall be
added to the Project Costs in determining Developer's performance of such
obligation.

                        (b) Developer shall continue to be liable pursuant to
this Section 2.07, and the provisions hereof shall remain in full force and
effect notwithstanding: (i) any partial release of Developer from any liability
with respect to the Guaranteed Obligations or any portion thereof; or (ii)
Owner's enforcement of or failure to enforce its rights under this Section 2.07
or under any other guaranty.

                        (c) Developer's liability pursuant to this Section 2.07
shall continue until the full and complete satisfaction of the Guaranteed
Obligations, and shall not be reduced by virtue of any partial payment or
performance by Developer of any amount due or other obligation to be performed
under the Development Agreement or by Owner's recourse to any collateral,
security, or other guaranty except as the same shall be applied to reduce the
amount of the Guaranteed Obligations then outstanding.

                        (d) Developer hereby waives, to the extent permitted by
law: (i) all notices to Developer or to any other person, including, but not
limited to, notices of the acceptance of the provisions of this Section 2.07, or
the creation, renewal, extension or modification of the Guaranteed Obligations,
or of default in the performance of the Guaranteed Obligations (or any portion
thereof) and enforcement of any right or remedy with respect thereto or notice
of any other matters relating thereto; and (ii) diligence and demand of
performance. Moreover, Developer agrees that its obligations shall not be
affected by any circumstances which constitute a legal or equitable discharge of
a guarantor or surety.

                        (e) Developer's performance of a portion, but not all,
of the Guaranteed Obligations shall in no way limit, affect, modify or abridge
Developer's liability for that portion of the Guaranteed Obligations which is
not performed. Without in any way limiting the generality of the foregoing, in
the event that Owner is awarded a judgment in any suit brought to enforce
Developer's covenant to perform a portion of the Guaranteed Obligations, such
judgment shall in no way be deemed to release Developer from its covenant to
perform any portion of the Guaranteed Obligations which is not the subject of
such suit.

                        (f) The Development Budget shall not be amended without
the consent of Construction Lender (if such consent is required); however, an
amendment without the consent of the Construction Lender shall not affect the
obligations of the Developer to Owner as provided in this Section 2.07. If and
to the extent that Developer's direct obligations to the Construction Lender
pursuant to any separate guaranty which Developer may, for Owner's benefit,
provide to Construction Lender, exceed Developer's obligations hereunder (for
example, by not providing a maximum interest rate for which Developer is
liable), then, upon final completion of the Facility and Owner's satisfaction
that the Guaranteed Obligations have been fulfilled, to the extent Developer
shall have made any payment to Construction Lender which


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exceeds Developer's liability to Owner hereunder, Owner shall promptly reimburse
Developer for such excess.

                        (g) Notwithstanding anything to the contrary herein,
Developer's obligations hereunder shall be subject to Section 6 of that certain
Master Agreement of even date herewith among Developer, Manager and AEW (the
"Master Agreement").

        2.08 Representations and Warranties. Developer represents and warrants
to Owner as follows:

                (a) Developer has obtained or will in due course obtain all
required governmental permits and approvals which are necessary for the
commencement of construction of the Facility and will obtain all additional
governmental permits and approvals which are necessary in connection with the
construction of the Facility. The Facility will be developed in accordance with
all applicable laws, including, without limitation, all building codes, rules
and regulations and all requirements of the Board of Fire Underwriters.

                (b) Developer is not aware of any fact or circumstance that
would prevent or materially increase the cost of the development, ownership and
operation of the Facility for its intended purpose.

                (c) Developer is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia, has full
corporate power and authority to enter into this Agreement and is duly qualified
or licensed to do business as a foreign corporation in the state in which the
Facility is located.

                (d) Developer has full power and authority to enter into this
Agreement and to carry out its obligations set forth herein. Developer has taken
all action required by law, its articles of incorporation, its bylaws or
otherwise to be taken to authorize the execution and deliver of this Agreement
and the consummation of the transactions contemplated hereby. This Agreement is
a valid and binding agreement of Developer enforceable in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditor's rights, and the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought.

                                   ARTICLE III
                            DEVELOPER'S COMPENSATION

        3.01 Zoning Fee. The Zoning Fee shall equal three-quarters of one
percent (0.75%) of the total budgeted Project Costs of the Facility (other than
land acquisition costs). The Zoning Fee shall compensate Developer for its
efforts in obtaining the approval of the appropriate zoning, special use permit
or other local approvals with respect to the Site, to permit the construction of
the Facility thereon. All services to be performed by Developer in connection


                                       12
<PAGE>

with the Zoning Fee shall have been fully performed and completed upon issuance
of final zoning and other local governmental approvals for construction of the
Facility.

        3.02 Site Approval Fee. The Site Approval Fee shall equal three-quarters
of one percent (0.75%) of the total budgeted Project Costs of the Facility
(other than land acquisition costs). The Site Approval Fee shall compensate
Developer for its services in obtaining and supplying to Owner the project
materials described in Section 2.01 to allow Owner to make a determination
whether to proceed with acquisition by Owner of the Site. The Site Approval Fee
shall have been earned (but not paid except pursuant to Section 3.05) upon
Owner's approval of the Site and the proposed Facility. By Owner's execution
hereof, the Site and Facility have been approved.

        3.03 Development Guaranty Fee. The Development Guaranty Fee shall equal
one percent (1%) of the total budgeted Project Costs of the Facility (other than
land acquisition costs). The Development Guaranty Fee shall compensate Developer
for providing Owner with the completion guaranty set forth in Section 2.07. The
Development Guaranty Fee shall be deemed to have been earned (but not paid
except pursuant to Section 3.05) over the course of construction of the Project.

        3.04 Development Services Fee. The Development Services Fee shall equal
two and one-half percent (2.5%) of the total budgeted Project Costs of the
Facility (other than land acquisition costs). The Development Services Fee shall
compensate Developer for the design and construction management services
provided Owner pursuant to Section 2.05 of this Agreement. The Development
Services Fee shall be deemed to have been earned (but shall not be paid except
pursuant to Section 3.05) over the course of construction of the Project.

        3.05 Payment of the Fees. The Zoning Fee, Site Approval Fee, Development
Guaranty Fee and the Development Services Fee are hereinafter collectively
referred to as the "Development Fees." Notwithstanding anything to the contrary
set forth in this Agreement, the Development Fees shall be paid by Owner to
Developer as follows:

                (a) Seventy percent (70%) of the Development Fees (the "First
        Portion") will be paid over the period beginning with the commencement
        of construction to the issuance of the Certificate of Occupancy for the
        Facility (such period being hereinafter referred to as the "Construction
        Period") monthly, on a percentage of completion basis. If, as of the
        date of execution of this Agreement, the Construction Period has
        commenced and the Facility is partially complete, then Owner shall make
        payment upon execution of this Agreement of the appropriate percentage
        of the First Portion of the Development Fees. Percentage of completion
        shall be determined by the amount of Project Costs incurred as of the
        end of each calendar month as a percentage of total Project Costs.
        Subsequent payments of the First Portion of the Development Fees shall
        be paid monthly by Owner to Developer within fifteen (15) days after
        Owner's receipt of evidence of percentage of completion.


                                       13
<PAGE>

                (b) The remaining thirty percent (30%) of the Development Fees
        (the "Second Portion") shall be paid at such time as the occupancy level
        of the Facility equals twenty percent (20%) or greater on a resident
        basis for one (1) calendar month. Developer shall provide Owner with
        reasonably satisfactory evidence that such occupancy level has been
        obtained. Owner shall make payment of the Second Portion within fifteen
        (15) days after receipt of such evidence.

        3.06 Financing Fee. As compensation for services rendered in connection
with Developer's negotiating and obtaining the Loan (as described in Recital C
above), Developer shall be entitled to receive a fee (the "Financing Fee") in
the amount of one percent (1%) of the maximum loan amount committed to by the
Construction Lender. The Financing Fee shall be earned and shall be payable in
full upon closing of the Loan with the Construction Lender. If Developer retains
any third party broker to assist Developer in obtaining the Loan, such third
party broker shall be paid by Developer out of the Financing Fee. Any fees
payable to the Construction Lender directly shall be at Owner's cost.

        3.07 Cost Reimbursement. Upon execution hereof, Developer shall be
entitled to reimbursement of its out-of-pocket expenses incurred in acquiring
the Site (prior to the date of this Agreement) and in the development of the
Project and paid to third parties, in accordance with the Development Budget and
as approved by the Construction Lender. The foregoing shall not include
Developer's own personnel and overhead, except that Owner has reimbursed
Developer for certain in house costs of Developer incurred in pursuing and
acquiring the Site.

        3.08 Right of Offset. If Developer fails to perform Developer's
obligations under Section 2.07, and such failure continues for ten (10) days
after written notice thereof by Owner to Developer, without limiting any other
rights and remedies of Owner for such failure, Owner shall be entitled to offset
any Development Fees coming due against Developer's obligations. In addition,
notwithstanding that Developer may have fully performed its services with
respect to a particular fee hereunder, Owner shall have no obligation to make
any further payments of the Development Fees unless and until the requirements
for payment thereof shall have been met.

                                   ARTICLE IV
                                   TERMINATION

        4.01 Termination for Default. If Developer shall fail to keep, observe
or perform any material covenant, agreement, term or provision of this Agreement
to be kept, observed or performed by Developer, and such failure shall continue
(i) for a period of twenty (20) business days after Developer receives written
notice from Owner specifying the default in case of monetary defaults or (ii)
for a period of thirty (30) days after Developer receives written notice from
Owner in the case of non-monetary defaults (provided, however, that if such
non-monetary default cannot be cured within such thirty (30) day period, then
Developer shall be entitled to such additional time as shall be reasonable,
provided Developer is capable of curing same, has promptly proceeded to commence
cure of such default within said period, and thereafter diligently prosecutes
the cure to completion; and provided further, that in no event shall such
additional time exceed one hundred eighty (180) days for any non-monetary
default), an "Event


                                       14
<PAGE>

of Default" shall exist, and Owner may, at the expiration of such applicable
cure period, cancel and terminate this Agreement upon five (5) days' written
notice. Upon any such termination by Owner due to Developer's default, Owner
shall be entitled to pursue all its legal rights and remedies.

        4.02 Bankruptcy of Either Party. If either Owner or Developer shall
cease to exist, for any reason, during the term of this Agreement, or in the
event a petition in bankruptcy, arrangement or reorganization is filed by or
against either of them and such petition is not dismissed within sixty (60)
days, or if either or them shall make an assignment for the benefit of creditors
or take advantage of any insolvency law, the same shall be an Event of Default
and the other of them may forthwith terminate this Agreement. Owner shall also
have the right to terminate this Agreement if Developer's affiliate is removed
as the Managing Member of Owner.

        4.03 Suspension of Performance. If development of the Facility
contemplated under this Agreement is suspended for any reason described in
Section 8.04 below, then upon written notice by Owner to Developer (the "Notice
of Suspension"), Owner may suspend Developer's performance of its obligations
under this Agreement for a period of ninety (90) days. Owner may terminate such
suspension and re-commence development of the Facility by written notice to
Developer whereupon Developer shall re-commence performing its obligations under
this Agreement within thirty (30) days of receipt of such notice.

        4.04 Additional Defaults by Developer. Developer shall be deemed to be
in default under this Agreement (an "Event of Default") in the event of any of
the following:

        (a) the misappropriation of Owner's funds by Developer or one of its
Affiliates and their respective employees, unless such funds are returned within
thirty (30) days after (i) any one of the General Counsel, Controller,
Treasurer, Chief Financial Officer, or President of Developer have actual
knowledge of such misappropriation and have quantified the amount thereof; or
(ii) Owner has given written notice to Developer of such appropriation and the
amount to be restored, if known by Owner.

        (b) any fraudulent act by Developer or one of its Affiliates and their
respective employees affecting the Owner or its assets or the Facility that is
not promptly dealt with by Developer after receipt of written notice specifying
the alleged act in a manner satisfactory to Owner.

        (c) the gross negligence or willful misconduct or Developer, with
respect to its duties and obligations under this Agreement which remains uncured
for ten (10) business days after written notice thereof.

        (d) the occurrence of an event of default under the Loan (or any
replacement thereof) caused by the acts or omissions of Developer or any
Affiliate of Developer.

        (e) upon any Prohibited Change of Control (as defined in Section 8.24).


                                       15
<PAGE>

        (f) upon the occurrence of any of the events specified in Section 2 of
the Master Agreement.

        4.05 Default by Owner. Owner shall be deemed to be in default hereunder
under this Agreement (an "Event of Default") in the event Owner shall fail to
keep, observe or perform any material covenant, agreement, term or provision of
this Agreement to be kept, observed or performed by Owner and such failure shall
continue (i) for a period of twenty (20) business days after written notice
thereof by Developer to Owner in case of monetary defaults or (ii) for a period
of thirty (30) days after written notice thereof by Developer to Owner in the
case of non-monetary defaults; provided, however, if such default cannot be
cured within such thirty (30) day period, then Owner shall be entitled to such
additional time as shall be reasonable, provided that Owner is capable of curing
same, has promptly proceeded to commence cure of such default within said
period, and thereafter diligently prosecutes the cure to completion; provided,
however, that in no event shall such additional time to cure non-monetary
defaults exceed ninety (90) days.

        4.06 Remedies of Owner. Upon an Event of Default by Developer as
specified in this Agreement and expiration of any applicable cure period
provided by this Agreement, Owner shall be entitled to terminate this Agreement
effective immediately, to remove Developer from the development of the Facility,
and replace Developer with a substitute Developer and otherwise to exercise all
its rights at law or in equity.

        4.07 Remedies of Developer. Upon Event of Default by Owner as specified
in this Agreement and the expiration of any applicable cure period provided by
this Agreement, Developer shall be entitled to terminate this Agreement
effective immediately, and to exercise all of its rights at law or in equity.

        4.08 No Waiver of Default. The failure of Owner or Developer to seek
remedy for any violation of, or to insist upon the strict performance of, any
term or condition of this Agreement shall not prevent a subsequent act by Owner
or Developer which would have originally constituted a violation of this
Agreement by Owner or Developer, from having all the force and effect of an
original violation. Owner or Developer may waive any breach or threatened breach
by Owner or Developer of any term or condition herein contained. The failure by
Owner or Developer to insist upon the strict performance of any one of the terms
or conditions of this Agreement or to exercise any right, remedy or election
herein contained or permitted by law shall not constitute or be construed as a
waiver or relinquishment for the future of such term, condition, right, remedy
or election, but the same shall continue and remain in full force and effect.
All rights and remedies that Owner or Developer may have at law, in equity or
otherwise for any breach of any term or condition of this Agreement shall be
distinct, separate and cumulative rights and remedies and no one of them,
whether or not exercised by Owner or Developer, shall be deemed to be in
exclusion of any right or remedy of Owner or Developer.

        4.09 Interest. Upon the failure of either party to make any payment
required to be made in accordance with the terms of this Agreement as of the due
date which is specified in this Agreement, the amount owed to the non-defaulting
party shall accrue interest at the greater of (i)


                                       16
<PAGE>

14% or (ii) the Prime Rate (defined below) plus 5% (but not greater than the
highest rate permitted by applicable law), from and after the date on which such
payment was originally due to the non-defaulting party until such payment is
made. As used herein, "Prime Rate" means the "prime rate" as published in the
"Money Rates" section of The Wall Street Journal; however, if such rate is, at
any time during the Term, no longer so published, the "Prime Rate" means the
average of the prime interest rates which are announced, from time to time, by
the three (3) largest banks (by assets) headquartered in the United States which
publish a "prime rate."

        4.10 Procedure on Termination. If this Agreement is terminated due to an
Event of Default by Developer, Developer shall be compensated for its services
only through the date of termination after deducting therefrom damages incurred
by Owner as a result of Developer's default. If Developer is entitled to any
payment pursuant to Section 6 of the Master Agreement, then no termination
hereof shall be effective without the payment in full of such payment. Further,
in the event of such termination, both parties shall fully cooperate with one
another to ensure a smooth transition of development and construction. Upon
termination of this Agreement, Developer will deliver to Owner the following
with respect to the Facility:

                (i) A final accounting, reflecting the status of construction of
the Facility as of the date of termination, to be delivered as soon as
reasonably possible but not later than thirty (30) days after such termination;

                (ii) Any balance of monies of Lender or Owner deposits, or both,
held by Developer with respect to the Facility, to be delivered as soon as
reasonably possible, but not later than 30 days after such termination;

                (iii) All records, contracts, files, receipts for deposits,
unpaid bills and other papers, documents or computer disks or information which
pertain in any way to the Facility to be delivered as soon as reasonably
possible, but not later than 30 days after such termination; and

                (iv) Developer shall cooperate reasonably in all respects to
achieve a transfer of any license and/or certificate (or to obtain a new license
and/or certificate, if necessary) required in connection with the development
and construction of the Facility, but shall not be required to incur any
monetary expenditures in connection therewith (unless Owner agrees to reimburse
Developer for the same).

        Developer shall use good faith, diligent efforts to deliver all of
foregoing as soon as reasonably possible.

                                    ARTICLE V
                                    INSURANCE

        5.01 Insurance. Developer shall maintain a program of insurance coverage
in compliance with the requirements of Exhibit E or as may from time to time be
required by Owner.


                                       17
<PAGE>

        5.02 Contractors' Insurance. All service contracts and all subcontracts
for the performance of services with respect to the Facility shall require the
contracting party to maintain insurance coverage, at such party's expense,
consistent with Owner's requirements, which shall reflect the risk management
policies of AEW Capital Management, L.P. Developer shall obtain and keep on file
a certificate of insurance for each service contract and major subcontract which
shows that each such party is so insured. Owner and Developer shall be named as
an additional insured with respect to appropriate coverages. Developer shall
obtain from each party to a service contract customary indemnification and hold
harmless provisions in favor of Owner and Developer.

        5.03 Waiver of Subrogation. If and to the extent that the following
provision may be effective without invalidating or making it impossible to
obtain insurance, Developer and Owner agree that with respect to any loss or
claim which is covered by insurance then carried by either Owner or Developer,
(a) the party carrying such insurance and suffering such loss releases the other
party of and from any and all claims with respect to such loss to the extent of
the insurance proceeds paid with respect thereto and specifically excepting from
such release any deductible required to be paid; and (b) their respective
insurance companies shall have no right of subrogation against the other or
their respective agents, contractors, employees, licensees or invitees on
account thereof.

                                   ARTICLE VI
                           RECORDS, PLANS AND REPORTS

        6.01 Maintenance of Records. Developer shall develop and maintain on a
current basis a system of accounts and a document filing system with respect to
the Facility, which systems shall at all times be in form and substance mutually
satisfactory to Owner and Developer, and in compliance with any third party
lender requirements. All records shall be maintained at the address specified in
this Agreement for notices to Developer or at such other location as may be
mutually agreed upon by Developer and Owner. Developer shall establish and
maintain controls over accounting and financial transactions reasonably designed
to protect Owner's assets from theft, negligence or fraudulent activity on the
part of Developer's employees or other agents. Uninsured losses arising from
theft, fraud, gross negligence or breach of this Agreement by Developer or
Developer's employees shall be borne by Developer in its individual capacity.

        6.02 Owner's Property. Owner acknowledges that the drawings and
specifications for the Facility are proprietary to Developer and shall remain
Developer's property. If Owner terminates this Agreement due to an Event of
Default by Developer, Owner shall have a right to use the drawings and
specifications to complete the Facility and to maintain and repair the Facility,
but for no other purpose. All other records received or maintained by Developer
pursuant to this Agreement are and shall remain the property of Owner and, upon
termination or expiration of this Agreement for any reason whatsoever, shall be
promptly turned over to Owner, provided that Developer may retain copies of such
records so long as Developer shall maintain such records as confidential and
shall disclose such records to third parties solely if and to the extent
obligated to do so as a matter of law or judicial or administrative order. Each
party agrees


                                       18
<PAGE>

not to destroy any records or other material records relating to this Agreement
for a period of at least three years following termination or expiration of this
Agreement, and each such party further agrees to permit the other party to have
reasonable access to all such records, including any such access requested in
connection with any dispute between the parties.

        6.03 Owner's Audit Rights. Developer shall cooperate with, and at any
time make all records available to, Owner and any auditor, independent
accountant, agent or other person designated from time to time (but not more
frequently than two times per year) by Owner; provided that Owner shall conduct
regular auditor's inspections solely during normal business hours and upon ten
(10) business days' prior written notice. Developer shall promptly correct any
weaknesses in internal control or errors in recordkeeping as may be identified
by audit or otherwise. If any such examination or audit discloses an aggregate
overpayment to Developer hereunder in excess of five percent (5%), the cost of
such audits and examinations shall be borne by Developer; otherwise, the cost
thereof shall be borne by Owner. In addition, Developer shall be subject to
examination and audit by the Auditor General of the State of California for a
period of three (3) years after the termination of this Agreement. Such
examination shall be confined to those matters connected with the performance of
this Agreement and shall be performed at the expense of AEW.

                                   ARTICLE VII
                                  BANK ACCOUNTS

        7.01 Deposits. Developer shall open a separate bank account at Bank of
America to receive construction draws and make payments in accordance with the
cash management procedures set forth on Exhibit G. The account is to be used
only for the construction phase after which point tenant receipts flow through
the cash structure established by Owner with Manager. Developer will request
funding for construction draws which would be approved by Owner and funded
directly into the separate account by Owner and Construction Lender. Developer
will then pay vendors and the construction company from the Bank of America
accounts.

        7.02 Access to Accounts. Through the use of signature cards, authorized
representatives of Owner shall have access to all accounts and the contents
thereof. Owner shall promptly notify Developer of any withdrawals made by Owner
from such-bank accounts. Developer's authority to draw against Owner's Account
may be terminated by Owner upon any default by Developer under this Agreement.

        7.03 Costs Payable from Owner's Account.

                (a) Developer shall pay, directly from Owner's Account, all
costs incurred in connection with the acquisition, development of the Facility,
provided that such costs are incurred pursuant to and authorized by the then
current Development Plan (and the Development Budget).

                (b) Developer shall pay directly from Owner's Account, if and to
the extent not funded directly by Owner, amounts payable as compensation to
Developer under this


                                       19
<PAGE>

Agreement, provided that no such disbursement shall be of that portion of any
sums as to which any dispute exists between Owner and Developer of which written
notice has been delivered unless and until such dispute is resolved by agreement
of Owner and Developer or by appropriate proceedings.

                (c) If any costs are shared with other senior housing facilities
being developed or managed by Developer, Manager or any of their Affiliates,
whether owned by Affiliates of Owner or other parties, at the request of AEW,
Developer shall provide Owner with an analysis, in such detail as AEW may
reasonably request, of the formula and methodology employed by Developer in
allocating such costs, including a breakdown of corporate overhead costs
associated with any such cost, and a statement as to the fairness of the formula
and methodology for allocating such costs among the applicable senior housing
facilities. Such allocation shall be included in the Development Budget and
shall be subject to Owner's audit rights pursuant to Section 6.03, and, as part
of any such audit, the Accountants shall review and verify the formula and
methodology employed by Developer in allocating such costs, as well as the
breakdown of corporate overhead expenses associated with any such shared costs.

        7.04 Overhead Costs. The following expenses and costs (collectively, the
"Overhead Costs") incurred by or on behalf of Developer shall be at the sole
cost and expense of Developer and shall not be paid from Owner's Account:

        (a) Except as expressly agreed to by Owner, costs incurred by Developer
        for salary and wages, payroll taxes, workers' compensation, bonus
        compensation, incentive compensation, retirement plan payments, travel
        expenses of home office, non-development personnel and other benefits
        payable to Developer's corporate office employees or divisional or
        regional supervisor employees (including, without limitation,
        non-incentive stock option grants and any bonus compensation to such
        employees);

        (b) Costs incurred by Developer for in-house accounting and reporting
        systems, software or services, or any pro rata charge thereof, furnished
        by Developer under this Agreement, as distinguished from third party
        accounting and reporting costs (as for example, the annual auditing
        costs of accountants);

        (c) Costs incurred by Developer for forms, papers, ledgers and other
        supplies, equipment, copying and telephone of any kind used in
        Developer's office at any location other than the Facility;

        (d) Costs incurred by Developer for political contributions;

        (e) Costs attributable to losses which are covered by the indemnity
        obligations of Developer pursuant to this Agreement;

        (f) Except as expressly agreed to by Owner, costs incurred by Developer
        for training and hiring expenses related to corporate office employees
        or divisional or regional supervisory employees (for example, but not by
        way of limitation, corporate level


                                       20
<PAGE>

        support of "Sunrise University" and other corporate level training,
        services and systems engaged in or utilized by Developer for the purpose
        of furthering the development of the Facility in accordance with the
        Sunrise Standards), including but not limited to employment and
        employment agency fees;

        (g) Costs incurred by Developer for advertising expenses of Developer
        other than costs of marketing the Facility for lease or occupancy, or
        costs of employment ads for positions at the Facility;

        (h) Costs incurred by Developer for any in-house risk manager,
        architect, engineer, accountant or other professional advisor or
        consultant employed by Developer (as distinct from third parties engaged
        for the performance of such services);

        (i) Costs incurred by Developer for dues of Developer or any of its
        employees in professional organizations or for any of Developer's
        employees participating in industry conventions or meetings (except to
        the extent included in the Development Budget or as otherwise
        specifically approved by Owner);

        (j) Any costs and expenses incurred in development of other facilities;

        (k) Any other home office and corporate level expenses not included in a
        Development Budget.

For purposes of this Section 7.04, "third parties" or "third party" shall in no
event include Developer or any Affiliate of Developer.

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

        8.01 Standard of Performance. Developer will devote its best efforts to
the development of the Facility as contemplated by this Agreement and will act
in good faith to cause the completion of the Facility in accordance with the
terms and conditions of this Agreement.

        8.02 Proprietary Information. Any and all architectural, structural,
engineering or other construction drawings furnished to Owner with regard to the
Facilities are the property of Developer. Owner shall not use any such drawings
or cause to have any such drawings disseminated to any third party without the
written consent of Developer. Owner may deliver a copy of the plans and
specifications to a third party purchaser on the express condition that such
copy is for information purposes only in the operation and maintenance of this
Facility and may not be used in connection with any other project. Without
prejudice to any rights and remedies otherwise available to Developer, Developer
shall be entitled to equitable relief by way of injunction if Owner breaches
this Section 8.02. No failure or delay by Developer in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other


                                       21
<PAGE>

right, power or privilege hereunder. Owner agrees to indemnify Developer for any
costs and expenses, including legal expenses, Developer may incur in connection
with the enforcement of this Section 8.02.

        8.03 Consent. Any consent, approval or other action required or
requested under or in connection with this Agreement shall not unreasonably be
withheld or delayed and any request made or direction given hereunder or in
connection herewith shall be reasonable, it being the intention and expectation
of Owner and Developer that neither shall be capricious or arbitrary under or in
connection with this Agreement. Any determination of reasonableness under this
Section shall be made in light of the objectives of Owner, which objectives
include, without limitation, the development of the Facility as a first class
building and the operation of the Facility as a high quality assisted living
community.

        8.04 Force Majeure. With respect to any services to be furnished or
obligations to be performed hereunder, no party shall ever be liable for failure
to furnish or perform the same when prevented from doing so by Acts of God,
strike, lockout or labor unrest (unless caused by Developer's actions),
explosion, sabotage, accident, order or regulation of or by any governmental
authority, or because of war (declared or undeclared), acts of terrorism, riot,
civil commotion or other emergency; provided, however, that the lack of
financial resources shall never be excused.

        8.05 Assignment and Subcontract. Except as specifically provided in this
Agreement, neither Owner nor Developer may assign any of its rights or delegate
any of the obligations specified in this Agreement without the prior written
consent of the other party. Developer may not subcontract any of its obligations
under this Agreement, except to its Affiliates, without the prior written
consent of Owner. Notwithstanding any such subcontracting permitted or approved
hereunder, Developer will remain primarily liable for the performance of its
obligations under this Agreement.

        8.06 Benefits of Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns,
legal representatives and heirs, but nothing contained in this Section shall be
deemed to constitute a consent to any assignment otherwise restricted by this
Agreement.

        8.07 Indemnification. Developer will defend, indemnify and hold Owner
(and any Affiliate of Owner and its respective members, employees and agents)
harmless from and against any claims, losses, expenses, costs, suits, actions,
proceedings, damages, demands or liabilities (including, without limitation,
engineers' and attorneys' fees and expenses, and costs of litigation) that are
asserted against or sustained or incurred by them and arising under or in
connection with (a) Developer's breach of this Agreement, (b) legal actions or
regulatory violations arising from Developer's breach of this Agreement or
Developer's negligence, gross negligence, fraud, or willful misconduct, (c) the
placing, discharge, leakage, use and/or storage of hazardous or regulated
materials at, in or beneath the Facility by Developer or its Affiliates or their
respective agents, employees, contractors or representatives in violation of any
legal requirements, or (d) Developer's negligence, gross negligence, willful
misconduct or fraud in


                                       22
<PAGE>

developing the Facility. The scope of the foregoing indemnities includes any and
all costs and expenses incurred in connection with any proceedings to defend any
indemnified claim, or to enforce the indemnity, or both. Owner will defend,
indemnify, and hold Developer harmless, from and against any and all claims,
expenses, losses, costs, suits, actions, proceedings, demands, or liabilities
that are asserted against, or sustained or incurred by Developer in the proper
performance of Developer's duties under this Agreement or otherwise while acting
properly within the scope of the agency established by the parties to this
Agreement, other than for matters for which Developer is required to indemnify
Owner pursuant to this Section. Recovery upon an indemnity contained in this
Agreement shall be reduced dollar-for-dollar by any applicable insurance
collected by Owner or Developer. For purposes of this Section 8.07, any member,
manager, partner, employee and agent of each named entity shall be deemed an
Affiliate of that entity. This Section 8.07 shall survive the termination of
this Agreement.

        8.08 Modification. Except as otherwise provided herein, neither this
Agreement nor any provision hereof can be modified, changed, discharged,
extended or terminated except by an instrument in writing executed by the party
against whom enforcement is sought. Any such modification, change, discharge,
extension or termination must receive the prior consent of the Construction
Lender until full repayment of the Loan.

        8.09 Waiver. The failure to insist upon strict compliance with any of
the terms, covenants or conditions herein on one or more occasions shall not be
deemed a waiver of such terms, covenants or conditions nor shall such failure
impose any obligation to provide notice that strict compliance will be expected
in the future, nor shall nay waiver or relinquishment of any right at any one or
more times be deemed a waiver or relinquishment of such right at any other time
or times.

        8.10 Notices. All notices, demands, consents, approvals, and requests
given by either party to the other hereunder shall be in writing and shall be
sent by hand, by overnight courier, or by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following addresses:

Owner:                AL U.S./Studio City Senior Housing, L.P.
                      c/o Sunrise Assisted Living Investments, Inc.
                      7902 Westpark Drive
                      McLean, Virginia 22102
                      Attention:  Daniel B. Gorham, Executive Vice President
                      Facsimile:  (703) 744-1645

Copy to:              AEW Capital Management, L.P.
                      Two Seaport Lane
                      Boston, MA  02110-2021
                      Attention:  Asset Manager-AEW Senior Housing Company, LLC
                      Facsimile:  (617) 261-9555


                                       23
<PAGE>

and a copy to:        Hale and Dorr, LLP
                      60 State Street
                      Boston, MA  02109
                      Attention:  Joseph J. Christian, Esq.
                      Facsimile:  (617) 526-5000

Developer:            Sunrise Development, Inc.
                      7902 Westpark Drive
                      McLean, Virginia 22102
                      Attn:  Legal Department
                      Facsimile:  (703) 744-1885

Copy to:              Wayne G. Tatusko, Esquire
                      Watt, Tieder & Hoffar, L.L.P.
                      7929 Westpark Drive, Suite 400
                      McLean, Virginia  22102
                      Facsimile:  (703) 356-5388

or to such other address and to the attention of such other person as either
party may from time to time designate in writing. Notices shall be effective
upon receipt. Refusal to accept delivery shall constitute receipt.

        8.11 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance is held to be invalid or
unenforceable for any reason, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law, but only to the extent the same
continues to reflect fairly the intent and understanding of the parties
expressed by this Agreement taken as a whole.

        8.12 Governing Law. To the maximum extent the parties hereto may
lawfully agree, this Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Virginia without regard to conflict of
laws principles, and shall be enforced in the state and federal courts located
in the Commonwealth of Virginia. Each of the parties to this Agreement submits
to the jurisdiction of the courts of that state and agrees that process may be
served upon it by registered or certified mail addressed as provided in Section
5.10.

        8.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same document.

        8.14 Mediation. The parties agree that any disputes arising hereunder
shall be submitted to non-binding mediation in accordance with the rules of the
American Arbitration Association prior to the commencement of litigation by
either party. Any applicable statute of


                                       24
<PAGE>

limitation or repose shall be tolled from the date of filing of the request for
mediation with the American Arbitration Association until ten (10) days after
the mediation is concluded.

        8.15 Costs of Dispute. In any legal action or proceeding arising out of
this Agreement, the successful or prevailing party or parties therein shall be
entitled to recover from the other party or parties reasonable attorney's fees
and other costs incurred in that action or proceeding, including those related
to appeal of any such action. Such recovery of attorney's fees and costs shall
be in addition to any other relief to which the successful or prevailing party
or parties may be entitled. A party shall be deemed to prevail if an action or
proceeding commenced against it is dismissed or non-suited, whether voluntarily
or involuntarily.

        8.16 No Liens. Developer acknowledges that this Agreement is not
intended and shall not be interpreted to afford Developer any right, title or
interest in the Facility. In the event of any dispute between Owner and
Developer relating to this Agreement, Developer shall in no event place any lien
or notice of lis pendens against the Facility or portion thereof. If and to the
extent that Developer would have possessed any such rights to lien or lis
pendens, Developer, as a material inducement to Owner to enter into this
Agreement, hereby unconditionally, irrevocably and absolutely releases and
waives such rights.

        8.17 Confidentiality.

                (a) Developer and Owner agree that the terms of this Agreement,
any other agreements entered into in connection with the transactions
contemplated hereby are confidential and shall not be disclosed to any other
party without the prior written consent of both Developer and Owner, provided,
however, that either party may disclose the existence and/or terms and
conditions of this Agreement if so required by law, or applicable regulation, so
long as such party first provides a copy of any written request for disclosure
to the other party and consults with such other party with respect to the
content of the disclosure.

                (b) Developer agrees to maintain the confidentiality of all
information contained in the Facility records. Developer may, however, disclose
any of such information to its agents, directors, officers, employees, agents,
consultants, advisors, attorneys, affiliates or representatives who require such
information for the purpose of performing or assisting in the performance of
Developer's services under this Agreement, provided that such parties shall be
informed of the confidential nature of such information. Developer may also
disclose any such information to the extent required by law or court order
provided that Developer shall have first, to the extent reasonably practicable,
advised Owner of the requirement to disclose such information and shall have
afforded Owner an opportunity to dispute such requirement and seek relief
therefrom by legal process. The provisions of this Section 8.17 shall survive
the expiration or termination of this Agreement.

        8.18 Cooperation. Should any claim, demand, suit or other legal
proceeding be made or instituted by either party which arises out of any of the
matters relating to this Agreement, each party shall give the other all
pertinent information possessed by such party and reasonable assistance in the
defense or other disposition thereof.


                                       25
<PAGE>

        8.19 Remedies. Each of the parties recognizes and agrees that the
remedies at law for any breach of the provisions of this Agreement would be
inadequate and that the other party shall, in addition to such other remedies as
may be available at law or in equity or as provided in this Agreement, be
entitled to injunctive relief, to require an accounting and to enforce its
rights by an action for specific performance, all to the fullest extent
permitted by applicable law.

        8.20 Entire Contract. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.

        8.21 Headings. Headings in this Agreement are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof.

        8.22 Time of Essence. Time is of the essence in the performance of each
provision of this Agreement.

        8.23 Litigation Expenses. If either party should bring an action or
proceeding (including, without limitation, any cross-complaint, counter-claim or
third party claim) against the other party by reason of the breach of the terms
of this Agreement, the prevailing party in such action or proceeding shall be
entitled to recover its reasonable costs and attorneys' fees from the other
party. If any party to this Agreement is required to initiate or defend
litigation with any third party because of the material violation by the other
party of any term of this Agreement and such litigating party is the prevailing
party, then the party so litigating shall be entitled to recover reasonable
costs and attorneys' fees from the violating party.

        8.24. Change of Control.

        (a) A "Change of Control" of Developer shall be deemed to occur if, at
any time after the date hereof, (i) any individual or entity, or its heirs,
successors or assigns (a "Person") (or one or more Persons acting in concert as
a group) acquires (A) more than fifty percent (50%) of the outstanding capital
stock of Sunrise Assisted Living, Inc. ("SALI"), SALII, Developer or Sunrise
Assisted Living Management, Inc. ("SALMI") or (B) such percentage of the
outstanding capital stock of SALI, SALII, Developer or SALMI or such other
rights as would entitle such Person (or such group) to appoint a majority of the
board of SALI, SALII, Developer or SALMI and such Person 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 holders of the outstanding capital stock of SALI, SALII, Developer
or SALMI immediately prior to such Business Combination, disregarding for such
purposes any holders who are affiliates of another party to the Business
Combination or acting in concert as a group with such other party, own less than
fifty-one percent (51%) of the aggregate equity interests of the surviving
entity or own less than fifty-one percent (51%) of the voting securities
(determined on the basis of number of votes per security) immediately following
such Business Combination; or (iii) all or


                                       26
<PAGE>

substantially all of the assets of SALI, SALII, Developer or SALMI are sold or
otherwise disposed of, directly, indirectly, voluntarily, involuntarily, by
operation of law or otherwise; provided, however, that a sale by SALI, SALII,
Developer or SALMI of their real estate assets shall not be considered a Change
of Control if SALI, SALII, Developer, SALMI or an entity of which SALI, SALII,
Developer or SALMI owns not less than fifty-one percent (51%) of the aggregate
equity interests or not less than fifty-one percent (51%) of the voting
securities (determined on the basis of number of votes per security) retains
management of such real estate assets for a term not less than ten (10) years.

        (b) A "Permitted Change of Control" is a Change of Control (i) which
occurs after December 31, 2003, and (ii) pursuant to which any applicable Person
(or Persons) acquiring the stock of SALI, SALII, Developer or SALMI under
Section 8.24(a)(i), the surviving entity of any applicable Business Combination
under Section 8.24(a)(ii), or the Person which purchases all or substantially
all of the assets of SALI, SALII, Developer or SALMI under Section 8.24(a)(iii)
(each such Person 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 of Control is not less than
the greatest of (A) the tangible net worth of SALI, SALII, Developer and/or
SALMI, as the case may be, as of the date hereof, (B) the tangible net worth of
SALI, SALII, Developer and/or SALMI as the case may be, on the day prior to the
date of the Change of Control, and (C) $250,000,000;

                (ii) Neither the New Entity nor any Person 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; (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; (C) have paid on three (3) or more occasions during any period of
five (5) consecutive years prior to the occurrence of the Change of Control any
fine, penalty or sanction in excess of $10,000 each to one or more governmental
authorities having jurisdiction with respect to licenses or certifications to
operate assisted living/dementia care or nursing home facilities or under any
Medicare, Medicaid or third party payor program (D) been found to have been
grossly negligent or reckless or to have committed willful or intentional
misconduct in any lawsuit alleging any wrongdoing by the New Entity or any of
its Affiliates or any of their respective employees relating to assisted
living/dementia care or skilled nursing care, or (E) been found to have been
liable in three (3) or more lawsuits alleging any wrongdoing by the New Entity
or any of its Affiliates or any of their respective employees relating to
assisted living/dementia care of skilled nursing facilities for any reason other
than gross negligence, willful misconduct or recklessness;

                (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 each state in which the Properties are
located as of the date of the Change of Control, and (B) have at least


                                       27
<PAGE>

five (5) years experience in, the operation of a substantial number of assisted
living/dementia care facilities located in metropolitan markets substantially
similar to the Facility and the Other Facilities; 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 in effect as of the date hereof.

        (c) A "Prohibited Change of Control" shall mean any Change of Control
other than a Permitted Change of Control.


                                       28
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first above written.

WITNESS:         OWNER:

                 AL U.S./Studio City Senior Housing, L.P., a California limited
                 partnership

                 By:   AL California GP, LLC, a Delaware limited liability
                       company, its General Partner

                       By:  AL U.S. POOL ONE, LLC, a Delaware limited liability
                            company, its Sole Member


                       By:  AL U.S. Development Venture, LLC, its sole member

                            By:  Sunrise Assisted Living Investments, Inc.,
                                 Managing Member

                             By: /s/ Daniel B. Gorham
----------------                 ---------------------
                                 Daniel B. Gorham, Vice President

                        By:  AEW Senior Housing Company, LLC, Member

----------------             By:  Seaport Senior Housing Management, LLC, its
                                  Managing Member

                                 By: /s/ Christopher A. Kazantis
                                     ---------------------------
                                     Christopher A. Kazantis, Vice President

                     DEVELOPER:

                     Sunrise Development, Inc., a Virginia corporation

                     By: /s/ Daniel B. Gorham
----------------         --------------------
                         Daniel B. Gorham, Executive Vice President


                                       29
<PAGE>

                                     JOINDER

        The undersigned Sunrise Assisted Living, Inc. hereby joins this
Agreement for the purpose of guaranteeing the payment and performance by the
Owner of its obligations and liabilities hereunder.

                                 SUNRISE ASSISTED LIVING, INC., a Delaware
                                 Corporation

                                 By: /s/Christian B.A. Slavin
                                    -------------------------
                                 Name: Christian B.A Slavin
                                      ---------------------
                                 Title: Exective Vice President
                                       ------------------------


                                  EXHIBIT LIST

               Exhibit A - Description of Real Property
               Exhibit B - [Intentionally Omitted]
               Exhibit C - Development Budget
               Exhibit D - CalPERS Responsible Contractor Program Policy
               Exhibit E - Insurance Requirements
               Exhibit F - Progress Schedule
               Exhibit G - Cash Management Structure
               Exhibit H - Reports



                                       30