10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended September 30, 2009
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period From          to

Commission file number: 1-16499

SUNRISE SENIOR LIVING, INC.

(Exact name of registrant as specified in its charter)

Delaware	54-1746596
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7902 Westpark Drive

McLean, Virginia 22102

(Address of principal executive offices)

(703) 273-7500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

There were 51,565,282 shares of the Registrant’s common stock outstanding at October 31, 2009.

SUNRISE SENIOR LIVING, INC.

Form 10-Q
For the Quarterly Period Ended September 30, 2009

TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION
	Item 1.	Condensed Financial Statements
		Consolidated Balance Sheets at September 30, 2009 (unaudited) and December 31, 2008		3
		Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008 (unaudited)
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (unaudited)		7
		Notes to Consolidated Financial Statements		8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
	Item 3.	Quantitative and Qualitative Disclosure About Market Risk		55
	Item 4.	Controls and Procedures		55
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		56
	Item 1A.	Risk Factors		56
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		57
	Item 3.	Defaults Upon Senior Securities		57
	Item 4.	Submission of Matters to a Vote of Security Holders		57
	Item 5.	Other Information		57
	Item 6.	Exhibits		57
Signatures				58
EX-2.1
EX-2.2
EX-2.3
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-10.12
EX-10.13
EX-10.14
EX-10.15
EX-10.16
EX-10.17
EX-10.18
EX-10.19
EX-10.20
EX-10.21
EX-10.22
EX-10.23
EX-10.28
EX-10.29
EX-10.30
EX-10.31
EX-10.32
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

SUNRISE SENIOR LIVING, INC.

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2009			2008
(In thousands, except per share and share amounts)	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	43,382		$	29,513
Accounts receivable, net		37,265			54,842
Income taxes receivable		7,330			30,351
Due from unconsolidated communities		24,146			45,255
Deferred income taxes, net		14,999			25,341
Restricted cash		31,857			37,392
Assets held for sale		88,254			49,076
German assets held for sale		105,554			—
Prepaid insurance		3,838			9,512
Prepaid expenses and other current assets		17,058			23,626
Total current assets		373,683			304,908
Property and equipment, net		419,871			681,352
Due from unconsolidated communities		18,978			31,693
Intangible assets, net		54,400			70,642
Goodwill		—			39,025
Investments in unconsolidated communities		71,161			66,852
Investments accounted for under the profit-sharing method		13,531			22,005
Restricted cash		100,966			123,772
Restricted investments in marketable securities		33,670			31,080
Other assets, net		9,893			10,228
Total assets	$	1,096,153		$	1,381,557
LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of debt	$	335,749		$	377,449
Outstanding draws on bank credit facility		68,878			95,000
Debt relating to German assets held for sale		200,034			—
Accounts payable and accrued expenses		155,332			184,144
Liabilities associated with German assets held for sale		9,908			—
Due to unconsolidated communities		1,883			914
Deferred revenue		7,398			7,327
Entrance fees		35,158			35,270
Self-insurance liabilities		46,174			35,317
Total current liabilities		860,514			735,421
Debt, less current maturities		19,964			163,682
Investment accounted for under the profit-sharing method		—			8,332
Guarantee liabilities		13,777			13,972
Self-insurance liabilities		62,947			68,858
Deferred gains on the sale of real estate and deferred revenues		17,480			88,706
Deferred income tax liabilities		14,999			28,129
Other long-term liabilities, net		102,442			126,543
Total liabilities		1,092,123			1,233,643
Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.01 par value, 120,000,000 shares authorized, 51,072,275 and 50,872,711 shares issued and outstanding, net of 392,961 and 342,525 treasury shares, at September 30, 2009 and December 31, 2008, respectively		511			509
Additional paid-in capital		461,945			458,404
Retained loss		(471,407	)		(327,056	)
Accumulated other comprehensive income		8,864			6,671
Total stockholders’ (deficit) equity		(87	)		138,528
Noncontrolling interests		4,117			9,386
Total equity		4,030			147,914
Total liabilities and equity	$	1,096,153		$	1,381,557

See accompanying notes

3

SUNRISE SENIOR LIVING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
(In thousands, except per share amounts)	(Unaudited)						(Unaudited)
Operating revenue:
Management fees	$	26,795		$	36,179		$	84,305		$	101,071
Resident fees for consolidated communities		106,098			106,112			319,842			314,462
Ancillary fees		11,067			11,235			34,148			32,197
Professional fees from development, marketing and other		809			12,631			11,343			33,632
Reimbursed costs incurred on behalf of managed communities		237,810			246,460			709,158			751,158
Total operating revenues		382,579			412,617			1,158,796			1,232,520
Operating expenses:
Community expense for consolidated communities		80,761			81,248			242,384			234,389
Community lease expense		15,608			15,184			44,765			44,916
Depreciation and amortization		11,659			11,630			41,454			34,264
Ancillary expenses		10,378			9,480			31,880			28,339
General and administrative		34,024			37,147			91,829			116,017
Development expense		1,797			7,995			10,462			28,417
Write-off of capitalized project costs		652			47,512			14,147			84,209
Accounting Restatement, Special Independent Committee inquiry,
SEC investigation and stockholder litigation		1,108			5,072			3,541			26,436
Restructuring costs		8,960			7,219			25,883			7,219
Provision for doubtful accounts		331			2,280			11,335			5,716
Loss on financial guarantees and other contracts		809			975			1,463			1,703
Impairment of long-lived assets		9,922			—			34,962			2,349
Costs incurred on behalf of managed communities		240,494			246,076			719,735			749,384
Total operating expenses		416,503			471,818			1,273,840			1,363,358
Loss from operations		(33,924	)		(59,201	)		(115,044	)		(130,838	)
Other non-operating income (expense):
Interest income		572			1,000			1,428			3,973
Interest expense		(3,661	)		(3,997	)		(10,809	)		(7,937	)
Gain (loss) on investments		95			720			904			(4,000	)
Other income (expense)		2,957			780			4,276			(4,866	)
Total other non-operating expense		(37	)		(1,497	)		(4,201	)		(12,830	)
Gain on the sale and development of real estate and equity interests		3,627			4,717			20,330			19,029
Sunrise’s share of (loss) earnings and return on investment
in unconsolidated communities		(4,613	)		(15,549	)		9,362			(7,207	)
(Loss) income from investments accounted for under the profit-sharing method		(2,897	)		594			(9,157	)		95
Loss before (provision for) benefit from income
taxes and discontinued operations		(37,844	)		(70,936	)		(98,710	)		(131,751	)
(Provision for) benefit from income taxes		(1,010	)		33,248			1,449			49,476
Loss before discontinued operations		(38,854	)		(37,688	)		(97,261	)		(82,275	)
Discontinued operations, net of tax		(5,523	)		(32,035	)		(46,959	)		(54,945	)
Net loss		(44,377	)		(69,723	)		(144,220	)		(137,220	)
Less: Net (income) loss attributable to noncontrolling interests		(25	)		1,057			(131	)		3,653
Net loss attributable to common shareholders	$	(44,402	)	$	(68,666	)	$	(144,351	)	$	(133,567	)
Earnings per share data:
Basic net loss per common share
Loss before discontinued operations	$	(0.77	)	$	(0.75	)	$	(1.93	)	$	(1.64	)
Discontinued operations, net of tax		(0.11	)		(0.61	)		(0.92	)		(1.01	)
Net loss	$	(0.88	)	$	(1.36	)	$	(2.85	)	$	(2.65	)
Diluted net loss per common share
Loss before discontinued operations	$	(0.77	)	$	(0.75	)	$	(1.93	)	$	(1.64	)
Discontinued operations, net of tax		(0.11	)		(0.61	)		(0.92	)		(1.01	)
Net loss	$	(0.88	)	$	(1.36	)	$	(2.85	)	$	(2.65	)

See accompanying notes

4

SUNRISE SENIOR LIVING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
	2009			2008
(In thousands)	(Unaudited)
Operating activities
Net loss	$	(144,220	)	$	(137,220	)
Less: Net loss from discontinued operations		46,959			54,945
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Gain on sale and development of real estate and equity interests		(20,330	)		(19,029	)
Loss (income) from investments accounted for under the profit-sharing method		9,157			(95	)
(Gain) loss on investments		(904	)		4,000
Unrealized gain on interest rate swap		—			(313	)
Impairment of long-lived assets		34,962			2,349
Sunrise’s share of (earnings) loss and return on investment in unconsolidated communities		(9,362	)		7,207
Loss on financial guarantees and other contracts		1,463			1,703
Distributions of earnings from unconsolidated communities		15,438			12,690
Provision for doubtful accounts		11,335			5,716
Benefit from deferred income taxes		(2,788	)		(76,083	)
Depreciation and amortization		41,454			34,264
Amortization of financing costs, debt discount and guarantee liabilities		1,007			1,815
Write-off of capitalized project costs		14,147			84,209
Stock-based compensation		3,480			2,490
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		7,521			(5,031	)
Due from unconsolidated communities		19,601			(4,839	)
Prepaid expenses and other current assets		11,312			36,683
Captive insurance restricted cash		891			7,639
Other assets		21,946			(4,120	)
Increase (decrease) in:
Accounts payable and accrued expenses		(28,989	)		(79,473	)
Entrance fees		(112	)		159
Self-insurance liabilities		5,135			(658	)
Guarantee liabilities		(125	)		(34,924	)
Deferred gains on the sale of real estate and deferred revenues		560			(460	)
Net cash used in discontinued operations		(753	)		(10,636	)
Net cash provided by (used in) operating activities		38,785			(117,012	)
Investing activities
Capital expenditures		(17,226	)		(167,162	)
Net funding for condominium project		(2,927	)		(49,323	)
Dispositions of assets		8,595			54,402
Change in restricted cash		7,641			59,575
Purchases of short-term investments		—			(102,800	)
Proceeds from short-term investments		500			62,800
Increase in advances to communities under development and notes receivable		(74,589	)		(136,387	)
Proceeds from advances to communities under development and notes receivable		83,637			154,742
Investments in unconsolidated communities		(4,820	)		(16,869	)
Distributions of capital (to) from unconsolidated communities		(142	)		6,655
Consolidation of German communities		—			25,557
Net cash provided by (used in) discontinued operations		3,711			(41,096	)
Net cash provided by (used in) investing activities		4,380			(149,906	)
Financing activities
Net proceeds from exercised options		206			4,165
Additional borrowings of debt		3,614			194,826
Repayment of debt		(7,181	)		(12,096	)
Net repayments on Bank Credit Facility		(24,800	)		(5,000	)
Financing costs paid		(65	)		(2,465	)
Distributions to noncontrolling interests		(1,070	)		(967	)
Net cash provided by discontinued operations		—			3,080
Net cash (used in) provided by financing activities		(29,296	)		181,543
Net increase (decrease) in cash and cash equivalents		13,869			(85,375	)
Cash and cash equivalents at beginning of period		29,513			138,212
Cash and cash equivalents at end of period	$	43,382		$	52,837

See accompanying notes.

5

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1.   Interim Financial Presentation

Our accompanying unaudited consolidated financial statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the three and nine month periods ended September 30, 2009 and 2008 pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read together with our consolidated financial statements and the notes thereto for the year ended December 31, 2008 included in our 2008 Form 10-K, as amended on March 31, 2009. Operating results are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. We have reclassified certain amounts to conform with the current period presentation.

The accompanying consolidated financial statements have been prepared on the basis of us continuing as a going concern. In our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission (“SEC”) on March 2, 2009, we disclosed that there was substantial doubt regarding our ability to continue as a going concern. In response, we have undertaken or expect to commence certain efforts to reduce expenses and preserve liquidity including: (i) extending the term of our Bank Credit Facility to December 2, 2010 (subject to certain conditions as discussed more fully in Note 6); (ii) seeking to reduce operating costs; (iii) seeking to restructure the terms of our other indebtedness including extension of scheduled maturity dates; and (iv) pursuing sales of selected assets. No assurance can be given that we will be successful in achieving any of these efforts.

2.   New and Future Accounting Standards

New Accounting Standards

We adopted provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Fair Value Measurements Topic for non-financial assets and liabilities on January 1, 2009. We had previously adopted the other provisions of fair value measurement for financial assets and liabilities on January 1, 2008. The provisions are required to be applied prospectively as of the beginning of the first fiscal year in which the provisions are applied. Adoption of these provisions of the ASC did not have a material impact on our reported consolidated financial position, results of operations or cash flows.

We adopted provisions of the ASC Business Combination Topic on January 1, 2009. These provisions require most identifiable assets, liabilities, non-controlling interests and goodwill acquired in business combinations to be recorded at “full fair value.” Transaction costs are no longer be included in the measurement of the business acquired and instead should be expensed as incurred. These provisions apply prospectively to business combinations occurring on or after 2009.

We adopted provisions of the ASC Consolidation Topic on January 1, 2009. These provisions establish new accounting and reporting requirements for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, these provisions require the recognition of a non-controlling interest (minority interest) as equity in the consolidated financial statements separate from the parent’s equity. The amount of net income attributable to the non-controlling interest is now included in consolidated net income on the face of the income statement. The provisions also clarify that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions. In addition, the provisions require that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation date. The provisions also include expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. Adoption of the provisions under

6

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

the Consolidation Topic regarding non-controlling interests on January 1, 2009 did not have a material impact on our reported consolidated financial position, results of operations or cash flows.

On January 1, 2009, we adopted provisions of the ASC Derivative and Hedging Topic which provides guidance on certain disclosures about credit derivatives and certain guarantees. Adoption of these provisions did not have a material impact on our reported consolidated financial position, results of operations or cash flows.

We adopted provisions of the ASC Investments — Equity Method and Joint Venture Topic effective on January 1, 2009. The intent of these provisions is to clarify the accounting for certain transactions and impairment considerations related to equity method investments. The adoption of these provisions did not have a material impact on our reported consolidated financial position, results of operations or cash flows.

We adopted each of the following provisions to the ASC in the second quarter of 2009. These provisions did not have a material impact on our reported consolidated financial position, results of operations or cash flows.

In April 2009, we adopted provisions of the ASC Investments — Debt and Equity Securities Topic which modifies the other-than-temporary impairment guidance for debt securities through increased consistency in the timing of impairment recognition and enhanced disclosures related to the credit and non-credit components of impaired debt securities that are not expected to be sold. In addition, increased disclosures are required for both debt and equity securities regarding expected cash flows, credit losses, and an aging of securities with unrealized losses.

In April 2009, we adopted provisions of the ASC Financial Instruments Topic which requires fair value disclosures for financial instruments that are not reflected in the consolidated balance sheets at fair value. Prior to these provisions, the fair values of those assets and liabilities were disclosed only once each year. With the adoption of these provisions, we are now required to disclose this information on a quarterly basis, providing quantitative and qualitative information about fair value estimates for all financial instruments not measured in the consolidated balance sheets at fair value.

In April 2009, we adopted provisions of the ASC Fair Value Measurements Topic which clarifies the methodology used to determine fair value when there is no active market or where the price inputs being used represent distressed sales. These provisions also reaffirm the objective of fair value measurement, which is to reflect how much an asset would be sold for in an orderly transaction. They also reaffirm the need to use judgment to determine if a formerly active market has become inactive, as well as to determine fair values when markets have become inactive.

In May 2009, we adopted provisions of the ASC Subsequent Events Topic. These provisions establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or available to be issued.

In the third quarter of 2009, we adopted the ASC as the single source of authoritative nongovernmental generally accepted accounting principles. The adoption of the ASC did not have a material impact on our consolidated financial position, results of operations or cash flows.

Future Adoption of Accounting Standards

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 requires an analysis to be performed to determine whether a variable interest entity gives an enterprise a controlling financial interest in a variable interest entity. The analysis identifies the primary beneficiary of a variable interest entity. Additionally, SFAS 167 requires ongoing assessments as to whether an enterprise is the primary beneficiary and eliminates the quantitative approach of FIN 46(R) in determining the primary beneficiary. SFAS 167 is effective for us January 1, 2010. We are currently evaluating whether SFAS 167 will have a material impact on our consolidated financial position, results of operations or cash flows.

7

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value (“ASU 2009-05”). ASU 2009-05 amends the Fair Value Measurement Topic by providing additional guidance clarifying the measurement of liabilities at fair value including how the price of a traded debt security should be considered in estimating the fair value of the issuer’s liability. ASU 2009-05 is effective for us for the fourth quarter of 2009. We are currently evaluating whether ASU 2009-05 will have a material impact on our consolidated financial position, results of operations or cash flows.

In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”). It requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. It eliminated the use of the residual method of allocation and requires the relative-selling-price method in all circumstances in which an entity recognized revenue for an arrangement with multiple deliverables subject to ASU 605-25. ASU 2009-13 is effective for us for the year beginning January 1, 2011. We are currently evaluating whether ASU 2009-13 will have a material impact on our consolidated financial position, results of operations or cash flows.

3.   Fair Value Measurements

Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the ASC Fair Value Measurements Topic establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels. These levels, in order of highest priority to lowest priority, are described below:

Level 1:  Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2:  Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3:  Unobservable inputs are used when little or no market data is available.

Auction Rate Securities, Marketable Securities and Interest Rate Caps

The following table details the auction rate securities, marketable securities and interest rate caps measured at fair value as of September 30, 2009 (in thousands):

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
	September 30,		Identical Assets		Inputs		Inputs
Asset	2009		(Level 1)		(Level 2)		(Level 3)
Auction rate securities	$	31,484	$	—	$	—	$	31,484
Marketable securities		2,186		2,186		—		—
Interest rate caps		64		—		64		—
	$	33,734	$	2,186	$	64	$	31,484

At September 30, 2009, we held investments in five Student Loan Auction-Rate Securities (“SLARS”), four with a face amount of $8.0 million and one with a face amount of $6.4 million, for a total of $38.4 million. These SLARS are issued by non-profit corporations and their proceeds are used to purchase portfolios of student loans. The SLARS holders are repaid from cash flows resulting from the student loans in a trust estate. The student loans are 98% guaranteed by the Federal government against default. The interest rate for these five SLARS are reset every 7 to 35 days. The interest rates at September 30, 2009 ranged from 0.63% to 0.88%. Uncertainties in the credit markets have prevented us and other investors from liquidating our holdings of auction rate securities in recent

8

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

auctions. We classify our investments in auction rate securities as trading securities and carry them at fair value. The fair value of the securities at September 30, 2009 was determined to be $31.5 million and we recorded unrealized gains (losses) of $0.1 million and $0.7 million for the three months ended September 30, 2009 and 2008, respectively, and $0.9 million and $(4.0) million for the nine months ended September 30, 2009 and 2008, respectively.

Due to the lack of actively traded market data, the valuation of these securities was based on Level 3 unobservable inputs. These inputs include an analysis of sales discounts realized in the secondary market, as well as assumptions about risk after considering recent events in the market for auction rate securities. The discount range of SLARS in the secondary market ranged from 16% to 38% at September 30, 2009 with an average SLARS discount on closed deals of 23% at September 30, 2009.

In October 2009, $8.0 million of our auction rate securities were called and redeemed at par. These securities were carried at an estimated fair value of $6.4 million on our consolidated balance sheet as of September 30, 2009. As a result, we will recognize a gain on the redemption of those securities of $1.6 million in the fourth quarter of 2009. The proceeds from the disposition of these securities will be reflected as restricted cash as it relates to our insurance reserves.

The following table reconciles the beginning and ending balances for the auction rates securities using fair value measurements based on significant unobservable inputs for the nine months ended September 30, 2009 (in thousands):

	Auction
	Rate Securities
Beginning balance - 1/1/09	$	31,080
Total gains		904
Sales		(500	)
Ending balance - 9/30/09	$	31,484

At September 30, 2009, we have an investment in marketable securities related to a consolidated entity in which we have control but no ownership interest. The fair value of the investment is approximately $2.2 million. The valuation was based on Level 1 data.

At September 30, 2009, we have interest rate caps relating to mortgage debt for 16 of our wholly owned communities. The fair value of the interest rate caps is approximately $0.1 million at September 30, 2009. The valuation was based on Level 2 prevailing market data.

German Assets Held for Sale, Assets Held for Sale and Assets Held and Used

German Assets Held for Sale

The German assets held for sale at September 30, 2009 consists of the following (in thousands):

	September 30,
	2009
Cash and cash equivalents	$	897
Accounts receivable, net		3,216
Property and equipment, net		101,032
Prepaid and other assets		409
German assets held for sale	$	105,554
Accounts payable and accrued expenses	$	9,908

9

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Assets Held for Sale

Other assets held for sale with a lower of carrying value or fair value less estimated costs to sell consists of the following (in thousands):

	September 30,		December 31,
	2009		2008
Land	$	79,049	$	46,018
Closed community		2,514		—
Condominium units		6,691		3,058
Assets held for sale	$	88,254	$	49,076

In the second quarter of 2009, we recorded our land parcels held for sale at the lower of their carrying value or fair value less estimated costs to sell. We used appraisals, market knowledge and broker opinions of value to determine fair value. As the carrying value of some of the assets was in excess of the fair value less estimated costs to sell, we recorded a charge of $1.3 million which is included in operating expenses under impairment of long-lived assets.

In the third quarter of 2009, all of the criteria were met for additional parcels of land, two closed construction sites and a closed property to be classified as assets held for sale. We recorded them at the lower of their carrying value or fair value less estimated costs to sell. We used appraisals, market knowledge and brokers opinions of value to determine fair value. As the carrying value of some of the assets was in excess of the fair value less estimated costs to sell, we recorded a charge of $0.8 million which is included in operating expenses under impairment of long-lived assets.

Assets Held and Used

In the second quarter of 2009, we recorded impairment charges of $15.8 million related to certain operating communities that are held and used as the carrying value of these assets was in excess of the fair value. We also recorded impairment charges of $7.9 million for certain land parcels held and used as the carrying value of these assets was in excess of the fair value. We used appraisals and recent sales to estimate fair value of all of these assets. The charges are included in operating expenses under impairment of long-lived assets.

In the third quarter of 2009, we recorded impairment charges of $9.1 million related to certain operating communities that are held and used as the carrying value of these assets was in excess of the fair value. We used an appraisal for one community and applied a cost of capital rate to the communities’ average net operating income to arrive at fair value for all the other communities. The impairment charge is included in operating expenses under impairment of long-lived assets.

10

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Fair Value Measurements of German Assets Held for Sale, Assets Held for Sale and Assets Held and Used

Upon designation as assets held for sale, we recorded the assets at the lower of carrying value or their fair value less estimated costs to sell. The following table details only assets held for sale and assets held and used where fair value was lower than the carrying value and an impairment loss was recorded (in thousands):

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable		Total
	September 30,		Identical Assets		Inputs		Inputs		Impairment
Asset	2009		(Level 1)		(Level 2)		(Level 3)		Losses
German assets held for sale	$	82,669	$	—	$	—	$	82,669	$	(52,414	)
Other assets held for sale		37,301		—		—		37,301		(2,142	)
Assets held and used		61,659		—		—		61,659		(32,820	)
	$	181,629	$	—	$	—	$	181,629	$	(87,376	)

Other Fair Value Information

Cash equivalents, accounts receivable, notes receivable, accounts payable and accrued expenses, equity investments and other current assets and liabilities are carried at amounts which reasonably approximate their fair values. At September 30, 2009, the carrying amount of our cost method investment is $5.5 million. The fair value of the cost method investment was not estimated as there were no events or changes in circumstances that may have a significant adverse effect on the fair value of the investment, and we determined that it is not practicable to estimate the fair value of the investment.

The fair value of our debt has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. We have applied Level 2 and Level 3 type inputs to determine the estimated fair value of our debt. Note that debt is reflected on the face of our consolidated balance sheets at the stated value, except for the German debt which was initially recorded at fair value at September 1, 2008. The following table details by category the principal amount, the average interest rate and the estimated fair market value of our debt (in thousands):

	Fixed Rate			Variable Rate
	Debt			Debt
Total Carrying Value	$	5,270		$	619,355
Average Interest Rate		6.8	%		3.1	%
Estimated Fair Market Value	$	5,489		$	530,037

Disclosure about fair value of financial instruments is based on pertinent information available to us at September 30, 2009.

4.   Investments in Unconsolidated Communities

During the first quarter of 2009, a U.K. venture in which we have a 20% interest sold three communities to a different U.K. venture in which we have a 10% interest. As a result of the gains on these asset sales recorded in the venture, we recorded earnings in unconsolidated communities of $19.0 million. When the first U.K. venture was formed, we established a bonus pool in respect to the venture for the benefit of employees and others responsible for the success of the venture. At the time, we agreed with our venture partner that after certain return thresholds were met, we would each reduce our percentage interests in the venture distributions with such excess to be used to fund

11

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

these bonus pools. During the first quarter of 2009, we recorded bonus expense of $1.1 million with respect to the bonus pool relating to the U.K. venture. We did not record any additional bonus expense related to this venture in the second and third quarters of 2009.

In March 2009, a venture in which we have a 20% interest received a notice of default from its lender for alleged violation of financial covenants and other matters. Based on the notice of default from the lender and poor rental experience in the venture, we considered our equity to be other than temporarily impaired and wrote off the balance, $1.1 million, in March 2009. In addition, based on discussions with the lender as of March 31, 2009, we believed that the lender did not intend to fund to the venture the amount that would be necessary to repay our receivables and accordingly, any repayment of our receivables from advances we made to the venture would need to be from excess proceeds from the ultimate sale of the community after the loan has been repaid. We did not believe that collectability of our receivable was reasonably assured and we wrote-down the carrying value of our receivable, $5.4 million, to zero in March 2009. We made additional advances of $0.8 million in the second and third quarters of 2009 which are fully reserved at September 30, 2009. In the third quarter of 2009, the residents were relocated to other senior living facilities and the facility was shut down. The lender is in the process of foreclosing on the asset.

Summarized S-X Rule 3-09 Income Statement Information

The following is summarized income statement information for an equity investee, PS UK Investment (Jersey) LP, a U.K. venture in which we own a 20% interest, for which annual audited financial statements are expected to be required for the year 2009 under S-X Rule 3-09 (in thousands):

			Net (Loss)
	Total		Income Before			Net
	Operating		Provision for			(loss)
	Revenues		Income Taxes			Income
Three Months Ended September 30, 2009	$	4,115	$	(1,411	)	$	(1,411	)
Three Months Ended September 30, 2008		3,910		(6,809	)		(6,809	)
Nine Months Ended September 30, 2009		9,869		18,414			18,414
Nine Months Ended September 30, 2008		14,761		15,634			15,634

The venture is treated as a partnership for federal income tax purposes. No provision for federal income taxes is made since taxable income or loss passes through and is reportable by the venture’s members.

5.   Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):

	September 30,		December 31,
	2009		2008
Accounts payable and accrued expenses	$	41,272	$	66,760
Accrued salaries and bonuses		38,403		30,123
Accrued employee health and other benefits		39,676		47,685
Accrued legal, audit and professional fees		6,719		8,933
Other accrued expenses		29,262		30,643
	$	155,332	$	184,144

12

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

6.   Bank Credit Facility and Debt

Bank Credit Facility

On March 23, 2009, we entered into the Eleventh Amendment to our Bank Credit Facility. The Eleventh Amendment, among other matters, suspended until May 1, 2009 the obligation of the lenders under the Bank Credit Facility to (1) advance any additional proceeds of the loans to the borrowers under the Bank Credit Facility or (2) issue any new letters of credit. However, the lenders agreed to renew certain scheduled outstanding letters of credit in accordance with the annual renewal provisions of such letters of credit. The Eleventh Amendment also waived compliance with certain financial covenants of the Bank Credit Facility through April 29, 2009 and the applicability of certain cross-default provisions through April 30, 2009.

The Eleventh Amendment also permanently reduced the aggregate commitments of the lenders under the Bank Credit Facility from $160.0 million to $118.0 million (outstanding borrowings of $93.5 million plus outstanding letters of credit of $24.5 million at the time of the Eleventh Amendment).

On April 28, 2009, we entered into the Twelfth Amendment to the Bank Credit Facility. The significant terms include:

•  waiver of all existing financial covenants through December 2, 2009, the maturity date of the Bank Credit Facility;

•  agreement for renewal of existing letters of credit;

•  an amendment fee of $0.5 million;

•  authorization to consummate certain transactions;

•  restriction on the disposition of assets except to permit the transfer of scheduled assets;

•  requirement to maintain minimum cash balance as of the last day of each month and of not less than $5 million at any time;

•  a cash sweep as of the last day of October and November 2009 to reduce principal equal to the greater of consolidated cash in excess of $35 million or $2 million; and

•  a permanent reduction of the commitment after an agreed-upon repayment of the outstanding balance from dispositions consented to by our lenders, federal income tax refunds of $20.8 million and payments received from the cash sweep.

On October 19, 2009, we entered into the Thirteenth Amendment to the Bank Credit Facility. The significant terms include:

•  an extension of the maturity date from December 2, 2009 to December 2, 2010;

•  renewal of existing letters of credit;

•  an amendment fee of $0.5 million of which $250,000 was paid on October 19, 2009 and $250,000 to be paid upon the earlier of the sale of properties or January 4, 2010;

•  principal payment of $6.0 million which was paid on October 19, 2009;

•  principal payments previously due on October 31 and November 30, 2009 are no longer due;

•  modifies the minimum liquidity covenant to not less than $10.0 million of unrestricted cash on hand the last day of the month;

13

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

•  modifies the restriction on the disposal of assets to permit disposition of certain assets as long as 50% of the net sale proceeds are allocated to the lenders;

•  the proceeds from the pending sale of 21 properties are allocated as follows:

•  a principal payment of $25 million;

•  $20 million deposited into a collateral account for the benefit of other creditors;

•  either cause a return of $3.7 million in letters of credit or make a principal payment of that same amount;

•  if the pending sale of the 21 properties does not close by June 30, 2010, we will either make a principal payment of $28.7 million or make a $5 million principal payment, pay an additional $1 million extension fee and grant mortgage liens junior to existing mortgages or a perfected first priority pledge of and security interest in, the equity interests in the entities owning 16 certain properties (the granting of such mortgages of security interest is subject to the existing mortgage lenders’ consent). If we are unable to deliver these items, the Bank Credit Facility will be in default and become due and payable; and

•  a permanent reduction of the commitment after future principal repayments or cancellation of letters of credit.

We have no borrowing availability under the Bank Credit Facility, and we have significant scheduled debt maturities in 2009 and 2010 and significant long-term debt that is in default. We are endeavoring to extend debt maturity dates, re-finance debt and obtain waivers from applicable lenders. We are engaged in discussions with various venture partners and third parties regarding the sale of certain assets with the purpose of increasing liquidity and reducing obligations to enable us to continue operations.

In April 2009, we received federal income tax refunds of $20.8 million which was used to pay down the Bank Credit Facility and $1 million of the proceeds from the sale of our equity interest and receivable from the Aston Gardens venture was also used to pay down the Bank Credit Facility. In June 2009, $2.5 million of proceeds from an agreement with Trinity’s prior owners (Note 12) was used to pay down the Bank Credit Facility. At September 30, 2009, the outstanding borrowings under the Bank Credit Facility were $68.9 million. On October 19, 2009, after paying $6.0 million of principal in connection with the Thirteenth Amendment, the outstanding borrowings under the Bank Credit Facility were $62.9 million.

Debt

At September 30, 2009, we had $624.6 million of outstanding debt with a weighted average interest rate of 3.13% as follows (in thousands):

	September 30,		December 31,
	2009		2008
Community mortgages	$	248,955	$	241,851
German communities(1)		200,034		185,901
Bank Credit Facility		68,878		95,000
Land loans		34,327		37,407
Other		28,286		30,655
Variable interest entity		23,225		23,905
Margin loan (auction rate securities)		20,920		21,412
	$	624,625	$	636,131

(1) The face amount of the debt related to the German communities was $219.3 million at September 30, 2009.

14

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Of the outstanding debt we had $5.3 million of fixed-rate debt with a weighted average interest rate of 6.82% and $619.3 million of variable rate debt with a weighted average interest rate of 3.10%.

Debt that is in default at September 30, 2009 consists of the following (in thousands):

	September 30,
	2009
German communities(1)	$	200,034
Community mortgages		147,930
Variable interest entity		23,225
Land loans		12,420
Other		28,286
	$	411,895

(1) The face amount of the debt related to the German communities was $219.3 million at September 30, 2009.

We are working with our lenders to either re-schedule certain of these obligations or obtain waivers.

For debt that is not in default, we have scheduled debt maturities as follows (in thousands):

			1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
	2009		2010		2010		2010		2010		Thereafter		Total
Bank Credit Facility(1)	$	68,878	$	—	$	—	$	—	$	—	$	—	$	68,878
Community mortgages		39,796		40,573		195		497		198		19,766		101,025
Land loans		21,907		—		—		—		—		—		21,907
Margin loan (auction rate securities)		20,920		—		—		—		—		—		20,920
	$	151,501	$	40,573	$	195	$	497	$	198	$	19,766	$	212,730

(1) As of 10/19/09, maturity date changed to 12/2/10 (subject to certain conditions, refer to discussion above).

Sunrise ventures have total debt of $4.2 billion with near-term scheduled debt maturities of $69.7 million in 2009 and $576.1 million in 2010. Of this $4.2 billion of debt, there is long-term debt that is in default of $1.4 billion. The debt in the ventures is non-recourse to us with respect to principal payment guarantees and we and our venture partners are working with the venture lenders to obtain covenant waivers. However, in certain cases, we have provided operating deficit and completion guarantees to the lenders or ventures. We have minority non-controlling interests in these ventures. See Note 12 of the Notes to Consolidated Financial Statements of our 2008 Form 10-K, as amended, for a list of our ventures and our related ownership interest.

7.   Gains on the Sale of Real Estate

We accounted for the sale of three communities in 2004 under the profit-sharing method of accounting as we provided a guarantee to make monthly payments to the buyer equal to the amount by which a net operating income target exceeded actual net operating income for the communities for an extended period of time. The guarantee expired in the second quarter of 2009 and we recorded a gain of approximately $8.9 million. In addition, we recognized gains of approximately $2.3 million and $9.9 million during the three and nine months ended September 30, 2009, respectively, relating to transactions which recognition of gain had been previously deferred due to various forms of continuing involvement and are being accounted for under the basis of performance method of accounting.

15

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

8.   Income Taxes

The (provision for) benefit from income taxes related to continuing operations was $(1.0) million and $33.2 million for the three months ended September 30, 2009 and 2008, respectively, and $1.4 million and $49.5 million for the nine months ended September 30, 2009 and 2008, respectively. Our effective tax (rate) benefit from continuing operations was (2.63)% and 46.9% for the three months ended September 30, 2009 and 2008, respectively, and 1.56% and 37.6% for the nine months ended September 30, 2009 and 2008, respectively. At December 31, 2008, we determined that deferred tax assets in excess of reversing tax liabilities were not likely to be realized and we recorded a valuation allowance on net deferred tax assets. Income tax expense of $4.8 million attributable to gains in discontinued operations recorded in the first quarter of 2009 reversed in the second quarter due to current period losses in discontinued operations. As of September 30, 2009, we are continuing to offset our net deferred tax asset by a full valuation allowance.

The IRS is currently examining our U.S. federal income tax returns for 2005 through 2008. There are no income tax returns under audit by the Canadian government with the years after 2004 remaining open and subject to audit. The German government is currently auditing income tax returns for the years 2006 through 2008. During the third quarter, the 2003-2005 German audits were closed resulting in no significant adjustments. There are no returns under audit by the U.K. government with years after 2004 remaining open and subject to audit. At this time, we do not expect the results from any income tax audit to have a material impact on our financial statements; however, it is reasonably possible that the amount of the FIN 48 state liability for unrecognized tax benefits could decrease by $2 to $3 million during the remainder of 2009.

9.   Stock-Based Compensation

In February 2009, we granted 14 employees non-qualified stock options to purchase 360,000 shares of common stock at a price of $0.77. One-third of the options vest yearly beginning in 2010. In 2009, 131,998 shares of restricted stock have vested.

In addition in May 2009, we accelerated the vesting of our former chief financial officer’s stock options and restricted stock per the terms of his separation agreement (refer to Note 11). The options expire 12 months after the termination of his consulting term, which can be up to nine months after his termination date of May 29, 2009. 70,859 shares of restricted stock and 750,000 options vested. We recorded non-cash compensation expense of $0.8 million as a result of the vesting acceleration.

In August 2009, we granted three employees non-qualified stock options to purchase 150,000 shares of common stock at a price of $2.34. These options vest one-third per year beginning in 2010.

16

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

10.   Commitments and Contingencies

Guarantees

The maximum potential amount of future fundings for outstanding guarantees, the carrying amount of the liability for expected future fundings at September 30, 2009 and fundings during 2009 are as follows (in thousands):

			ASC		ASC
			Guarantee		Contingencies
	Maximum		Topic		Topic		Total		Fundings
	Potential		Liability		Liability		Liability		from
	Amount		for Future		for Future		for Future		January 1, 2009
	of Future		Fundings at		Fundings at		Fundings at		through
Guarantee Type	Fundings		September 30, 2009		September 30, 2009		September 30, 2009		September 30, 2009
Operating deficit		Uncapped	$	476	$	500	$	976	$	—
Income support		Uncapped		560		12,241		12,801		—
Other		—		—		—		—		125
Total			$	1,036	$	12,741	$	13,777	$	125

Aston Gardens

In July 2008, we received notice of default from our equity partner alleging a default under our management agreement for six communities as a result of the venture’s receipt of a notice of default from a lender. In December 2008, the venture’s debt was restructured and we entered into an agreement with our venture partner under which we agreed to resign as managing member of the venture and manager of the communities when we are released from various guarantees provided to the venture’s lender.

At loan inception, we provided the lender a guarantee of monthly principal and interest payments and during 2008 we made payments under this guarantee since the venture did not have enough available cash flow to cover the default interest payments. Advances under this guarantee are recoverable in the form of a loan in a capital or refinancing event prior to the repayment of capital to the partners but subordinate to the repayment of the debt. Through April 30, 2009, the date we sold our equity interest in Aston Gardens, we had funded $7.0 million under this guarantee which was fully reserved at the time of sale.

On April 30, 2009, we sold our 25% equity interest in the venture and were released from all guarantee obligations. Our management contract was terminated on April 30, 2009. We received proceeds of approximately $4.8 million for our equity interest and our receivable from the venture for fundings under the operating deficit guarantees. We received management fees of $3.2 million and $3.7 million in 2008 and 2007, respectively.

Fountains

In 2008, the Fountains venture, in which we hold a 20% interest, failed to comply with the financial covenants in the venture’s loan agreement. The lender has been charging a default rate of interest (5.51% at September 30, 2009) since April 2008. At loan inception, we provided the lender a guarantee of operating deficits including payments of monthly principal and interest payments, and in 2008 we funded payments under this guarantee as the venture did not have enough available cash flow to cover the full amount of the interest payments at the default rate. Advances under this guarantee are recoverable in the form of a loan to the venture, which must be repaid prior to the repayment of equity capital to the partners, but is subordinate to the repayment of other venture debt. Through September 30, 2009, we have funded $14.2 million under this operating deficit guarantee which also has been written-down to zero. These advances under the operating deficit guarantee are in addition to the $12.8 million we have funded under our income support guarantee to our venture partner, which has been written-down to zero.

17

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

In January 2009, we informed the venture’s lenders and our venture partner that we were suspending payment of default interest and payments under the income support guarantee, and that we would seek a comprehensive restructuring of the loan, our operating deficit guarantees and our income support guarantee. Our failure to pay default interest on the loan was an additional default of the loan agreement. In October 2009, we entered into agreements with our venture partner, as well as with the lender to release us from all claims that our venture partner and the lender had against us prior to the date of the agreements and from all of our future funding obligations in connection with the Fountains portfolio.

Pursuant to the agreements relating to the Fountains portfolio, the lender and our venture partner released us from all past and future funding commitments in connection with the Fountains portfolio, as well as from all other liabilities prior to the date of the agreements arising under the Fountains joint venture, loan and management agreements, including obligations under operating deficit and income support obligations. We will retain certain management and operating obligations going forward during a temporary transition period.

In exchange for these releases, we have, among other things:

•  Transferred our 20-percent ownership interest in the Fountains joint venture to our joint venture partner;

•  Contributed vacant land parcels adjacent to six of the Fountains communities and owned by us to the Fountains venture;

•  Agreed to transition from management of the 16 Fountains communities as soon as the transition closing conditions are met and the new manager has obtained the regulatory approvals necessary to assume control of the facilities (we expect to transition from management of the Fountains communities during the course of 2010); and

•  Agreed to repay the venture the management fee we had earned to date in 2009 of $1.8 million.

The contributed vacant land parcels were carried on our consolidated balance sheet at a book value of $12.9 million at September 30, 2009, in addition to a guarantee liability of $12.9 million both of which will be written off upon closing of the transaction resulting in no gain or loss.

Senior Living Condominium Project

In 2006, we sold a majority interest in one condominium venture and one related assisted living venture to third parties. In conjunction with the development agreement for this project, we agreed to be responsible for actual project costs in excess of budgeted project costs of more than $10.0 million (subject to certain limited exceptions). The $10.0 million is recoverable as a loan from the venture. Through September 30, 2009, we have paid $50.7 million in cost overruns. Construction of this project is now complete. We account for the condominium and assisted living ventures under the profit-sharing method of accounting, and our investment carrying value at September 30, 2009 is $13.5 million for the two ventures, which includes our $10.0 million recoverable loan and advances we have made to the ventures. We recorded a loss of $2.9 million and $9.9 million from the two ventures in the three and nine months ended September 30, 2009, respectively. The pace of sales of condominium units and prices could impact the recovery of our investment carrying value. The weak economy in the Washington, D.C. area will require us to implement more aggressive marketing and sales plans. No assurance can be given that additional pre-tax charges will not be required in subsequent periods with respect to this condominium venture.

In July 2009, the lender notified us that an event of default had occurred. The event of default was related to providing certain financial information for the venture that the lender had previously requested. In October 2009, we received a notice of default related to the nonpayment of interest. We are in discussions with the lender on these matters.

18

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Agreements with Marriott International, Inc.

Our agreements with Marriott International, Inc. (“Marriott”) related to our purchase of Marriott Senior Living Services, Inc. in 2003 provide that Marriott has the right to demand that we provide cash collateral security for Assignee Reimbursement Obligations, as defined in the agreements, in the event that our implied debt rating is not at least B- by Standard and Poors or B1 by Moody’s Investor Services. Assignee Reimbursement Obligations relate to possible liability with respect to leases assigned to us in 2003 and entrance fee obligations assumed by us in 2003 that remain outstanding (approximately $53.4 million at September 30, 2009). Marriott has informed us that they reserve all of their rights to issue a Notice of Collateral Event under the Assignment and Reimbursement Agreement.

Other

Generally, the financing obtained by our ventures is non-recourse to the venture members, with the exception of the debt repayment guarantees discussed above. However, we have entered into guarantees with the lenders with respect to acts which we believe are in our control, such as fraud or voluntary bankruptcy of the venture, that create exceptions to the non-recourse nature of debt. If such acts were to occur, the full amount of the venture debt could become recourse to us. The combined amount of venture debt underlying these guarantees is approximately $3.3 billion at September 30, 2009. We have not funded under these guarantees, and do not expect to fund under such guarantees in the future.

To the extent that a third party fails to satisfy an obligation with respect to two continuing care retirement communities we manage, we would be required to repay this obligation, the majority of which is expected to be refinanced with proceeds from the issuance of entrance fees as new residents enter the communities. At September 30, 2009, the remaining liability under this obligation is $45.2 million. We have not funded under these guarantees, and do not expect to fund under such guarantees in the future.

Legal Proceedings

HCP, Inc.

In June 2009, various affiliates of HCP, Inc. and their associated tenant entities filed nine complaints in the Delaware Court of Chancery naming the Company and several of its subsidiaries as defendants. The complaints allege monetary and non-monetary defaults under a series of owner and management agreements that govern nine portfolios comprised of 64 properties with annual management fees of approximately $25.4 million in 2008 and $15.5 million for the nine months ended September 30, 2009. We have $18.5 million of unamortized management contract intangibles relating to these contracts. In each case, the plaintiffs include (a) the HCP affiliates that own various assisted living community properties that are managed by Sunrise, and (b) certain tenant entities alleged to be independent from HCP that lease those properties from HCP affiliates and have management agreements with Sunrise. The complaints assert claims for (1) declaratory judgment; (2) injunctive relief; (3) breach of contract; (4) breach of fiduciary duties; (5) aiding and abetting breach of fiduciary duty; (6) equitable accounting; and (7) constructive trust. The complaints seek equitable relief, including a declaration of a right to terminate the agreements, disgorgement, unspecified money damages, and attorneys’ fees. Plaintiffs filed a motion to expedite the proceedings. Following briefing by the parties, the Delaware Court of Chancery on July 9, 2009 denied the Plaintiff’s motion. In July 2009, various affiliates of HCP, Inc. and their associated tenant entities refiled a complaint, which had been voluntarily withdrawn in the Delaware actions, in the federal district court for the Eastern District of Virginia (the “Virginia action”). On August 17, 2009, Sunrise answered all of the complaints in both jurisdictions and asserted counterclaims.

19

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Trinity OIG Investigation and Qui Tam Action

As previously disclosed, on September 14, 2006, we acquired all of the outstanding stock of Trinity Hospice Inc. (“Trinity”). As a result of this transaction, Trinity became an indirect, wholly owned subsidiary of the Company. On January 3, 2007, Trinity received a subpoena from the Phoenix field office of the OIG requesting certain information regarding Trinity’s operations in three locations for the period January 1, 2000 through June 30, 2006, a period that was prior to the Company’s acquisition of Trinity. The Company was advised that the subpoena was issued in connection with an investigation being conducted by the Commercial Litigation Branch of the U.S. Department of Justice and the civil division of the U.S. Attorney’s office in Arizona. The subpoena indicates that the OIG is investigating possible improper Medicare billing under the FCA. In addition to recovery of any Medicare reimbursements previously paid for false claims, an entity found to have submitted false claims under the FCA may be subject to treble damages plus a fine of between $5,500 and $11,000 for each false claim submitted. Trinity has complied with the subpoena and continues to supplement its responses as requested.

On September 11, 2007, Trinity and the Company were served with a complaint filed on September 5, 2007 in the United States District Court for the District of Arizona. That filing amended a complaint filed under seal on November 21, 2005 by four former employees of Trinity under the qui tam provisions of the FCA. On July 3, 2008, an amended complaint was revised in the form of a second amended complaint which replaced the loss sustained range of $75 million to $100 million with an alleged loss by the United States of at least $100 million. The original complaint named KRG Capital, LLC (an affiliate of former stockholders of Trinity) and Trinity Hospice LLC (a subsidiary of Trinity) as defendants. The second amended complaint names Sunrise Senior Living, Inc., KRG Capital, LLC, aka KRG Capital Partners, LLC, KRG Capital, LLC, KRG Capital Fund II, L.P., KRG Capital Fund II (PA), L.P., KRG Capital Fund II (FF), L.P., KRG Co-Investment, L.L.C., American Capital Strategies, LTD, and Trinity as defendants. On October 21, 2008, the United States, through the Civil Division of the U.S. Department of Justice, and the U.S. Attorney’s Office for the District of Arizona, filed a motion with the District Court to intervene in the pending case, but only as the case relates to defendant Trinity Hospice, Inc.

All parties entered into a settlement agreement on June 3, 2009 which was subsequently approved by the District Court. The lawsuit is styled United States ex rel. Joyce Roberts, et al., v. KRG Capital, LLC, et al., CV05 3758 PHX-MEA (D. Ariz.).

On February 13, 2008, Trinity received a subpoena from the Los Angeles regional office of the OIG requesting information regarding Trinity’s operations in 19 locations for the period between December 1, 1998 through February 12, 2008. It is anticipated that further response to this subpoena, as well as the subpoena issued by the OIG Phoenix field office noted above, will be unnecessary upon final closure of the Qui Tam action.

IRS Audit

The Internal Revenue Service is auditing our federal income tax returns for the years ended December 31, 2005 through 2008. In July 2008, our 2005 federal income tax return audit was settled with the IRS, resulting in a tax liability of approximately $0.2 million. In January 2009, the IRS reopened the audit of our 2005 federal income tax return as a result of a refund claim filed with our 2007 federal income tax return relating to the 2007 net operating loss carryback for which we were seeking reimbursement of a certain portion of the federal income taxes we had paid in 2005.

In February 2009, we settled with the IRS on our employment tax audits and paid a penalty of $0.2 million in November 2008 for the years 2004, 2005, and 2006. The IRS determined that we were liable for payroll tax deposit penalties on stock option exercises during 2004, 2005, and 2006 for certain withholdings that were made after the prescribed due dates.

20

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

SEC Investigation

We previously announced on December 11, 2006 that we had received a request from the SEC for information about insider stock sales, timing of stock option grants and matters relating to our historical accounting practices that had been raised in media reports in the latter part of November 2006 following receipt of a letter by us from the Service Employees International Union. On May 25, 2007, we were advised by the staff of the SEC that it had commenced a formal investigation. We have fully cooperated, and intend to continue to fully cooperate, with the SEC. The Company has commenced discussions with the SEC staff concerning potential resolution of the matter and conclusion of the investigation.

Putative Class Action Litigation

Two putative securities class actions, styled United Food & Commercial Workers Union Local 880-Retail Food Employers Joint Pension Fund, et al. v. Sunrise Senior Living, Inc., et al., Case No. 1:07CV00102, and First New York Securities, L.L.C. v. Sunrise Senior Living, Inc., et al., Case No. 1:07CV000294, were filed in the U.S. District Court for the District of Columbia on January 16, 2007 and February 8, 2007, respectively. Both complaints alleged securities law violations by Sunrise and certain of its current or former officers and directors based on allegedly improper accounting practices and stock option backdating, violations of generally accepted accounting principles, false and misleading corporate disclosures, and insider trading of Sunrise stock. Both sought to certify a class for the period August 4, 2005 through June 15, 2006, and both requested damages and equitable relief, including an accounting and disgorgement. Pursuant to procedures provided by statute, two other parties, the Miami General Employees’ & Sanitation Employees’ Retirement Trust and the Oklahoma Firefighters Pension and Retirement System, appeared and jointly moved for consolidation of the two securities cases and appointment as the lead plaintiffs, which the Court ultimately approved. The cases were consolidated on July 31, 2007. Thereafter, a stipulation was submitted pursuant to which the new putative class plaintiffs filed their consolidated amended complaint (under the caption In re Sunrise Senior Living, Inc. Securities Litigation, Case No. 07-CV-00102-RBW) on June 6, 2008. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and names as defendants the Company, Paul J. Klaassen, Teresa M. Klaassen, Thomas B. Newell, Tiffany L. Tomasso, Larry E. Hulse, Carl G. Adams, Barron Anschutz, and Kenneth J. Abod.

On February 27, 2009, Sunrise and its current or former directors or officers who were named individually as defendants entered into an agreement. The settlement calls for the certification by the court of a class consisting of persons (with certain exceptions) who purchased Sunrise common stock between February 26, 2004 and July 28, 2006, and payment of $13.5 million in cash into an interest-bearing escrow account by March 6, 2009.

Concurrently with entering into the settlement agreement, Sunrise and the Individual Defendants also are entering into agreements and releases with two of its insurance carriers, which provided primary and excess insurance coverage, respectively, under certain Directors’ and Officers’ Liability insurance policies for the relevant periods. The two insurance carriers are combining to pay $13.4 million toward the settlement amount, which will exhaust the coverage limits under the primary policy (after taking account of prior payments for related defense costs), but will not exhaust coverage limits under the excess policy. These payments pursuant to the settlement were made under the then applicable policies and, therefore, do not reduce the amount of insurance proceeds available under current policies now in effect. Sunrise and the Individual Defendants have provided releases to the carrier. Taking into account the insurance contribution, the net cost of the settlement of the putative securities class action lawsuit to Sunrise is expected to be approximately $0.1 million. No amounts are to be paid by the Individual Defendants.

The settlement agreement was approved by the U.S. District Court for the District of Columbia on June 26, 2009 and follows the settlement agreement entered into on February 19, 2009 by Sunrise and the individuals named as defendants in two putative stockholder derivative actions brought by certain alleged stockholders of Sunrise for the

21

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

benefit of the company, entitled In re Sunrise Senior Living Derivative Litigation, Inc., Case No. 1:07CV00143-RBW and Young, et al. v. Klaassen, et al., Case No. 2770-N (CCNCC) which settlement agreement and related funding arrangements are described in greater detail below.

Putative Shareholder Derivative Litigation

On January 19, 2007, the first of three putative shareholder derivative complaints was filed in the U.S. District Court for the District of Columbia against certain of our current and former directors and officers, and naming us as a nominal defendant. Counsel for the plaintiffs subsequently agreed among themselves to the appointment of lead plaintiffs and lead counsel. On June 29, 2007, the lead plaintiffs filed a Consolidated Shareholder Derivative Complaint, again naming us as a nominal defendant, and naming as individual defendants Paul J. Klaassen, Teresa M. Klaassen, Ronald V. Aprahamian, Craig R. Callen, Thomas J. Donohue, J. Douglas Holladay, William G. Little, David G. Bradley, Peter A. Klisares, Scott F. Meadow, Robert R. Slager, Thomas B. Newell, Tiffany L. Tomasso, John F. Gaul, Bradley G. Rush, Carl Adams, David W. Faeder, Larry E. Hulse, Timothy S. Smick, Brian C. Swinton and Christian B. A. Slavin. The consolidated case is captioned: In re Sunrise Senior Living Derivative Litigation, Inc, Case No. 1:07CV00143 (the “District of Columbia action”). The consolidated complaint alleges violations of federal securities laws and breaches of fiduciary duty by the individual defendants, arising out of the same matters as are raised in the purported class action litigation described above. The plaintiffs seek damages and equitable relief on behalf of Sunrise. We and the individual defendants filed separate motions to dismiss the consolidated complaint. Subsequently, the plaintiffs filed an amended consolidated complaint that did not substantially alter the nature of their claims. The amended consolidated complaint was accepted by the Court and deemed to have been filed on March 28, 2008. We and the individual defendants filed motions to dismiss the amended consolidated complaint on June 16, 2008. The plaintiffs also filed a motion to lift the stay on discovery in this derivative suit. The motion was denied after briefing.

On March 6, 2007, a putative shareholder derivative complaint was filed in the Court of Chancery in the State of Delaware against Paul J. Klaassen, Teresa M. Klaassen, Ronald V. Aprahamian, Craig R. Callen, Thomas J. Donohue, J. Douglas Holladay, David G. Bradley, Robert R. Slager, Thomas B. Newell, Tiffany L. Tomasso, Carl Adams, David W. Faeder, Larry E. Hulse, Timothy S. Smick, Brian C. Swinton and Christian B. A. Slavin, and naming us as a nominal defendant. The case is captioned Peter V. Young, et al. v. Paul J. Klaassen, et al., Case No. 2770-N (CCNCC) (the “Delaware action”). The complaint alleges breaches of fiduciary duty by the individual defendants arising out of the grant of certain stock options that are the subject of the purported class action and shareholder derivative litigation described above. The plaintiffs seek damages and equitable relief on behalf of Sunrise. We and the individual defendants separately filed motions to dismiss this complaint on June 6, 2007 and June 13, 2007. The plaintiffs amended their original complaint on September 17, 2007. On November 2, 2007, we and the individual defendants moved to dismiss the amended complaint. In connection with the motions to dismiss, and at plaintiffs’ request, the Chancery Court issued an order on April 25, 2008 directing us to produce a limited set of documents relating to the Special Independent Committee’s findings with respect to historic stock option grants. We produced those documents to the plaintiffs on May 16, 2008. Supplemental briefing on defendants’ motions to dismiss has been completed and, while the motions were pending, the plaintiffs requested that the Chancery Court stay the action, at least temporarily. The defendants did not oppose that request, and the Chancery Court granted an indefinite stay of proceedings on November 19, 2008, and directed the parties to provide a further status report by February 1, 2009. Following the parties’ status report, in which it was proposed that the stay remain in place, the Chancery Court extended the stay on February 17, 2009, and directed the parties to provide a further report by May 4, 2009.

On February 19, 2009, the Company and the individual defendants entered into an agreement to settle the District of Columbia and Delaware actions. Under the terms of this settlement, the Company, in addition to corporate governance measures that it already has implemented or is in the process of implementing, has agreed to (1) require independent directors to certify that they are independent under the rules of the New York Stock

22

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Exchange and to give prompt notification of any changes in their status that would render them no longer independent and (2) implement a minimum two-year vesting period, with appropriate exceptions, for stock option awards to employees. In addition, Paul J. Klaassen, the Company’s non-executive chairman, and the Company have agreed that the 700,000 stock options granted to Mr. Klaassen in conjunction with his previous employment agreement executed in September 2000 will be repriced from (a) $8.50 per share, the price set on September 11, 2000 by the Compensation Committee of the Company’s Board based on the prior day’s closing price, to (b) $13.09 per share, the closing price on the business day prior to November 10, 2000, the date on which the Company’s full Board approved the terms of the employment agreement. The agreement also provides that if plaintiffs in the District of Columbia action apply to the court for an award of attorneys’ fees and expenses, the Company and/or its insurers will pay the amount so awarded, not to exceed $1.0 million, within 10 days following final approval of the settlement and the fee and expense award. Plaintiffs in the Delaware action will not make any separate application for an award of fees or expenses. The amount of attorneys’ fees and expenses that the court awards to plaintiffs is to be funded by one of the Company’s directors’ and officers’ liability insurance carriers under an applicable policy of insurance. No amounts are to be paid by the Company or by the individual defendants in the District of Columbia and Delaware actions. The settlement was approved by the U.S. District Court for the District of Columbia on June 26, 2009. On August 4, 2009, the court in the Delaware action entered an order formally dismissing that action.

Other Pending Lawsuits and Claims

In addition to the lawsuits and litigation matters described above, we are involved in various lawsuits and claims arising in the normal course of business. In the opinion of management, although the outcomes of these other suits and claims are uncertain, in the aggregate they are not expected to have a material adverse effect on our business, financial condition, and results of operations.

11.   Severance and Restructuring Plan

In May 2009, we announced a plan to continue to reduce corporate expenses through reorganization of our corporate cost structure, including a reduction in spending related to, among other areas, administrative processes, vendors, and consultants. The plan is designed to reduce our annual recurring general and administrative expenses (including expenses previously classified as venture expense) by over $20 million, from our 2009 budgeted annual recurring level of approximately $120 million (after the sale of Greystone, which is presented in discontinued operations in our financial statements) to approximately $100 million, and to reduce our centrally administered services which are charged to the communities by approximately $1.5 million. Under the plan, approximately 150 positions will be eliminated. As of September 30, 2009, we have eliminated 114 positions and will be eliminating an additional 49 positions by early 2010. We have recorded severance expense of $5.6 million as a result of the plan through September 30, 2009 and expect to record an additional $0.6 million through early 2010. These costs are incremental to the restructuring plan implemented by us in 2008, which provided for the elimination of 165 positions and corresponding expense reductions.

In May 2009, we entered into a separation agreement with our chief financial officer, Richard Nadeau, in connection with this plan. Pursuant to the separation agreement, Mr. Nadeau’s employment with us terminated effective as of May 29, 2009. Pursuant to Mr. Nadeau’s employment agreement, Mr. Nadeau received severance benefits that included a lump sum cash payment of $1.4 million. In addition, Mr. Nadeau received a bonus in the amount of $0.5 million and Mr. Nadeau’s outstanding and unvested stock options, restricted stock and other long-term equity compensation awards were fully vested, resulting in a non-cash compensation expense to us of $0.8 million.

In September 2009, we terminated a portion of our lease on our corporate headquarters in McLean, Virginia. We recorded a charge of $2.7 million related to the termination.

23

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

The following table reflects the activity related to our severance and restructuring plans during the nine months ended September 30, 2009:

	Liability at						Cash Payments			Liability at
	January 1,		Additional				and Other			September 30,
	2009		Charges		Adjustments		Settlements			2009
(In thousands)
Voluntary severance	$	3,312	$	1,066	$	—	$	(4,105	)	$	273
Involuntary severance		1,518		9,045		—		(8,781	)		1,782
CEO retirement compensation		1,523		41		—		—			1,564
Professional fees		—		12,523		—		(12,523	)		—
Lease termination costs		2,394		3,208		591		(2,576	)		3,617
	$	8,747	$	25,883	$	591	$	(27,985	)	$	7,236

Included in the above table is legal and professional fees of $4.3 million, $3.7 million and $4.6 million in the first, second and third quarters, respectively, relating to corporate restructuring.

12.   German Assets Held for Sale and Discontinued Operations

German Assets Held for Sale

We own nine communities (two of which are closed) in Germany. The debt related to these communities has partial recourse to us as the debt for four of the communities of €50.0 million ($73.0 million at September 30, 2009) has a stipulated release price for each community and for the remaining five communities, we have provided guarantees to the lenders of the repayment of the monthly interest payments and principal amortization and operating shortfalls until the maturity dates of the loans. As a result of the violation of a covenant in one of the loan documents, one of the lenders has asserted that we are effectively obligated to repay a portion of the principal at this time. Subsequent to September 30, 2009, in connection with the German debt restructure, we have settled with this lender. The face amount of the total debt related to the German communities at September 30, 2009 is $219.3 million.

In January 2009, we informed the lenders to our German communities and the Hoesel land, an undeveloped land parcel, that our German subsidiary was suspending payment of principal and interest on all loans for our German communities and that we would seek a comprehensive restructuring of the loans and our operating deficit guarantees. As a result of the failure to make payments of principal and interest on the loans for our German communities, we are in default of the loan agreements but have entered into standstill agreements with the lenders pursuant to which the lenders have agreed not to foreclose on the communities that are collateral for their loans or to commence or prosecute any action or proceeding to enforce their demand for payment by us pursuant to our operating deficit agreements until the earliest of the occurrence of certain other events relating to the loans.

In October 2009, we entered into a restructuring agreement, in the form of a binding term sheet, with two of our lenders to seven of the nine communities, to settle and compromise their claims against us, including under operating deficit and principal repayment guarantees provided by us in support of our German subsidiaries. These two lenders contended that these claims had an aggregate value of approximately $121.6 million. The binding term sheet contemplates that, on or before the first anniversary of the execution of definitive documentation for the restructuring, certain other of our identified lenders may elect to participate in the restructuring with respect to their asserted claims. The claims being settled by the two lenders represent approximately 77.5 percent of the aggregate amount of claims asserted by the lenders that may elect to participate in the restructuring transaction.

The restructuring agreement provides that the electing lenders will release and discharge us from certain claims they may have against us. We will issue to the lenders that elect to participate in the restructuring on or before

24

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

the first execution of the definitive documentation, their pro rata share of up to an aggregate of 5 million shares of our common stock and will grant mortgages for the benefit of all electing lenders on certain of our unencumbered North American properties. Following the first execution of the definitive documentation for the restructuring, we will pursue the sale of such mortgaged properties and distribute the net sale proceeds to the electing lenders. We have guaranteed that, within 30 months of the first execution of the definitive documentation for the restructuring, the electing lenders will receive a minimum of $58.3 million from the net proceeds of any such sale, which equals 80 percent of the most recent aggregate appraised value of these properties. If the electing lenders do not receive at least $58.3 million by such date, we will make payment to cover any shortfall or, at such lenders’ option, convey to them the remaining unsold properties.

In addition, we will market for sale the German assisted living communities subject to loan agreements with the electing lenders and will remain responsible for all costs of operating, preserving and maintaining these communities until the earlier of either their sale or December 31, 2010.

The closing of the transaction, including the execution of the definitive documentation, the release of claims and the issuance of Sunrise common stock, is conditioned upon receipt of consent for the transaction from Bank of America, N.A., as the administrative agent under our Bank Credit Facility, on or before November 11, 2009. In accordance with the binding term sheet, definitive documentation shall be executed as soon as reasonably possible (but no later than 40 days) after the receipt of such required consent.

We continue to be liable under certain operating deficit and repayment guarantees for the Klein Flottbeck and Wiesbaden communities, and certain principal repayment guarantees for the Hoesel land which is not part of the restructuring agreement.

As of September 30, 2009, we have classified the German communities as assets held for sale. During the second quarter of 2009, we classified the German communities as assets held for sale as all of the following criteria were met:

•  Executive management has committed to a plan to sell the assets;

•  The assets are available for immediate sale in their present condition;

•  There is an active program to locate a buyer and other actions required to complete the sale have been initiated;

•  The assets are being actively marketed; and

•  The sale of the assets is probable and it is unlikely that significant changes to the sale plan will be made.

Upon designation as assets held for sale, we recorded the assets at the lower of their carrying value or their fair value less estimated costs to sell. We used the average of the bids received to date in the determination of fair value. As the carrying value of a majority of the assets was in excess of the fair value less estimated costs to sell, during the second quarter of 2009 we recorded a charge of $52.4 million which is included in discontinued operations. Also, upon designation as assets held for sale, the results of operations for the German communities are reported as discontinued operations.

25

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

The German assets held for sale at September 30, 2009 consists of the following (in thousands):

	September 30,
	2009
Cash and cash equivalents	$	897
Accounts receivable, net		3,216
Property and equipment, net		101,032
Prepaid and other assets		409
German assets held for sale	$	105,554
Accounts payable and accrued expenses	$	9,908

Discontinued Operations

In March 2009, we sold our Greystone subsidiary and our interests in Greystone seed capital partnerships to an entity controlled by Michael Lanahan and Paul Steinhoff, two senior executives of the Greystone subsidiary. Total consideration was (i) $2,000,000 in cash at closing; (ii) $5,700,000 in short-term notes, (iii) a $6,000,000 7-year note (iv) a $2,500,000 note payable, and (v) 35% of the net proceeds received by the seed capital investors for each of the seed capital interests purchased from us. We collected $5.7 million of short-term notes through September 30, 2009.

As Greystone’s contracts were multiple element arrangements and there was not sufficient objective and reliable evidence of the fair value of undelivered elements at each billing milestone, revenue recognition was deferred until the completion of the development contract. The sale of Greystone generated a book gain resulting from the realization of previously deferred revenue. The sale of Greystone generated a tax loss of approximately $40 million. Due to the uncertainty of collectability of the $6.0 million note, initial gain recognition is not appropriate and gain will be recognized as payment is received. The $2.5 million note payable is contingent on future income of Greystone and gain will be recognized when the contingency is resolved and consideration is received.

In the fourth quarter of 2008, we determined not to provide any additional funding to our Trinity subsidiary due to our review of our future cash requirements. As of December 31, 2008, Trinity had ceased operations. In order to resolve and settle the claims among us and Trinity’s prior owners, in June 2009, we entered into a settlement agreement with the former majority stockholders of Trinity, which, among other matters, provides for the release and discharge of all claims and causes of action between the parties to the settlement agreement. In consideration of the settlement agreement, the former majority stockholders of Trinity paid us an aggregate amount of approximately $9.8 million. The parties to the settlement agreement also agreed to cooperate to achieve voluntary dismissal of certain litigation matters.

We had previously recorded a receivable of $2.7 million from the former stockholders of Trinity for various liabilities relating to events occurring prior to our purchase of Trinity. Accordingly, $2.7 million of the proceeds were applied against the receivable and the remaining amount of $7.1 million has been recorded as income from discontinued operations.

In December 2008, two wholly owned communities were sold to unrelated third parties for which we have no continuing involvement. In the second quarter of 2009, a wholly owned community ceased operations. All three of these communities are classified as discontinued operations. In the third quarter of 2009, a wholly owned community was sold to an unrelated third party for approximately $2.0 million. We received $0.3 million of cash and a note receivable for $1.7 million, recognizing gain of $0.3 million. We have no continuing involvement with this property.

26

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

The results of operations for our German communities, Greystone, Trinity and the four communities have been reclassified to discontinued operations. The following amounts related to our German communities, Greystone, Trinity and the four communities have been segregated from continuing operations and reported as discontinued operations (in thousands):

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2009			2008			2009			2008
Revenue	$	8,231		$	23,355		$	29,975		$	70,635
Expenses		(9,432	)		(41,486	)		(42,200	)		(123,745	)
Impairment losses		—			—			(52,414	)		—
Other expense		(4,666	)		(2,923	)		(6,412	)		(2,884	)
Gain on sale		344			—			24,092			—
Income taxes		—			2,274			—			14,304
Extraordinary loss, net of tax		—			(13,255	)		—			(13,255	)
Loss from discontinued operations	$	(5,523	)	$	(32,035	)	$	(46,959	)	$	(54,945	)

13.   Net Loss per Common Share

The following table summarizes the computation of basic and diluted net loss per share amounts presented in the accompanying consolidated statements of operations (in thousands, except per share data):

	For the Three Months
	Ended September 30,
	2009			2008
Loss attributable to common shareholders:
Loss before discontinued operations, net of noncontrolling interests	$	(38,879	)	$	(37,884	)
Loss from discontinued operations, net of noncontrolling interests		(5,523	)		(30,782	)
Net loss	$	(44,402	)	$	(68,666	)
Weighted-average shares outstanding — basic and diluted		50,682			50,346
Basic and diluted net loss per common share
Loss before discontinued operations, net of noncontrolling interests	$	(0.77	)	$	(0.75	)
Loss from discontinued operations, net of noncontrolling interests		(0.11	)		(0.61	)
Net loss per share attributable to common shareholders	$	(0.88	)	$	(1.36	)

	For the Nine Months
	Ended September 30,
	2009			2008
Loss attributable to common shareholders:
Loss before discontinued operations, net of noncontrolling interests	$	(97,578	)	$	(82,583	)
Loss from discontinued operations, net of noncontrolling interests		(46,773	)		(50,984	)
Net loss	$	(144,351	)	$	(133,567	)
Weighted-average shares outstanding — basic and diluted		50,620			50,317
Basic and diluted net loss per common share
Loss before discontinued operations, net of noncontrolling interests	$	(1.93	)	$	(1.64	)
Loss from discontinued operations, net of noncontrolling interests		(0.92	)		(1.01	)
Net loss per share attributable to common shareholders	$	(2.85	)	$	(2.65	)

27

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Options and restricted stock are included under the treasury stock method to the extent they are dilutive. Shares issuable upon exercise of stock options of 4,668,152 and 3,239,297 for the three months ended September 30, 2009 and 2008, respectively, and 4,751,099 and 3,261,235 for the nine months ended September 30, 2009 and 2008, respectively, have been excluded from the computation because the effect of their inclusion would be anti-dilutive.

14.   Information about Sunrise’s Segments

Effective in 2009, we changed our operating segments.  In 2008, we reported five operating segments: domestic operations, international operations (Canada and the United Kingdom), Germany, Greystone and Trinity. We now have six operating segments for which operating results are regularly reviewed by our chief operating decision makers:

North American Management, which is the results from the management of third party, joint venture and wholly owned/leased Sunrise senior living communities in the United States and Canada.

North American Development, which is the results from the development of Sunrise senior living communities in the United States and Canada.

Equity Method Investments, which is the results from our investment in domestic and international ventures.

Consolidated (Wholly Owned/Leased), which is the results from the operation of wholly owned and leased Sunrise senior living communities in the United States and Canada net of an allocated management fee of $6.9 million and $7.8 million for the three months ended September 30, 2009 and 2008, respectively, and $20.6 million and $21.2 million for the nine months ended September 30, 2009 and 2008, respectively.

United Kingdom, which is the results from the development and management of Sunrise senior living communities in the United Kingdom.

Germany, which is the results from the management of nine (two of which are closed) Sunrise senior living communities in Germany through September 1, 2008. The operation of nine Sunrise senior living communities after September 1, 2008 when we began consolidating the communities are included in discontinued operations.

The old North American segment was split into the new North American Management, North American Development, Equity Method Investments and Consolidated (Wholly Owned/Leased) segments. Results from Canadian operations are now included in the North American Management and Wholly Owned/Leased segments, while previously they were included in the International segment. The operating results from the United Kingdom development and management activities are now its own separate segment. The Germany segment remains unchanged. Greystone, which was sold in March 2009, and Trinity, which ceased operations in December 2008, are now reported as discontinued operations.

Our historical segment reporting has been restated to reflect the changes made in 2009.

28

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

Segment results are as follows (in thousands):

	For the Three Months Ended September 30, 2009
										Consolidated									Unallocated
							Equity			(Wholly						Germany			Corporate
	North American			North American			Method			Owned/			United			Management			and
	Management			Development			Investments			Leased)			Kingdom			Company			Eliminations			Total
Revenues	$	276,835		$	802		$	134		$	106,047		$	6,145		$	57		$	(7,441	)	$	382,579
Community expense		218			6			7			87,150			—			—			(6,620	)		80,761
Development expense		(201	)		2,787			58			11			476			7			(1,341	)		1,797
Depreciation and amortization		1,904			430			—			5,676			147			28			3,474			11,659
Other operating expenses		271,082			2,932			2,186			24,983			6,829			976			13,298			322,286
Income (loss) from operations		3,832			(5,353	)		(2,117	)		(11,773	)		(1,307	)		(954	)		(16,252	)		(33,924	)
Interest income		181			326			2			57			1			2			3			572
Interest expense		(119	)		(225	)		—			(2,124	)		—			—			(1,193	)		(3,661	)
Foreign exchange gain/(loss)		—			—			—			2,717			74			(24	)		—			2,767
Sunrise’s share of losses and return on investment in unconsolidated communities		—			—			(4,572	)		—			—			—			(41	)		(4,613	)
Income (loss) before income taxes, discontinued operations, and noncontrolling interests		5,459			(5,810	)		(6,687	)		(11,408	)		(1,232	)		(968	)		(17,198	)		(37,844	)

	For the Three Months Ended September 30, 2008
										Consolidated									Unallocated
							Equity			(Wholly						Germany			Corporate
	North American			North American			Method			Owned/			United			Management			and
	Management			Development			Investments			Leased)			Kingdom			Company			Eliminations			Total
Revenues	$	294,500		$	8,633		$	(211	)	$	106,563		$	9,141		$	2,930		$	(8,939	)	$	412,617
Community expense		2,079			194			31			87,056			—			450			(8,562	)		81,248
Development expense		1,035			4,911			626			—			1,261			48			114			7,995
Depreciation and amortization		2,018			234			—			5,565			50			31			3,732			11,630
Other operating expenses		276,639			51,248			2,850			15,371			6,090			3,887			14,860			370,945
Income (loss) from operations		12,729			(47,954	)		(3,718	)		(1,429	)		1,740			(1,486	)		(19,083	)		(59,201	)
Interest income		242			34			197			92			(21	)		25			431			1,000
Interest expense		(70	)		(344	)		—			(3,671	)		—			94			(6	)		(3,997	)
Foreign exchange gain (loss)		—			(2,001	)		—			(121	)		(601	)		4,414			—			1,691
Sunrise’s share of earnings and return on investment in unconsolidated communities		—			—			(15,455	)		—			—			—			(94	)		(15,549	)
Income (loss) before income taxes, discontinued operations, and noncontrolling interests		13,201			(45,394	)		(19,022	)		(5,009	)		1,084			3,046			(18,842	)		(70,936	)

29

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

	For the Nine Months Ended September 30, 2009
										Consolidated									Unallocated
							Equity			(Wholly						Germany			Corporate
	North American			North American			Method			Owned/			United			Management			and
	Management			Development			Investments			Leased)			Kingdom			Company			Eliminations			Total
Revenues	$	832,715		$	6,649		$	1,594		$	319,704		$	19,534		$	114		$	(21,514	)	$	1,158,796
Community expense		1,500			(94	)		34			259,919			32			158			(19,165	)		242,384
Development expense		(244	)		10,608			1,187			48			1,257			127			(2,521	)		10,462
Depreciation and amortization		10,849			1,514			—			17,570			281			82			11,158			41,454
Other operating expenses		815,662			34,352			5,666			71,155			18,466			3,422			30,817			979,540
Income (loss) from operations		4,948			(39,731	)		(5,293	)		(28,988	)		(502	)		(3,675	)		(41,803	)		(115,044	)
Interest income		305			1,098			2			181			8			8			(174	)		1,428
Interest expense		(165	)		(653	)		—			(6,812	)		—			(13	)		(3,166	)		(10,809	)
Foreign exchange gain/(loss)		—			—			—			4,567			(301	)		(43	)		—			4,223
Sunrise’s share of earnings (losses) and return on investment in unconsolidated communities		—			—			9,509			—			—			(16	)		(131	)		9,362
Income (loss) before income taxes, discontinued operations, and noncontrolling interests		8,758			(30,254	)		4,224			(31,850	)		(1,167	)		(3,868	)		(44,553	)		(98,710	)

	For the Nine Months Ended September 30, 2008
										Consolidated									Unallocated
							Equity			(Wholly						Germany			Corporate
	North American			North American			Method			Owned/			United			Management			and
	Management			Development			Investments			Leased)			Kingdom			Company			Eliminations			Total
Revenues	$	884,342		$	20,765		$	1,801		$	314,906		$	25,772		$	10,225		$	(25,291	)	$	1,232,520
Community expense		898			762			39			255,255			(45	)		813			(23,333	)		234,389
Development expense		8,298			18,363			2,767			9			3,384			140			(4,544	)		28,417
Depreciation and amortization		5,373			789			—			16,231			150			105			11,616			34,264
Other operating expenses		842,563			92,054			10,006			48,404			17,171			13,085			43,005			1,066,288
Income (loss) from operations		27,210			(91,203	)		(11,011	)		(4,993	)		5,112			(3,918	)		(52,035	)		(130,838	)
Interest income		696			78			726			244			590			40			1,599			3,973
Interest expense		(168	)		(834	)		(365	)		(7,316	)		—			—			746			(7,937	)
Foreign exchange gain (loss)		—			(1,886	)		—			(85	)		(1,030	)		212			—			(2,789	)
Sunrise’s share of earnings (losses) and return on investment in unconsolidated communities		—			—			(7,105	)		—			—			—			(102	)		(7,207	)
Income (loss) before income taxes, discontinued operations, and noncontrolling interests		28,041			(76,234	)		(17,037	)		(11,741	)		4,639			(3,670	)		(55,749	)		(131,751	)

30

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

15.   Comprehensive Loss and Capital Structure

Comprehensive loss for the three and nine months ended September 30, 2009 and 2008 was as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Net loss attributable to common shareholders	$	(44,402	)	$	(68,666	)	$	(144,351	)	$	(133,567	)
Foreign currency translation adjustment		(5,306	)		2,479			(5,268	)		66
Unrealized gain on investments		103			—			103			—
Equity interest in investees’ other comprehensive loss		633			1,045			7,358			(473	)
Comprehensive loss attributable to common shareholders	$	(48,972	)	$	(65,142	)	$	(142,158	)	$	(133,974	)

The following table details changes in shareholders’ equity, including changes in equity attributable to common shareholders and changes in equity attributable to the noncontrolling interests.

													Accumulated			Equity
	Shares of						Additional						Other			Attributable
	Common			Common			Paid-in			Retained			Comprehensive			to Noncontrolling
	Stock			Stock			Capital			Loss			Income(Loss)			Interests
(In thousands)
Balance at December 31, 2008		50,872		$	509		$	458,404		$	(327,056	)	$	6,671		$	9,386
Net (loss) income		—			—			—			(144,351	)		—			218
Foreign currency translation,
net of tax		—			—			—			—			(5,268	)		—
Sunrise’s share of investee’s other
comprehensive income		—			—			—			—			7,358			—
Unrealized gain on investments		—			—			—			—			103			—
Exercise of stock options		250			3			203			—			—			—
Forfeiture of restricted stock		(34	)		—			—			—			—			—
Surrender of shares for taxes		(16	)		(1	)		(116	)		—			—			—
Stock compensation expense		—			—			3,596			—			—			—
Distributions to noncontrolling
interests		—			—			(142	)		—			—			(1,069	)
Consolidation of controlling
interest		—			—			—			—			—			2,215
Sale of Greystone		—			—			—			—			—			(6,633	)
Balance at September 30, 2009		51,072		$	511		$	461,945		$	(471,407	)	$	8,864		$	4,117

16.   Supplemental Cash Flow Information

Interest paid was $10.2 million and $16.2 million for the nine months ended September 30, 2009 and 2008, respectively. Interest capitalized was $0.5 million and $5.6 million for the nine months ended September 30, 2009 and 2008, respectively. Income taxes (refunded) paid was $(23.9) million and $2.1 million for the nine months ended September 30, 2009 and 2008, respectively.

31

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

For the nine months ended September 30, 2008, significant non-cash transactions included the addition of $166.1 million of fixed assets and $216.7 million of long-term debt as the result of the consolidation of our German venture.

17.   Variable Interest Entities

Generally accepted accounting principles require if an entity is determined to be a variable interest entity (“VIE”), it must be consolidated by the primary beneficiary. The primary beneficiary is the party that absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns or both. We perform a qualitative and quantitative analysis using the methodology as described under the ASC Consolidation Topic to calculate expected losses to determine if the entity is a VIE. If the entity is a VIE, we determine which party has the greater variability and is the primary beneficiary. At September 30, 2009, we are the primary beneficiary of one VIE and therefore consolidate that entity.

VIEs where Sunrise is the Primary Beneficiary

We have a management agreement with a not-for-profit corporation established to own and operate a continuing care retirement community (“CCRC”) in New Jersey. This entity is a VIE. The CCRC contains a 60-bed skilled nursing unit, a 32-bed assisted living unit, a 27-bed Alzheimer’s care unit and 252 independent living apartments. We have included $18.4 million and $19.2 million, respectively, of net property and equipment and debt of $23.2 million and $23.9 million, respectively, in our September 30, 2009 and December 31, 2008 consolidated balance sheets for this entity. The majority of the debt is bonds that are secured by a pledge of and lien on revenues, a letter of credit with Bank of New York and by a leasehold mortgage and security agreement. We guarantee the letter of credit. Proceeds from the bonds’ issuance were used to acquire and renovate the CCRC. As of September 30, 2009, we guaranteed $21.9 million of the bonds. The entity has incurred losses and has experienced negative working capital for several years and has failed the debt service coverage ratio related to the bonds. Management fees earned by us were $0.1 million for both the three months ended September 30, 2009 and 2008, respectively, and $0.4 million for both the nine months ended September 30, 2009 and 2008, respectively. The management agreement also provides for reimbursement to us for all direct cost of operations. Payments to us for direct operating expenses were $2.4 million and $1.7 million for the three months ended September 30, 2009 and 2008, respectively, and $8.3 million and $5.6 million for the nine months ended September 30, 2009 and 2008, respectively. The entity obtains professional and general liability coverage through our affiliate, Sunrise Senior Living Insurance, Inc. The entity incurred $39,334 and $47,992 for the three months ended September 30, 2009 and 2008, respectively, and $0.1 million and $0.2 million for the nine months ended September 30, 2009 and 2008, respectively, related to the professional and general liability coverage. The entity also has a ground lease with us. Rent expense is recognized on a straight-line basis at $0.7 million per year. Deferred rent relating to this agreement is $6.0 million and $5.6 million at September 30, 2009 and December 31, 2008, respectively. These amounts are eliminated in our consolidated financial statements.

Beginning in September 2008, we consolidated the German communities. In January 2009, we exercised our option and acquired a controlling interest of 94.9% in the German communities. In June 2009, we exercised our option and acquired the remaining 5.1% interest in our German communities therefore wholly owning those communities.

We previously consolidated six VIEs that were investment partnerships formed with third-party partners to invest capital in the pre-financing stage of Greystone projects. Five of these investment partnerships were sold as part of the Greystone transaction in March 2009 (refer to Note 12) and we retained ownership in one which we deconsolidated as we are no longer affiliated with the general partner and do not control the entity. We expect that this entity will be dissolved by year end. We own 49.5% of the investment partnership with 50.5% owned by third-parties. The purpose of the venture had been to develop a senior living community owned by a nonprofit entity.

32

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

VIEs Where We Are Not the Primary Beneficiary but Hold a Significant Variable Interest in the VIEs

In July 2007, we formed a venture with a third party to purchase six communities from our first U.K. development venture. The entity was financed with £187.6 million of debt. The venture also entered into a firm commitment to purchase 11 additional communities from our first U.K. development venture. As of September 30, 2009, the venture has 14 operating communities in the U.K. Our equity investment in the venture is $1.0 million at September 30, 2009. The line item “Due from unconsolidated communities” on our consolidated balance sheet contains $0.7 million due from the venture. Our maximum exposure to loss is our equity investment of $1.0 million. We calculated the maximum exposure to loss as the maximum loss (regardless of probability of being incurred) that we could be required to record in our statement of operations as a result of our involvement with the VIE.

In September 2006, a venture was formed to acquire and operate six senior living facilities located in Florida. We owned a 25% interest in the venture as managing member and our venture partner owned the remaining 75% interest. The venture was financed with $156 million of equity and $304 million of debt. In December 2008, the venture’s debt was restructured and we entered into an agreement with our venture partner under which we agreed to resign as managing member of the venture and manager of the communities when we are released from various guarantees provided to the venture’s lender. On April 30, 2009, we sold our equity interest in the venture and were released from all guarantee obligations. Our management contract was terminated on April 30, 2009. We received proceeds of approximately $4.8 million for our equity interest and our receivable from the venture for fundings under the operating deficit guarantees.

18.   Related Parties

In October 2008, we entered into a contract with SecureNet Payment Systems LLC (“SecureNet”) to provide consulting services in connection with the processing of direct deposit and credit card payments by community residents of their monthly fees. The sales agent representing SecureNet, whose compensation will be based on SecureNet’s revenue from the contract, is the wife of a Sunrise employee. In November 2008, after the award of the contract, that employee became Senior Vice President, North American Operations and an officer of the Company. The Governance Committee reviewed this transaction at its meeting on July 20, 2009 and concluded that the bidding process was done with integrity, that the award to SecureNet appeared to have been in our best interest and that our employee’s relationship to the SecureNet sales representative did not have any influence over the decision to select SecureNet. As of September 30, 2009, $0.1 million of fees were paid to SecureNet.

In November 2008, we entered into an oral consulting arrangement with Mr. Klaassen. Under the consulting arrangement, we agreed to pay Mr. Klaassen a fee of $25,000 per month for consulting with us and Mr. Ordan, our new chief executive officer, on senior living matters. This was in addition to any benefits Mr. Klaassen was entitled to under his employment agreement. Fees totaling $87,500 were paid to Mr. Klaassen for three and a half months commencing in November 2008.

For additional discussion of related parties transactions, refer to Note 18 to the Consolidated Financial Statements of our 2008 Form 10-K, as amended.

19.   Subsequent Events

Sale of 21 Communities

In October 2009, we entered into an agreement to sell 21 wholly owned assisted living communities, located in 11 states, to Brookdale Senior Living Inc. (“Brookdale”) for $204 million. Brookdale placed into escrow an earnest money deposit of $5 million toward the purchase price. The closing date is currently scheduled for November 16, 2009. At the closing of the sale, we expect to receive approximately $60 million in proceeds after payment or assumption by Brookdale of certain mortgage loans, the posting of required escrows, and payment of expenses by

33

Sunrise Senior Living, Inc.

Notes to Consolidated Financial Statements — (Continued)

(Unaudited)

us. We will use $25 million of proceeds to pay down our Bank Credit Facility and will place $20 million into a collateral account for the benefit of other creditors.

We recorded an impairment charge of $6.8 million in the third quarter of 2009 to write down five of the 21 communities to fair value. We expect to record a gain on the sale of real estate of approximately $50 million upon closing of the transaction.

Bank Credit Facility

See Note 6 for a discussion of the Thirteenth Amendment to our Bank Credit Facility.

Germany

See Note 12 for a discussion of the debt restructuring agreements with two of our lenders for our German communities.

Fountains

See Note 10 for a discussion regarding the release of our obligations related to the Fountains venture.

Other

See Note 3 for a discussion regarding the sale of auction rate securities.

We have evaluated all other events occurring after September 30, 2009 through November 8, 2009, the date our financial statements are issued.

34

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the information contained in our consolidated financial statements, including the related notes, and other financial information appearing elsewhere herein. This management’s discussion and analysis contains certain forward-looking statements that involve risks and uncertainties. Although we believe the expectations reflected in such forward looking statements are based on reasonable assumptions, there can be no assurance that our expectations will be realized. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, our ability to raise funds and maintain sufficient liquidity; our ability to extend the maturity dates of, obtain waivers with respect to, or refinance, some of our outstanding debt; our ability to achieve the anticipated savings from our cost-savings program; the sale of our German communities and the settlement of the related debt; the outcome of the HCP, Inc. litigation; the outcome of the SEC’s investigation; the outcome of the Trinity OIG investigation; risk of changes in our critical accounting estimates; risk of further write-downs or impairments of our assets; risk of future fundings of guarantees and other support arrangements to some of our ventures, lenders to the ventures or third party owners; risk of declining occupancies in existing communities or slower than expected leasing of new communities; development and construction risks; risks associated with past or any future acquisition; compliance with government regulations; risk of new legislation or regulatory developments; business conditions; competition; changes in interest rates; unanticipated expenses; market factors that could affect the value of our properties; the risks of further downturns in general economic conditions; availability of financing for development, including under construction loans as to which we are in default; and other risks detailed in our amended 2008 Annual Report on Form 10-K filed with the SEC on February 27, 2009 as amended on March 31, 2009 and April 30, 2009, and, as may be amended or supplemented in our Form 10-Q filings. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Unless the context suggests otherwise, references herein to “Sunrise,” the “Company,” “we,” “us,” and “our” mean Sunrise Senior Living, Inc. and its consolidated subsidiaries.

Overview

We are a Delaware corporation and a provider of senior living services in the United States, Canada, the United Kingdom and Germany.

At September 30, 2009, we operated 418 communities, including 371 communities in the United States, 15 communities in Canada, 25 communities in the United Kingdom and seven communities in Germany, with a total unit capacity of approximately 43,000.

The following table summarizes our portfolio of operating communities:

	As of		As of
	September 30,		September 30,		Percent
	2009		2008		Change
Total communities
Consolidated (owned or leased)		68		64		6.3	%
Consolidated Variable Interest
Entity		1		10		(90.0	)%
Unconsolidated Ventures		213		200		6.5	%
Managed		136		170		(20.0	)%
Total		418		444		(5.9	)%

During the first nine months of 2009 we continued to execute a strategy of 1) divesting of non-core assets and unprofitable operations to raise cash, improve our liquidity, avoid significant capital investment and reduce our operating and financial risks and 2) improve the efficiency of our operations and our administrative functions.

We had $43.4 million and $29.5 million of unrestricted cash at September 30, 2009 and December 31, 2008, respectively. The outstanding borrowings on the Bank Credit Facility were $68.9 million at September 30, 2009. On October 19, 2009, we entered into the Thirteenth Amendment to the Bank Credit Facility, which extended the

35

maturity date to December 2, 2010 (subject to certain conditions as discussed more fully under Liquidity and Capital Resources). We have no borrowing availability under the Bank Credit Facility.

Debt that is in default at September 30, 2009 consists of the following (in thousands):

	September 30,
	2009
German communities(1)	$	200,034
Community mortgages		147,930
Variable interest entity		23,225
Land loans		12,420
Other		28,286
	$	411,895

(1) The face amount of the debt related to the German communities was $219.3 million at September 30, 2009.

We are working with our lenders to extend the maturities of, or otherwise either re-schedule obligations under debt in default or to obtain waivers.

For debt that is not in default, we have scheduled debt maturities as follows (in thousands):

			1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
	2009		2010		2010		2010		2010		Thereafter		Total
Bank Credit Facility(1)	$	68,878	$	—	$	—	$	—	$	—	$	—	$	68,878
Community mortgages		39,796		40,573		195		497		198		19,766		101,025
Land loans		21,907		—		—		—		—		—		21,907
Margin loan (auction rate securities)		20,920		—		—		—		—		—		20,920
	$	151,501	$	40,573	$	195	$	497	$	198	$	19,766	$	212,730

(1) As of 10/19/09, maturity date changed to 12/2/10 (subject to certain conditions).

As discussed more fully in Liquidity and Capital Resources, we are in default of the loan agreements relating to our German communities and the Hoesel land, but have entered into standstill agreements with the lenders pursuant to which the lenders have agreed not to foreclose on the communities that are collateral for their loans or to commence or prosecute any action or proceeding to enforce their demand for payment by us pursuant to our operating deficit agreements until the earliest of the occurrence of certain other events relating to the loans.

In October 2009, we entered into a restructuring agreement, in the form of a binding term sheet, with two of our lenders to seven of the nine communities, to settle and compromise their claims against us, including under operating deficit and principal repayment guarantees provided by us in support of our German subsidiaries. These two lenders contended that these claims had an aggregate value of approximately $121.6 million. The binding term sheet is discussed more fully in Liquidity and Capital Resources.

The restructuring agreement provides that the electing lenders will release and discharge us from certain claims they may have against us. We will issue to the lenders that elect to participate in the restructuring on or before the first execution of the definitive documentation, their pro rata share of up to an aggregate of 5 million shares of our common stock and will grant mortgages for the benefit of all electing lenders on certain of our unencumbered North American properties. Following the first execution of the definitive documentation for the restructuring, we will pursue the sale of such mortgaged properties and distribute the net sale proceeds to the electing lenders. We have guaranteed that, within 30 months of the first execution of the definitive documentation for the restructuring, the electing lenders will receive a minimum of $58.3 million from the net proceeds of any such sale, which equals 80 percent of the most recent aggregate appraised value of these properties. If the electing lenders do not receive at least $58.3 million by such date, we will make payment to cover any shortfall or, at such lenders’ option, convey to

36

them the remaining unsold properties. As any gain or loss on the transaction is dependent upon the values at closing of the aforementioned consideration, we are unable to estimate any gain or loss at this time.

In addition, we will market for sale the German assisted living communities subject to loan agreements with the electing lenders and will remain responsible for all costs of operating, preserving and maintaining these communities until the earlier of either their sale or December 31, 2010.

The closing of the transaction, including the execution of the definitive documentation, the release of claims and the issuance of Sunrise common stock, is conditioned upon receipt of consent for the transaction from Bank of America, N.A., as the administrative agent under our Bank Credit Facility, on or before November 11, 2009. In accordance with the binding term sheet, definitive documentation shall be executed as soon as reasonably possible (but no later than 40 days) after the receipt of such required consent.

We continue to be liable under certain operating deficit and repayment guarantees for the Klein Flottbeck and Wiesbaden communities, and certain principal repayment guarantees for the Hoesel land which is not part of the restructuring agreement.

In the second quarter of 2009, we engaged a broker to assist in the sale of the nine German communities and at that time, classified the German assets as held for sale. As the book value of the majority of the assets was in excess of their fair value less estimated costs to sell, we recorded a charge of $52.4 million in the second quarter of 2009 which is included in discontinued operations.

In January 2009, we suspended payment of default interest and payments under the income support guarantee for the Fountains venture. Our failure to pay default interest on the loan was an additional default of the loan agreement. In October 2009 as described in Note 10 to the Financial Statements, we entered into agreements with our venture partner, as well as with the lender to release us from all claims that our venture partner and the lender had against us prior to the date of the agreements and from all of our future funding obligations in connection with the Fountains portfolio in exchange for which we have, among other things:

•  Transferred our 20-percent ownership interest in the Fountains joint venture to our joint venture partner;

•  Contributed vacant land parcels adjacent to six of the Fountains communities and owned by us to the Fountains venture;

•  Agreed to transition from management of the 16 Fountains communities as soon as the transition closing conditions are met and the new manager has obtained the regulatory approvals necessary to assume control of the facilities (we expect to transition from management of the Fountains communities during the course of 2010); and

•  Agreed to repay the venture the management fee we had earned to date in 2009 of $1.8 million.

The contributed vacant land parcels were carried on our consolidated balance sheet at a book value of $12.9 million at September 30, 2009, in addition to a guarantee liability of $12.9 million both of which will be written off upon closing of the transaction resulting in no gain or loss.

In March 2009, we sold our Greystone subsidiary and our interests in Greystone seed capital partnerships to an entity controlled by Michael Lanahan and Paul Steinhoff, two senior executives of the Greystone subsidiary. Total consideration was (i) $2,000,000 in cash at closing; (ii) $5,700,000 in short-term notes, (iii) a $6,000,000 7-year note (iv) a $2,500,000 note payable, and (v) 35% of the net proceeds received by the seed capital investors for each of the seed capital interests purchased from us. We collected $5.7 million of short-term notes through September 30, 2009.

In April 2009, we sold the equity interest in our Aston Gardens venture and were released from all guarantee obligations. Our management contracts for the six communities in the venture were terminated on April 30, 2009. We received proceeds of approximately $4.8 million for our equity interest and our receivable from the venture for fundings under the operating deficit guarantees. We received management fees of $3.2 million and $3.7 million in 2008 and 2007, respectively.

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In May 2009, we announced a plan to continue to reduce corporate expenses through reorganization of our corporate cost structure, including a reduction in spending related to, among other areas, administrative processes, vendors, and consultants. The plan is designed to reduce our annual recurring general and administrative expenses (including expenses previously classified as venture expense) by over $20 million, from our 2009 budgeted annual recurring level of approximately $120 million (after the sale of Greystone, which is presented in discontinued operations in our financial statements) to approximately $100 million, and to reduce our centrally administered services which are charged to the communities by approximately $1.5 million. Under the plan, approximately 150 positions will be eliminated. As of September 30, 2009, we have eliminated 114 positions and will be eliminating an additional 49 positions by early 2010. We have recorded severance expense of $5.6 million as a result of the plan through September 30, 2009 and expect to record an additional $0.6 million through early 2010. The costs from the 2009 restructuring plan are in addition to the costs incurred in 2009 related to the 2008 restructuring plan, which provided for the elimination of 165 positions and corresponding expense reductions.

In May 2009, we entered into a separation agreement with our chief financial officer, Richard Nadeau, in connection with this plan. Pursuant to the separation agreement, Mr. Nadeau’s employment with us terminated effective as of May 29, 2009. Pursuant to Mr. Nadeau’s employment agreement, Mr. Nadeau received severance benefits that included a lump sum cash payment of $1.4 million. In addition, Mr. Nadeau received a bonus in the amount of $0.5 million and Mr. Nadeau’s outstanding and unvested stock options, restricted stock and other long-term equity compensation awards were fully vested, resulting in a non-cash compensation expense to us of $0.8 million. The options expire 12 months after the termination of his consulting term, which can be up to nine months after his termination date of May 29, 2009. 70,859 shares of restricted stock and 750,000 options vested. We recorded non-cash compensation expense of $0.8 million as a result of the vesting acceleration.

In June 2009, we were terminated as manager for a portfolio of 15 communities. We managed these communities through October 1, 2009. The management fees for the years 2008, 2007 and the nine months ended September 30, 2009 were $3.0 million, $2.9 million and $2.3 million, respectively.

In August 2009, a wholly owned community was sold to an unrelated third party for approximately $2.0 million. We received $0.3 million of cash and a note receivable for $1.7 million, recognizing gain of $0.3 million.

In September 2009, we terminated our lease on a portion of our corporate headquarters in McLean, Virginia. We recorded a charge of $2.7 million which is reflected in restructuring expense on our consolidated statement of operations. We expect to save $5.6 million in cash over four years as a result of terminating this portion of the lease.

In October 2009, we entered into an agreement to sell 21 wholly owned assisted living communities, located in 11 states, to Brookdale Senior Living Inc. (“Brookdale”) for $204 million. Brookdale placed into escrow an earnest money deposit of $5 million toward the purchase price. The closing date is currently scheduled for November 16, 2009. At the closing of the sale, we expect to receive approximately $60 million in proceeds after payment or assumption by Brookdale of certain mortgage loans, the posting of required escrows, and payment of expenses by us. We will use $25 million of proceeds to pay down our Bank Credit Facility and will place $20 million into a collateral account for the benefit of other creditors.

In addition to selling the German communities and the 21 communities to Brookdale, we intend to sell 11 operating communities, of which eight are located in the United States and three in Canada. Of the 11 operating communities, five are collateral for the German lenders and future net proceeds of the remaining six operating communities would be split equally between us and the lenders of the Bank Credit Facility. We also intend to sell one closed community in the United States which is collateral for the German lenders.

We intend to sell 16 parcels of land, of which 12 are located in the United States and four in Canada. Of the 16 land parcels, 11 are collateral for the German lenders and future proceeds of the remaining five land parcels after repayment of related debt would be split equally between us and the lenders of the Bank Credit Facility. In addition, we intend to sell two closed construction sites and one building located in the United States which are collateral for the German lenders.

38

Results of Operations

Our results of operations for each of the three and nine months ended September 30, 2009 and 2008 were as follows:

										Percent
	For the Three Months Ended						Variance			Change
	September 30,						2009 vs.			2009 vs.			Favorable/
	2009			2008			2008			2008			(Unfavorable)
(In thousands)	(Unaudited)
Operating revenue:
Management and buyout fees	$	26,795		$	36,179		$	(9,384	)		25.9	%		U
Resident fees for consolidated communities		106,098			106,112			(14	)		0.0	%		U
Ancillary fees		11,067			11,235			(168	)		1.5	%		U
Professional fees from development, marketing
and other		809			12,631			(11,822	)		93.6	%		U
Reimbursed costs incurred on behalf of managed communities		237,810			246,460			(8,650	)		3.5	%		U
Total operating revenue		382,579			412,617			(30,038	)		7.3	%		U
Operating expenses:
Community expense for consolidated communities		80,761			81,248			(487	)		0.6	%		F
Community lease expense		15,608			15,184			424			2.8	%		U
Depreciation and amortization		11,659			11,630			29			0.2	%		U
Ancillary expenses		10,378			9,480			898			9.5	%		U
General and administrative		34,024			37,147			(3,123	)		8.4	%		F
Development expense		1,797			7,995			(6,198	)		77.5	%		F
Write-off of capitalized project costs		652			47,512			(46,860	)		98.6	%		F
Accounting Restatement, Special Independent
Committee inquiry, SEC investigation and
stockholder litigation		1,108			5,072			(3,964	)		78.2	%		F
Restructuring costs		8,960			7,219			1,741			24.1	%		U
Provision for doubtful accounts		331			2,280			(1,949	)		85.5	%		F
Loss on financial guarantees and other contracts		809			975			(166	)		17.0	%		F
Impairment of long-lived assets		9,922			—			9,922			NA			U
Costs incurred on behalf of managed communities		240,494			246,076			(5,582	)		2.3	%		F
Total operating expenses		416,503			471,818			(55,315	)		11.7	%		F
Loss from operations		(33,924	)		(59,201	)		25,277			42.7	%		F
Other non-operating income (expense):
Interest income		572			1,000			(428	)		42.8	%		U
Interest expense		(3,661	)		(3,997	)		336			8.4	%		F
Gain on investments		95			720			(625	)		NM			U
Other income		2,957			780			2,177			279.1	%		F
Total other non-operating expense		(37	)		(1,497	)		1,460			NM			F
Gain on the sale and development of real estate
and equity interests		3,627			4,717			(1,090	)		23.1	%		U
Sunrise’s share of loss and return on
investment in unconsolidated communities		(4,613	)		(15,549	)		10,936			70.3	%		F
(Loss) income from investments accounted for under the
profit sharing method		(2,897	)		594			(3,491	)		NM			U
Loss before (provision for) benefit from
income taxes and discontinued operations		(37,844	)		(70,936	)		33,092			46.7	%		F
(Provision for) benefit from income taxes		(1,010	)		33,248			(34,258	)		NM			U
Loss before discontinued operations		(38,854	)		(37,688	)		(1,166	)		3.1	%		F
Discontinued operations, net of tax		(5,523	)		(32,035	)		26,512			82.8	%		F
Net loss		(44,377	)		(69,723	)		25,346			36.4	%		F
Less: Net (income) loss attributable to noncontrolling interests		(25	)		1,057			(1,082	)		NM			U
Net loss attributable to common shareholders	$	(44,402	)	$	(68,666	)	$	24,264			35.3	%		F

Note: Not Meaningful (NM) is used when there is a positive number in one period and a negative number in another period.

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										Percent
	For the Nine Months Ended						Variance			Change
	September 30,						2009 vs.			2009 vs.			Favorable/
	2009			2008			2008			2008			(Unfavorable)
(In thousands)	(Unaudited)
Operating revenue:
Management and buyout fees	$	84,305		$	101,071		$	(16,766	)		16.6	%		U
Resident fees for consolidated communities		319,842			314,462			5,380			1.7	%		F
Ancillary fees		34,148			32,197			1,951			6.1	%		F
Professional fees from development, marketing
and other		11,343			33,632			(22,289	)		66.3	%		U
Reimbursed costs incurred on behalf of managed communities		709,158			751,158			(42,000	)		5.6	%		U
Total operating revenue		1,158,796			1,232,520			(73,724	)		6.0	%		U
Operating expenses:
Community expense for consolidated communities		242,384			234,389			7,995			3.4	%		U
Community lease expense		44,765			44,916			(151	)		0.3	%		F
Depreciation and amortization		41,454			34,264			7,190			21.0	%		U
Ancillary expenses		31,880			28,339			3,541			12.5	%		U
General and administrative		91,829			116,017			(24,188	)		20.8	%		F
Development expense		10,462			28,417			(17,955	)		63.2	%		F
Write-off of capitalized project costs		14,147			84,209			(70,062	)		83.2	%		F
Accounting Restatement, Special Independent
Committee inquiry, SEC investigation and
stockholder litigation		3,541			26,436			(22,895	)		86.6	%		F
Restructuring costs		25,883			7,219			18,664			258.5	%		U
Provision for doubtful accounts		11,335			5,716			5,619			98.3	%		U
Loss on financial guarantees and other contracts		1,463			1,703			(240	)		14.1	%		F
Impairment of long-lived assets		34,962			2,349			32,613			1388.4	%		U
Costs incurred on behalf of managed communities		719,735			749,384			(29,649	)		4.0	%		F
Total operating expenses		1,273,840			1,363,358			(89,518	)		6.6	%		F
Loss from operations		(115,044	)		(130,838	)		15,794			12.1	%		F
Other non-operating income (expense):
Interest income		1,428			3,973			(2,545	)		64.1	%		U
Interest expense		(10,809	)		(7,937	)		(2,872	)		36.2	%		U
Gain (loss) on investments		904			(4,000	)		4,904			NM			F
Other expense		4,276			(4,866	)		9,142			NM			F
Total other non-operating expense		(4,201	)		(12,830	)		8,629			67.3	%		F
Gain on the sale and development of real estate
and equity interests		20,330			19,029			1,301			6.8	%		F
Sunrise’s share of earnings (loss) and return on
investment in unconsolidated communities		9,362			(7,207	)		16,569			NM			F
(Loss) gain from investments accounted for under the
profit sharing method		(9,157	)		95			(9,252	)		NM			U
Loss before benefit from
income taxes and discontinued operations		(98,710	)		(131,751	)		33,041			25.1	%		F
Benefit from income taxes		1,449			49,476			(48,027	)		97.1	%		U
Loss before discontinued operations		(97,261	)		(82,275	)		(14,986	)		18.2	%		U
Discontinued operations, net of tax		(46,959	)		(54,945	)		7,986			14.5	%		F
Net loss		(144,220	)		(137,220	)		(7,000	)		5.1	%		U
Less: Net (income) loss attributable to noncontrolling interests		(131	)		3,653			(3,784	)		NM			U
Net loss attributable to common shareholders	$	(144,351	)	$	(133,567	)	$	(10,784	)		8.1	%		U

Note: Not Meaningful (NM) is used when there is a positive number in one period and a negative number in another period.

40

Results of Operations

Loss attributable to common shareholders was $44.4 million for the three months ended September 30, 2009 from $68.7 million for the three months ended September 30, 2008 and $144.4 million for the nine months ended September 30, 2009 from $133.6 million for the nine months ended September 30, 2008.

Adjusted (Loss) Income from Ongoing Operations

In the third quarter, net loss from operations for the three months ended September 30, 2009, was $33.9 million. Excluding the SEC investigation costs of $1.1 million and restructuring costs of $9.0 million and non-cash charges including depreciation and amortization of $11.7 million, the provision for doubtful accounts of $0.3 million, write-off of capitalized project costs of $0.7 million and impairment of long-lived assets of $9.9 million, adjusted loss from ongoing operations was $1.3 million. The following table reconciles adjusted (loss) income from ongoing operations to loss from operations (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
	(Unaudited)						(Unaudited)
Loss from operations	$	(33,924	)	$	(59,201	)	$	(115,044	)	$	(130,838	)
Non-cash expenses:
Depreciation and amortization		11,659			11,630			41,454			34,264
Write-off of capitalized project costs		652			47,512			14,147			84,209
Provision for doubtful accounts		331			2,280			11,335			5,716
Impairment of long-lived assets		9,922			—			34,962			2,349
(Loss) income from operations before non-cash expenses		(11,360	)		2,221			(13,146	)		(4,300	)
Accounting Restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation		1,108			5,072			3,541			26,436
Restructuring costs		8,960			7,219			25,883			7,219
Adjusted (loss) income from ongoing operations	$	(1,292	)	$	14,512		$	16,278		$	29,355

Adjusted (loss) income from ongoing operations is a measure of operating performance that is not calculated in accordance with U.S. generally accepted accounting principles and should not be considered as a substitute for income/loss from operations or net income/loss. Adjusted income from ongoing operations is used by management to focus on cash generated from our ongoing operations and to help management assess if adjustments to current spending decisions are needed. As further outlined below, total revenue has decreased without proportionate decreases to expense. As a result, we incurred a loss from ongoing operations for the third quarter of 2009. We are continuing to focus on our cost restructuring initiative as further discussed in Note 11.

Three Months Ended September 30, 2009 Compared to the Three Months Ended September 30, 2008

Operating Revenue

Management and buyout fees

The decrease in management and buyout fees of $9.4 million, or 25.9%, was primarily comprised of:

•  $3.5 million decrease related to subordinating management fees from a venture;

•  $2.0 million decrease primarily due to lower occupancy;

•  $1.8 million decrease as a result of terminated management contracts;

•  $2.1 million decrease in incentive management fees;

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•  $0.2 million decrease related to international communities; partially offset by

•  $0.9 million increase from communities in the lease-up phase.

Resident fees for consolidated communities

Resident fees for consolidated communities were relatively unchanged due to the following:

•  $2.1 million from the addition of three consolidated Canadian communities and one domestic community;

•  $2.6 million from increases in average daily rates; offset by a

•  $3.0 million decrease from lower occupancy.

Ancillary fees

Ancillary fees were comprised of the following:

	Three Months
	Ended September 30,
	2009		2008
	(In millions)
New York Health Care Services	$	9.7	$	9.1
Fountains Health Care Services		1.2		1.4
International Health Care Services		0.2		0.7
	$	11.1	$	11.2

Professional fees from development, marketing and other

The decrease in professional fees from development, marketing and other revenue of $11.8 million was primarily comprised of:

•  $3.6 million decrease from the reduction of international projects from six unopened communities in 2008 to two unopened communities in 2009; and

•  $7.4 million decrease from domestic design and development fees from the reduction of domestic projects from 33 unopened communities in 2008 to three unopened communities in 2009.

Reimbursed costs incurred on behalf of managed communities

Reimbursed costs incurred on behalf of managed communities were $237.8 million in the third quarter of 2009 compared to $246.5 million in the third quarter of 2008. The decrease of 3.5% was due primarily to 32 fewer communities in the third quarter of 2009 than the third quarter of 2008.

Operating Expenses

Community expense for consolidated communities

The decrease in community expense of $0.5 million, or 0.6%, was primarily comprised of:

•  $2.6 million decrease from lower expenses in existing communities; offset by a

•  $1.4 million increase from the addition of three Canadian communities and one domestic community; and

•  $0.7 million from increased net insurance costs as insurance credits received in 2008 did not recur in 2009.

Community lease

Community lease expense increased $0.4 million primarily related to increases of $0.5 million in contingent rent.

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Depreciation and amortization

The depreciation and amortization expense was $11.7 million in the third quarter of 2009 and $11.6 million in the third quarter of 2008. The expense was comparable as the number of consolidated communities remained constant.

Ancillary expenses

Ancillary expenses were comprised of the following:

	Three Months
	Ended September 30,
	2009		2008
	(In millions)
New York Health Care Services	$	8.9	$	8.0
Fountains Health Care Services		1.3		1.3
International Health Care Services		0.2		0.2
	$	10.4	$	9.5

General, administrative and venture expense

The decrease in general and administrative expenses of $3.1 million is primarily due to:

•  $1.8 million decrease in salaries and bonus as result of our cost reduction program resulting in the elimination of 40 positions to date;

•  $1.3 million decrease in general corporate expenses as a result of cost containment initiatives including a reduction of information technology costs, training and education and temporary help;

•  $0.9 million decrease in travel; partially offset by

•  $0.9 million increase related to our executive deferred compensation plan.

Development expense

The $6.2 million decrease in development expense related to the reduction of development activity, 39 unopened communities in 2008 compared to five unopened communities in 2009, was primarily comprised of:

•  $3.5 million decrease in development labor costs; and

•  $2.0 million decrease in development related expenses including travel, insurance, professional fees, legal, telecommunication, and other costs.

Write-off of capitalized project costs

Write-off of capitalized project costs was $0.7 million and $47.5 million in the third quarter of 2009 and 2008, respectively. We ceased all new development at the end of 2008 until suitable construction financing becomes available.

Accounting Restatement, Special Independent Committee Inquiry, SEC Investigation and Stockholder Litigation

Legal and accounting fees related to the accounting restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation decreased to $1.1 million in the third quarter of 2009 compared to $5.1 million in the third quarter of 2008. The Special Independent Committee activities and the accounting restatement were completed during the first quarter of 2008. However, we continue to incur legal fees and related expenses in connection with the SEC investigation. The stockholder litigation was settled in the second quarter of 2009.

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Restructuring costs

Costs associated with our 2008 and corporate 2009 restructuring plans were $9.0 million in the third quarter of 2009 which includes $4.6 million of legal and professional fees relating to corporate restructuring activities. In the third quarter of 2008, restructuring costs were $7.2 million.

Provision for doubtful accounts

The provision for doubtful accounts decreased $1.9 million during the three months ended September 30, 2009 compared to the three months ended September 30, 2008 primarily due to a $1.8 million reserve for operating advances to five ventures recorded in the third quarter of 2008.

Loss on financial guarantees and other contracts

We recorded a loss on our financial guarantees of $0.8 million and $1.0 million during the three months ended September 30, 2009 and 2008, respectively, related to construction cost overrun guarantees on a condominium project and a completion guarantee on an operating property.

Impairment of long-lived assets

Impairment of long-lived assets was $9.9 million in the third quarter 2009. This impairment charge related to six communities, one land parcel and two discontinued development projects.

Costs incurred on behalf of managed communities

Cost incurred on behalf of managed communities were $240.5 million in the third quarter of 2009 compared to $246.1 million in the third quarter of 2008. The decrease of 2.3% was due primarily to 32 fewer communities in the third quarter of 2009 than the third quarter of 2008.

Other Non-Operating Income and Expense

Total other non-operating expense was $37,000 and $1.5 million for the three months ended September 30, 2009 and 2008, respectively. The decrease in other non-operating expense was primarily due to:

•  $0.4 million decrease in interest expense;

•  $0.4 million decrease in interest income;

•  $2.8 million for net foreign exchange gains in 2009 comprised of the $2.7 million and $0.1 million of gain related to the Canadian dollar and British pound, respectively, compared to $1.5 million of net foreign exchange gains in 2008 comprised of $(2.1) million and $(0.6) million of loss related to the Canadian dollar and British pound, respectively and $4.2 million of gain related to the Euro; and

•  $0.1 million unrealized gain compared to a $0.7 unrealized gain on our investments in auction rate securities which are classified as trading securities and carried at fair value.

Gain on the Sale and Development of Real Estate and Equity Interests

Gain on the sale and development of real estate and equity interests was $3.6 million and $4.7 million for the three months ended September 30, 2009 and 2008, respectively. The gains primarily resulted from transactions which occurred in prior years for which the recognition of gain had been deferred due to various forms of continuing involvement.

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Sunrise’s Share of (Loss) Earnings and Return on Investment in Unconsolidated Communities

	Three Months Ended September 30,
	2009			2008
	(In millions)
Sunrise’s share of losses in unconsolidated communities	$	(7.2	)	$	(20.5	)
Return on investment in unconsolidated communities		2.6			5.0
	$	(4.6	)	$	(15.5	)

The decrease in our share of losses in unconsolidated communities of $13.3 million was primarily due to non-recurring losses in the third quarter of 2008 of $10.2 million and $1.6 million from the Fountains and Aston Gardens ventures, respectively, and incrementally smaller operating losses from our unconsolidated communities.

Distributions from operations from investments where the book value is zero and we have no contractual or implied obligation to support the venture were $2.6 million and $5.0 million in the third quarter of 2009 and 2008, respectively.

(Loss) Income from Investments Accounted for Under the Profit-Sharing Method

(Loss) income from investments accounted for under the profit-sharing method was $(2.9) million and $0.6 million for the three months ended September 30, 2009 and 2008, respectively. The losses in the third quarter of 2009 were generated from our condominium community that recently opened and where profits associated with condominium sales are required to be deferred.

(Provision for) Benefit from Income Taxes

The (provision for) benefit from income taxes allocated to continuing operations was $(1.0) million and $33.2 million for the three months ended September 30, 2009 and 2008, respectively. Our effective tax (rate) benefit was (2.63)% and 46.9% for the three months ended September 30, 2009 and 2008, respectively. As of September 30, 2009, we are continuing to offset our net deferred tax asset by a full valuation allowance.

Discontinued Operations

Discontinued operations consists of our German communities which we are marketing for sale, our Greystone subsidiary which was sold in the first quarter of 2009, our Trinity subsidiary which ceased operations in the fourth quarter of 2008, one community sold in the third quarter of 2009, one community which was closed in the second quarter of 2009 and two communities which were sold in 2008 and for which we have no continuing involvement.

Germany’s loss included in discontinued operations was $5.2 million for the three months ended September 30, 2009.

Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

Operating Revenue

Management and buyout fees

The decrease in management and buyout fees of $16.8 million, or 16.6%, was primarily comprised of:

•  $6.7 million decrease related to subordinating management fees for a venture;

•  $2.4 million decrease in incentive management fees;

•  $3.4 million decrease as a result of terminated management contracts;

•  $3.3 million decrease due primarily to lower occupancy;

•  $0.8 million decrease associated with international communities; partially offset by

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•  $1.7 million increase from communities in the lease-up phase.

Resident fees for consolidated communities

The increase in resident fees for consolidated communities of $5.4 million, or 1.7%, was primarily comprised of:

•  $5.6 million from the addition of three consolidated Canadian communities and one domestic community;

•  $6.1 million from increases in average daily rates; offset by a

•  $4.4 million decrease due to lower occupancy.

Ancillary fees

Ancillary fees were comprised of the following:

	Nine Months
	Ended September 30,
	2009		2008
	(In millions)
New York Health Care Services	$	28.5	$	26.2
Fountains Health Care Services		3.9		4.1
International Health Care Services		1.7		1.9
	$	34.1	$	32.2

Professional fees from development, marketing and other

The decrease in professional fees from development, marketing and other revenue of $22.3 million was primarily comprised of:

•  $8.2 million decrease from the reduction of six unopened international communities in 2008 to two unopened communities in 2009;

•  $1.1 million decrease from international financing guarantee fees; and

•  $12.1 million decrease from domestic design and development fees due to a decrease in unopened communities from 33 in 2008 to three in 2009.

Reimbursed costs incurred on behalf of managed communities

Reimbursed costs incurred on behalf of managed communities were $709.2 million in the first nine months of 2009 compared to $751.2 million in the first nine months of 2008. The decrease of 5.6% was due primarily to 32 fewer communities in 2009 than 2008.

Operating Expenses

Community expense for consolidated communities

The increase in community expense of $8.0 million, or 3.4%, was primarily comprised of:

•  $5.8 million from the consolidation of three Canadian communities and one domestic community; and

•  $2.2 million from increased insurance, labor, utilities and other costs.

Community lease

Community lease expense decreased $0.2 million primarily related to a lease termination.

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Depreciation and amortization

The depreciation and amortization expense was $41.5 million in 2009 and $34.3 million in 2008. The increase of $7.2 million was primarily due to $5.8 million of additional amortization expense related to a change in the estimated life of a management contract intangible and $1.5 million of incremental depreciation expense related to four new communities (the three Canadian communities referred to above and a completed project in California which opened in January 2009).

Ancillary expenses

Ancillary expenses were comprised of the following:

	Nine Months
	Ended September 30,
	2009		2008
	(In millions)
New York Health Care Services	$	26.5	$	22.9
Fountains Health Care Services		3.6		4.0
International Health Care Services		1.8		1.4
	$	31.9	$	28.3

General, administrative and venture expense

The decrease in general and administrative expenses of $24.2 million is primarily due to:

•  $9.1 million decrease in salaries and bonus as a result of our cost reduction program resulting in the elimination of 169 positions to date;

•  $8.2 million decrease in general corporate expenses as a result of cost containment initiatives including information technology costs, training and education and temporary help;

•  $3.6 million decrease in travel;

•  $2.0 million decrease in bonus expense related to one of our ventures;

•  $1.5 million decrease related to an employee litigation settlement;

•  $1.2 million decrease due to a 2008 penalty related to one of our communities; partially offset by

•  $1.9 million increase in executive deferred compensation costs.

Development expense

The $18.0 million decrease in development expense related to the reduction of development activity, 39 unopened communities in 2008 compared to five unopened communities in 2009, was primarily comprised of:

•  $8.6 million decrease in development labor costs; and

•  $9.5 million decrease in development related expenses including travel, insurance, professional fees, legal, telecommunication, and other costs.

Write-off of capitalized project costs

Write-off of capitalized project costs was $14.1 million and $84.2 million in 2009 and 2008, respectively. We ceased all new development at the end of 2008 until suitable construction financing becomes available.

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Accounting Restatement, Special Independent Committee Inquiry, SEC Investigation and Stockholder Litigation

Legal and accounting fees related to the accounting restatement, Special Independent Committee inquiry, SEC investigation and stockholder litigation decreased to $3.5 million in 2009 compared to $26.4 million in 2008. The Special Independent Committee activities and the accounting restatement were completed during the first quarter of 2008. However, we continue to incur legal fees and related expenses in connection with the SEC investigation and stockholder litigation. The stockholder litigation was settled in the second quarter of 2009.

Restructuring costs

Costs associated with our 2008 and corporate 2009 restructuring plans were $25.9 million in 2009. Costs in 2008 were $7.2 million.

Provision for doubtful accounts

The provision for doubtful accounts increased $5.6 million during 2009 compared to 2008 primarily due to a reserve of $6.2 million for advances to a venture and a $1.6 million reserve write-off of the remaining Aston Gardens operating deficit guarantee. These increases were partially offset by a decrease in other reserves.

Loss on financial guarantees and other contracts

We recorded a loss on our financial guarantees of $1.5 million and $1.7 million during 2009 and 2008, respectively, related to construction cost overrun guarantees on a condominium project and a completion guarantee on an operating property.

Impairment of long-lived assets

Impairment of long-lived assets was $35.0 million in 2009 and $2.3 million in 2008. The 2009 impairment charge related to 10 operating communities, two discontinued development projects and nine land parcels and in 2008, one community.

Costs incurred on behalf of managed communities

Costs incurred on behalf of managed communities were $719.7 million in 2009 compared to $749.4 million in 2008. The decrease of 4.0% was due primarily to 32 fewer communities in 2009 than 2008 and higher insurance charges.

Other Non-Operating Income and Expense

Total other non-operating expense was $4.2 million and $12.8 million for the nine months ended September 30, 2009 and 2008, respectively. The decrease in other non-operating expense was primarily due to:

•  $2.9 million increase in interest expense due to increased borrowings;

•  $2.5 million decrease in interest income;

•  $4.2 million for net foreign exchange gains in 2009 comprised of the $4.6 million of gain related to the Canadian dollar, $(0.3) million and $(0.1) million of loss related to the British pound and Euro, respectively, compared to $(2.9) million of net foreign exchange losses in 2008 comprised of $(2.0) million and $(1.0) million of loss related to the Canadian dollar and British pound, respectively, and $0.1 million of gain related to the Euro; and

•  $4.9 million decrease in the unrealized loss on our investments in auction rate securities which are classified as trading securities and carried at fair value.

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Gain on the Sale and Development of Real Estate and Equity Interests

Gain on the sale and development of real estate and equity interests was $20.3 million and $19.0 million for the nine months ended September 30, 2009 and 2008, respectively. The gain in 2009 primarily resulted from transactions which occurred in prior years for which the recognition of gain had been deferred due to various forms of continuing involvement. We accounted for the sale of three communities in 2004 under the profit-sharing method of accounting as we provided guarantees to make monthly payments to the buyer equal to the amount by which a net operating income target exceeded actual net operating income for the community for an extended period of time. The guarantee expired in the second quarter of 2009 and we recorded a gain of approximately $8.9 million. During the first nine months of 2008, we completed the recapitalization of a venture with two underlying properties. As a result of this recapitalization, guarantees that were requiring us to use the profit-sharing method were released and we recorded a pre-tax gain on sale of approximately $6.7 million. In addition, we recognized a gain of $1.1 million from the sale of three land parcels.

Sunrise’s Share of Earnings and Return on Investment in Unconsolidated Communities

	Nine Months Ended September 30,
	2009			2008
	(In millions)
Sunrise’s share of income (losses) in unconsolidated communities	$	2.2		$	(30.2	)
Return on investment in unconsolidated communities		8.4			23.0
Impairment of equity investment		(1.2	)		—
	$	9.4		$	(7.2	)

The increase in our share of income (losses) in unconsolidated communities of $32.4 million was primarily due to our UK venture, in which we have a 20% interest, selling three communities to a venture in which we have a 10% interest. As a result of sales, the venture recorded a gain of which we recognized $19.0 million for our equity interest in the earnings. In addition, there were non-recurring losses in 2008 of $11.6 million and $2.4 million from our Fountains and Aston Gardens ventures, respectively, and operating losses from joint ventures were smaller in 2009 compared to 2008.

Distributions from operations from investments where the book value is zero and we have no contractual or implied obligation to support the venture were $2.1 million lower in 2009 than 2008. During the first nine months of 2008, the expiration of contractual obligations resulted in the recognition of $9.2 million of gain and the recapitalization of one venture resulting in a return on investment of $3.3 million.

In March 2009, based on the receipt of a notice of default from the lender to a venture in which we own a 20% interest and the poor rental experience in the venture, we consider our equity to be other than temporarily impaired and wrote off the remaining equity balance of $1.1 million.

In June 2009, we determined the fair value of our investment in a venture in which we had a 1% interest had decreased to zero and was other than temporarily impaired. We wrote our investment down to zero and recorded an impairment charge of $0.1 million.

(Loss) Income from Investments Accounted for Under the Profit-Sharing Method

(Loss) income from investments accounted for under the profit-sharing method was $(9.2) million and $0.1 million for the nine months ended September 30, 2009 and 2008, respectively. The losses in 2009 were generated from our condominium community that recently opened and where profits associated with condominium sales are required to be deferred until such time as 50 percent of units are sold.

Benefit from Income Taxes

The benefit from income taxes allocated to continuing operations was $1.4 million and $49.5 million for the nine months ended September 30, 2009 and 2008, respectively. Our effective tax benefit was 1.56% and 37.6% for

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the nine months ended September 30, 2009 and 2008, respectively. At December 31, 2008, we determined that deferred tax assets in excess of reversing tax liabilities were not likely to be realized and we recorded a valuation allowance on net deferred tax assets. Income tax expense of $4.8 million attributable to gains in discontinued operations recorded in the first quarter of 2009 was reversed in the second quarter due to current period losses in discontinued operations. As of September 30, 2009, we are continuing to offset our net deferred tax asset by a full valuation allowance.

Discontinued Operations

Discontinued operations consists of our German communities which we are marketing for sale, our Greystone subsidiary which was sold in the first quarter of 2009, our Trinity subsidiary which ceased operations in the fourth quarter of 2008, one community sold in the third quarter of 2009, one community which was closed in the second quarter of 2009 and two communities which were sold in 2008 and for which we have no continuing involvement.

Germany’s loss, included in discontinued operations, was $73.9 million for the nine months ended September 30, 2009 which included an impairment charge of $52.4 million. Greystone’s income includes $23.7 million of gain related to its sale.

In order to resolve and settle the claims among us and Trinity’s prior owners, in June 2009, we entered into a settlement agreement with the former majority stockholders of Trinity, which, among other matters, provides for the release and discharge of all claims and causes of action between the parties to the settlement agreement.

In consideration of the settlement agreement, the former majority stockholders of Trinity paid us an aggregate amount of approximately $9.8 million. The parties to the settlement agreement also agreed to cooperate to achieve voluntary dismissal of certain litigation matters.

In exchange for the consideration, we and the former majority stockholders of Trinity have reciprocally released each other from any and all claims that each such parties had against other such parties relating to any matters through the date of the settlement agreement.

We had previously recorded a receivable of $2.7 million from the former stockholders of Trinity for various liabilities relating to events occurring prior to our purchase of Trinity. Accordingly, $2.7 million of the proceeds were applied against the receivable and the remaining amount of $7.1 million has been recorded as income from discontinued operations.

Liquidity and Capital Resources

We had $43.4 million and $29.5 million of unrestricted cash and cash equivalents at September 30, 2009 and December 31, 2008, respectively. Since January 1, 2009, we have had no borrowing availability under the Bank Credit Facility; as a result, during 2009, we have been and currently are financing our operations primarily with cash generated from operations and sales of assets, including the sale of our Greystone subsidiary in March 2009 and the sale of our Aston Gardens equity interest in April 2009.

In connection with communities under construction, we have provided project completion guarantees to venture lenders. In addition, we have provided operating deficit guarantees to venture lenders. These financial guarantees are designed to assure completion of development projects in the event of cost overruns, and, after depletion of reserves established in the loan agreements, guarantee scheduled principal amortization and interest during the term of the guarantee. We are not in compliance with one of these construction loans, and, as a result the lenders could cease funding the projects. Five communities remain under construction at September 30, 2009. We are working with our lenders and venture partners to address the defaults. Although we believe that completion of the projects will not involve material cost overruns and that established reserves are adequate to fund the lease-up period once the projects are completed, there can be no assurance that these lenders will continue to fund the construction and development of these projects. We estimate that completion of the five communities (two in the U.K. and three in the U.S.) we have under construction in ventures as of September 30, 2009 will require an additional $14.5 million, which we anticipate funding with the proceeds of committed construction financing. We have no further equity contribution commitments for projects under construction as of September 30, 2009,

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assuming the lenders continue to fund under existing construction loan financing commitments and we incur no cost overruns.

We do not currently have plans to commence any new projects in the U.S. or the U.K. Our U.S. and U.K. development team has been reduced to 10 people at September 30, 2009. We will reconsider future development when market conditions stabilize and the cost of capital for development projects is in line with projected returns.

In October 2009, we entered into an agreement to sell 21 wholly owned assisted living communities, located in 11 states, to Brookdale Senior Living Inc. for $204 million. Brookdale placed into escrow an earnest money deposit of $5 million toward the purchase price. The closing date is currently scheduled for November 16, 2009. At the closing of the sale, we expect to receive approximately $60 million in proceeds after payment or assumption by Brookdale of certain mortgage loans, the posting of required escrows, and payment of expenses by us. We anticipate that approximately $130 million of our debt will be assumed or repaid at closing. We will use $25 million of proceeds to pay down our Bank Credit Facility and will place $20 million into a collateral account for the benefit of other creditors.

In addition to selling the German communities and the 21 communities to Brookdale, we intend to sell 11 operating communities, of which eight are located in the United States and three in Canada. Of the 11 operating communities, five are collateral for the German lenders and future net proceeds of the remaining six operating communities would be split equally between us and the lenders of the Bank Credit Facility. We also intend to sell one closed community in the United States which is collateral for the German lenders.

We intend to sell 16 parcels of land, of which 12 are located in the United States and four in Canada. Of the 16 land parcels, 11 are collateral for the German lenders and future proceeds of the remaining five land parcels after repayment of related debt would be split equally between us and the lenders of the Bank Credit Facility. In addition, we intend to sell two closed construction sites and one building located in the United States which are collateral for the German lenders.

Additional financing resources will be required to refinance existing indebtedness that comes due within the next 12 months. We have undertaken or expect to commence certain efforts to reduce expenses and preserve liquidity including; (i) extending the term of our Bank Credit Facility to December 2, 2010 (subject to certain conditions as discussed more fully below), (ii) seeking to reduce operating costs; (iii) seeking to restructure the terms of our other indebtedness including extension of scheduled maturity dates; and (iv) pursuing sales of selected assets. No assurance can be given that we will be successful in achieving any of these efforts.

In April 2009, we received federal income tax refunds of $20.8 million and $1 million of the proceeds from the sale of our equity interest and receivable from the Aston Gardens venture which were used to pay down the Bank Credit Facility. In June 2009, $2.5 million of proceeds from an agreement with Trinity’s prior owners (Note 12) was used to pay down the Bank Credit Facility. At September 30, 2009, the outstanding borrowings were $68.9 million.

Bank Credit Facility

On March 23, 2009, we entered into the Eleventh Amendment to our Bank Credit Facility. The purpose of the Eleventh Amendment is to provide the parties with an additional period of time to negotiate the terms of a Twelfth Amendment to the Bank Credit Facility which would comprehensively address any remaining issues between the parties with respect to the Bank Credit Facility through the Bank Credit Facility’s current stated maturity date of December 2, 2009. The Eleventh Amendment is described in Note 6 to the Financial Statements.

On April 28, 2009, we entered into the Twelfth Amendment to the Bank Credit Facility. The significant terms include:

•  waiver of all existing financial covenants through December 2, 2009, the maturity date of the Bank Credit Facility;

•  agreement for renewal of existing letters of credit;

•  an amendment fee of $0.5 million;

•  authorization to consummate certain transactions;

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•  restriction on the disposition of assets except to permit the transfer of scheduled assets;

•  requirement to maintain minimum cash balance as of the last day of each month and of not less than $5 million at any time;

•  a cash sweep as of the last day of October and November 2009 to reduce principal equal to the greater of consolidated cash in excess of $35 million or $2 million; and

•  a permanent reduction of the commitment after an agreed-upon repayment of the outstanding balance from dispositions consented to by our lenders, federal income tax refunds of $20.8 million and payments received from the cash sweep.

On October 19, 2009, we entered into the Thirteenth Amendment to the Bank Credit Facility. The significant terms include:

•  an extension of the maturity date from December 2, 2009 to December 2, 2010;

•  renewal of existing letters of credit;

•  an amendment fee of $0.5 million of which $250,000 was paid on October 19, 2009 and $250,000 to be paid upon the earlier of the sale of properties or January 4, 2010;

•  principal payment of $6.0 million which was paid on October 19, 2009;

•  principal payments previously due on October 31 and November 30, 2009 are no longer due;

•  modifies the minimum liquidity covenant to not less than $10.0 million of unrestricted cash on hand the last day of the month;

•  modifies the restriction on the disposal of assets to permit disposition of certain assets as long as 50% of the net sale proceeds are allocated to the lenders;

•  the proceeds from the pending sale of 21 properties are allocated as follows:

•  a principal payment of $25 million;

•  $20 million deposited into a collateral account for the benefit of other creditors;

•  either cause a return of $3.7 million in letters of credit or make a principal payment of that same amount;

•  if the pending sale of the 21 properties does not close by June 30, 2010, we will either make a principal payment of $28.7 million or make a $5 million principal payment, pay an additional $1 million extension fee and grant mortgage liens junior to existing mortgages or a perfected first priority pledge of and security interest in, the equity interests in the entities owning 16 certain properties (the granting of such mortgages or security interest is subject to the existing mortgage lenders’ consent). If we are unable to deliver these items, the Bank Credit Facility will be in default and become due and payable; and

•  a permanent reduction of the commitment after future principal repayments or cancellation of letters of credit.

We have no borrowing availability under the Bank Credit Facility, and we have significant scheduled debt maturities in 2009 and 2010 and significant long-term debt that is in default. We are endeavoring to extend debt maturity dates, re-finance debt and obtain waivers from applicable lenders. We are engaged in discussions with various venture partners and third parties regarding the sale of certain assets with the purpose of increasing liquidity and reducing obligations to enable us to continue operations.

In April 2009, we received federal income tax refunds of $20.8 million which was used to pay down the Bank Credit Facility and $1 million of the proceeds from the sale of our equity interest and receivable from the Aston Gardens venture was also used to pay down the Bank Credit Facility. In June 2009, $2.5 million of proceeds from an agreement with Trinity’s prior owners (Note 12) was used to pay down the Bank Credit Facility. At September 30, 2009, the outstanding borrowings under the Bank Credit Facility were $68.9 million and there were $23.1 million of letters of credit outstanding.

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Debt

At September 30, 2009, we had $624.6 million of outstanding debt with a weighted average interest rate of 3.13% as follows (in thousands):

	September 30,		December 31,
	2009		2008
Community mortgages	$	248,955	$	241,851
German communities(1)		200,034		185,901
Bank Credit Facility		68,878		95,000
Land loans		34,327		37,407
Other		28,286		30,655
Variable interest entity		23,225		23,905
Margin loan (auction rate securities)		20,920		21,412
	$	624,625	$	636,131

(1) The face amount of the debt related to the German communities was $219.3 million at September 30, 2009.

Of the outstanding debt we had $5.3 million of fixed-rate debt with a weighted average interest rate of 6.82% and $619.3 million of variable rate debt with a weighted average interest rate of 3.10%.

Debt that is in default at September 30, 2009 consists of the following (in thousands):

	September 30,
	2009
German communities(1)	$	200,034
Community mortgages		147,930
Variable interest entity		23,225
Land loans		12,420
Other		28,286
	$	411,895

(1) The face amount of the debt related to the German communities was $219.3 million at September 30, 2009.

We are working with our lenders to either re-schedule certain of these obligations or obtain waivers.

For debt that is not in default, we have scheduled debt maturities as follows (in thousands):

			1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
	2009		2010		2010		2010		2010		Thereafter		Total
Bank Credit Facility(1)	$	68,878	$	—	$	—	$	—	$	—	$	—	$	68,878
Community mortgages		39,796		40,573		195		497		198		19,766		101,025
Land loans		21,907		—		—		—		—		—		21,907
Margin loan (auction rate securities)		20,920		—		—		—		—		—		20,920
	$	151,501	$	40,573	$	195	$	497	$	198	$	19,766	$	212,730

(1) As of 10/19/09, maturity date changed to 12/2/10 (subject to certain conditions).

Sunrise ventures have total debt of $4.2 billion with near-term scheduled debt maturities of $69.7 million in 2009 and $576.1 million in 2010. Of this $4.2 billion of debt, there is long-term debt that is in default of $1.4 billion. The debt in the ventures is non-recourse to us with respect to principal payment guarantees and we and our venture partners are working with the venture lenders to obtain covenant waivers. However, in certain cases, we have provided operating deficit and completion guarantees to the lenders and joint ventures. We have minority non-

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controlling interests in these ventures. See Note 12 of the Notes to Consolidated Financial Statements of our 2008 Form 10-K, as amended, for a list of our ventures and our related ownership interest.

Germany Venture

We own nine communities (two of which are closed) in Germany. The debt related to these communities has partial recourse to us as the debt for four of the communities of €50.0 million ($73.0 million at September 30, 2009) has a stipulated release price for each community and for the remaining five communities, we have provided guarantees to the lenders of the repayment of the monthly interest payments and principal amortization and operating shortfalls until the maturity dates of the loans. As a result of the violation of a covenant in one of the loan documents, one of the lenders has asserted that we are effectively obligated to repay a portion of the principal at this time. Subsequent to September 30, 2009, in connection with the German debt restructure, we have settled with this lender. The face amount of the total debt related to the German communities at September 30, 2009 is $219.3 million.

In January 2009, we informed the lenders to our German communities and the Hoesel land, an undeveloped land parcel, that our German subsidiary was suspending payment of principal and interest on all loans for our German communities and that we would seek a comprehensive restructuring of the loans and our operating deficit guarantees. As a result of the failure to make payments of principal and interest on the loans for our German communities, we are in default of the loan agreements but have entered into standstill agreements with the lenders pursuant to which the lenders have agreed not to foreclose on the communities that are collateral for their loans or to commence or prosecute any action or proceeding to enforce their demand for payment by us pursuant to our operating deficit agreements until the earliest of the occurrence of certain other events relating to the loans.

In October 2009, we entered into a restructuring agreement, in the form of a binding term sheet, with two of our lenders to seven of the nine communities, to settle and compromise their claims against us, including under operating deficit and principal repayment guarantees provided by us in support of our German subsidiaries. These two lenders contended that these claims had an aggregate value of approximately $121.6 million. The binding term sheet contemplates that, on or before the first anniversary of the execution of definitive documentation for the restructuring, certain other of our identified lenders may elect to participate in the restructuring with respect to their asserted claims. The claims being settled by these two lenders represent approximately 77.5 percent of the aggregate amount of claims asserted by the lenders that may elect to participate in the restructuring transaction.

The restructuring agreement provides that the electing lenders will release and discharge us from certain claims they may have against us. We will issue to the lenders that elect to participate in the restructuring on or before the first execution of the definitive documentation, their pro rata share of up to an aggregate of 5 million shares of our common stock and will grant mortgages for the benefit of all electing lenders on certain of our unencumbered North American properties. Following the first execution of the definitive documentation for the restructuring, we will pursue the sale of such mortgaged properties and distribute the net sale proceeds to the electing lenders. We have guaranteed that, within 30 months of the first execution of the definitive documentation for the restructuring, the electing lenders will receive a minimum of $58.3 million from the net proceeds of any such sale, which equals 80 percent of the most recent aggregate appraised value of these properties. If the electing lenders do not receive at least $58.3 million by such date, we will make payment to cover any shortfall or, at such lenders’ option, convey to them the remaining unsold properties. As any gain or loss on the transaction is dependent upon the values at closing of the aforementioned consideration, we are unable to estimate any gain or loss at this time.

In addition, we will market for sale the German assisted living communities subject to loan agreements with the electing lenders and will remain responsible for all costs of operating, preserving and maintaining these communities until the earlier of either their sale or December 31, 2010.

The closing of the transaction, including the execution of the definitive documentation, the release of claims and the issuance of Sunrise common stock, is conditioned upon receipt of consent for the transaction from Bank of America, N.A., as the administrative agent under our Bank Credit Facility, on or before November 11, 2009. In accordance with the binding term sheet, definitive documentation shall be executed as soon as reasonably possible (but no later than 40 days) after the receipt of such required consent.

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We continue to be liable under certain operating deficit and repayment guarantees for the Klein Flottbeck and Wiesbaden communities, and certain principal repayment guarantees for the Hoesel land which is not part of the restructuring agreement.

In the second quarter of 2009, we engaged a broker to assist in the sale of the nine German communities and at that time, classified the German assets as held for sale.

Guarantees

See Note 10, Commitments and Contingencies, for a discussion of other guarantees outstanding at September 30, 2009.

Cash Flows

Net cash provided by (used in) operating activities was $38.8 million and $(117.0) million for the nine months ended September 30, 2009 and 2008, respectively, an increase of $155.8 million. This increase in cash provided by operations was primarily due to an increase of cash from net working capital of $122.8 million and a decrease in cash used in discontinued operations of $9.9 million.

Net cash provided by (used in) investing activities was $4.4 million and $(149.9) million for the nine months ended September 30, 2009 and 2008, respectively, an increase of $154.3 million. The increase in cash provided by investing activities was primarily due to a decrease of $196.3 million in capital expenditures and condominium fundings partially offset by a decrease of $45.8 million in proceeds from the disposition of assets.

Net cash (used in) provided by financing activities was $(29.3) million and $181.5 million for the nine months ended September 30, 2009 and 2008, respectively, a decrease of $210.8 million. This decrease was primarily due to a decrease in net borrowings of $206.1 million.

New and Future Accounting Standards

See Note 2, New and Future Accounting Standards, for information related to the adoption of new accounting standards in the first nine months of 2009, none of which had a material impact on our financial statements, and the future adoption of recently issued standards, which we do not expect or have not yet evaluated whether the new standards will have a material impact on our consolidated financial position or results of operations.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our 2008 Form 10-K as amended on March 31, 2009. Since the date of our 2008 Form 10-K as amended, there has been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

Item 3.   Quantitative and Qualitative Disclosure About Market Risk

Our exposure to market risk has not materially changed since December 31, 2008.

Item 4.   Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. You should note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and

55

we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon the foregoing evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the first nine months of 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1.   Legal Proceedings

For information regarding pending and resolved or settled legal proceedings, see Note 10 to the condensed consolidated financial statements.

Item 1A.   Risk Factors

There were no material changes, other than those that follow, to the risk factors disclosed in Part I, “Item 1A. Risk Factors” of our 2008 Annual Report on Form 10-K for the year ended December 31, 2008.

The failure of our 2009 cost reduction plan to achieve sufficient expense savings.

In May 2009, we announced a plan to continue to reduce corporate expenses through reorganization of our corporate cost structure, including a reduction in spending related to, among other areas, administrative processes, vendors, and consultants. The plan is designed to reduce our annual recurring general and administrative expenses (including expenses previously classified as venture expense) by over $20 million, from our 2009 budgeted annual recurring level of approximately $120 million (after the sale of Greystone, which is presented in discontinued operations in our financial statements) to approximately $100 million, and to reduce our centrally administered services which are charged to the communities by approximately $1.5 million. Under the plan, approximately 150 positions will be eliminated. If we are unable to fully effect the expense reduction plan or if the plan fails to achieve the anticipated results, we may not have sufficient operating cash to meet our obligations.

If the sale of our German assets is not consummated, we may not have sufficient cash to meet our obligations.

We continue to be liable under certain operating deficit and repayment guarantees for the Klein Flottbeck and Wiesbaden communities, and certain principal repayment guarantees for the Hoesel land which is not part of the restructuring agreement. If we are unable to sell our German assets in the required time frame or for sufficient proceeds, we may be required to pay the lenders the difference of the proceeds and $58.3 million. We may not have sufficient operating cash to meet this obligation at the time it becomes due.

Our ability to execute our plan to sell certain assets.

In October 2009, we entered into an agreement to sell 21 wholly owned assisted living communities, located in 11 states, to Brookdale Senior Living Inc. (“Brookdale”) for $204 million. Brookdale placed into escrow an earnest money deposit of $5 million toward the purchase price. The closing date is currently scheduled for November 16, 2009. At the closing of the sale, we expect to receive approximately $60 million in proceeds after payment or assumption by Brookdale of certain mortgage loans, the posting of required escrows, and payment of expenses by

56

us. We will use $25 million of proceeds to pay down our Bank Credit Facility and will place $20 million into a collateral account for the benefit of other creditors.

In addition to selling the German communities and the 21 communities to Brookdale, we intend to sell 11 operating communities, of which eight are located in the United States and three in Canada. Of the 11 operating communities, five are collateral for the German lenders and future net proceeds of the remaining six operating communities would be split equally between us and the lenders of the Bank Credit Facility. We also intend to sell one closed community in the United States which is collateral for the German lenders.

We intend to sell 16 parcels of land, of which 12 are located in the United States and four in Canada. Of the 16 land parcels, 11 are collateral for the German lenders and future proceeds of the remaining five land parcels after repayment of related debt would be split equally between us and the lenders of the Bank Credit Facility. In addition, we intend to sell two closed construction sites and one building located in the United States which are collateral for the German lenders.

If we are unable to sell certain assets as planned, we may not have sufficient cash to meet our obligations.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.   Defaults Upon Senior Securities

None

Item 4.   Submission of Matters to a Vote of Security Holders

None

Item 5.   Other Information

None

Item 6.   Exhibits

The exhibits required by this Item are set forth on the Index of Exhibits attached hereto.

57

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, on this 9th day of November 2009.

SUNRISE SENIOR LIVING, INC.
(Registrant)

/s/  Julie A. Pangelinan

Julie A. Pangelinan

Chief Financial Officer

/s/  C. Marc Richards

C. Marc Richards

Chief Accounting Officer

58

INDEX OF EXHIBITS

				Incorporated by Reference
Exhibit					Filing Date	Exhibit
Number			Description	Form	with SEC	Number
	2	.1	Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc.* #	N/A	N/A	N/A
	2	.2	First Amendment to Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc.* #	N/A	N/A	N/A
	2	.3	Second Amendment to Purchase and Sale Agreement, dated as of October 7, 2009, by and among various subsidiaries of Sunrise Senior Living, Inc. and BLC Acquisitions, Inc.* #	N/A	N/A	N/A
	10	.1	Settlement Agreement, dated as of June 12, 2009, by and among Sunrise Senior Living, Inc. and the former majority stockholders of Trinity.*	N/A	N/A	N/A
	10	.2	Loan Agreement, dated as of September 28, 2007, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, LP, as borrowers, and Wells Fargo Bank, National Association, as lender.*	N/A	N/A	N/A
	10	.3	Letter Agreement, dated October 1, 2009, by and among Sunrise Pasadena CA Senior Living, LLC and Sunrise Pleasanton CA Senior Living, L.P., as borrowers, Sunrise Senior Living, Inc., as guarantor, and Wells Fargo Bank, National Association, as lender.*	N/A	N/A	N/A
	10	.4	Loan and Security Agreement (Loan A), dated as of August 28, 2007, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as agent for the lenders party thereto.*	N/A	N/A	N/A
	10	.5	Guaranty of Payment (Loan A), dated as of August 28, 2007, by and among Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A
	10	.6	Deed of Trust Note A, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to MB Financial Bank, N.A.*	N/A	N/A	N/A
	10	.7	Deed of Trust Note A, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A
	10	.8	Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A), dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as grantor, Alexandra Johns and Ellen-Elizabeth Lee, as trustees, and Chevy Chase Bank, F.S.B., as agent.*	N/A	N/A	N/A
	10	.9	Loan and Security Agreement (Loan B), dated as of August 28, 2007, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as lender.*	N/A	N/A	N/A
	10	.10	Guaranty of Payment (Loan B), dated as of August 28, 2007, by and among Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A
	10	.11	Deed of Trust Note B, dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, to Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A

59

				Incorporated by Reference
Exhibit					Filing Date	Exhibit
Number			Description	Form	with SEC	Number
	10	.12	Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B), dated as of August 28, 2007, by Sunrise Connecticut Avenue Assisted Living, L.L.C., as grantor, Alexandra Johns and Ellen-Elizabeth Lee, as trustees, and Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A
	10	.13	First Amendment to Loan Agreement (Loan A), dated as of April 15, 2008, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B., as agent to the lenders party thereto.*	N/A	N/A	N/A
	10	.14	First Amendment to Guaranty of Payment (Loan A), dated as of September 2008, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A
	10	.15	First Amendment to Loan Agreement (Loan B), dated as of April 15, 2008, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, F.S.B. as lender.*	N/A	N/A	N/A
	10	.16	First Amendment to Guaranty of Payment (Loan B), dated as of September 2008, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, F.S.B.*	N/A	N/A	N/A
	10	.17	Second Amendment to Loan Agreement (Loan A), dated as of August 28, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as agent for the lenders party thereto.*	N/A	N/A	N/A
	10	.18	Second Amendment to Guaranty of Payment (Loan A), dated as of August 28, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A.*	N/A	N/A	N/A
	10	.19	First Amendment to Deed of Trust Note A (Loan A), dated as of August 28, 2009,by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and MB Financial Bank, N.A., as lender.*	N/A	N/A	N/A
	10	.20	First Amendment to Deed of Trust Note A (Loan A), dated as of August 28, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.*	N/A	N/A	N/A
	10	.21	Second Amendment to Loan Agreement (Loan B), dated as of August 28, 2009, by and among Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.*	N/A	N/A	N/A
	10	.22	Second Amendment to Guaranty of Payment (Loan B), dated as of August 28, 2009, by and between Sunrise Senior Living, Inc. and Chevy Chase Bank, a division of Capital One, N.A.*	N/A	N/A	N/A
	10	.23	First Amendment to Deed of Trust Note A (Loan B), dated as of August 28, 2009, by and between Sunrise Connecticut Avenue Assisted Living, L.L.C., as borrower, and Chevy Chase Bank, a division of Capital One, N.A., as lender.*	N/A	N/A	N/A
	10	.24	Thirteenth Amendment to the Credit Agreement, dated as of October 19, 2009, by and among Sunrise Senior Living Inc., certain subsidiaries of Sunrise Senior Living, Inc. party thereto, the lenders from time to time party thereto and Bank of America, N.A.	8-K	October 20, 2009	10.1

60

				Incorporated by Reference
Exhibit					Filing Date	Exhibit
Number			Description	Form	with SEC	Number
	10	.25	Restructure Term Sheet, dated as of October 22, 2009, by and among Sunrise Senior Living, Inc. and the creditors party thereto.	8-K	October 28, 2009	10.1
	10	.26	Settlement Agreement, dated as of October 26, 2009, by and among Sunrise Senior Living Investments, Inc., Sunrise Senior Living Management, Inc., Sunrise Senior Living, Inc., US Senior Living Investments, LLC and Sunrise IV Senior Living Holdings, LLC.	8-K	October 28, 2009	10.2
	10	.27	Settlement Agreement, dated as of October 26, 2009, by and among Sunrise Senior Living Investments, Inc., Sunrise Senior Living, Inc., Fountains Senior Living Holdings, LLC, Sunrise Senior Living Management, Inc., US Senior Living Investments, LLC and HSH Nordbank AG, New York Branch.	8-K	October 28, 2009	10.3
	10	.28	2009 Annual Bonus Performance Metrics Applicable to Executive Officers.*+	N/A	N/A	N/A
	10	.29	Consulting Arrangement with Paul J. Klaassen.*+	N/A	N/A	N/A
	10	.30	2009 Special Bonus Payments to Executive Officers.*+	N/A	N/A	N/A
	10	.31	2009 Partial Bonus Payments to Executive Officers.*+	N/A	N/A	N/A
	10	.32	2009 Director Fees.*+
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	N/A	N/A	N/A
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	N/A	N/A	N/A
	32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	N/A	N/A	N/A
	32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	N/A	N/A	N/A

*	Filed herewith.
#	Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Sunrise hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
+	Represents management contract or compensatory plan or arrangement.

61

EX-2.1

Exhibit 2.1

PURCHASE AND SALE AGREEMENT

between

The parties designated on Exhibit “A”,

as Seller,

and

BLC Acquisitions, Inc.

as Purchaser
As of October 7, 2009

Sunrise of Santa Rosa	Sunrise of Fort Wayne	Sunrise at Finneytown
3250 Chanate Road	3110 East Coliseum Boulevard	9101 Winton Road
Santa Rosa, CA 95404	Fort Wayne, IN 46805	Cincinnati, OH 45231
Sunrise of Colorado Springs	Sunrise at Willow Lake	Sunrise at Kenwood
10 West Monument Street	2725 Lake Circle Drive	9090 Montgomery Road
Colorado Springs, CO 80903	Indianapolis, IN 46268	Cincinnati, OH 45242
Sunrise of West Hartford	Sunrise of Ann Arbor	Sunrise at Oakwood
22 Simsbury Road	2190 Ann Arbor-Saline Road	1701 Far Hills Avenue
West Hartford, CT 06117	Ann Arbor, MI 48103	Dayton, OH 45419
Sunrise of Wilton	Sunrise of Albuquerque	Sunrise of Wooster
96 Danbury Road	4910 Tramway Ridge Dr, NE	(Ground Lease)
Wilton, CT 06897	Albuquerque, NM 87111	1615 Cleveland Road
		Wooster, OH 44691
Sunrise of Augusta	Sunrise of South Charlotte	Sunrise of Monroeville
326 Boy Scout Road	5515 Rea Road	2589 Mosside Boulevard
Augusta, GA 30909	Charlotte, NC 28226	Monroeville, PA 15146
Sunrise of Carmel	Sunrise of Bath	Virginia Beach Estates
301 Executive Drive	101 N. Cleveland Massillon Rd	937 Diamond Spring Rd
Carmel, IN 46032	Akron, OH 44333	Virginia Beach, VA 23455
Sunrise at Fall Creek	Sunrise of Englewood	Sunrise of South Hills
5011 Kessler Boulevard, East	95 West Wenger Road	1320 Greentree Road
Indianapolis, IN 46220	Englewood, OH 45322	Pittsburgh, PA 15220

TABLE OF CONTENTS

				Page
I.	DEFINITIONS				1
II.	SALE AND PURCHASE OF PROPERTY				8
		2.1	Purchase of Property		8
		2.2	Purchase Price and Terms of Payment		8
		2.3	Assumption of the Contracts		9
		2.4	Assumption of the Resident Agreements		9
		2.5	Assumed Liabilities		9
		2.6	Allocation of Purchase Price		9
		2.7	Discharge of Liens		9
III.	ESCROW				10
		3.1	Escrow		10
		3.2	Deposit of Funds		10
IV.	TITLE				10
		4.1	Title Commitment		10
		4.2	Title to the Real Property		11
		4.3	Inspection		12
		4.4	Condition of the Property		15
V.	CLOSING				19
		5.1	Closing Date		19
		5.2	Action Prior to the Closing Date by Seller		19
		5.3	Action Prior to the Closing Date by Purchaser		21
		5.4	Recording of Deeds		22
		5.5	Prorations		22
		5.6	Closing Costs		25
		5.7	Distribution of Funds and Documents Following Closing		25
		5.8	Possession		27
VI.	ADDITIONAL COVENANTS AND INDEMNITIES				28
		6.1	Purchaser’s Covenants		28
		6.2	Seller Covenants		28
		6.3	Employee Matters		29
		6.4	Bridging of Licenses		31
VII.	REPRESENTATIONS AND WARRANTIES				32
		7.1	Purchaser’s Representations and Warranties		32
		7.2	Sellers’ Representations and Warranties		32
		7.3	Seller’s Knowledge		34
		7.4	Failure of Condition But No Seller Breach		35
		7.5	Survival Period		35

-i- 

TABLE OF CONTENTS
(Cont’d)

				Page
VIII.	CONDITIONS PRECEDENT TO CLOSING				35
		8.1	Conditions to Seller’s Obligations		35
		8.2	Conditions to Purchaser’s Obligations		36
		8.3	Failure of Conditions to Closing		36
		8.4	Purchase of all Facilities		37
IX.	REMEDIES FOR PRE-CLOSING AND POST-CLOSING DEFAULTS ; LIQUIDATED DAMAGES				37
		9.1	Default by Purchaser Prior to Closing		37
		9.2	Default by Sellers Prior to Closing		38
		9.3	Limitations of Purchaser’s Post-Closing Claims		39
		9.5	Survival of Purchaser’s Claims		39
		9.6	Limitations on Sellers’ Post-Closing Claims		40
		9.7	Survival of Seller’s Claims		40
		9.8	Limitations on Liability		41
		9.9	Survival		41
X.	BROKERS				41
XI.	NOTICES				42
XII.	MISCELLANEOUS				43
		12.1	Governing Law		43
		12.2	Professional Fees and Costs		43
		12.3	Exhibits and Schedules a Part of This Agreement		43
		12.4	Executed Counterparts		43
		12.5	Assignment		44
		12.6	IRS - Form 1099-S		44
		12.7	Successors and Assigns		44
		12.8	Time is of the Essence		44
		12.9	Entire Agreement		44
		12.10	Further Assurances		45
		12.11	Waiver		45
		12.12	Headings		45
		12.13	Risk of Loss		45
		12.14	Construction of Agreement		46
		12.15	No Public Disclosure		47
		12.16	Bulk Transfers		47
		12.17	Covenants, Representations and Warranties		47
		12.18	Confidentiality		47
		12.19	No Third-Party Beneficiaries		48
		12.20	Facsimile Signatures		48
		12.21	Severability		48
		12.22	Cumulative Remedies		49
		12.23	Consents and Approvals		49
		12.24	WAIVER OF JURY TRIAL		49

-ii- 

TABLE OF CONTENTS
(Cont’d)

				Page
		12.25	Natural Hazard Report for California Property		49
		12.26	Waiver Regarding California Property		49
XIII.	EXECUTION				51

SCHEDULE OF EXHIBITS

Exhibit “A”	Properties and Sellers
Exhibit “A-1”	Legal Description of Properties
Exhibit “A-2”	Allocation of Purchase Price between Properties
Exhibit “A-3”	Allocation of Purchase Price for each Property between Real Property, Personal Property, and Intangible Property
Exhibit “B”	Form of Escrow Agreement for Earnest Money Deposit
Exhibit “C”	Contracts
Exhibit “C-1”	Resident List
Exhibit “C-2”	Operating Statements
Exhibit “D”	Form of Assignment of Purchase Contract to Applicable Property
Exhibit “E-1”	Form of California Grant Deed
Exhibit “E-2”	Form of Colorado Grant Deed
Exhibit “E-3”	Form of Connecticut Grant Deed
Exhibit “E-4”	Form of Georgia Grant Deed
Exhibit “E-5”	Form of Indiana Grant Deed
Exhibit “E-6”	Form of Michigan Grant Deed
Exhibit “E-7”	Form of New Mexico Grant Deed
Exhibit “E-8”	Form of North Carolina Grant Deed
Exhibit “E-9”	Form of Ohio Grant Deed
Exhibit “E-10”	Form of Pennsylvania Grant Deed
Exhibit “E-11”	Form of Virginia Grant Deed
Exhibit “F”	Form of Bill of Sale
Exhibit “G”	Form of Assignment of Intangibles
Exhibit “H”	Form of Assignment and Assumption of Contracts
Exhibit “I”	Form of Assignment and Assumption of Resident Agreements
Exhibit “J”	Form of FIRPTA Certificate
Exhibit “K”	Form of Notice to Residents
Exhibit “L”	Form of Assignment of Ground Lease for Sunrise Wooster Assisted Living, L.L.C
Exhibit “M”	Form of Bridging Lease
Exhibit “N”	Form of Bridging Management Agreement
Exhibit “O”	Pending Litigation
Exhibit “P”	Form of Post-Closing Escrow Agreement

-iii- 

PURCHASE AND SALE AGREEMENT

     THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is dated as of this 7^th day of October, 2009 (“Effective Date”), and is made by and between each of the parties named on Exhibit “A” hereto (each, individually, “Seller” and, collectively, “Sellers”), and BLC Acquisitions, Inc., a Delaware corporation (“Purchaser”).

RECITALS

     A. Sellers are the owners of all of the Properties, with the specific Seller of each Property being the party specified as the owner of the corresponding Property listed on Exhibit “A”.

     B. Purchaser desires to purchase all of the Properties and to acquire all of Sellers’ respective right, title and interest in and to the Properties, on the terms and conditions set forth in this Agreement.

     C. Sellers desire to sell to Purchaser all of the Properties and to convey to Purchaser all of their respective right, title and interest in the Properties, on the terms and conditions set forth in this Agreement.

     D. All capitalized terms used in this Agreement and not otherwise defined shall have the meanings ascribed to such terms in Article I.

AGREEMENT

     NOW, THEREFORE, for valuable consideration, including the promises, covenants, representations and warranties hereinafter set forth, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally and equitably bound, agree as follows.

I.

DEFINITIONS

     As used in this Agreement, the following terms have the meanings ascribed to them in this Article I:

     “Affiliate.” with respect to any person or entity, (i) all persons or entities that, directly or indirectly, control, are controlled by, or under common control with, such person or entity; or (ii) all persons or entities that, directly or indirectly, own, are owned by or under common ownership with, such person or entity.

     “Agreement.” As set forth in the preamble hereof.

     “Allocated Purchase Price.” As set forth in Section 2.6 hereof.

     “Assignment of Contracts.” As set forth in Section 5.2(d) hereof.

     “Assignment of Ground Lease.” As set forth in Section 5.2(n) hereof.

     “Assignment of Intangibles.” As set forth in Section 5.2(c) hereof.

     “Assignment of Resident Agreements.” As set forth in Section 5.2(e) hereof.

     “Bill of Sale.” As set forth in Section 5.2(b) hereof.

     “Books and Records.” With respect to each Property, all documentation, third party reports and studies, land surveys, land use applications, land use permits and approvals, operating permits and other documents in printed or electronic form (but with respect to items in electronic format excluding software which is proprietary to Seller, its Affiliates or any third party, or is licensed from third parties by Seller or its Affiliates) that is in the possession or under the control of Seller or its Affiliates and that pertains to the use, operation, ownership or condition of the Property, including (i) all correspondence, billing, and other files, (ii) all structural reviews, environmental assessments or audits, architectural drawings and engineering, geophysical, soils, seismic, geologic, environmental (including with respect to the impact of materials used in the construction or renovation of the Improvements) and architectural reports, studies and certificates pertaining to the Property, and (iii) all financial statements and other accounting, tax, financial, and other books and records relating to the use, maintenance, and operation of the Property, but excluding (x) any Excluded Documents and (y) those items that are consolidated with items from other facilities owned, leased or managed by Seller or its Affiliates and not being conveyed to Purchaser, if any.

     “30-Day Contracts.” As set forth in Section 4.3.4 hereof.

     “Bridging Lease.” As set forth in Section 6.4.2 hereof.

     “Bridging Management Agreement.” As set forth in Section 6.4.2 hereof.

     “Brokers.” As set forth in Article X hereof.

     “Business Agreements.” With respect to each Property, any lease, residency agreement, rental agreement, loan agreement, mortgage, easement, covenant, restriction or other agreement or instrument at any time or times affecting all or a portion of the Property.

     “Cap Amount.” As set forth in Section 9.3 hereof.

     “Casualty.” As set forth in Section 12.13.1 hereof.

     “Casualty Notice.” As set forth in Section 12.13.1 hereof.

     “Casualty Renovation Cost.” As set forth in Section 12.13.1 hereof.

     “Claims.” Collectively, damages, claims (including without limitation, any claim for damage to property of others or injury to or death of any persons), penalties, obligations, liabilities, fines, losses, causes of action, fees, injuries, liens, encumbrance, proceedings, judgments, actions, rights, demands, costs and expenses (including without limitation, reasonable attorneys’ fees whether or not legal proceedings are instituted and court and litigation costs).

-2-

     “Claim Notice.” As set forth in Section 9.4 hereof.

     “Closing.” The sale and assignment of the Properties to Purchaser on the Closing Date and the performance by each party of the obligations on its part then to be performed under and in accordance with this Agreement.

     “Closing Date.” As set forth in Section 5.1 hereof.

     “Closing Documents.” As set forth in Section 9.3 hereof.

     “Closing Payment.” As set forth in Section 2.2.2 hereof.

     “Closing Statement.” As set forth in Section 5.2(k) hereof.

     “Contracts.” With respect to each Property, all leases of furniture, fixtures and equipment, and all contracts, leases, and agreements relating to the ownership and/or operation of the Facility and/or the Property, copies of which were provided to Purchaser with the Due Diligence Materials as provided herein or have otherwise been provided to Purchaser prior to the Effective Date, together with (a) all related written warranties and guaranties, and (b) all other contracts, leases, and agreements entered into by Seller in the ordinary course of business after the Effective Date as permitted, and disclosed to Purchaser as required, by the terms of this Agreement, but excluding any Terminated Contracts and excluding any contracts that are national or regional in scope.

     “Conveyance Documents.” Collectively, the Deeds, the Bills of Sale, the Assignments of Intangibles, the Assignments of Contracts, and the Assignments of Resident Agreements.

     “Current Month.” As set forth in Section 5.5.11 hereof.

     “Cut-Off Time.” As set forth in Section 5.5.3 hereof.

     “Deeds.” As set forth in Section 5.2(a) hereof.

     “Due Diligence Issue Notice.” As defined in Section 4.3.1. hereof.

     “Due Diligence Issues.” As defined in Section 4.3.1 hereof.

     “Due Diligence Materials.” As set forth in Section 4.3.1 hereof.

     “Due Diligence Period.” As set forth in Section 4.3.1 hereof.

     “Earnest Money Deposit.” As set forth in Section 2.2.1 hereof.

     “Effective Date.” As set forth in the preamble hereof.

     “Environmental Damages.” As set forth in Section 4.4(g) hereof.

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     “Environmental Requirements.” As set forth in Section 4.4(h) hereof.

     “Escrow.” As set forth in Section 3.1 hereof.

     “Escrow Agent.” First American Title Insurance Company’s National Commercial Services office located at 1801 K Street, N.W., Suite 200K, Washington, D.C. 20006, Attention: Mr. Craig Johnson.

     “Escrow Agreement.” As set forth in Section 3.1 hereof.

     “EST.” Eastern Standard (or Daylight) Time, the time applicable in the eastern time zone of the United States.

     “Excluded Assets.” With respect to each Property, the Excluded Documents, all computer hardware and software used by Seller or its Affiliates or in connection with the Facility, cash, cash equivalents, checks and other funds, including, without limitation, Seller’s Accounts Receivable (other than the proration of rent for the Current Month, as set forth in Section 5.5.11 below), notes, securities and other evidence of indebtedness held at the Facility as of the Cut-Off Time, and balances on deposit to the credit of Seller with banking institutions, all of which shall be retained by Seller.

     “Excluded Documents.” With respect to each Property, all (a) Proprietary Information, (b) Intellectual Property Rights (provided that Purchaser shall be entitled to a limited license to continue to use any signage on each Property containing the trademark “Sunrise” until Purchaser’s new signage can be installed, but in no event to exceed thirty (30) days, and to refer to the name “Sunrise” in any notices or marketing materials relating to and announcing the change of ownership for a period not to exceed thirty (30) days following the Closing, but provided that Seller must approve all such usage in advance), (c) all casualty, liability, and life insurance policies owned or obtained by Seller on behalf or in connection with Seller’s business at the Facility, (d) the corporate minute books and stock registers of Seller, (e) internal memoranda, correspondence, analyses, documents or reports prepared by or for Seller or its Affiliates in connection with the sale of the Property, including, without limitation, tax returns or financial statements of Seller (exclusive of operating statements and the general ledger of the Facility and any supporting information which shall be available for review by Purchaser) for or in connection with its ownership or operation of the Property, (f) communications between Seller or any Affiliate and their respective attorneys, (g) employee personnel files of Seller, (h) appraisals, assessments or other valuations of the Property in the possession or control of Seller, (i) original bills, invoices, receipts and checks relating to expenses incurred prior to the Cut-Off Time (provided that Purchaser shall be entitled to copies of such items and to retain copies of all of the other Due Diligence Materials after Closing, which right shall survive the Closing), and (j) any confidential or proprietary information of Seller or any confidential information of a resident (unless the transfer of such confidential information of a resident is made in compliance with all Legal Requirements), in each case however embodied.

     “Existing Liens.” As set forth in Section 2.7 hereof.

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     “Facility.” With respect to each Property, the senior living community operated and conducted by Seller on the Real Property.

     “Fannie Mae Debt.” As set forth in Section 4.2.3.

     “Good Funds.” A deposit of cashier’s check, certified funds, or confirmed wire transfer of funds.

     “Hazardous Materials.” As set forth in Section 4.4(i) hereof.

     “Hired Employees.” As set forth in Section 6.3.2 hereof.

     “Improvements.” With respect to each Property, the buildings, structures, fixtures, and other permanent improvements located on the Land, including, without limitation, the Facility, electrical distribution systems, HVAC systems, walkways, driveways, parking lots, plumbing, lighting, and mechanical equipment and fixtures installed thereon, and all rights, benefits and privileges appurtenant thereto.

     “Intangible Property.” With respect to each Property, all (a) local telephone and facsimile exchange numbers identified exclusively with the Facility, (b) transferable certificates (including the Certificate of Occupancy for the Real Property), licenses, permits (including the Permits) and warranties now in effect with respect to the Property at no cost to Seller, (c) all general intangibles relating to design, development, operation and use of a Property, all rights and work product under construction, service, consulting, engineering, architectural, design and construction agreements (including any warranties contained therein) and other Contracts, and plans and specifications of any portion of a Property, and all development rights and goodwill related to any portion of a Property, and (d) all other intangible property used by Seller exclusively in connection with the ownership and operation of the Property, but excluding the Excluded Assets.

     “Intellectual Property Rights.” With respect to each Property, all patents, copyrights, trade secrets, trademarks, trade names, service marks, confidential information and other know-how owned by Seller or its Affiliates or used by Seller or its Affiliates in managing the Facility, including but not limited to (a) marketing and management intangibles, (b) all proprietary computer software developed and owned by Seller or its Affiliate, and (c) all proprietary manuals, instructions, policies, procedures and directives issued by Seller or its Affiliates to its employees at the Facility except for those manuals, policies and instructions that related solely to the operation of the Facility. The term “Intellectual Property Rights” shall include the Proprietary Marks, but it does not include the specific data and information stored or maintained on the Intellectual Property Rights that uniquely pertains to the Facility or those served at the Facility (unless such data and information is confidential or proprietary to Seller). The term “Proprietary Marks” means all trademarks, service marks, trade names, trade dress, symbols, logos, slogans, designs, insignia, emblems, devices, domain names, distinctive designs of signs, or any other source identifying feature, or combinations thereof, which are used to identify the Facility or Seller’s or its Affiliates’ services at the Facility, or which are used in connection with the operation of the Facility by Seller or its Affiliates, including but not limited to the trademark “Sunrise.”

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     “Inventory.” With respect to each Property, all inventories, materials and supplies used in connection with the operation of the Property and located thereat.

     “Land.” With respect to each Property, the land, as more particularly described on Exhibit “A-1” attached hereto and upon which the Improvements are located, including all easements, rights-of-way, rights of ingress and egress, strips, zones, licenses, transferable hereditaments, privileges, tenements and appurtenances in any way belonging to or appertaining to the same or the Improvements, and any right or interest in any open or proposed highways, streets, roads, avenues, alleys, easements, strips, gores and rights-of-way in, across, in front of, contiguous to, abutting or adjoining the Land, and other rights and benefits running with the Land and/or the owner of the Land.

     “Legal Requirement.” Any applicable federal, state, local or municipal constitution, law, ordinance, rule, order, regulation or statute of any governmental authority bearing on the construction, alteration, rehabilitation, maintenance, use, operation, sale, transfer or any other aspect of all or any portion of a Property.

     “Non-Foreign Affidavit.” As set forth in Section 5.2(f) hereof.

     “Non-Performing Party.” As set forth in Section 9.8 hereof.

     “Notice to Residents.” As set forth in Section 5.2(m) hereof.

     “Notice.” As set forth in Article XI hereof.

     “Official Records.” The office of the recorder of deeds and other real estate records in the jurisdiction in which a Property is located.

     “Permits.” With respect to each Property, the licenses and permits, approvals, entitlements, and other governmental authorizations (including certificates of occupancy) issued by a governmental or administrative agency or authority (whether federal, state or local) in Seller’s possession or control in connection with the ownership, operation, planning, development, constructions, use, or maintenance of the Property.

     “Permitted Exceptions.” As set forth in Section 4.2 hereof.

     “Personal Property.” With respect to each Property, all (a) keys and combinations to all doors, cabinets, enclosures and other locks on or about the Real Property, (b) furniture, equipment, televisions, telephone systems; mechanical systems, fixtures and equipment; electrical systems, fixtures and equipment; heating fixtures, systems, and equipment; air conditioning fixtures, systems and equipment; plumbing fixtures, systems, and equipment; security systems and equipment; carpets, drapes, artwork and other furnishings; refrigerators, microwaves, ovens, stoves, and all other appliances; vehicles, office equipment, furniture and fixtures not considered improvements, spare parts, supplies and other physical assets, machinery, tools, trade fixtures, utensils, china, glassware, and other personal property owned by Seller, which are used exclusively in connection with the maintenance and operation of the Facility and/or the Real Property, (c) copies of files maintained or generated by Seller in the course of the operation of the Property (excluding the Excluded Documents) which are located on the Real Property, (d) the Inventory, (e) the Books and Records, and (h) all other personal property which Seller is the owner thereof and which is used by Seller exclusively in connection with the ownership, maintenance, and operation of the Facility and/or the Real Property; but excluding, however, (i) the Excluded Assets, (ii) the personal property owned by any resident or employee on the Real Property, and (iii) all tax and utilities and other deposits.

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     “Post-Closing Escrow Agreement.” As set forth in Section 9.3 hereof.

     “Post-Closing Liability Escrow.” As set forth in Section 9.3 hereof.

     “Property.” With respect to each Seller, the Land, the Improvements, the Facility, the Personal Property, the Contracts, and the Intangible Property owned by such Seller.

     “Proprietary Information.” As set forth in Section 12.18 hereof.

     “Purchaser.” As set forth in the preamble hereof.

     “Purchase Price.” As set forth in Section 2.2 hereof.

     “Purchaser Closing Documents.” As set forth in Section 9.6 hereof.

     “Purchaser Permits.” As set forth in Section 6.1.2 hereof.

     “Real Property.” With respect to each Property, the Land and the Improvements.

     “Releases.” As set forth in Section 4.2.3 hereof.

     “Resident Agreements.” Those leases, occupancy, residency, and similar written agreements entered into with residents of each Facility, and all amendments, modifications, supplements, renewals, and extensions thereof, of which Seller has provided to Purchaser copies (or access to the same at the Properties) prior to the Effective Date.

     “Resident List.” The list of residents at each Facility, a copy of which is attached hereto as Exhibit “C-1”.

     “Seller’s Accounts Receivable.” With respect to each Property, all accounts receivable and other sums owing to Seller in connection with the operation of the Facility existing on and prior to the Cut-Off Time.

     “Sellers.” As set forth in the preamble hereof.

     “Sixteenth Property.” As set forth in Section 4.2 hereof.

     “Survey.” As set forth in Section 4.2.2 hereof.

     “Survival Date.” As set forth in Section 9.5 hereof.

     “Terminated Contracts.” Those Contracts terminated by Sellers pursuant to Section 4.3.4 hereof.

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     “Threshold Amount.” As set forth in Section 9.3 hereof.

     “Title Commitment.” As set forth in Section 4.1 hereof.

     “Title Policy.” As set forth in Section 4.2.1 hereof.

     "“Utility Deposits.” With respect to each Property, all deposits made by the Seller in connection with providing water, sewer, gas, electricity, telephone and other public utilities to the Real Property.

     “WARN Act.” As set forth in Section 6.3.3 hereof.

II.

SALE AND PURCHASE OF PROPERTY

     2.1 Purchase of Property. On the Closing Date, and subject to the terms and conditions of this Agreement, each Seller shall sell, assign, convey, transfer and deliver to Purchaser, and Purchaser shall purchase and acquire from each Seller, such Seller’s right, title, and interest in and to the Land and Improvements, good and marketable title in the Personal Property, and all of such Seller’s right, title and interest in and to the Contracts, the Resident Agreements and the Intangible Property, free and clear of all monetary liens and encumbrances (other than the Contracts, the Resident Agreements, and the Permitted Exceptions), as further described in Section 2.7 hereof, at the purchase price provided in Section 2.2 hereof.

     2.2 Purchase Price and Terms of Payment. The aggregate purchase price for the Properties (“Purchase Price”) shall be Two Hundred Four Million Dollars ($204,000,000), allocated among the Properties as indicated on Exhibit “A-2”, and shall consist of and be payable as follows:

          2.2.1 Earnest Money Deposit. Within two (2) business days after the Effective Date, Purchaser shall deliver to Escrow Agent, in Good Funds, the sum of Five Million Dollars ($5,000,000.00) (together with all interest accrued thereon, the “Earnest Money Deposit”). The Earnest Money Deposit shall be non-refundable to Purchaser, except (a) if a condition precedent to Purchaser’s obligations as set forth in Section 8.2 below is not satisfied or cured as of the Closing Date and such failure is not due to an act or failure to act of Purchaser, or (b) as specifically provided in Section 4.3.1 below, and in any such event Purchaser’s right to such refund will survive any termination of this Agreement. The Earnest Money Deposit shall be applied to the Purchase Price on the Closing Date.

          2.2.2 Balance of Purchase Price. Not later than 1:00 p.m. EST on the Closing Date, Purchaser shall deposit with Escrow Agent, in Good Funds, the balance of the Purchase Price, reduced or increased by such amounts as are required to take into account any prorations, credits, costs or other adjustments which are required by this Agreement and which can be computed and determined as of the time for the required deposit hereunder. The amount to be paid under this Section 2.2.2 is referred to in this Agreement as the “Closing Payment.”

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     2.3 Assumption of the Contracts. As additional consideration, Purchaser shall, on and as of the Closing Date, at its sole cost and expense, assume and agree to pay all sums and perform, fulfill and comply with all other covenants and obligations which are to be paid, performed and complied with by Sellers under the Contracts which first arise or accrue on and after the Closing Date.

     2.4 Assumption of the Resident Agreements. As additional consideration, Purchaser shall on and as of the Closing Date, at its sole cost and expense, assume and agree to perform, fulfill and comply with all covenants and obligations which are to be performed and complied with by Sellers under the Resident Agreements in effect at such Facility which first arise or accrue on and after the Closing Date.

     2.5 Assumed Liabilities. Except as expressly set forth herein, Purchaser shall not assume, in connection with the transactions contemplated hereby, any liability or obligation of the Sellers whatsoever, and the Sellers shall retain responsibility for all liabilities and obligations accrued or incurred prior to Closing and all liabilities and obligations arising from each Seller’s operations prior to Closing, whether or not accrued and whether or not disclosed.

     2.6 Allocation of Purchase Price. The Purchase Price shall be allocated among the Properties as agreed to by Seller and Purchaser (the portion of the Purchase Price allocated to each Property is referred to herein as the “Allocated Purchase Price”). Seller’s proposed allocation of the Purchase Price, including an allocation of the Allocated Purchase Price among the Real Property and the various items of Personal Property and Intangible Property, are indicated on Exhibit “A-2” and Exhibit “A-3” attached hereto. Each party agrees to file federal, state and local tax returns consistent with such allocations agreed upon between the parties. If Seller and Purchaser do not agree on such allocations of the Purchase Price, each party shall file federal, state and local tax returns based on each party’s own determination of the proper allocations of the Purchase Price, each bearing its own consequences of any discrepancies, provided that the parties shall use Seller’s proposed allocations indicated on Exhibit “A-2” for the determination of any transfer or recordation taxes payable in connection with the recordation of the Deeds.

     2.7 Discharge of Liens. Except with respect to any loans to be assumed under Section 4.2.3 below, Sellers shall cause all bond financing, mortgages, deeds of trust, and monetary liens (including liens for delinquent taxes and mechanics’ and judgment liens properly charged to any of Sellers) affecting the Properties and all indebtedness secured thereby (the “Existing Liens”) to be fully satisfied, released, and discharged of record on the Closing Date with the use of the proceeds of Closing, so that Purchaser shall take title to the Properties free of the same. All costs related to the discharge of the Existing Liens shall be borne by Sellers. Sellers acknowledge that such satisfaction, release, and discharge may involve prepayment penalties or premiums and other costs or expenses, all of which shall be paid by Sellers at their sole cost and expense in connection with the Closing (and the proceeds of Closing shall be used for such purpose).

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III.

ESCROW

     3.1 Escrow. Purchaser and Sellers have established or will establish an escrow (“Escrow”) with Escrow Agent by depositing with Escrow Agent the Earnest Money Deposit and having three (3) copies of the Escrow Agreement in the form attached hereto as Exhibit “B” duly executed (in counterparts or otherwise) by Sellers, Purchaser and Escrow Agent (the “Escrow Agreement”). The Earnest Money Deposit shall be held by Escrow Agent in accordance with the terms of the Escrow Agreement. In the event of any conflict between this Agreement and the Escrow Agreement, the terms of this Agreement shall control.

     3.2 Deposit of Funds. Except as otherwise provided in this Agreement, all funds deposited into the Escrow by Purchaser shall be immediately deposited by Escrow Agent into an interest bearing account, subject to the control of Escrow Agent in a bank or savings and loan association, or such other institution approved by Purchaser, or such other investment as may be approved by Purchaser; provided, however, that such funds must be readily available as necessary to comply with the terms of this Agreement and the Escrow Agreement, and for the Escrow to close within the time specified in Section 5.1 of this Agreement. Except as may be otherwise specifically provided herein, interest on amounts placed by Escrow Agent in any such investments or interest bearing accounts shall accrue to the benefit of Purchaser, and Purchaser shall promptly provide to Escrow Agent Purchaser’s Tax Identification Number.

IV.

TITLE

     4.1 Title Commitment. The parties acknowledge and agree that Escrow Agent has already made available to Purchaser a title report for each Property reflecting the status of title to the Real Property as of the effective date thereof, and to the extent available, legible copies of the exceptions shown thereon, including easements, licenses, restrictions, rights-of-way, leases, covenants, and other conditions, if any, affecting the Real Property, and (subject to the last sentence of this Section 4.1) Purchaser has no further right to object to any title matters except as expressly set forth in Section 4.3.1 below. Purchaser, at Purchaser’s sole cost and expense, shall cause to be furnished to Purchaser, with a copy to Sellers, a current commitment for an A.L.T.A. Owner’s Policy of Title Insurance 2006 Form (or if not available, the local equivalent) (extended coverage, if and to the extent available) for each Property issued by Escrow Agent (“Title Commitment”) and committing to issue the Title Policy to Purchaser for the Real Property and the Improvements in the full amount of the Allocated Purchase Price therefor. Any matters set forth and first appearing in any update of the Title Commitment received after the Effective Date shall be subject to the express written but reasonable approval of Purchaser.

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     4.2 Title to the Real Property.

          4.2.1 Effective as of the Closing Date, but conditioned upon Closing, Escrow Agent shall issue to Purchaser for each Property Escrow Agent’s A.L.T.A. Owner’s Policy of Title Insurance 2006 Form (or if not available, the local equivalent) (extended coverage, if and to the extent available) (“Title Policy”), with the liability under each Title Policy to be in an amount equal to the Allocated Purchase Price for such Property, insuring the fee title or ground lessee’s interest, as the case may be, in such Real Property as vested in Purchaser subject only to the following matters affecting title (“Permitted Exceptions”):

     (a) All general and special property taxes and assessments not yet due and owing;

     (b) Any supplemental property taxes assessed as a result of the sale of the Real Property and the Improvements by Seller to Purchaser;

     (c) All liens, covenants, conditions, restrictions, easements, rights of way, and all other exceptions to title in the Official Records in existence as of the Effective Date or approved by Purchaser prior to the expiration of the Due Diligence Period (in accordance with the terms of Section 4.3.1 below); provided, however, that Seller shall remove at or prior to the Closing Date (with use of the Purchase Price, at Seller’s option) all of the Existing Liens (except as may be caused by Purchaser or if and to the extent assumed by Purchaser as set forth in Section 4.2.3 below);

     (d) All exceptions to title in existence as of the Effective Date and disclosed by or in the Survey (and any updates thereto) of the Real Property (including, without limitation, easements, encroachments and zoning) or that would have been disclosed had Purchaser obtained the Survey, or any other matters approved by Purchaser prior to Closing;

     (e) Rights of parties in possession (including residents of the Facility), easements, or claims of easements not shown by the public records, but with respect to which Seller has provided copies of the applicable leases or documents to Escrow Agent and to Purchaser with the Due Diligence Materials as provided herein;

     (f) Governmental laws, codes, ordinances and restrictions now or hereafter in effect so far as these affect the Real Property or any part thereof, including, without limitation, zoning ordinances (and amendments and additions relating thereto) and the Americans with Disabilities Act of 1990, as amended; and

     (g) Any exceptions created by Purchaser or its agents, employees and/or contractors, including without limitation, any exceptions arising by reason of the entry on the Real Property by Purchaser or by its agents, employees and/or contractors.

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          4.2.2 Purchaser shall have the right, at Purchaser’s sole cost and expense, to obtain from Escrow Agent such endorsements to the Title Policies and/or such additional liability protection as Purchaser may elect to obtain; provided, however, that Purchaser’s ability to obtain such title endorsements and/or such additional liability protection shall not be a condition precedent to Purchaser’s obligations hereunder and shall not extend or delay Closing. Purchaser shall be solely responsible for negotiating with Escrow Agent with respect to the Title Policy and/or with respect to such title endorsements and/or such additional liability protection as may be requested by Purchaser, if any. Purchaser shall be solely responsible for, and shall assume the risk of, obtaining a survey (or updating Sellers’ survey) of the Real Property (“Survey”) acceptable to Escrow Agent for purposes of issuing the Title Policy.

          4.2.3 Purchaser shall assume, at Purchaser’s sole risk, cost, and expense, the existing Fannie Mae loan (the “Fannie Mae Debt”) currently encumbering fifteen (15) of the Properties under terms and conditions reasonably acceptable to Purchaser, Sellers, and Fannie Mae; provided, however, that the terms of the assumption of the Fannie Mae Debt shall be deemed to be acceptable to Purchaser if it provides for Purchaser to be subject to substantially the same economic terms and conditions as currently contained in Sellers’ existing loan documents and guaranties, and Purchaser will pay all reasonable costs of the assumption, including without limitation, an increase in the interest rate, payment of points, and/or a loan curtailment. The parties acknowledge and agree that the Fannie Mae Debt currently encumbers a sixteenth property (the “Sixteenth Property”) that is not one of the Properties. On the Closing Date, Sellers shall cause the portion of the Fannie Mae debt applicable to the Sixteenth Property to be deducted from the balance of the Fannie Mae Debt to be assumed by Purchaser and the Fannie Mae Debt shall not be cross-defaulted with the Sixteenth Property. Purchaser also shall have the right, at Purchaser’s sole risk, cost, and expense, to assume any one or more of the other existing loans on the remaining Properties, provided that Purchaser gives Sellers written notice of the assumption of such other loans within ten (10) business days after the Effective Date. With respect to the assumption of any loans, including the Fannie Mae Debt, it is expressly understood and agreed that (a) Purchaser shall be solely responsible for obtaining the applicable lender’s consent to any loan assumption and for the coordination thereof, and (except in relation to the assumption of the Fannie Mae Debt as provided above) the Closing shall not be subject to, contingent upon, nor delayed by any loan assumption(s), (b) Purchaser shall pay all fees, costs, and expenses in connection with any loan assumption(s), (c) any assumption shall include an affirmative release of the applicable Sellers and their respective Affiliates by the lender of all liabilities and obligations in connection with such assumed loan(s) and any guarantees or indemnities in connection therewith, in form and substance acceptable to Sellers (collectively, the “Releases”), and (d) if Purchaser assumes any portion of Sellers’ loans in accordance with the terms hereof, then the Purchase Price shall be reduced solely by the principal and interest one or more Sellers would otherwise have been obligated to pay as of the Cut-Off Time. Sellers shall reasonably cooperate with Purchaser in connection with any assumption pursuant to the terms hereof, all at no cost or risk to Sellers.

     4.3 Inspection.

          4.3.1 Prior to the date hereof, each Seller made available to Purchaser the information, documents, agreements and reports relating to each Property in such Seller’s possession or control (collectively, the “Due Diligence Materials”) without representation or warranty of any kind or nature, whether express or implied.

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The parties acknowledge that Purchaser has had the opportunity to review and inspect the Due Diligence Materials and the Property prior to the date hereof and by executing this Agreement, Purchaser acknowledges that it has completed its inspections and studies of the Property and it has no remaining contingencies to Closing nor rights to object to any due diligence matters except as expressly provided below in this Section 4.3.1, and is agreeing to proceed in accordance with the terms hereof (including without limitation, the terms of Section 4.4 below). Notwithstanding such prior inspections, Sellers shall cooperate and provide Purchaser with reasonable and continuing access to the Real Property upon commercially reasonable Notice to Sellers for the purpose of Purchaser’s inspection (provided, however, that Purchaser shall not perform any invasive testing of any Real Property without Seller’s prior written consent in each instance, which may be granted or withheld in Seller’s sole and absolute discretion). Neither Purchaser nor any of its employees, agents or representatives shall contact or otherwise discuss this transaction and /or the operation of the Facilities with any on-site employees of the Facilities; provided, however, that Purchaser may meet with any Facility’s Executive Director upon commercially reasonable Notice to Sellers but, if required by Sellers, only in the presence of Sellers’ representative. Each Seller shall have the right to have a representative of such Seller present during all inspections or examinations of the applicable Real Property by Purchaser. Notwithstanding anything to the contrary contained herein, commencing on the Effective Date and continuing until 6:00 p.m. EST on (X) the date that is ten (10) calendar days after the Effective Date, with respect to items (a), (b), (c), and (d) below, or (Y) October 30, 2009, with respect to items (e) and (f) below (in each instance, the “Due Diligence Period”), Purchaser shall have the right to deliver a Notice to Sellers of any Due Diligence Issues, as defined below (a “Due Diligence Issue Notice”). As used herein, “Due Diligence Issues” may include only one or more of the following and no other items: (a) an exception to title to any of the Properties or a matter shown or that would be shown on a current Survey for the Properties to be obtained by Purchaser at its sole cost and expense for the Properties located in Finneytown, Bath, Carmel, Santa Rosa, and South Hills, in any such event only if the same would materially and adversely impact Purchaser’s ability to operate the subject Property; (b) financial terms in the Resident Agreements that are materially and adversely different than as shown on the rent roll previously provided to Purchaser as part of the Due Diligence Materials; (c) provisions or terms in the Contracts that would materially and adversely impact Purchaser’s ability to operate the subject Property; (d) no material adverse differences in the operating statements of the Facilities used by Sellers’ Affiliate in connection with the preparation of its audited financial statements for the year 2008 (as provided by Sellers to Purchaser prior to the Effective Date) from the information contained in the Due Diligence Materials (i.e., the Offering Memorandum) except for the one-time accounting write-downs and adjustments for management fees, insurance, and extraordinary expenses, as noted thereon; (e) non-compliance with a zoning Legal Requirement that would materially and adversely impact Purchaser’s ability to operate the subject Property; or (f) material and adverse differences in the condition of the Properties from that reflected in the Due Diligence Materials (based on updated property condition assessment reports and phase I environmental assessments to be obtained by Purchaser at its sole cost and expense, and on site visits by Purchaser’s maintenance personnel based on such maintenance personnel’s commercially reasonable judgment). If Purchaser sends Seller a Due Diligence Issue Notice, the same shall include with specificity the Due Diligence Issues and the actions required to cure the same. Seller shall then have five (5) business days to send Purchaser a Notice stating whether or not Seller will attempt to cure such Due Diligence Issues, which determination shall be in Seller’s sole and absolute discretion.

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If Seller elects to attempt to cure such Due Diligence Issues, Seller shall have up to thirty (30) days from the date of Purchaser’s Due Diligence Issue Notice to effectuate such cure, and the Closing Date shall be extended until the date that is five (5) business days after Seller completes such cure. If Seller elects not to attempt to cure any such Due Diligence Issues, or if Seller is unable to cure any of the same despite its election and commercially reasonable efforts to attempt to do so, Purchaser shall have the right in its sole and absolute discretion, as its sole remedy, to terminate this Agreement within five (5) business days after receiving Seller’s Notice either that it will not attempt to cure any of the Due Diligence Issues or that it is unable to cure any of the Due Diligence Issues Seller elected to attempt to cure. If this Agreement is terminated pursuant to the provisions of this Section, the Earnest Money Deposit shall be returned to Purchaser and each of the parties shall be relieved from further liability to the other, except as otherwise expressly provided herein. If Purchaser does not timely elect to terminate this Agreement as set forth above in this Section 4.3.1, Closing shall occur on the date that is five (5) business days after the later to occur of Purchaser’s Notice to Seller of its election to proceed or the expiration of the time in which Purchaser could have elected to terminate this Agreement.

          4.3.2 Prior to any entry by Purchaser or any of Purchaser’s designees onto any Property, Purchaser shall: (i) if Purchaser does not then have such a policy in force, procure a policy of commercial general liability insurance, issued by an insurer reasonably satisfactory to Sellers, covering all Purchaser’s activities, with a single limit of liability (per occurrence and aggregate) of not less than $2,000,000.00; and (ii) deliver to Sellers a Certificate of Insurance, evidencing that such insurance is in force and effect, and evidencing that Sellers have been named as an additional insured thereunder with respect to any Purchaser’s activities (such Certificate of Insurance shall be delivered to Sellers). Such insurance shall be written on an “occurrence” basis, and shall be maintained in force until the earlier of (x) the termination of this Agreement and the conclusion of all of Purchaser’s activities, or (y) the Closing Date.

          4.3.3 Purchaser, at all times, will conduct all inspections and reviews in compliance with all Legal Requirements, and in a manner so as to not cause damage, loss, cost or expense to Sellers, any Property or the residents of any Property, and without unreasonably interfering with or disturbing any employee or resident at the Facilities. Prior to Closing, the results of or any other information acquired pursuant to Purchaser’s inspections shall be subject to the terms and conditions of Section 12.18 below. Purchaser will promptly restore any damage to any Property caused by Purchaser’s inspection to its condition immediately preceding such inspections and examinations and will keep the Properties free and clear of any mechanic’s liens or materialmen’s liens in connection with such inspections and examinations.

          4.3.4 Attached hereto as Exhibit “C” is a list of all Contracts. Purchaser shall assume all of the Contracts on the Closing Date. Notwithstanding the foregoing, Purchaser shall not assume (i) any Contracts which are terminable on thirty (30) days’ or less notice and which Purchaser does not wish to assume (the “30-Day Contracts”), provided that Purchaser provides Seller Notice of Purchaser’s decision not to assume such 30-Day Contracts within ten (10) calendar days after the Effective Date, and (ii) any management agreements with Seller’s Affiliate which Purchaser does not elect to assume, provided that Purchaser provides Seller Notice of Purchaser’s decision not to assume such management agreements prior to the expiration of the Due Diligence Period.

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          4.3.5 The cost of the inspections and tests undertaken pursuant to this Section 4.3 shall be borne solely by Purchaser.

          4.3.6 Purchaser covenants and agrees that, until the Closing Date, all information and materials disclosed and/or delivered to it by Sellers, or Sellers’ agents, employees and representatives (including without limitation, the Due Diligence Materials), are confidential and proprietary information, and that Purchaser shall hold the same in accordance with the terms and conditions of Section 12.18 below. Purchaser also agrees that, in the event the transactions contemplated in this Agreement are not consummated as provided herein, Purchaser shall promptly return to Sellers or notify Seller in writing that Purchaser has destroyed all such information and documentation, and all copies thereof, together with copies of all third party reports and studies obtained by Purchaser with respect to any of the Properties that do not include information confidential or proprietary to Purchaser.

          4.3.7 Except as expressly provided herein, Sellers make no representations or warranties as to the truth, accuracy or completeness of any materials, data or other information, if any, supplied to Purchaser in connection with Purchaser’s inspection of the Property (e.g., that such materials are complete, accurate or the final version thereof, or that all such materials are in Sellers’ possession). Except for Purchaser’s reliance on any representation and warranties expressly provided herein, it is the parties’ express understanding and agreement that any such materials are to be provided only for Purchaser’s convenience in making its own examination and determination as to whether it wishes to purchase the Properties, and, in doing so, Purchaser shall rely exclusively on its own independent investigation and evaluation of every aspect of each Property and not on any materials supplied by Sellers. Except for Purchaser’s reliance on any representation and warranties expressly provided herein with respect to any such materials, Purchaser expressly disclaims any intent to rely on any such materials provided to it by Sellers in connection with its inspection and agrees that it shall rely solely on its own independently developed or verified information.

          4.3.8 The obligations of Purchaser under this Section 4.3 (including its indemnification obligations) shall survive Closing or the termination of this Agreement.

     4.4 Condition of the Property. THE FOLLOWING PROVISIONS IN THIS SECTION 4.4 ARE SUBJECT TO THE EXPRESS REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS, AND OTHER PROVISIONS OF THIS AGREEMENT (INCLUDING WITHOUT LIMITATION THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 7.2) AND THE CONVEYANCE DOCUMENTS:

     (a) BY ENTERING INTO THIS AGREEMENT, PURCHASER HAS AGREED TO, AND WILL, PERFORM (AND PURCHASER REPRESENTS AND WARRANTS TO SELLERS THAT PURCHASER IS CAPABLE OF PERFORMING) AN INDEPENDENT INVESTIGATION, ANALYSIS AND EVALUATION OF THE PROPERTIES. PRIOR TO THE EFFECTIVE DATE, PURCHASER HAS DETERMINED, SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, THAT THE PROPERTIES ARE ACCEPTABLE TO PURCHASER. PRIOR TO THE EFFECTIVE DATE, PURCHASER HAS CONDUCTED ITS OWN THOROUGH AND INDEPENDENT INSPECTION, INVESTIGATION, ANALYSIS AND EVALUATION OF ALL INSTRUMENTS, RECORDS AND DOCUMENTS WHICH PURCHASER DETERMINED TO BE APPROPRIATE OR ADVISABLE TO REVIEW IN CONNECTION WITH PURCHASER’S ACQUISITION OF THE PROPERTY AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

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     (b) PURCHASER FURTHER ACKNOWLEDGES THAT PURCHASER HAS SUBSTANTIAL EXPERIENCE WITH REAL PROPERTY AND SENIOR LIVING FACILITIES AND THEIR OPERATIONS, AND THAT PURCHASER WILL ACQUIRE THE PROPERTIES IN “AS IS, WHERE IS, WITH ALL FAULTS” CONDITION, AND SOLELY IN RELIANCE ON PURCHASER’S OWN INSPECTION AND EXAMINATION AND SELLERS’ REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED HEREIN.

     (c) EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CONVEYANCE DOCUMENTS, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT SELLERS MAKE NO REPRESENTATIONS, WARRANTIES OR GUARANTIES OF ANY KIND, NATURE OR SORT, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION, PAST, PRESENT OR FUTURE OPERATION AND/OR PERFORMANCE, OR VALUE, OF ANY PROPERTY AND THAT SELLERS CONVEY THE PROPERTIES TO PURCHASER “AS IS AND WHERE IS, WITH ALL FAULTS,” AND PURCHASER ACKNOWLEDGES THAT SELLERS MAKE NO REPRESENTATIONS, GUARANTIES OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE QUALITY, CHARACTER, EXTENT, PERFORMANCE, CONDITION OR SUITABILITY OF THE PROPERTIES FOR ANY PURPOSE.

     (d) PURCHASER’S INSPECTION, INVESTIGATION AND SURVEY OF THE PROPERTIES SHALL BE IN LIEU OF ANY NOTICE OR DISCLOSURE REQUIRED BY ANY APPLICABLE HEALTH AND SAFETY CODE, OR BY ANY OTHER PROVISION OF APPLICABLE LAW, RULE OR REGULATION, INCLUDING, WITHOUT LIMITATION, LAWS REQUIRING DISCLOSURE BY SELLER OF FLOOD, FIRE, MOLD, SEISMIC HAZARDS, LEAD PAINT, LANDSLIDE AND LIQUEFACTION, OTHER GEOLOGICAL HAZARDS, RAILROAD AND OTHER UTILITY ACCESS, SOIL CONDITIONS AND OTHER CONDITIONS WHICH MAY AFFECT THE USE OF THE REAL PROPERTY, AND PURCHASER HEREBY WAIVES ANY REQUIREMENT FOR A NOTICE PURSUANT TO THOSE PROVISIONS AND HEREBY ACKNOWLEDGES AND AGREES THAT IT WILL CONDUCT ITS OWN INSPECTIONS AND REVIEWS WITH RESPECT TO ALL MATTERS COVERED THEREBY, AND HEREBY RELEASES SELLERS FROM LIABILITY IN CONNECTION WITH ANY SUCH MATTERS THAT ARE NOT THE SUBJECT OF ANY OF SELLERS’ REPRESENTATIONS AND WARRANTIES.

     (e) PURCHASER ALSO ACKNOWLEDGES AND AGREES THAT, ALTHOUGH SELLERS HAVE PROVIDED TO PURCHASER THE DUE DILIGENCE MATERIALS AND THE BOOKS AND RECORDS, SELLERS HAVE NOT VERIFIED THE ACCURACY THEREOF AND MAKE NO REPRESENTATIONS OR WARRANTIES REGARDING THE MATTERS SET FORTH THEREIN EXCEPT AS MAY BE EXPRESSLY SET FORTH HEREIN, IT BEING THE RESPONSIBILITY OF PURCHASER TO VERIFY THE ACCURACY OF SUCH MATERIALS.

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     (f) FURTHERMORE, EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CONVEYANCE DOCUMENTS, PURCHASER ACKNOWLEDGES THAT SELLERS HAVE NOT AND DO NOT MAKE ANY REPRESENTATIONS OR WARRANTIES IN CONNECTION WITH THE PRESENCE OR INTEGRATION OF HAZARDOUS MATERIALS UPON OR WITHIN ANY REAL PROPERTY. IN THAT REGARD, PURCHASER HAS, PRIOR TO THE EFFECTIVE DATE, CONDUCTED ITS OWN INVESTIGATIONS TO DETERMINE IF ANY REAL PROPERTY CONTAINS ANY HAZARDOUS MATERIALS OR TOXIC WASTE, MATERIALS, DISCHARGE, DUMPING OR CONTAMINATION, WHETHER SOIL, GROUNDWATER OR OTHERWISE, WHICH VIOLATES ANY FEDERAL, STATE, LOCAL OR OTHER GOVERNMENTAL LAW, REGULATION OR ORDER OR REQUIRES REPORTING TO ANY GOVERNMENTAL AUTHORITY.

     EXCEPT AS TO THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CONVEYANCE DOCUMENTS, PURCHASER, FOR ITSELF AND ITS OWNERS, SUCCESSORS AND ASSIGNS, HEREBY RELEASES AND FOREVER DISCHARGES SELLERS, AND THEIR PAST, PRESENT AND FUTURE MEMBERS, PARTNERS, AFFILIATES, EMPLOYEES, AGENTS, ATTORNEYS, ASSIGNS, AND SUCCESSORS-IN-INTEREST FROM ALL PAST, PRESENT AND FUTURE CLAIMS, DEMANDS, OBLIGATIONS, LOSSES AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER, WHETHER NOW KNOWN OR UNKNOWN, DIRECT OR INDIRECT, FORESEEN OR UNFORESEEN, SUSPECTED OR UNSUSPECTED, WHICH ARE BASED UPON OR ARISE OUT OF OR IN CONNECTION WITH THE CONDITION OF THE PROPERTIES AND, WITH RESPECT TO THE PRESENCE OF ANY HAZARDOUS MATERIALS, ANY ENVIRONMENTAL DAMAGES OR ENVIRONMENTAL REQUIREMENTS, INCLUDING, WITHOUT LIMITATIONS, THE PHYSICAL, STRUCTURAL, GEOLOGICAL, MECHANICAL AND ENVIRONMENTAL (SURFACE AND SUBSURFACE) CONDITION OF ANY REAL PROPERTY (INCLUDING THE IMPROVEMENTS THEREON) OR ANY LAW OR REGULATION RELATING TO HAZARDOUS MATERIALS. WITHOUT LIMITING THE FOREGOING, THIS RELEASE SPECIFICALLY APPLIES TO ALL LOSSES AND CLAIMS ARISING UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT OF 1986, (42 U.S.C. SECTIONS 9601 ET SEQ.), THE RESOURCES CONSERVATION AND RECOVERY ACT OF 1976, (42 U.S.C. SECTIONS 6901 ET SEQ.), THE CLEAN WATER ACT, (33 U.S.C. SECTIONS 466 ET SEQ.), THE SAFE DRINKING WATER ACT, (14 U.S.C. SECTION 1401-1450), THE HAZARDOUS MATERIALS TRANSPORTATION ACT, (49 U.S.C. SECTIONS 1801 ET SEQ.), THE TOXIC SUBSTANCE CONTROL ACT, (15 U.S.C. SECTIONS 2601-2629), AND ANY OTHER FEDERAL, STATE OR LOCAL LAW OF SIMILAR EFFECT, AS WELL AS ANY AND ALL COMMON LAW CLAIMS.

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     BY INITIALING THIS CLAUSE BELOW, PURCHASER ACKNOWLEDGES THAT THIS SECTION HAS BEEN READ AND FULLY UNDERSTOOD, AND THAT PURCHASER HAS HAD THE CHANCE TO ASK QUESTIONS OF ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE.

/s/

PURCHASER’S INITIALS

     (g) “Environmental Damages” means all claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability), encumbrances, liens, costs, and expenses of investigation and defense of any claim, whether or not such claim is ultimately defeated, and of any good faith settlement of judgment, of whatever kind or nature, contingent or otherwise matured or unmatured, foreseeable or unforeseeable, including without limitation reasonable attorneys’ fees and disbursements and consultants’ fees, any of which are incurred at any time as a result of the existence of Hazardous Materials upon, about or beneath any Real Property or migrating to or from any Real Property, or the existence of a violation of Environmental Requirements pertaining to any Real Property, regardless of whether the existence of such Hazardous Materials or the violation of Environmental Requirements arose prior to the present ownership or operation of such Real Property.

     (h) “Environmental Requirements” means all applicable present and future statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises, and similar items, of all governmental agencies, departments, commissions, boards, bureaus, or instrumentalities of the United States, states and political subdivisions thereof and all applicable judicial, administrative, and regulatory decrees, judgments, and orders relating to Hazardous Materials.

     (i) “Hazardous Materials” means any substance (i) the presence of which requires investigation or remediation under any federal, state or local statute, regulation, ordinance or policy; or (ii) which is defined as a “hazardous waste” or “hazardous substance” under any federal, state or local statute, regulation or ordinance, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and amendments thereto and regulations promulgated thereunder; or (iii) which is toxic, explosive, corrosive, infectious or otherwise hazardous or is regulated by any federal, state or local governmental authority; or (iv) without limitation which contains polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde.

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The provisions of this Section 4.4 shall survive Closing.

V.

CLOSING

     5.1 Closing Date. The “Closing Date” for purposes of this Agreement shall be November 16, 2009, or such earlier date as may be agreed upon, in writing, by Sellers and Purchaser; provided, however, that Seller shall have the right, at its option, to extend the Closing Date as set forth in Sections 4.3.1, 7.4, 9.2, and 12.13 herein.

     5.2 Action Prior to the Closing Date by Seller. Sellers agree that, provided Purchaser has complied with its obligations under Section 5.3 hereof, on or before 1:00 p.m. EST on the Closing Date, Sellers will deposit with Escrow Agent such items and instruments (executed and acknowledged, if appropriate) as may be necessary in order for Escrow Agent to comply with this Agreement, including, without limitation, the following:

     (a) For each Property, a grant deed, special warranty deed, quit claim deed or statutory form warranty deed substantially in the form and content attached hereto as Exhibit “E-1” through Exhibit “E-11,” prepared and executed by Seller and acknowledged before a Notary Public in the manner provided under the laws of the state in which the particular Property is located, reflecting the sale and transfer to Purchaser of the Real Property and the Improvements (collectively, the “Deeds”), subject only to those Permitted Exceptions applicable to such Property.

     (b) For each Property, two (2) duplicate originals of a Bill of Sale, in the form and content attached hereto as Exhibit “F”, prepared and executed by Seller, assigning, conveying and transferring to Purchaser the Personal Property (“Bill of Sale”);

     (c) For each Property, two (2) duplicate originals of an Assignment of Intangible Property, in the form and content attached hereto as Exhibit “G”, prepared and executed by Seller, assigning and conveying to Purchaser, at no cost or expense to Sellers, and without representation or warranty (other than as expressly set forth herein), all of Seller’s right, title and interest in the Intangible Property (“Assignment of Intangibles”);

     (d) For each Property, two (2) duplicate originals of an Assignment and Assumption of Contracts, in the form and content attached hereto as Exhibit “H”, prepared and executed by Seller, assigning and conveying to Purchaser, at no cost or expense to Sellers, and without representation or warranty (other than as expressly set forth herein), all of Seller’s right, title and interest under the Contracts (“Assignment of Contracts”);

     (e) For each Property, two (2) duplicate originals of an Assignment and Assumption of Resident Agreements, in the form and content attached hereto as Exhibit “I”, prepared and executed by Seller, assigning and conveying to Purchaser, at no cost or expense to Sellers, and without representation or warranty (other than as expressly set

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forth herein), all of Seller’s right, title and interest under the Resident Agreements (including any refundable security deposits thereunder) (“Assignment of Resident Agreements”);

     (f) For each Seller, a non-foreign affidavit signed by Seller in the form to be prepared by Escrow Agent (“Non-Foreign Affidavit”), in the form and content attached hereto as Exhibit “J”, any state tax withholding affidavits as applicable, and an IRS Form 1099;

     (g) All transfer tax and other tax returns, if any, which any Seller is required by law to execute and acknowledge and to deliver, either individually or together with Purchaser, to any governmental authority as a result of the sale, if and to the extent the same are available as of the Closing Date;

     (h) All of the plans (including “as built” plans), drawings, blueprints and specifications relating to the Properties where available, which are in any Sellers’ possession or control;

     (i) All written warranties in possession or control of each Seller, if any, of manufacturers, suppliers and contractors in effect on the Closing Date;

     (j) All keys to the Properties which are in the possession or control of any Seller (which will be available at each respective Facility);

     (k) A closing statement prepared by the Escrow Agent and reasonably approved by Sellers and Purchaser setting forth, among other things, all payments to and from Escrow in connection with the purchase and sale of the Properties (the “Closing Statement”);

     (l) All affidavits, gap indemnity agreements and other documents consistent with the express provisions of this Agreement and reasonably required by the Escrow Agent (including without limitation, evidence reasonably satisfactory to Escrow Agent that all necessary authorizations of the transaction contemplated hereby have been obtained by Sellers), each in form and substance reasonably acceptable to Sellers;

     (m) For each Property, a form Notices to Residents, in the form and content attached hereto as Exhibit “K,” prepared and executed by Seller (collectively, the “Notices to Residents”);

     (n) Two (2) duplicate originals of an Assignment of Ground Lease for Sunrise Wooster Assisted Living, L.L.C., in the form and content attached hereto as Exhibit “L” (the “Assignment of Ground Lease”);

     (o) For each Property, two (2) duplicate originals of a Bridging Lease, if necessary pursuant to and as defined in Section 6.4.2 below, prepared and executed by Seller;

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     (p) For each Property, two (2) duplicate originals of a Bridging Management Agreement, if necessary pursuant to and as defined in Section 6.4.2 below, prepared and executed by Seller;

     (q) Two (2) duplicate originals of the Post-Closing Escrow Agreement, as set forth in Section 7.3 below, prepared and executed by Seller;

     (r) Title to transfer any motor vehicles being conveyed in connection herewith, each of which will be located at a Property;

     (s) To the extent not previously delivered to Purchaser and within the possession or control of Sellers or their Affiliates, access at each Facility with respect to the items pertaining to such Facility to the originals (or copies, if originals are not available) of all items within the Due Diligence Materials (including, to the extent available, originals of all Resident Agreements, Contracts, and Permits and copies of all resident correspondence and billing files and records);

     (t) Any releases necessary to extinguish the Existing Liens, as required hereby; and

     (u) Such other instruments or documents as may be reasonably necessary to effect or carry out the covenants and obligations to be performed by Sellers pursuant to this Agreement.

     5.3 Action Prior to the Closing Date by Purchaser. Purchaser agrees that on or before 1:00 p.m. EST on the Closing Date, Purchaser will deposit with Escrow Agent the Closing Payment and all documents (executed and acknowledged, if appropriate) necessary to comply with the terms of this Agreement, including without limitation:

     (a) To the extent that applicable law requires that the Deeds, transfer tax or other tax forms, or recording forms be executed by the grantee, such instruments shall be executed by Purchaser and acknowledged in the presence of a Notary Public in accordance with the laws of the state in which the particular Property is located;

     (b) For each Property, two (2) fully executed duplicate originals of the Assignment of Purchase Contract to Applicable Property executed by Purchaser and its assignee in the form and content attached hereto as Exhibit “D”;

     (c) For each Property, two (2) fully executed duplicate originals of the Assignment of Contracts executed by Purchaser;

     (d) For each Property, two (2) fully executed duplicate originals of the Assignment of Resident Agreements executed by Purchaser;

     (e) An executed Closing Statement;

     (f) For each Property, two (2) fully executed duplicate originals of the Assignment of Intangibles executed by Purchaser;

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     (g) For each Property, two (2) fully executed duplicate originals of the Bill of Sale executed by Purchaser;

     (h) Two (2) fully executed duplicate originals of the Assignment of Ground Lease executed by Purchaser;

     (i) For each Property (if necessary pursuant to Section 6.4.2 below), two (2) fully executed duplicate originals of the Bridging Lease executed by Purchaser;

     (j) For each Property (if necessary pursuant to Section 6.4.2 below), two (2) fully executed duplicate originals of the Bridging Management Agreement executed by Purchaser;

     (k) Two (2) duplicate originals of the Post-Closing Escrow Agreement, as set forth in Section 7.3 below, executed by Purchaser;

     (l) The Releases, as defined in Section 4.2.3 above, executed by the applicable lender(s); and

     (m) Such other funds, instruments or documents as may be reasonably necessary to effect or carry out the covenants and obligations to be performed by Purchaser pursuant to this Agreement.

     5.4 Recording of Deeds. Subject to Section 8.3 below, Escrow Agent will cause the Deeds to be dated as of the Closing Date and recorded in the Official Records, and all other conveyance documents deposited with Escrow Agent to be dated as of the Closing Date, when (but in no event after the Closing Date) Escrow Agent (i) is prepared to issue the Title Policies to be issued to Purchaser as contemplated in this Agreement, and (ii) holds for the account of Sellers and Purchaser all items and funds (if any) to be delivered to Sellers and Purchaser through the Escrow, after payment of costs, expenses, disbursements and prorations chargeable to Sellers or Purchaser pursuant to the provisions of this Agreement.

     5.5 Prorations.

          5.5.1 Taxes. With respect to each Property, all non-delinquent real estate and personal property general and special taxes and assessments for the Property and the Land for the current assessment year of the applicable taxing authority in which the Closing Date occurs shall be prorated as of the Closing Date. If the exact amount of taxes is not known at Closing, the proration will be based on an amount equal to 105% of the prior assessment year’s taxes and shall be adjusted directly between Seller and Purchaser once actual figures become available after Closing. It is understood that any supplemental property tax bill issued as a result of the sale of any Property pursuant to the provisions of this Agreement, shall be borne by Purchaser. Notwithstanding anything to the contrary in this Agreement, (i) Sellers shall retain all right, title and interest in and to any and all property tax (both real property and personal property) refunds and claims for refunds with respect to the Properties for any period prior to the Closing Date, and (ii) Sellers are responsible for all taxes due and payable prior to the Closing Date. Purchaser shall assume all obligations accruing from and after the Closing Date with respect to any agreements relating to the appealing of real estate taxes or real estate tax assessments, including the obligation to pay portions of amounts of real estate tax savings and costs and expenses related thereto. With respect to each Property, Purchaser and Seller shall be equally responsible for, and shall pay equally, all sales, use and other transfer taxes imposed in connection with the sale and transfer of the Personal Property and the Intangible Property (i.e., Purchaser shall pay 50% and Sellers shall, collectively, pay 50%).

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          5.5.2 Utility Service. With respect to each Property, Seller shall request each utility company providing utility service to the Real Property to cause all utility billings to be closed and billed as of the Closing Date in order that utility charges may be separately billed for the period prior to the Closing Date and the period on and after the Closing Date. In the event any such utility charges are not separately billed, the same shall be prorated. In connection with any such proration, it shall be presumed that utility charges were uniformly incurred during the billing period in which the Closing Date occurs. Sellers shall receive a credit at Closing for any Utility Deposits with respect to the Facilities that are transferred or made available to Purchaser. Purchaser shall arrange for placing all utility services and bills in its own name as of the Closing Date.

          5.5.3 Revenue From Operations. With respect to each Property, all revenues from Facility operations accruing or relating to the period up to and including 11:59 p.m. EST on the day immediately preceding the Closing Date (“Cut-Off Time”) shall belong to Seller. All revenues from Facility operations accruing or relating to the period after the Cut-Off Time shall belong to Purchaser. Without limiting the foregoing, it is the agreement and intent of the parties that all revenues shall be prorated as of the Closing Date.

          5.5.4 Accounts Payable and Operating Expenses. With respect to each Property, all obligations and liabilities (for services and materials ordered, or otherwise in the ordinary course of business) and accounts payable for the Facility and the Real Property owing as of the Closing Date for merchandise, equipment, supplies and other materials and services paid, incurred or ordered shall be prorated between Seller and Purchaser as of the Closing Date based on whether the merchandise, equipment, supplies and other materials remain in inventory as of the Closing Date and when the services were, or are to be rendered, i.e. prior to, or on or after the Closing Date.

          5.5.5 Miscellaneous Permits and Taxes. Except as covered by the terms of Section 5.5.1 above, with respect to each Property, all water and sewer charges, taxes (other than ad valorem property taxes), including license taxes or fees for licenses which are assignable or transferable without added cost and have a value which will survive Closing, and any unpaid taxes payable in arrears, shall be prorated as of the Closing Date. Sellers will be credited for that portion of taxes and fees paid by Sellers allocable to the period after the Closing Date.

          5.5.6 Contracts. With respect to each Property, all payments and receipts, as applicable, under the Contracts assumed by Purchaser shall be prorated between Purchaser and Seller as of the Closing Date. Seller shall receive a credit for all prepayments and deposits thereunder.

          5.5.7 Intentionally Deleted.

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          5.5.8 Other Income. With respect to each Property, all other income derived by Seller from the Property accruing or relating to the period up to and including the Cut-Off-Time shall be paid to Seller. All other income derived by Seller from the Property accruing or relating to the period on and after the Cut-Off-Time shall be paid to Purchaser.

          5.5.9 Other Expenses. With respect to each Property, all other expenses and obligations not otherwise specified in this Section 5.5 incurred in the ownership of the Property and operation of the Facility shall be prorated between Seller and Purchaser as of the Closing Date.

          5.5.10 Accounts Receivable. Subject to Section 5.5.11 below, all of Sellers’ Accounts Receivable shall be and remain the property of Sellers subsequent to the Closing of the transaction contemplated hereby. At the Closing, Sellers shall prepare a list of their outstanding Sellers’ Accounts Receivable as of the Cut-Off Time, specifying the name of each account and the amount due to each Seller. Purchaser shall hold in trust for Sellers any funds which are received by Purchaser as payment of such accounts receivable, i.e., if Purchaser actually collects any such amounts; and Purchaser shall pay the monies collected in respect thereof (net of actual collection costs) to Sellers at the end of each calendar month, accompanied by a statement showing the amount collected on each such account. Other than the foregoing, Purchaser shall have no obligation with respect to any such account, and Purchaser shall not be required to take any legal proceeding or action to effect collection on behalf of Sellers. It is the intention of Purchaser and Sellers that although all of Sellers’ accounts receivable shall be and remain the property of Sellers, still, if any such accounts are paid to Purchaser, then Purchaser shall collect same and remit to Sellers in the manner above provided. Nothing herein contained shall be deemed to preclude Sellers from enforcing collection of the accounts receivable which are owed to Sellers. The provisions of this Section shall survive Closing.

          5.5.11 Rent. All rentals and other resident charges, including any community fees and reimbursements, in respect to the month in which the Closing Date occurs (the “Current Month”) shall be prorated as of the Cut-Off Time, whether or not actually received prior to the Closing Date. All rentals and other resident charges received by Purchaser from a resident after the Closing Date shall be applied first to collection costs and then to the most recently accrued obligation of such resident. After application as set forth above, Purchaser shall promptly remit to Seller that portion of rentals and other resident charges received after the Closing Date attributable to periods prior to the Cut-Off Time. Sellers shall retain the right to pursue directly collection of amounts due on account of the period prior to the Cut-Off Time.

          5.5.12 Interest Payments. With respect to any loans to be assumed by Purchaser pursuant to Section 4.2.3 above, all interest payments due with respect to the Current Month shall be prorated between Purchaser and Seller as of the Cut-Off Time.

          5.5.13 Security Deposits; Prepaid Rent. Purchaser shall receive a credit against the Purchase Price for (a) prepaid rents and other resident charges, including any community fees, applicable to periods after the Cut-Off Time, and (b) any refundable security deposits (and if Legal Requirements or any agreements require a landlord to be accountable for interest on such refundable security deposits, any accrued interest owed thereon).

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          5.5.14 General Provision. Except as otherwise expressly provided in this Agreement, all apportionments and adjustments shall be made in accordance with generally accepted accounting principles. The computation of the adjustments shall be jointly prepared by Sellers and Purchaser. In the event any prorations or apportionments made under this Section 5.5 shall prove to be incorrect for any reason, then any party shall be entitled to an adjustment to correct the same in accordance with the remaining terms of this Section 5.5.14. To the extent the exact amount of any adjustment item provided for in this Section 5.5 cannot be precisely determined on the Closing Date, such prorations and apportionments shall be tentatively prorated on the basis of the best data then available and re-prorated when the information is available. Notwithstanding the foregoing, any adjustment or re-proration pursuant to the two immediately preceding sentences shall be made, if at all, within ninety (90) days after the Closing Date (except with respect to taxes and assessments, in which case such re-proration shall be made within thirty (30) days after the information necessary to perform such re-proration is available). All payments to be made as a result of the final results of the adjustments shall be paid to the party entitled to the same within thirty (30) days after the final determination thereof. Seller and Purchaser agree that none of the insurance policies relating to any Property will be assigned to Purchaser (and Seller shall pay any cancellation fees or minimum earned premiums resulting from the termination of such policies) and Purchaser shall be responsible for arranging for its own insurance as of the Closing Date.

          5.5.15 Proration Allocation. For proration purposes, the day that falls on the Closing Date shall be charged to Purchaser.

          5.5.16 Survival. The provisions of this Section 5.5 shall survive Closing.

     5.6 Closing Costs. With respect to each Property, Purchaser shall bear the cost of the premium for the Title Policy and any and all endorsements to the Title Policy requested by Purchaser or its lender. Purchaser shall bear the cost of the survey (or the updating thereof) for each Property. Seller shall pay any commission due to Broker (as defined in Article X). With respect to each Property, each of Seller and Purchaser shall pay one-half (1/2) of the documentary transfer taxes and the recording fee for the Deeds and one-half (1/2) of all escrow and closing fees relating to the sale of the Property (but not in connection with any financing by Purchaser, which shall be paid solely by Purchaser). Each party shall pay its own attorneys’ fees pertaining to the sale of the Properties. Purchaser shall be responsible for the payment of any mortgage taxes or recording fees for the mortgage securing Purchaser’s loan. All other costs pertaining to the sale of each Property shall be allocated as is customary for real estate transactions where the applicable Property is located. The parties agree to cooperate in all reasonable respects to minimize all such costs, premiums, taxes, and fees.

     5.7 Distribution of Funds and Documents Following Closing. The conditions to the closing of Escrow shall be Escrow Agent’s receipt of funds and documents described in Sections 5.2 and 5.3 above. Upon satisfaction of the above conditions, Escrow Agent shall distribute the documents described in Sections 5.2 and 5.3 above as follows and in accordance with the Escrow Agreement and take all other actions authorized by the Escrow Agreement:

          5.7.1 To Sellers. With respect to each Property:

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     (a) The cash portion of the Purchase Price due to Seller as set forth in the Closing Statement;

     (b) A copy of the recorded Deeds;

     (c) One (1) fully executed duplicate original of the Bill of Sale;

     (d) One (1) fully executed duplicate original of the Assignment of Intangibles;

     (e) One (1) fully executed duplicate original of the Assignment of Contracts;

     (f) One (1) fully executed duplicate original of the Assignment of Resident Agreements;

     (g) One (1) fully executed duplicate original of the Non-Foreign Affidavit;

     (h) One (1) fully executed duplicate original of the Assignment of Ground Lease;

     (i) One (1) fully executed duplicate original of the Bridging Lease, if applicable;

     (j) One (1) fully executed duplicate original of the Bridging Management Agreement, if applicable;

     (k) One (1) fully executed duplicate original of the Post-Closing Escrow Agreement;

     (l) One (1) fully executed duplicate original of the Releases;

     (m) A copy of the Title Policy issued to Purchaser;

     (n) One (1) duplicate original or conformed copy as appropriate, of any other document to be received by Sellers through Escrow pursuant to the provisions of this Agreement; and

     (o) (o) One (1) copy of any other document delivered to Escrow Agent by Purchaser or Sellers pursuant to the terms of this Agreement. Copies of any of Purchaser’s loan documents (other than the Releases) shall not be provided to Sellers.

          5.7.2 To Purchaser. With respect to each Property:

     (a) Any excess funds deposited by Purchaser which remain after disbursement to Sellers;

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     (b) One (1) conformed copy of the Deeds, the originals to be mailed to Purchaser following the recordation thereof, in each instance;

     (c) One (1) fully executed duplicate original of the Bill of Sale;

     (d) One (1) fully executed duplicate original of the Assignment of Intangibles;

     (e) One (1) fully executed duplicate original of the Assignment of Contracts;

     (f) One (1) fully executed duplicate original of the Assignment of Resident Agreements;

     (g) One (1) fully executed duplicate original of the Assignment of Ground Lease;

     (h) One (1) fully executed duplicate original of the Bridging Lease, if applicable;

     (i) One (1) fully executed duplicate original of the Bridging Management Agreement, if applicable;

     (j) One (1) fully executed duplicate original of the Post-Closing Escrow Agreement;

     (k) One (1) duplicate original or conformed copy as appropriate, of any other document to be received by Purchaser through Escrow pursuant to the provisions of this Agreement (including without limitation, the items and documents described in Section 5.2(h) and (i) above, unless the same are delivered directly to Purchaser by Sellers);

     (l) One (1) copy of any other document delivered to Escrow Agent by Purchaser or Sellers pursuant to the terms of this Agreement;

     (m) The original of the Title Policy for each Property;

     (n) One (1) fully executed copy of the Non-Foreign Affidavit for each of the Sellers; and

     (o) The fully executed originals of the Notices to Residents.

     5.8 Possession. Purchaser shall be entitled to sole possession of each Property on the Closing Date, subject to the possessory rights of any resident of the Facility and the terms of the Contracts.

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VI.

ADDITIONAL COVENANTS AND INDEMNITIES

     6.1 Purchaser’s Covenants.

          6.1.1 Purchaser Indemnity. With the exception of items for which Purchaser is expressly indemnified hereunder, Purchaser covenants and agrees to defend, indemnify, protect, defend, and hold harmless Sellers, and their respective affiliates, owners, members, partners, employees, lenders, agents and representatives, from and against any and all Claims (a) arising from the acts and omissions of Purchaser and its agents, employees and contractors occurring in connection with or as a result of, any inspections, tests or examinations of or to the Properties, (b) if the Closing occurs, arising from the use, management, operation, rental, maintenance and ownership of the Properties, based upon acts, conduct or omissions (other than by Sellers) occurring on or after the Closing Date, including, without limitation, with respect to and under the Contracts assumed by Purchaser under the Assignment of Contracts, (c) caused by or arising out of any material misrepresentation by Purchaser in connection with this Agreement, and (d) arising from any breach of this Agreement by Purchaser or any instrument or agreement delivered or required to be delivered pursuant to the provisions of this Agreement. This indemnity shall survive Closing.

          6.1.2 Pursuit of State Permits. Prior to Closing, Purchaser shall use its commercially reasonable efforts to obtain all required licenses and approvals to permit Purchaser to operate the Facilities under Purchaser’s name, including certificates of need (or waiver thereof) to the extent required by law (“Purchaser Permits”). Subject to Section 6.2.2 below, Purchaser shall commence the process of filing all applications and other documents required by the applicable governmental or administrative agency or authority for all such required Purchaser Permits within one (1) business day after the Effective Date and shall endeavor to complete such filing process within ten (10) business days thereafter. In the event that any Purchaser Permits required to be obtained prior to the Closing Date are not obtained at such time, the terms of Section 6.4 below shall control.

     6.2 Seller Covenants. Each Seller (but solely for itself and its own Property, and not for any other Seller or any other Property) covenants to Purchaser as follows:

          6.2.1 Operation of the Facility. Subject to the terms of this Agreement, each Seller, during the term of this Agreement, shall carry on the business and operations of the Facility in substantially the same manner as heretofore carried on by it. Prior to the Closing Date, each Seller shall maintain (or replace with policies of like amounts) all existing insurance policies insuring the Property and the operation of the Facility. No Seller shall remove any of the Personal Property from the Real Property, unless such Seller replaces the same with like items that are of equal or better quality and condition. Each Seller shall maintain the Inventory consistent with such Seller’s past practices and will replenish the same consistent with its past practices. Each Seller may extend, amend, modify or terminate any of the Contracts as such Seller deems appropriate to operate, service and maintain the Property consistent with normal business practices, and may enter into new Contracts; provided, however, that so long as Purchaser is not in default of any of its obligations under this Agreement beyond the expiration

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of any applicable notice or cure period, other than with respect to entering into new Resident Agreements in accordance with the rental schedules previously delivered to Purchaser, (a) from the date of this Agreement to the Closing Date, Seller shall provide to Purchaser copies of new Contracts and any terminations, amendments, extensions, or modifications of existing Contracts, which Seller has entered into, or intends to enter into, within two (2) business days thereof, (b) Seller shall not, without the written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed), enter into (i) any leases of furniture, fixtures or equipment for the Facility, (ii) any new Contract other than those that are terminable with not more than thirty (30) days’ notice without penalty, (iii) any extension, amendment, modification, or termination of a Contract other than an extension of an existing Contract on identical terms (provided that Purchaser has not delivered to Seller Notice of its intent to terminate such Contract), or (iv) any additional Business Agreements affecting the Property (other than with respect to entering into additional Resident Agreements as set forth above), (c) other than in the ordinary course of business at the Property, no part of the Property, or any interest therein, will be sold or otherwise transferred or encumbered without Purchaser’s prior written consent, which approval shall not be unreasonably withheld or delayed, and (d) without the prior written approval of Purchaser (which approval shall not be unreasonably withheld or delayed), Seller shall not: (i) make any material alterations to the Property, or, (ii) remove or otherwise dispose of any material portion of the Personal Property, except in the ordinary course of business.

          6.2.2 Cooperation. Sellers shall cooperate with Purchaser in all commercially reasonable respects, including by executing and/or delivering necessary or desirable applications and other information and documents, to facilitate the issuance and/or transfer of the Purchaser Permits (as defined in Section 6.1.2 above) and other authorizations in connection with the operation of the Properties. Purchaser shall promptly reimburse Seller for all governmental or other administrative agency fees incurred by Seller in connection with such cooperation. In the event that any Purchaser Permit required under any Legal Requirement to be obtained prior to the Closing Date are not obtained at such time, but all other conditions set forth herein are satisfied (other than conditions which, by their nature, are to be satisfied on the Closing Date), the Sellers agree to cooperate in good faith with Purchaser and use commercially reasonable efforts in formulating and implementing mutually acceptable alternatives (if any) that permit the consummation of the transactions contemplated by this Agreement in accordance with all Legal Requirements in the absence of such Purchaser Permits, provided that any such arrangements are fully in compliance with all Legal Requirements, that Purchaser either pays for or promptly reimburses Seller for all governmental or other administrative agency fees incurred by Seller in connection therewith, and that Purchaser indemnifies and holds Seller harmless from and against any liabilities arising in connection therewith. The provisions of this Section 6.2.2 shall survive the Closing.

     6.3 Employee Matters. With respect to each Property:

          6.3.1 On the Closing Date, Seller shall pay or credit Purchaser with all employee salaries, wages, and other compensation (including accrued vacation days but not including sick leave), including any applicable federal, state and local taxes, for any employees of the Facility which have accrued up to the Cut-Off Time and remain unpaid. Subject to the provisions of Sections 6.3.2 and 6.3.3, Seller shall indemnify, defend and hold harmless Purchaser against any and all labor or employment claims, liabilities or obligations (including, without limitation, reasonable attorneys’ fees and costs) which arise or accrue before, or arise out of events occurring before, the Closing Date, which indemnity shall survive Closing. Purchaser shall be responsible for any severance pay due to any Hired Employee that Purchaser elects to terminate on or after the Closing Date.

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          6.3.2 On or before the day that is ten (10) days after the Effective Date, each Seller shall provide Purchaser with a list of all employees at its respective Property and access to other pertinent information as reasonably requested by Purchaser (including access to review the employee file and information on the terms of employment of each employee). After the Effective Date of this Agreement, each Seller shall afford Purchaser and Purchaser’s proposed property manager with opportunities to meet with any employees of such Seller or its manager who are involved in the operation of each Facility and each Property. Such meetings shall be at such times as mutually agreed to by each Seller and Purchaser and each Seller shall be entitled to have a representative present at any such meetings with the employees at its Property. As of the Closing Date, Purchaser shall offer employment to all then-current employees of the Facilities. Purchaser shall indemnify, defend and hold harmless Seller, and its affiliates, owners and employees, against any and all labor or employment claims, liabilities and obligations (including, without limitation, reasonable attorneys’ fees and costs) which arise or accrue from or after, or arise out of events occurring from or after the Closing Date, including, without limitation, all claims arising as a result of the termination by Purchaser of any Facility employee or personnel performing services at or for the Facility, which indemnity shall survive Closing. The foregoing indemnity shall survive Closing. Those employees who accept employment with Purchaser or its property manager shall be referred to as the “Hired Employees.” For a period of one (1) year after the Closing Date, neither Sellers (nor their managers or Affiliates) shall hire or seek to hire any Hired Employees who are then currently employed at any of the Facilities.

          6.3.3 Purchaser and Sellers acknowledge and agree that the provisions of Section 6.3.2 are designed, in part, to ensure that Seller (or its manager) is not required to give notice to employees of the Facility of the “closure” thereof under the federal Worker Adjustment and Retraining Notification Act (the “WARN Act”) or any other comparable state law by avoiding the substantial cessation of industrial or commercial operation in a covered establishment. Nothing in this Section 6.3 shall, however, create any rights in favor of any person not a party to this Agreement, including employees of the Facility, or constitute an employment agreement or condition of employment for any employee of Seller (or its manager) or any affiliate of Seller (or its manager) who is a Hired Employee..

          6.3.4 Sellers shall and hereby agree to indemnify and save Purchaser, and its Affiliates and property managers, harmless from and against any liability for wages, salaries, bonuses, and accrued vacation days (but not sick leave) to be paid to employees on account of services rendered prior to Closing, except to the extent the same is credited to Purchaser pursuant to Section 6.3.1 above. Notwithstanding anything to the contrary herein contained, there shall be no apportionment or proration of medical, pension, welfare benefits, other employee benefits or other fringe benefits (hereinafter collectively referred to as “benefits”) and Sellers shall remain liable for and hereby indemnify and save Purchaser, and its affiliates, harmless from and against all benefits due to employees under plans in which employees participate prior to Closing, and all payments due on the plans providing such benefits. Sellers agrees to give all affected employees written notice of termination of participation of employees working at any Property in any applicable 401(K) or other pension or retirement plan affecting the employees. The obligations of Sellers and Purchaser set forth in this Section 6.3 shall survive Closing.

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     6.4 Bridging of Licenses.

          6.4.1 Without limiting Purchaser’s obligations set forth in Section 6.1.2 above and Seller’s agreement to cooperate as set forth in Section 6.2.2 above, from and after the date hereof, Purchaser and Sellers shall cooperate and work together diligently and in good faith to obtain all necessary consents and approvals for the issuance of the Purchaser Permits (as defined in Section 6.1.2 above) to Purchaser, or the transfer to Purchaser of the existing Permits for the operation of each of the Facilities. In furtherance of the foregoing, Purchaser and Sellers shall submit all necessary applications and filings with all relevant federal, state, and local governmental or administrative agencies or authorities, or other relevant parties, and provide complete information and requested materials.

          6.4.2 In the event the existing Permits for the operation of any one or more Facilities cannot be transferred (or a new Purchaser Permit for the operation of such Facility cannot be obtained by Purchaser) prior to the Closing Date, the Closing shall proceed in accordance with the terms hereof. In such event, Purchaser and Sellers shall enter into such other mutually and reasonably acceptable documents and agreements as may be necessary and permitted under all applicable laws, rules, and regulations in each instance to cause the current license-holder for each such Facility to remain in place pending final approval and transfer of such Permits to Purchaser (or its designated related entity) or the issuance to Purchaser of a new Purchaser Permit for the operation of such Facility. Without limitation, this may include a lease from Purchaser to one of the Sellers, its management company or the current license-holder, in the form and content attached hereto as Exhibit “M” (each, a “Bridging Lease”), and a management agreement between the license-holder as lessee under the Bridging Lease and a designee of Purchaser, in the form and content attached hereto as Exhibit “N” (each, a “Bridging Management Agreement”). All such document(s) shall include, without limitation, an indemnity (in form and substance reasonably acceptable to Purchaser and Sellers) by Purchaser of such Seller and its management company and license-holder, and their respective affiliates, owners, members, partners, employees, lenders, agents and representatives, from and against any and all Claims arising in or in connection with the ownership, management or operation of any Facility after the Closing Date, to the extent that such Claims are not attributable to the grossly negligent or willful acts or omissions of such Seller or its management company and license-holder.

          6.4.3 Purchaser and Sellers shall promptly notify, consult with, and keep the other advised as to the status of the matters referred to in this Section 6.4, including with respect to any communications to or from any governmental agency or other party in connection with the transfer or issuance of the Purchaser Permits.

          6.4.4 Nothing in this Section shall require Sellers to dispose of any of its assets or to limit its freedom of action with respect to any of its businesses, or to consent to any disposition of any of its assets or limits on its freedom of action with respect to the businesses of any Seller, or commit or agree to any of the foregoing in order to obtain any consents, approvals, permits or authorizations to remove any impediments to the transactions contemplated hereby relating to the Hart-Scott-Rodino Act or other antitrust, competition or trade regulation Law or to obtain or transfer any licenses or other permits to Purchaser.

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VII.

REPRESENTATIONS AND WARRANTIES

     7.1 Purchaser’s Representations and Warranties. Purchaser represents and warrants to Sellers that as of the date hereof and as of the Closing Date:

          7.1.1 Organization and Standing. Purchaser is a corporation, duly organized, validly existing, and in good standing under the laws of the State of Delaware, is, or on the Closing Date will be, duly qualified to do business in each state where such qualification is necessary with respect to the Properties, and has the full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby to be carried out by it.

          7.1.2 Due Authorization. The performance of this Agreement and the transactions contemplated hereunder by Purchaser have been duly authorized by all necessary action on the part of Purchaser, and this Agreement is binding on and enforceable against Purchaser in accordance with its terms. Purchaser shall, on or prior to the Closing Date, furnish Sellers with certified resolutions evidencing that Purchaser has been duly authorized to enter into and perform this Agreement and the transactions contemplated hereunder. No further consent of any shareholder, creditor, board of directors, governmental authority or other party to such execution, delivery and performance hereunder is required. The person(s) signing this Agreement, and any document pursuant hereto on behalf of Purchaser, has full power and authority to bind Purchaser.

          7.1.3 Lack of Conflict. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will violate any restriction, court order, judgment, law, regulation, charter, bylaw, instrument or agreement to which Purchaser is subject.

          7.1.4 Solvency/Bankruptcy. Purchaser has not (i) made any general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition in bankruptcy by Purchaser’s creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of Purchaser’s assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Purchaser’s assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made any offer of settlement, extension or compromise to its creditors generally. Furthermore, Purchaser has not taken against it any such actions.

     7.2 Sellers’ Representations and Warranties. Each Seller represents and warrants (but solely for itself and its own Property, and not for any other Seller or any other Property) to Purchaser that as of the date hereof and as of the Closing Date:

          7.2.1 Organization and Standing. Seller is a limited liability company or a limited partnership, as reflected on “Exhibit “A” to this Agreement, duly organized under the laws of the state of its formation, is validly existing, and in good standing under the laws of such state, qualified or registered to do business in the state where its Property is located, and has the full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby to be carried out by it.

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          7.2.2 Due Authorization. The performance of this Agreement and the transactions contemplated hereunder by Seller have been duly authorized by all necessary action on the part of Seller, and this Agreement is binding on and enforceable against Seller in accordance with its terms. Seller shall, on or prior to the Closing Date, furnish Purchaser with certified resolutions evidencing that Seller has been duly authorized to enter into and perform this Agreement and the transactions contemplated hereunder. No further consent of any member, manager, creditor, governmental authority or other party to such execution, delivery and performance hereunder is required. The person(s) signing this Agreement, and any document pursuant hereto on behalf of Seller, has full power and authority to bind Seller.

          7.2.3 Lack of Conflict. Neither the execution of this Agreement nor the consummation of the transactions contemplated herein will violate any restriction, court order, judgment, law, regulation, charter, bylaw, instrument, or agreement to which Seller or the Property (or any portion thereof) are subject.

          7.2.4 Non-Foreign Seller. Seller is not a foreign seller as defined in the “Foreign Investment in Real Property Tax Act.”

          7.2.5 Litigation; Condemnation. Except as listed on Exhibit “O” attached hereto, to each Seller’s actual knowledge, there are no demands, complaints, actions, suits, arbitrations, governmental investigations or other proceedings pending or threatened against or affecting such Seller and its respective Property (or any portion thereof) and each Seller has not received written notice of any of the same.

          7.2.6 Solvency; Bankruptcy. Neither Sellers nor any general partner or managing member of each Seller has (i) made any general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition in bankruptcy by such Seller’s or such general partner’s or managing member’s creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of such Seller’s or such general partner’s or managing member’s assets, or (iv) suffered the attachment or other judicial seizure of all, or substantially all, of such Seller’s or such general partner’s or managing member’s assets.

          7.2.7 No Default. To Sellers’ actual knowledge, Sellers have not received written notice of any material default in respect of its obligations under any of the Contracts or the Resident Agreements.

          7.2.8 Personal Property. To Sellers’ actual knowledge, each Seller holds good title to, and the entire right, title, and interest in and to, the Personal Property owned by it, free and clear of any and all leases, liens, encumbrances or other liabilities, except as set forth in the Contracts and the Resident Agreements.

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          7.2.9 Operating Statements. Attached hereto as Exhibit “C-2” are financial statements for the Property for the calendar year 2008 (the “Operating Statements”). To Sellers’ actual knowledge, the Operating Statements are full, true and correct in all material respects and have been prepared in accordance with standard accounting practices, consistently applied.

          7.2.10 Due Diligence Materials. To Sellers’ actual knowledge, Sellers have delivered to Purchaser or made available as part of the Due Diligence Materials true, correct, and complete (to the extent in Sellers’ possession) copies of all material information respecting the Property (including all Contracts) within the possession or control of Sellers; provided, however, that Sellers are not providing any representation or warranty as to the accuracy of the information or materials provided or prepared by a third party.

          7.2.11 Resident List. To Sellers’ actual knowledge, the Resident List for each Property is true and correct in all material respects as of the date thereof with respect to the room number of each resident in each Facility.

          7.2.12 Hazardous Materials. To Sellers’ actual knowledge, except as disclosed in any phase I or phase II environmental report delivered or made available to Purchaser as part of the Due Diligence Materials, there are (and have been) no Hazardous Materials installed, stored in, released from or onto, or otherwise existing at, on, in, under or about the Property. To Sellers’ actual knowledge, all phase I and phase II environmental reports related to the Property and in the possession or control of Seller have been made available to Purchaser as part of the Due Diligence Materials.

          7.2.13 Notices of Non-Compliance. Seller has not received written notice and has no actual knowledge that any government agency or any employee or official thereof considers the construction of the Property or the operation or use of the same to have failed to comply with any Legal Requirement, or that any investigation has been commenced or is contemplated respecting any such possible failure of compliance.

          7.2.14 ERISA. Sellers are not, and no portion of the Property is an asset of, an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (whether or not subject to ERISA, and including, without limitation, governmental and foreign plans), a plan subject to Section 4975 of Internal Revenue Code of 1986, as amended, or an entity that is deemed to hold plan assets of any of the foregoing by reason of investment by an employee benefit plan or other plan in such entity.

     7.3 Seller’s Knowledge. Wherever the phrase “to Seller’s actual knowledge” or any similar phrase stating or implying a limitation on the basis of knowledge appears in this Agreement, unless specifically otherwise qualified or except as otherwise provided herein, such phrase shall mean only the present actual knowledge of Philip Kroskin, Jerry Liang, and Daniel Schwartz of Seller, without any duty of inquiry, any imputation of the knowledge of another, or independent investigation of the relevant matter by any individual(s), and without any personal liability. Wherever the phrase “in Seller’s possession”, “in the possession of Seller” or similar phrase appears in this Agreement, such phrase shall be deemed to mean only to the extent the material or other item referred to by such phrase is located at a Property or in Seller’s offices in McLean, Virginia.

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     7.4 Failure of Condition But No Seller Breach. Notwithstanding any provision of this Agreement to the contrary (including Section 9.1 below), should any of the representations and warranties of Seller become false or inaccurate prior to the Closing Date or if Seller discovers that any representations and warranties are false or inaccurate and informs Purchaser in writing prior to the Closing Date, then Purchaser’s sole recourse shall be to either (i) if the same has a material, adverse impact on the value of the Property, to terminate this Agreement and cancel the Escrow, in which case the Earnest Money Deposit shall be returned to Purchaser and neither Seller nor Purchaser will have any further liability or obligation under this Agreement (except for those obligations which survive in accordance with their terms), or (ii) proceed with the closing, without reservation, in which case Purchaser shall be deemed to have waived all Claims against Seller with respect to such false or inaccurate representation and warranty. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, in the event of any right by Purchaser to terminate this Agreement (including without limitation, pursuant to Sections 8.3 and 9.2 below), Sellers shall first have the right, at its sole option, to cure any failure of a covenant, condition or inaccurate representation or warranty, by the payment of money or otherwise, and (a) the Closing Date will be extended at Sellers’ option for a reasonable period of time for Sellers to effectuate such cure, and (b) Purchaser and Sellers shall each act reasonably and in good faith to agree on the sufficiency of such cure. If Seller is unable to cure any such failure, inaccuracy, misrepresentation, failed covenant or obligation or other condition and the same impacts one or more but not all of the Properties, Seller shall have the right, at its sole option, to elect to proceed to Closing with respect to the remainder of the Properties, and in such event, the closing shall proceed with the Purchase Price reduced by the Allocated Purchase Price for the removed Property(ies).

     7.5 Survival Period. Subject to Section 9.5 below, the representations and warranties of Seller set forth in this Agreement shall survive until the date that is one (1) year after the Closing Date, at which time such representations and warranties shall terminate.

VIII.

CONDITIONS PRECEDENT TO CLOSING

     8.1 Conditions to Sellers’ Obligations. The obligation of Sellers to close the transaction contemplated hereunder shall be subject to the satisfaction or Notice of its waiver (delivered to Purchaser and Escrow Agent), in whole or in part, by Sellers of each of the following conditions precedent:

     (a) Except by reason of a default by Sellers, Escrow Agent is in a position to and will deliver to Sellers the instruments and funds accruing to Sellers pursuant to the provisions of this Agreement and the Escrow Agreement;

     (b) There is no existing uncured material breach of any of the covenants, representations, warranties or obligations of Purchaser set forth in this Agreement that has not been waived by Sellers; and

     (c) Sellers have received the approval of Bank of America of the transaction contemplated hereby.

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The foregoing conditions contained in this Section 8.1 are intended solely for the benefit of Sellers. Sellers shall at all times have the right to waive any condition precedent, provided that such waiver is in writing and delivered to Purchaser and Escrow Agent.

     8.2 Conditions to Purchaser’s Obligations. The obligations of Purchaser to close the transaction contemplated hereunder shall be subject to the satisfaction or Notice of its waiver (delivered to Sellers and Escrow Agent), in whole or in part, by Purchaser of each of the following conditions precedent, and Purchaser shall have no right to terminate this Agreement or delay the Closing for any other reason:

     (a) Except by reason of a default by Purchaser, Escrow Agent is in a position to and will deliver to Purchaser the instruments and funds, if any, accruing to Purchaser pursuant to the provisions of this Agreement;

     (b) There is no existing uncured material breach of any of the covenants, representations, warranties or obligations of Sellers set forth in this Agreement that has not been waived by Purchaser, and all of Sellers’ representations and warranties contained in or made pursuant to this Agreement shall be true and correct in all material respects as if made again on the Closing Date (in any event, such that the same results in a material, adverse impact on the value of the Property), but subject to Sellers’ right to cure any of the same pursuant to Section 7.4 above; and

     (c) The assumption at Closing of the Fannie Mae Debt and issuance by Fannie Mae of the Releases, as set forth in Section 4.2.3 above.

The foregoing conditions contained in this Section 8.2 are intended solely for the benefit of Purchaser. Purchaser shall at all times have the right to waive any condition precedent, provided that such waiver is in writing and delivered to Sellers and Escrow Agent.

     8.3 Failure of Conditions to Closing. Escrow Agent shall be responsible for confirming, on or before the Closing Date, that the conditions to Closing set forth in Sections 8.1 and 8.2 hereof, and as set forth elsewhere in this Agreement, have been satisfied. Purchaser and Sellers hereby agree to deliver their Notices to Escrow Agent, on or before the Closing Date, of the satisfaction or waiver of all conditions to Closing hereunder, and, in the event that both Purchaser and Sellers specifically notify and instruct Escrow Agent, in writing, to proceed to Closing hereunder, all such conditions to Closing hereunder that are not otherwise satisfied shall be deemed to have been waived by both Purchaser and Sellers. Escrow Agent shall not proceed to Closing hereunder unless both Purchaser and Sellers specifically notify and instruct Escrow Agent to do so. Sellers and Purchaser will not take any action that is inconsistent with its obligations under this Agreement in any material respect or that could reasonably be expected to hinder or delay the consummation of the transactions contemplated by this Agreement. Sellers and Purchaser shall use commercially reasonable efforts to satisfy the closing conditions set forth herein. Each party shall at any time and from time to time after the Closing execute, acknowledge where required, and deliver such further instruments and documents, and take such other action as may be reasonably requested by the other party in order to carry out the purposes of this Agreement.

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In the event any of the conditions to closing set forth in this Agreement are not satisfied or waived by the applicable party by the Closing Date (other than as a result of a failure of Purchaser to have used commercially reasonable efforts to satisfy its obligations under this Agreement), then Purchaser shall have the right at its option to declare this Agreement terminated and null and void, in which case the Earnest Money Deposit shall be immediately returned to Purchaser (and such right shall survive any termination of this Agreement) and each of the parties shall be relieved from further liability to the other, except as otherwise expressly provided herein.

     8.4 Purchase of all Facilities. Purchaser hereby acknowledges and agrees that this Agreement is for the purchase and sale of all of the Facilities and that Purchaser shall not under any circumstances purchase less than all of the Facilities, except as expressly set forth in Sections 7.4 and 12.13 herein.

IX.

REMEDIES FOR PRE-CLOSING AND POST-CLOSING DEFAULTS ; LIQUIDATED DAMAGES

     9.1 Default by Purchaser Prior to Closing. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF ANY MATERIAL DEFAULT OF PURCHASER (ALL CONDITIONS TO PURCHASER’S OBLIGATIONS HAVING BEEN SATISFIED IN ALL MATERIAL RESPECTS OR WAIVED), PURCHASER AND SELLERS AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLERS MAY SUFFER. THEREFORE, PURCHASER AND SELLERS DO HEREBY AGREE THAT, IN THE EVENT OF SUCH DEFAULT, IN ADDITION TO ATTORNEYS’ FEES AND COSTS PURSUANT TO SECTION 12.2 HEREOF, A REASONABLE ESTIMATE OF THE TOTAL DAMAGES THAT SELLERS WOULD SUFFER IN THE EVENT THAT PURCHASER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY IS AND SHALL BE, AS SELLERS’ SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), AN AMOUNT EQUAL TO THE EARNEST MONEY DEPOSIT. SAID AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE FAILURE OF PURCHASER TO CLOSE AND CONSUMMATE THE TRANSACTIONS HEREIN CONTEMPLATED. ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES IN CONNECTION WITH PURCHASER’S FAILURE TO CLOSE AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREIN ARE EXPRESSLY WAIVED BY SELLERS; HOWEVER, SELLERS RESERVE THEIR RIGHTS TO LEGAL AND EQUITABLE DAMAGES AND REMEDIES THAT ARE EXPRESSLY SET FORTH HEREIN FOR ANY OTHER DEFAULT BY PURCHASER HEREUNDER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLERS. UPON SUCH DEFAULT BY PURCHASER, THIS AGREEMENT SHALL BE TERMINATED AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT ANY INDEMNIFICATION OBLIGATIONS, THE RIGHTS OF SELLERS AND PURCHASER THAT SHALL SURVIVE AS PROVIDED HEREIN, AND FOR THE RIGHT OF SELLERS TO COLLECT SUCH LIQUIDATED DAMAGES FROM PURCHASER AND ESCROW AGENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 9.1, NOTHING HEREIN SHALL LIMIT SELLERS’ RECOVERY IN CONNECTION WITH ANY EXPRESS INDEMNITY BY PURCHASER PROVIDED IN THIS AGREEMENT.

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/s/   SELLERS’ INITIALS /s/   PURCHASER’S INITIALS

     9.2 Default by Sellers Prior to Closing. IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF ANY DEFAULT OF SELLERS, PURCHASER AND SELLERS AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH PURCHASER MAY SUFFER. THEREFORE, PURCHASER AND SELLERS DO HEREBY AGREE THAT, IN THE EVENT OF SUCH DEFAULT, IN ADDITION TO ATTORNEYS’ FEES AND COSTS PURSUANT TO SECTION 12.2 HEREOF, PURCHASER MAY, AS ITS SOLE RECOURSE AND REMEDY (AT LAW OR IN EQUITY), EITHER: (a) PURSUE AN ACTION AGAINST SELLERS FOR SPECIFIC PERFORMANCE, PROVIDED THAT SUCH ACTION IS INITIATED WITHIN NINETY (90) DAYS FOLLOWING THE CLOSING DATE SET FORTH HEREIN; OR (b) TERMINATE THIS AGREEMENT, RECEIVE THE RETURN OF THE EARNEST MONEY DEPOSIT, AND SELLERS SHALL REIMBURSE PURCHASER FOR ALL THIRD-PARTY OUT-OF-POCKET COSTS AND EXPENSES ACTUALLY INCURRED BY PURCHASER IN CONNECTION WITH THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT IN AN AMOUNT NOT TO EXCEED TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) (AND SUCH OBLIGATION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT). ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES IN CONNECTION WITH SELLERS’ FAILURE TO CLOSE AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREIN (OTHER THAN AS SPECIFIED IN (a) AND (b) HEREOF) ARE EXPRESSLY WAIVED BY PURCHASER. THE REFUND OF THE EARNEST MONEY DEPOSIT AND THE PAYMENT OF THE EXPENSES AS SET FORTH HEREIN AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO PURCHASER. UPON DEFAULT BY SELLERS, IF THIS AGREEMENT IS TERMINATED BY PURCHASER, NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT ANY INDEMNIFICATION OBLIGATIONS, THE RIGHTS OF SELLERS AND PURCHASER THAT SHALL SURVIVE AS PROVIDED HEREIN, AND FOR THE RIGHT OF PURCHASER TO COLLECT SUCH LIQUIDATED DAMAGES FROM SELLERS.

/s/   SELLERS’ INITIALS /s/   PURCHASER’S INITIALS

Notwithstanding the foregoing or any other provision of this Agreement, in the event that any Seller default described in this Section 9.2 above can be cured or compensated for by the payment of money or otherwise, Purchaser shall not have the right to terminate this Agreement by reason thereof in the event that Sellers cure the same or elect to grant to Purchaser at the Closing a credit against the Purchase Price in an amount agreed upon by Sellers and Purchaser, each acting reasonably, as necessary to fully cure or compensate Purchaser for such default, and the Closing Date will be extended at Sellers’ option for a reasonable period of time for Sellers to effectuate such cure.

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     9.3 Limitations of Purchaser’s Post-Closing Claims. Notwithstanding any provision to the contrary herein or in any document or instrument (including any deeds, bill of sale or assignments) executed by any Seller and delivered to Purchaser at or in connection with the Closing (excluding the Bridging Lease and the Bridging Management Agreement if applicable, collectively, “Closing Documents”), no Seller shall have (and each Seller is exculpated and released from any) liability whatsoever with respect to any Claims under, and Purchaser shall be forever barred from making or bringing any Claims with respect to, any of the representations and warranties, covenants and indemnities contained in this Agreement or in any Closing Document, except to the extent (and only to the extent) that the aggregate amount of all Claims for breach of such Seller’s representations and warranties, covenants and indemnities with respect to a particular Property or more than one Property in the aggregate exceeds One Hundred Thousand Dollars ($100,000) (the “Threshold Amount”) (but if such Claim is valid and is finally determined (or settled) to be in excess of the Threshold Amount, then the applicable Seller’s liability shall extend to the “first dollar” of Purchaser’s Claim); provided, however, notwithstanding any provision to the contrary herein or in any Closing Document, the total liability of a Seller for any or all Claims with respect to all of the Properties exceed Five Million Dollars ($5,000,000.00) (the “Cap Amount”), Two Million Five Hundred Thousand Dollars ($2,500,000) of which shall be placed in escrow with the Escrow Agent at Closing out of funds that would otherwise be payable to Sellers (the “Post-Closing Liability Escrow”), pursuant to the terms and conditions of Post-Closing Escrow Agreement, in form and content as attached hereto as Exhibit “P” (the “Post-Closing Escrow Agreement. On the Survival Date, the Escrow Agent shall refund to Seller any remaining balance of the Post-Closing Liability Escrow (including any interest earned thereon), unless there is a Pending Claim (defined below), in which event the Post-Closing Liability Escrow shall remain in place until the Pending Claim is definitively resolved by agreement of the parties or final court order.

     9.4 Purchaser shall not make any Claim or deliver any notice of a Claim (a “Claim Notice”) unless in good faith, it believes the Claim or all of the Claims in the aggregate would exceed the Threshold Amount.

     9.5 Survival of Purchaser’s Claims. Except as otherwise specifically set forth in this Agreement, the representations and warranties, covenants and indemnities of Sellers contained herein or in any Closing Document shall survive only until the date that is twelve (12) months after the Closing Date (the “Survival Date”). Any Claim that Purchaser may have at any time against Sellers for breach of any such representation, warranty, covenant or indemnity, whether known or unknown, with respect to which a Claim Notice has not been delivered to Sellers on or prior to the Survival Date, shall not be valid or effective and the party against whom such Claim is asserted shall have no liability with respect thereto. Any Claim that Purchaser may have at any time against Sellers for a breach of any such representation or warranty, or its covenants and indemnities whether known or unknown, with respect to which a Claim Notice has been delivered to Sellers on or prior to the Survival Date (a “Pending Claim”) may be the subject of subsequent litigation brought by Purchaser against Sellers.

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For the avoidance of doubt, on the Survival Date, each Seller shall be fully discharged and released (without the need for separate releases or other documentation) from any liability or obligation to Purchaser and/or its successors and assigns with respect to any Claims or any other matter relating to this Agreement or any Closing Document, except solely for those matters that are then the subject of the pending Claim Notice delivered by Purchaser to Sellers that is still pending on the Survival Date.

     9.6 Limitations on Sellers’ Post-Closing Claims. Notwithstanding any provision to the contrary herein or in any document or instrument executed by Purchaser and delivered to Sellers at or in connection with the Closing, (excluding the Bridging Lease and Bridging Management Agreement, if applicable, collectively, “Purchaser Closing Documents”), Purchaser shall have no liability whatsoever with respect to any Claims under any of the representations and warranties, covenants and indemnities contained in this Agreement or in any Purchaser Closing Document, except to the extent that the aggregate amount of all Claims for breach of Purchaser’s representations and warranties, covenants and indemnities with respect to a particular Property exceeds the Threshold Amount (but if such claim(s) is/are valid and finally determined (or settled) to be in excess of the Threshold Amount, then Purchaser’s liability shall extend to the “first dollar” of Sellers’ Claim); provided, however, notwithstanding any provision to the contrary herein or in any Purchaser Closing Document, the total liability of Purchaser for any or all Claims with respect to any Property shall not exceed the Cap Amount. Further, notwithstanding any provision to the contrary herein or in any Purchaser Closing Document, Purchaser shall have no liability with respect to any Claim under any of the representations and warranties, covenants and indemnities contained in this Agreement or in any Purchaser Closing Document, which Claim relates to or arises in connection with any other matter not expressly set forth in Purchaser’s representations and warranties set forth in Section 7.1 or its covenants or indemnities in this Agreement or any Purchaser Closing Document. Sellers shall not make any Claim or deliver any Claim Notice unless in good faith, Sellers believes the Claim would exceed the Threshold Amount as set forth above.

     9.7 Survival of Seller’s Claims. Except as otherwise specifically set forth in this Agreement, the representations and warranties, covenants and indemnities of Purchaser contained herein or in any Purchaser Closing Document shall survive only until the Survival Date. Any Claim that Sellers may have any time against Purchaser for breach of any such representation, warranty, covenant, or indemnity, whether known or unknown, with respect to which a Claim Notice has not been delivered to Purchaser on or prior to the Survival Date, shall not be valid or effective and the party against whom such Claim is asserted shall have no liability with respect thereto. Any Claim that Sellers may have at any time against Purchaser for a breach of any such representation or warranty, covenants and indemnities whether known or unknown, with respect to which a Claim Notice has been delivered to Purchaser on or prior to the Survival Date may be the subject of subsequent litigation brought by Sellers against Purchaser. For the avoidance of doubt, on the Survival Date, Purchaser shall be fully discharged and released (without the need for separate releases or other documentation) from any liability or obligation to Sellers, and/or their successors and assigns with respect to any Claims or any other matter relating to this Agreement or any Purchaser Closing Document, except solely for those matters that are then the subject of the pending Claim Notice delivered by Sellers to Purchaser that is still pending on the Survival Date.

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     9.8 Limitations on Liability.

          9.8.1 The parties hereto confirm and agree that in each instance herein where a party or its Affiliates is entitled to payment or reimbursement for damages, costs or expenses pursuant to the terms and conditions of this Agreement, any payment or reimbursement made to such party shall be conclusively deemed to be for the account of both such party and its Affiliates, it being acknowledged and agreed that a payment or reimbursement made to such party for damages, costs or expenses shall be sufficient to satisfy all claims for payment or reimbursement of such party and its Affiliates. The parties further confirm and agree that no party hereto (a “Non-Performing Party”) will be deemed to be in default hereunder or be liable for any breach of its representations and warranties under this Agreement if its failure to perform an obligation hereunder is based solely on the non-performance of another party to this Agreement (which other party is not an Affiliate of the Non-Performing Party) or where all conditions precedent to the obligation of such Non-Performing Party to consummate the Closing have not been fulfilled. In no event will either party be liable to the other for any indirect, special or consequential damages of any kind.

          9.8.2 To the maximum extent permitted by applicable law, no shareholder, director, officer or employee of any party to this Agreement shall have any personal liability with respect to the liabilities or obligations of such party under this Agreement or any document executed by such party pursuant to this Agreement.

     9.9 Survival. Article IX shall survive the Closing.

X.

BROKERS

     Sellers represent and warrant to Purchaser, and Purchaser represents and warrants to Sellers, that except for Goldman Sachs (“Broker”), no broker or finder has been engaged by it or their affiliates, respectively, in connection with the transaction contemplated by this Agreement or to its knowledge is in any way connected with this transaction. Purchaser shall be responsible for the payment of any commission, finder’s fee or other sum initiated by any broker, commission agent or other person engaged or retained by Purchaser in connection with the transaction contemplated by this Agreement. Sellers shall be responsible for the payment of any commission, finder’s fee or other sum initiated by any broker, commission agent or other person engaged or retained by Sellers in connection with the transaction contemplated by this Agreement, including without limitation, Broker. Sellers and Purchaser (except with respect to the commission which shall be paid by Seller to Broker) each agree to indemnify, protect, defend and hold the other harmless from and against any claims, actions, suits or demands for payment of any commission, finder’s fee or other sum initiated by any broker, commission agent or other person which such party or its representatives has engaged or retained or with which it has had discussions concerning or which shall be based upon any statement or agreement alleged to have been made by such party, in connection with the transaction contemplated by this Agreement or the sale of the Properties by Sellers. The provisions of this Article X shall survive the Closing.

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XI.

NOTICES

     Except as otherwise expressly provided in this Agreement, all notices, requests, demands and other communications hereunder (“Notice”) shall be in writing and shall be deemed delivered by (i) hand delivery upon receipt, (ii) registered mail or certified mail, return receipt requested, postage prepaid, upon delivery to the address indicated in the Notice, (iii) by confirmed telecopy or facsimile transmission when sent, and (iv) overnight courier (next business day delivery) on the next business day at 12:00 noon, whichever shall occur first, as follows:

To Sellers:	c/o Sunrise Senior Living Attention: Mr. Philip Kroskin 7900 Westpark Drive, Suite T-900 McLean, Virginia 22102 Telephone: (703) 854-0668 Facsimile: (703) 744-1885
With a copy to:	Sunrise Senior Living, Inc. 7900 Westpark Drive, Suite T-900 McLean, Virginia 22102 Attn: General Counsel Facsimile: (703) 744-1885
With a copy to:	Arent Fox LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5339 Attention: Mindy Pittell Hurwitz, Esq. Telephone: (202) 775-5721 Facsimile: (202) 857-6395
To Purchaser:	BLC Acquisitions, Inc. c/o Brookdale Senior Living, Inc. 111 Westwood Place, Suite 200 Brentwood, Tennesee 37027 Attention: General Counsel Telephone: (615) 564-8033 Facsimile: (615) 564-8204
With a copy to:	Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Facsimile: (212) 735-2000 Attention: Joseph A. Coco Thomas W. Greenberg

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Any correctly addressed Notice that is refused, unclaimed or undelivered because of an act or omission of the party to be notified shall be considered to be effective as of the first day that the Notice was refused, unclaimed or considered undeliverable by the postal authorities, messenger or overnight delivery service. The parties hereto shall have the right from time to time, and at any time, to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America, by giving to the other party at least ten (10) days prior Notice thereof, in the manner prescribed herein; provided, however, that to be effective, any such change of address must be actually received (as evidenced by a return receipt). Telephone numbers and email addresses, if listed, are listed for convenience purposes only and not for the purposes of giving Notice pursuant to this Agreement. Any Notice that is required or permitted to be given by either party to the other under this Agreement may be given by such party or its legal counsel, who are hereby authorized to do so on the party’s behalf.

XII.

MISCELLANEOUS

     12.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. If any legal action is necessary to enforce the terms and conditions of this Agreement, the parties hereby agree that the courts in the Commonwealth of Virginia shall be the sole jurisdiction and venue for the bringing of the action.

     12.2 Professional Fees and Costs. If a lawsuit, arbitration or other proceedings are instituted by any party to enforce any of the terms or conditions of this Agreement against any other party hereto, the prevailing party in such litigation, arbitration or proceedings shall be entitled, as an additional item of damages, to such reasonable attorneys’ and other professional fees and costs (including, but not limited to, witness fees), court costs, arbitrators’ fees, arbitration administrative fees, travel expenses, and other reasonable, actual, out-of pocket expenses or costs of such other proceedings, which amount shall be determined by any court of competent jurisdiction, arbitrator or other judicial or quasi-judicial body having jurisdiction thereof, whether or not such litigation or proceedings proceed to a final judgment or award. For the purposes of this section, any party receiving an arbitration award or a judgment for damages or other amounts shall be deemed to be the prevailing party, regardless of amount of the damage awarded or whether the award or judgment was based on all or some of such party’s claims or causes of action, and any party against whom a lawsuit, arbitration or other proceeding is instituted and later voluntarily dismissed by the instituting party shall be deemed to be the prevailing party.

     12.3 Exhibits and Schedules a Part of This Agreement. The Exhibits and Schedules attached hereto are incorporated in this Agreement by reference and are hereby made a part hereof.

     12.4 Executed Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the due execution and delivery of this Agreement to the parties hereto.

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     12.5 Assignment. Purchaser may not assign, convey and otherwise transfer all or any part of its interest or rights herein without the prior written consent of Sellers, which consent may be withheld in Sellers’ sole discretion. Notwithstanding the foregoing, however, Purchaser may (without Seller’s consent but with advance written noticed to Seller), by not later than ten (10) business days prior to Closing, assign and transfer in whole or in part all of its rights and obligations under this Agreement to one (1) or more wholly owned subsidiary(ies) thereof, or to a one hundred percent (100%) owned affiliate(s) thereof, or to any entity controlled (directly or indirectly, through voting or equity ownership) by Purchaser in the form of the Assignment of Purchase Agreement attached hereto as Exhibit “D”; provided, however, that Purchaser shall not be released of its obligations under this Agreement as a result of any such assignment. Any assignment as permitted in the preceding sentence shall be conditioned upon Purchaser delivering to Sellers and Escrow Agent, within forty-eight (48) hours of any such assignment, Notice thereof, together with a copy of such assignee’s organizational and formation documents and instruments, a Certificate of Good Standing for such assignee, and copies of the documents, if any, by or between Purchaser and such assignee authorizing such assignment. As a further condition to any such permitted assignment, Purchaser shall cause its assignee to execute an assignment and assumption agreement of Purchaser’s obligations under this Agreement (in form and content reasonably and mutually acceptable), and such other documents and instruments as Escrow Agent may reasonably request. Sellers shall upon request consent in writing to any such assignment that is made in accordance with the terms of this Section. Sellers may not assign or transfer their respective rights or obligations under this Agreement without the prior written consent of Purchaser (in which event such transferee shall assume in writing all of the transferor’s obligations hereunder, but such transferor shall not be released from its obligations hereunder). No transfer or assignment by either party in violation of the provisions hereof shall be valid or enforceable.

     12.6 IRS — Form 1099-S. For purposes of complying with Section 6045 of the Internal Revenue Code of 1986, as amended, Escrow Agent shall be deemed the “person responsible for closing the transaction” and shall be responsible for obtaining the information necessary to file with the Internal Revenue Service Form 1099-S, “Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions.”

     12.7 Successors and Assigns. Subject to the provisions of Section 12.5 hereof, this Agreement shall be binding upon and inure to the benefit of the parties’ respective successors and permitted assigns.

     12.8 Time is of the Essence. Time is of the essence of this Agreement.

     12.9 Entire Agreement. This Agreement, and Exhibits and Schedules and other documents and instruments attached to or referenced herein, contain the entire understanding and agreement between the parties hereto with respect to the purchase and sale of the Property, and all prior and contemporaneous understandings, letters of intent, agreements and representations, whether oral or written, are entirely superseded. Except for any of the following expressly contained in this Agreement, Sellers and Purchaser each expressly disclaim any reliance on any oral or written representations, warranties, comments, statements or assurances made by Sellers, Purchaser, and any of their respective affiliates, and their respective agents, employees, representatives, attorneys or brokers, as an inducement or otherwise, to Purchaser’s and Sellers’ respective execution hereof. No amendment of this Agreement shall be binding unless in writing and executed by the parties hereto.

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     12.10 Further Assurances. Whenever and so often as requested by a party, the other party will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in such requesting party all rights, interests, powers, benefits privileges and advantages conferred or intended to be conferred upon it by this Agreement, or to effectuate the termination of this Agreement and cancellation of the Escrow (if otherwise permitted hereunder). The terms of this section shall survive Closing and/or termination of this Agreement.

     12.11 Waiver. Failure or delay by either party to insist on the strict performance of any covenant, term, provision or condition hereunder, or to exercise any option herein contained, or to pursue any claim or right arising herefrom, shall not constitute or be construed as a waiver of such covenant, term, provision, condition, option, claim or right (except that if a party proceeds to Closing, notwithstanding the failure of a condition to its obligation to close, then such condition shall be deemed waived by virtue of the Closing). Any waiver by either party shall be effective only if in a writing delivered to the other party hereto and setting forth, with specificity, the covenant, term, provision or condition so waived. Any such waiver shall not constitute or be construed as a continuing waiver of any subsequent default.

     12.12 Headings. The headings of this Agreement are for purposes of convenience only and shall not limit or define the meaning of the provisions of this Agreement.

     12.13 Risk of Loss. With respect to each Property, the risk of loss shall be as follows:

          12.13.1 Risk of Loss. Until the Closing Date, Seller shall bear the risk of loss should there be damage to any of the Property by fire or other casualty (collectively “Casualty”). If, prior to the Closing Date, any of the Property shall be damaged by any Casualty, Seller shall promptly deliver to Purchaser a Notice (“Casualty Notice”) of such event. Upon Purchaser’s receipt of a Casualty Notice, Seller and Purchaser shall meet promptly to estimate the cost to repair and restore the Improvements to good condition and to replace the damaged Personal Property (“Casualty Renovation Cost”). If the parties are unable to agree on the cost of restoration, the matter will be submitted to an engineer designated by Seller and an engineer designated by Purchaser, each licensed to practice in the state in which the Land is located, and the engineers shall resolve the dispute. Each party hereto shall bear the costs and expenses of its own engineer.

          12.13.2 Material Loss. If the Casualty Renovation Cost for any single Facility exceeds Five Hundred Thousand Dollars ($500,000), then either Purchaser or Sellers may, at their option, elect to terminate this Agreement with respect to the impacted Property only by Notice to the other party within ten (10) business days after the date that the Casualty Renovation Cost is determined (and if necessary the Closing Date will be extended to accommodate such ten (10) business day period), and in the event of a termination hereof with respect to the impacted Property, the Purchase Price shall be reduced by the Allocated Purchase Price of the impacted Property.

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If neither party elects to terminate this Agreement with respect to the impacted Property, then the Closing shall take place as provided herein without reduction of the Purchase Price and Seller shall assign the insurance proceeds to Purchaser in the event the Casualty is insured against and shall pay to Purchaser the amount of any deductible not already otherwise paid by Seller under applicable insurance policies, or have the Purchase Price reduced by the Casualty Renovation Cost in the event the Casualty is not fully insured against (subject to further adjustment for actual restoration costs).

          12.13.3 Nonmaterial Loss. If the Casualty Renovation Cost is Five Hundred Thousand Dollars ($500,000) or less, then, in any such event, neither party hereto shall have any right to terminate this Agreement, but the Closing shall take place as provided herein without reduction of the Purchase Price, and Seller shall assign the insurance proceeds to Purchaser in the event the Casualty is insured against and shall pay to Purchaser the amount of any deductible, under applicable insurance policies, or have the Purchase Price reduced by the Casualty Renovation Cost in the event the Casualty is not fully insured against (subject to further adjustment for actual restoration costs).

          12.13.4 Eminent Domain. If, prior to the Closing Date, a Seller receives notice that a material portion of a Property (or access or other material rights in connection therewith) as would, in Purchaser’s reasonable judgment, materially adversely affect the operation of the Facility or uses of the Property is, or has been threatened in writing by a governmental authority of competent jurisdiction, to be taken by condemnation or eminent domain, Seller shall promptly notify Purchaser, and at the election of Purchaser this Agreement shall, upon the giving of Notice of such event or of the condemning authorities’ intention so to take the Property, terminate with respect only to the impacted Property, but the Closing shall proceed with respect to the remaining Properties (with the Purchase Price reduced by the Allocated Purchase Price of that Property). If Purchaser does not elect to terminate this Agreement prior to the Closing Date, on the Closing Date all of the proceeds of any award or payment made or to be made by reason of such taking shall be assigned by Seller to Purchaser, and any money theretofore received by Seller in connection with such taking shall be paid over to Purchaser, whereupon Purchaser shall pay the Purchase Price without abatement by reason of such taking. Seller shall not settle, agree to, or accept any award or payment in connection with a taking of less than all of the Property without obtaining Purchaser’s prior written consent in each case, which consent shall not be unreasonably withheld or delayed. As used in this Section, “material portion,” “material rights” or “materially adversely affect” shall mean a taking or condemnation which would reduce available parking below that required by, or in general cause a violation of, any Legal Requirements or any Business Agreement, or result in a condemnation award reasonably estimated to exceed Five Million Dollars ($5,000,000.00).

     12.14 Construction of Agreement. The parties hereto have negotiated this Agreement at length, and have had the opportunity to consult with, and be represented by, their own competent counsel. This Agreement is, therefore, deemed to have been jointly prepared. In determining the meaning of, or resolving any ambiguity with respect to, any word, phrase or provision of this Agreement, no uncertainty or ambiguity shall be construed or resolved against any party under any rule of construction, including the party primarily responsible for the drafting and preparation of this Agreement. The words “herein,” “hereof,” “hereunder” and words of similar reference shall mean this Agreement.

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The words “this Agreement” include the exhibits, schedules addenda and any future written modifications, unless otherwise indicated by the context. All words in this Agreement shall be deemed to include any number or gender as the context or sense of the Agreement requires. The words “will,” “shall” and “must” in this Agreement indicate a mandatory obligation. The use of the words “include,” “includes” and “including” followed by one or more examples is intended to be illustrative and is not a limitation on the scope of the description or term for which the examples are provided. All dollar amounts set forth in this Agreement are stated in United States Dollars, unless otherwise specified. The words “day” and “days” refer to calendar days unless otherwise stated. The words “business day” refer to a day other than a Saturday, Sunday or Legal Holiday (hereinafter defined). The words “month” and “months” refer to calendar months unless otherwise stated. The words “year” and “years” refer to calendar years unless otherwise stated. If any date herein set forth for the performance of any obligations by Seller or Purchaser or for the delivery of any instrument or notice as herein provided should fall on a Saturday, Sunday or Legal Holiday, the compliance with such obligations or delivery will be deemed acceptable on the next business day following such Saturday, Sunday or Legal Holiday. As used herein, the term “Legal Holiday” will mean any local or federal holiday on which post offices are closed in the Commonwealth of Virginia.

     12.15 No Public Disclosure. Neither party shall make any public disclosure of the terms of this transaction without the prior written consent of the other party prior to the Closing Date.

     12.16 Bulk Transfers. The Sellers and Purchaser specifically waive compliance with the applicable provisions of the Uniform Commercial Code — Bulk Transfers, with any similar provision under any similar provisions in the laws of the state, county, and city in which any Property is located, to the extent such provisions may be waived under the applicable Legal Requirement.

     12.17 Covenants, Representations and Warranties. By proceeding with the closing of the sale transaction, Sellers and Purchaser shall be deemed to have waived, and so covenant to waive, any claims of defaults or breaches by the other party existing on or as of the Closing Date whether under this Agreement or any other document or instrument executed by the other party in connection with this transaction, of which the waiving party was made aware by Notice from the defaulting or breaching party (and, if applicable, which is described on the Sellers certification of representations and warranties to be delivered at Closing) prior to the Closing Date for which the other party shall have no liability.

     12.18 Confidentiality. The parties acknowledge and agree that Purchaser previously executed and delivered to Sellers a confidentiality agreement, and such agreement remains and shall remain in full force and effect in accordance with the terms thereof. Other than as required or permitted by the terms of this Agreement or required by any Legal Requirements (including without limitation, any disclosures required or advisable by Sellers under any applicable securities laws or practices), no party hereto shall release or cause or permit to be released any press notices or releases or publicity (oral or written) or advertising promotion relating to, or otherwise announce or disclose or cause or permit to be announced or disclosed, in any manner whatsoever, the terms and conditions of the purchase and sale transaction for the Properties, nor shall Purchaser or its agents or representatives disclose, in any manner whatsoever, (a) the information provided to Purchaser by any Seller or its representatives, or (b) any analyses, compilations, studies or other documents or records prepared by or on behalf of Purchaser, in connection with Purchaser’s investigation of the Properties, without first obtaining the written consent of Sellers (collectively, “Proprietary Information”).

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The foregoing shall not preclude Purchaser (i) from discussing the Proprietary Information with any person who is employed by Purchaser or who, on behalf of Purchaser, is actively and directly participating in the purchase and sale of the Properties, including, without limitation, to Purchaser’s shareholders, partners, members, existing or prospective lenders, attorneys, accountants and other consultants and advisors, or (ii) from complying with all laws, rules, regulations and court orders, including, without limitation, governmental regulatory, disclosure, tax and reporting requirements; provided, however, that if Purchaser is required by applicable law or legal process to disclose any Proprietary Information, Purchaser agrees to furnish only that portion of the Proprietary Information which Purchaser is legally compelled to disclose and to use its commercially reasonable efforts to obtain assurance that, if possible, confidential treatment will be accorded to the Proprietary Information. Purchaser shall inform its respective representatives of the confidential nature of the Proprietary Information and shall direct them to be bound by the terms of this section. In addition to any other remedies available to Sellers, Sellers shall have the right to seek equitable relief, including, without limitation, injunctive relief or specific performance, against Purchaser in order to enforce the provisions of this section. The provisions of such confidentiality agreement shall survive any termination of this Agreement. Except as otherwise expressly provided in this Agreement, Purchaser agrees not to contact, directly or indirectly, any employees of any Facility prior to the Closing Date, and agrees to be liable for all of Sellers’ damages in the event of any such contact by Purchaser or any of its agents or representatives.

     12.19 No Third-Party Beneficiaries. Except as otherwise expressly provided herein, Sellers and Purchaser agree that there are no third parties who are intended to benefit from or who are entitled to rely on any of the provisions of this Agreement. No third party shall be entitled to assert any claims or to enforce any rights whatsoever pursuant to this Agreement. Except as otherwise expressly provided herein, the covenants and agreements provided in this Agreement are solely for the benefit of Sellers and Purchaser and their permitted successors and assigns respectively.

     12.20 Facsimile Signatures. The execution of this Agreement and all Notices given hereunder and all amendments hereto, may be effected by facsimile signatures, all of which shall be treated as originals; provided, however, that the party receiving a document with a facsimile signature may, by Notice to the other, require the prompt delivery of an original signature to evidence and confirm the delivery of the facsimile signature. Purchaser and Sellers each intend to be bound by its respective facsimile transmitted signature, and is aware that the other party will rely thereon, and each party waives any defenses to the enforcement of the Agreement, and documents, and any Notices delivered by facsimile transmission.

     12.21 Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, 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 such term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

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     12.22 Cumulative Remedies. No remedy conferred upon a party in this Agreement is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity or by statute (except as otherwise expressly herein provided).

     12.23 Consents and Approvals. Except as otherwise expressly provided herein, any approval or consent provided to be given by a party hereunder may be given or withheld in the absolute discretion of such party.

     12.24 WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     12.25 Natural Hazard Report for California Property. The Seller of Sunrise of Santa Rosa, California has or will employ the services of an appropriate third party (the “Natural Hazard Expert”) to examine the maps and other information specifically made available to the public by government agencies for the purposes of enabling such Seller to fulfill its disclosure obligations with respect to the natural hazards referred to in California Civil Code Section 1103.2 with respect to such California Property and to report the results of its examination to Purchaser and such Seller in writing. The written report prepared by the Natural Hazard Expert regarding the results of its examination fully and completely discharges the Seller of Sunrise of Santa Rosa from its disclosure obligations referred to in California Civil Code Section 1103.2, and, for the purposes of this Agreement, the provisions of California Civil Code Section 1103.4 regarding the non-liability of such Seller for errors and/or omissions not within their personal knowledge shall be deemed to apply.

     12.26 Waiver Regarding California Property. With respect to the Sunrise of Santa Rosa Property, Purchaser specifically waives the provisions of California Code Section 1542, which provides as follows:

     A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED THE SETTLEMENT WITH THE DEBTOR.

     Purchaser agrees, represents and warrants that the aforementioned waiver of California Code Section 1542 has been negotiated and agreed upon and that Purchaser hereby intends to release, discharge and acquit the applicable Seller from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses with respect to the Sunrise of Santa Rosa Property; provided, however, that the foregoing shall not relieve such Seller of any disclosures required pursuant to this Section.

[Signatures are on the following page.]

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XIII.

EXECUTION

     IN WITNESS WHEREOF, the parties hereto have caused this Purchase and Sale Agreement to be executed as of the 7^th day of October, 2009.

PURCHASER: BLC ACQUISITIONS, INC.
By:	/s/ T. Andrew Smith
	Name:	T. Andrew Smith
	Title:	Executive Vice President

SELLERS: SUNRISE OF SANTA ROSA Sunrise Assisted Living Limited Partnership VIII
By:	Sunrise Senior Living Investments, Inc.,
	its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF COLORADO SPRINGS Karrington of Colorado Springs Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
	By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

[Signatures continue on next page.]

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SUNRISE OF WEST HARTFORD Sunrise West Hartford Assisted Living, LLC
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF WILTON Sunrise Wilton Assisted Living, L.L.C.
By:	Sunrise Development, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF AUGUSTA Sunrise Augusta Assisted Living Limited Partnership
By:	Sunrise Senior Living Investments, Inc.,
	its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF CARMEL Sunrise Carmel Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

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SUNRISE AT FALL CREEK Sunrise Fall Creek Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF FORT WAYNE Sunrise Fort Wayne Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE AT WILLOW LAKE Sunrise Willow Lake Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF ANN ARBOR Sunrise Ann Arbor Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

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SUNRISE OF ALBUQUERQUE Karrington of Albuquerque Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF SOUTH CHARLOTTE Sunrise South Charlotte NC Senior Living, LLC
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF BATH Sunrise Bath Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF ENGLEWOOD Karrington of Englewood Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

[Signatures continue on next page.]

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SUNRISE AT FINNEYTOWN Karrington of Finneytown Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE AT KENWOOD Karrington of Kenwood Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE AT OAKWOOD Karrington of Oakwood Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
	SUNRISE OF WOOSTER Sunrise Wooster Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

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SUNRISE OF MONROEVILLE Sunrise Monroeville Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
VIRGINIA BEACH ESTATES Sunrise Virginia Beach Estates, LLC
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
	SUNRISE OF SOUTH HILLS Karrington Operating Company, Inc.
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

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EX-2.2

Exhibit 2.2

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

     THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (“First Amendment”) is dated as of this 7^th day of October, 2009, and is made by and between each of the parties named on Exhibit “A” hereto (each, individually, “Seller” and, collectively, “Sellers”), and BLC Acquisitions, Inc., a Delaware corporation (“Purchaser”).

     WHEREAS, Sellers and Purchaser are parties to that certain Purchase and Sale Agreement dated as of the date hereof (the “Purchase and Sale Agreement”);

     NOW, THEREFORE, for valuable consideration, including the promises, covenants, representations and warranties hereinafter set forth, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally and equitably bound, agree as follows:

     1. Sellers will indemnify Purchaser for any liabilities or obligations relating to the Properties, or arising from any Seller’s operations, and accruing prior to the Closing, whether or not disclosed, subject to the Limitations on Purchaser’s Post-Closing Claims set forth in Section 9.3 of the Purchase and Sale Agreement.

     2. The Earnest Money Deposit shall be delivered to Escrow Agent by wire transfer of immediately available federal funds no later than 2 p.m. New York time on October 8, 2009 in accordance with the wire transfer instructions set forth on Exhibit B attached hereto. The Earnest Money Deposit is absolutely non-refundable to the Purchaser in all events and circumstances, except that the Earnest Money Deposit shall be promptly returned to the Purchaser if (a) (i) the requisite lenders under the Sunrise Senior Living, Inc. line of credit agented by Bank of America (the “LOC”) do not irrevocably approve the transactions contemplated by the Purchase and Sale Agreement by 5 p.m. New York time on October 19, 2009 or (ii) the condition set forth in Section 8.1(c) fails because such approvals are no longer in force and effect any time prior to the Closing, (b) all of the conditions to Seller’s obligation to close are met and Seller nonetheless refuses to close, or (c) the Board of Directors of Sunrise Senior Living, Inc. shall not ratify Sellers’ execution of this First Amendment and the Purchase and Sale Agreement prior to 1 p.m. New York time on October 8, 2009.

     3. Purchaser shall have the right to terminate the Purchase Agreement if Sellers fail to receive the irrevocable approvals to the transactions contemplated by the Purchase and Sale Agreement from the requisite lenders under the LOC by 5 p.m. New York time on October 19, 2009.

     4. Section 8.1(c) of the Purchase Agreement shall be deleted and the following inserted in lieu thereof: “Sellers have received the irrevocable approvals to the transactions contemplated by the Purchase and Sale Agreement from the requisite lenders under the LOC and such approvals shall be and remain in full force and effect.”

     5. Sellers will give Purchaser a credit against the Purchase Price equal to 50% of the accrual for sick time reflected in Sellers’ respective financial statements as of the Closing Date, capped at $150,000.

     6. The governing law of the Purchase and Sale Agreement and this First Amendment is Delaware law.

     7. If Seller defaults under the Purchase and Sale Agreement for any reason other than Purchaser’s default, and Purchaser elects, or is deemed to elect, to terminate the Purchase and Sale Agreement, Seller shall reimburse Purchaser’s documented out-of-pocket costs and expenses up to $500,000.

     8. The foregoing provisions of this First Amendment supersede any provisions in the Purchase and Sale Agreement that are inconsistent with the terms of this First Amendment, and the Purchase and Sale Agreement will be deemed modified hereby as necessary to give full effect to the provisions of this First Amendment. Except as modified by this First Amendment, the Purchase and Sale Agreement remains in full force and effect in accordance with its terms.

     9. Sellers and Purchaser agree to negotiate in good faith, promptly following execution of this First Amendment and receipt of the Earnest Money Deposit, (i) to modify the Purchase and Sale Agreement to be consistent with this First Amendment and to consider clarifications to the Purchase and Sale Agreement that may be requested by Purchaser provided that no such clarifications shall alter the economic substance of the contemplated transaction and (ii) to update and finalize the exhibits and schedules to the Purchase and Sale Agreement. If Purchaser and Sellers are unable to agree to any such modification or clarification of the terms of the Purchase and Sale Agreement, this First Amendment and the Purchase and Sale Agreement shall remain in full force and effect.

     10. Sellers’ execution of this First Amendment and the Purchase and Sale Agreement is subject to ratification by the Board of Directors of Sunrise Senior Living, Inc. prior to 1 p.m. New York time on October 8, 2009. If Sellers do not confirm to Purchaser that Board ratification has been obtained by 1 p.m. New York time on October 8, 2009, this First Amendment and the Purchase and Sale Agreement shall be deemed to be void ab initio and of no force and effect.

[Signatures appear on following page.]

     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed as of the 7^th day of October, 2009.

PURCHASER: BLC ACQUISITIONS, INC.
By:	/s/ T. Andrew Smith
	Name:	T. Andrew Smith
	Title:	Executive Vice President

SELLERS:

SUNRISE OF SANTA ROSA

Sunrise Assisted Living Limited Partnership VIII
By:	Sunrise Senior Living Investments, Inc.,
	its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF COLORADO SPRINGS Karrington of Colorado Springs Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

[Signatures continue on next page.]

SUNRISE OF WEST HARTFORD Sunrise West Hartford Assisted Living, LLC
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF WILTON Sunrise Wilton Assisted Living, L.L.C.
By:	Sunrise Development, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF AUGUSTA Sunrise Augusta Assisted Living Limited Partnership
By:	Sunrise Senior Living Investments, Inc.,
	its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF CARMEL Sunrise Carmel Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

SUNRISE AT FALL CREEK Sunrise Fall Creek Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF FORT WAYNE Sunrise Fort Wayne Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE AT WILLOW LAKE Sunrise Willow Lake Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF ANN ARBOR Sunrise Ann Arbor Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

SUNRISE OF ALBUQUERQUE Karrington of Albuquerque Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF SOUTH CHARLOTTE Sunrise South Charlotte NC Senior Living, LLC
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF BATH Sunrise Bath Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF ENGLEWOOD Karrington of Englewood Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

[Signatures continue on next page.]

SUNRISE AT FINNEYTOWN Karrington of Finneytown Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE AT KENWOOD Karrington of Kenwood Ltd. By: Karrington Operating Company, Inc.,        its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE AT OAKWOOD Karrington of Oakwood Ltd.
By:	Karrington Operating Company, Inc.,
	its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF WOOSTER Sunrise Wooster Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

SUNRISE OF MONROEVILLE Sunrise Monroeville Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
VIRGINIA BEACH ESTATES Sunrise Virginia Beach Estates, LLC
By:	Sunrise Senior Living Investments, Inc.,
	its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF SOUTH HILLS Karrington Operating Company, Inc.
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

EX-2.3

Exhibit 2.3

SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT

     THIS SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (“Second Amendment”) is dated as of this 19^th day of October, 2009, and effective as of October 7, 2009, and is made by and between each of the parties named on Exhibit “A” hereto (each, individually, “Seller” and, collectively, “Sellers”), and BLC Acquisitions, Inc., a Delaware corporation (“Purchaser”).

     WHEREAS, Sellers and Purchaser are parties to that certain Purchase and Sale Agreement (the “Original Purchase and Sale Agreement”) dated as of October 7, 2009, as amended by that certain First Amendment to Purchase and Sale Agreement (the “First Amendment”) dated as of October 7, 2009 (as amended, the “Purchase and Sale Agreement”); and

     WHEREAS, Sellers and Purchaser desire to further amend certain terms of the Purchase and Sale Agreement.

     NOW, THEREFORE, for valuable consideration, including the promises, covenants, representations and warranties hereinafter set forth, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally and equitably bound, agree as follows:

     1. Incorporation of Terms. The terms of the First Amendment are hereby incorporated in the Purchase and Sale Agreement by this reference, as if all specific terms and provisions of the Original Purchase and Sale Agreement that conflict with or were otherwise modified by corresponding terms of the First Amendment were modified in detail to reflect such revised terms and be consistent with the terms of the First Amendment. Section 9 of the First Amendment is hereby deleted and of no further force and effect.

     2. Correction of Seller Entities. The parties acknowledge the following corrections to the entities comprising Sellers: (a) the Sunrise of Santa Rosa Facility is owned by Sunrise Assisted Living Limited Partnership VIII, L.P. and by Sunrise Chanate Assisted Living L.P. (with respect to different parcels that comprise the Real Property), and (b) the Sunrise of Oakwood Facility is owned by Karrington of Oakwood Ltd. Liability Co. The corrected entities are reflected in the attached Exhibit A and the signature blocks of this Second Amendment. By each such party’s execution of this Second Amendment it hereby agrees to be bound by the terms of the Purchase and Sale Agreement as if it had executed the same in the first instance.

     3. Exhibits. Attached hereto are the Exhibits to the Purchase and Sale Agreement, which are hereby attached to the Purchase and Sale Agreement in the place and stead of the Exhibits that were attached to the Original Purchase and Sale Agreement. All references in the Purchase and Sale Agreement to Exhibit “A-3” are hereby deleted.

     4. Limited License. The term of the limited license for Purchaser’s right to use the trademark “Sunrise” (contained within the definition of Excluded Documents in Article I of the Purchase and Sale Agreement) shall be extended with respect to any Property through the term of a Bridging Lease and/or Bridging Management Agreement for that Property to the extent necessary to effectuate the bridging arrangement contemplated thereby, provided that Sellers shall have the right to reasonably approve each such use.

     5. Proprietary Information. The definition of Proprietary Information in Article I of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

“Proprietary Information” As used herein, Proprietary Information shall mean (a) the information provided to Purchaser by any Seller or its representatives, or (b) any analyses, compilations, studies or other documents or records prepared by or on behalf of Purchaser, in connection with Purchaser’s investigation of the Properties.

     6. Resident Agreements. The definition of Resident Agreements in Article I of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

“Resident Agreements” Those leases, occupancy, residency, and similar written agreements entered into with residents of each Real Property, and all amendments, modifications, supplements, renewals, and extensions thereof, of which Seller shall provide Purchaser with copies (or access to the same) no more than three (3) business days after the Effective Date, and all other leases, occupancy, residency, and similar written agreements with residents of each Facility entered into by each Seller in the ordinary course of business after the Effective Date as permitted hereunder.

     7. Contracts and Existing Management Agreements. Section 4.3.4 of the Purchase and Sale Agreement is hereby amended to add the following to the end of such Section: “With respect to any 30-Day Contracts delivered to Purchaser by Sellers after the Effective Date, Purchaser shall not assume any such 30-Day Contracts that Purchaser provides Seller Notice of Purchaser’s decision not to assume within five (5) calendar days after Sellers’ delivery of the same to Purchaser. The parties acknowledge and agree that Purchaser shall not assume any of Sellers’ existing management agreements, except if and to the extent the parties agree to such assumption in connection with the bridging of licenses pursuant to Section 6.4 below.”

     8. Due Diligence Materials . Section 4.3.6 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Purchaser covenants and agrees that, until the Closing Date, all information and materials disclosed and/or delivered to it by Sellers, or Sellers’ agents, employees and representatives (including without limitation, the Due Diligence Materials) shall be held in accordance with the terms and conditions of Section 12.18 below.

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Upon Closing, unless otherwise provided herein, all such information and materials regarding the Properties and the Facilities shall become the property of Purchaser or its permitted assigns. Purchaser also agrees that, in the event the transactions contemplated in this Agreement are not consummated as provided herein, Purchaser shall take such action with respect to all such information and documentation as required pursuant to the Confidentiality Agreement (as defined in Section 12.18 hereof).

     9. Correction of Cross-Reference. The reference in Section 5.2(q) and 5.3(k) of the Purchase and Sale Agreement to “the Post-Closing Escrow Agreement, as set forth in Section 7.3 below,” is hereby amended to reflect that the Post-Closing Escrow Agreement is set forth in Section 9.3 of the Purchase and Sale Agreement.

     10. Accounts Receivable. Section 5.5.10 of the Purchase and Sale Agreement is hereby amended to add the following after the second sentence thereof: “For a period of six (6) months after the Closing, Purchaser will make a good faith effort to collect all outstanding Sellers’ Accounts Receivable, provided that Purchaser shall have no obligation to bring any claim or proceeding, or pursue any collections actions, against any resident. After the Closing, Sellers shall have no right to enforce collection of Sellers’ Accounts Receivable.” Further, the second to last sentence of Section 5.5.10 and the last sentence of Section 5.5.11 (both giving Sellers the right to pursue collection of Sellers’ Accounts Receivable following Closing) are hereby deleted in their entirety.

     11. Purchaser Indemnity. Section 6.1.1 of the Purchase and Sale Agreement is hereby amended to add the following to the end of such Section: “Prior to Closing, Sellers’ remedies based on the indemnities contained in Subsections (c) and (d) of this Section 6.1.1 shall be limited to the liquidated damages set forth in Section 9.1 below.”

     12. Transition Cooperation. Section 6.2.2 of the Purchase and Sale Agreement is hereby amended to add the following to the end of such Section: “Prior to and following Closing, Sellers shall reasonably cooperate with Purchaser in good faith in connection with the transition of the Facilities (and the operations thereof) to Purchaser (at no out-of-pocket cost to Sellers), including without limitation, by providing to Purchaser data in electronic form upon Purchaser’s request therefor, if and to the extent Sellers have such electronic data and provided that the same is not proprietary or confidential, in Sellers’ sole and absolute judgment.”

     13. Bridging Arrangements. The third sentence of Section 6.4.2 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Without limitation, this may include a lease from Purchaser to one of the Sellers, its management company or the current license-holder, in the form and content attached hereto as Exhibit “M,” subject to modification in accordance with any Legal Requirements (each, a “Bridging Lease”), and a management agreement between the license-holder as lessee under the Bridging Lease and a designee of Purchaser, in the form and content attached hereto as Exhibit “N,” subject to modification in accordance with any Legal Requirements (each, a “Bridging Management Agreement”).

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     14. Employee Matters. The parties acknowledge and agree that Purchaser’s employment of the existing employees at the Facilities may be conditional, subject to (a) satisfactory completion post-Closing of drug testing and security background checks in accordance with Purchaser’s standard practices and at Purchaser’s sole cost and expense, and (b) the employee’s consent to the transfer to Purchaser of Sellers’ personnel file for such employee (and with such employee consent, Sellers shall provide Purchaser with a copy of such employee’s personnel file at the Facility at which each such employee is employed). Except as otherwise expressly provided in the Purchase and Sale Agreement, Purchaser agrees not to contact, directly or indirectly, any employees of any Facility prior to the Closing Date without the prior consent of Sellers, and agrees to be liable for all of Sellers’ damages in the event of any such contact by Purchaser or any of its agents or representatives.

     15. Purchaser Representations. For purposes of Sections 7.1.2 and 7.1.3 of the Purchase and Sale Agreement, Purchaser hereby discloses to Sellers that Purchaser must (and shall prior to Closing) obtain consent to the transaction contemplated by the Purchase and Sale Agreement from its line of credit lenders. For the avoidance of doubt, the parties acknowledge that receipt of this consent is not a condition of the Closing and Purchaser shall not be entitled to a refund of the Earnest Money Deposit if it is unable to obtain such consent.

     16. Sellers Representations. For purposes of Sections 7.2.2 and 7.2.3 of the Purchase and Sale Agreement, Sellers hereby disclose to Purchaser that Sellers must obtain consent to the transaction contemplated by the Purchase and Sale Agreement from (a) the ground lessor in connection with the assignment of Wooster Ground Lease, (b) the Department of Housing and Urban Development in connection with the prepayment of the HUD-insured loan on Santa Rosa and any related approvals from the lender or municipality, and (c) the requisite lenders under the Sunrise Senior Living, Inc. line of credit agented by Bank of America (as set forth in the First Amendment).

     17. Post-Closing Liability Cap Amount.

     (a) Section 9.3 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

9.3 Limitations of Purchaser’s Post-Closing Claims. Notwithstanding any provision to the contrary herein or in any document or instrument (including any deeds, bill of sale or assignments) executed by any Seller and delivered to Purchaser at or in connection with the Closing (excluding the Bridging Lease and the Bridging Management Agreement and any other documents in connection with the bridging of licenses, if applicable, collectively, “Closing Documents”), Sellers shall have no (and each Seller is exculpated and released from any) liability whatsoever with respect to

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any Claims under, and Purchaser shall be forever barred from making or bringing any Claims with respect to, any of the representations and warranties, covenants and indemnities contained in this Agreement or in any Closing Document, unless the aggregate amount of all Claims for breach of all Sellers’ representations and warranties, covenants and indemnities exceeds One Hundred Thousand Dollars ($100,000) (the “Threshold Amount”) (but if such Claim(s) is/are valid and finally determined (or settled) to be in excess of the Threshold Amount, then the applicable Seller’s liability shall extend to the “first dollar” of Purchaser’s Claim), provided it is understood and agreed that the total liability of Sellers for any or all Claims in the aggregate with respect to all of the Properties shall not exceed Five Million Dollars ($5,000,000.00) (the “Cap Amount”), Two Million Five Hundred Thousand Dollars ($2,500,000) of which shall be placed in escrow with the Escrow Agent at Closing out of funds that would otherwise be payable to Sellers (the “Post-Closing Liability Escrow”), pursuant to the terms and conditions of Post-Closing Escrow Agreement, in form and content as attached hereto as Exhibit “P” (the “Post-Closing Escrow Agreement). Pursuant to the terms of the Post-Closing Escrow Agreement, on the Survival Date, the Escrow Agent shall refund to Seller any remaining balance of the Post-Closing Liability Escrow (including any interest earned thereon), unless there is a Pending Claim (defined below), in which event the Post-Closing Liability Escrow shall remain in place until the Pending Claim is definitively resolved by agreement of the parties or final court order.

     (b) Section 9.6 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

9.6 Limitations on Sellers’ Post-Closing Claims. Notwithstanding any provision to the contrary herein or in any document or instrument executed by Purchaser and delivered to Sellers at or in connection with the Closing (excluding the Bridging Lease and Bridging Management Agreement and any other documents in connection with the bridging of licenses, if applicable, collectively, “Purchaser Closing Documents”), Purchaser shall have no (and Purchaser is exculpated and released from any) liability whatsoever with respect to any Claims under, and Sellers shall be forever barred from making or bringing any Claims with respect to, any of the representations and warranties, covenants and indemnities contained in this Agreement or in any Purchaser Closing Document, unless the aggregate amount of all Claims for breach of Purchaser’s representations and warranties, covenants and indemnities exceeds the Threshold Amount (but if such Claim(s) is/are valid and finally determined (or settled) to be in excess of the Threshold Amount, then Purchaser’s liability shall extend to the “first dollar” of Sellers’ Claim), provided it is understood and agreed that the total liability of Purchaser for any or all Claims in the aggregate with respect to this Agreement and all of the Purchaser Closing Documents shall not exceed the Cap Amount. Sellers shall not make any Claim or deliver any Claim Notice unless in good faith, Sellers believes the Claim would exceed the Threshold Amount as set forth above.

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     18. Brokers. Article X of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

X

BROKERS

Sellers represent and warrant to Purchaser that except for Goldman Sachs (“Broker”), no broker or finder has been engaged by it or their affiliates, respectively, in connection with the transaction contemplated by this Agreement or to its knowledge is in any way connected with this transaction. Purchaser shall be responsible for the payment of any commission, finder’s fee or other sum initiated by any broker, commission agent or other person engaged or retained by Purchaser in connection with the transaction contemplated by this Agreement. Sellers shall be responsible for the payment of any commission, finder’s fee or other sum initiated by any broker, commission agent or other person engaged or retained by Sellers in connection with the transaction contemplated by this Agreement, including without limitation, Broker. Sellers and Purchaser (except with respect to the commission which shall be paid by Seller to Broker) each agree to indemnify, protect, defend and hold the other harmless from and against any claims, actions, suits or demands for payment of any commission, finder’s fee or other sum initiated by any broker, commission agent or other person which such party or its representatives has engaged or retained or with which it has had discussions concerning or which shall be based upon any statement or agreement alleged to have been made by such party, in connection with the transaction contemplated by this Agreement or the sale of the Properties by Sellers. The provisions of this Article X shall survive the Closing.

     19. Governing Law. Section 12.1 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. If any legal action is necessary to enforce the terms and conditions of this Agreement, the parties hereby agree that the courts in the State of Delaware shall be the sole jurisdiction and venue for the bringing of the action.

     20. Assignment. Section 12.5 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Assignment. Purchaser may not assign, convey and otherwise transfer all or any part of its interest or rights herein without the prior written consent of Sellers, which consent Sellers shall not unreasonably withhold.

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Notwithstanding the foregoing, however, Purchaser may (without Seller’s consent but with advance written notice to Seller), by not later than five (5) business days prior to Closing, assign and transfer in whole or in part all of its rights and obligations under this Agreement to one (1) or more wholly owned subsidiary(ies) of Brookdale Senior Living, Inc., or to a one hundred percent (100%) owned affiliate(s) thereof, or to any entity controlled (directly or indirectly, through voting or equity ownership) by Purchaser in the form of the Assignment of Purchase Agreement attached hereto as Exhibit “D.

Purchaser shall not be released of its obligations under this Agreement as a result of any assignment. Any permitted assignment shall be conditioned upon Purchaser delivering to Sellers and Escrow Agent, within forty-eight (48) hours of any assignment permitted without Sellers’ consent or prior to receiving Sellers’ consent where required as set forth above, Notice thereof, together with a copy of such assignee’s organizational and formation documents and instruments, a Certificate of Good Standing for such assignee, and copies of the documents, if any (or the proposed forms thereof), by or between Purchaser and such assignee authorizing such assignment. As a further condition to any assignment, Purchaser shall cause its assignee(s) to execute the Assignment of Purchase Agreement in the form attached hereto as Exhibit “D,” and such other documents and instruments as Escrow Agent may reasonably request. Sellers shall upon request consent in writing to any such assignment that is made in accordance with the terms of this Section.

Sellers may not assign or transfer their respective rights or obligations under this Agreement without the prior written consent of Purchaser (in which event such transferee shall assume in writing all of the transferor’s obligations hereunder, but such transferor shall not be released from its obligations hereunder). No transfer or assignment by either party in violation of the provisions hereof shall be valid or enforceable.

     21. No Public Disclosures. Section 12.15 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

No Public Disclosure. Sellers and Purchaser shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by Legal Requirements, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system. The parties agree to cooperate in good faith in connection with the press releases to be issued with respect to the transactions contemplated by this Agreement provided, however, that each of Seller and Purchaser may make any public statement in response to specific questions by the press, analysts, investors or those attending industry conferences or financial analyst conference calls, so long as any such statements are not inconsistent with previous press releases, public disclosures or public statements made jointly by Sellers and Purchaser and do not reveal material, non-public information regarding the other party.

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The parties acknowledge and agree that Sellers’ press release and 8K filing of October 9, 2009, and Purchaser’s press release of October 9, 2009, are all approved by the parties and in compliance with the terms of Section 12.15 of the Purchase and Sale Agreement, as amended hereby.

     22. Confidentiality. Section 12.18 of the Purchase and Sale Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Confidentiality. The parties acknowledge and agree that an affiliate of Purchaser previously executed and delivered to an affiliate of Sellers a confidentiality agreement (the “Confidentiality Agreement”), and such agreement remains and shall remain in full force and effect in accordance with the terms thereof and shall govern with respect to the transactions contemplated by this Agreement, except as may be mutually agreed by the parties in writing. The provisions of the Confidentiality Agreement shall survive any termination of this Agreement.

     23. Initials. Sellers and Purchaser are hereby deemed to have initialed, where applicable, Sections 4.4(f), 9.1 and 9.2 of the Purchase and Sale Agreement.

     24. Distribution of Sellers’ Funds. Purchaser acknowledges and agrees that each Seller may direct the Escrow Agent by irrevocable direct disbursement authorization (a “Disbursement Authorization”), or otherwise, to wire directly to Bank of America, N.A. any or all of the cash portion of the Purchase Price due to Sellers as set forth in the Closing Statement, and further agrees to provide to Escrow Agent and Bank of America, N.A. Purchaser’s written acknowledgement and consent to any such Disbursement Authorization.

     25. Binding and Inure. This Second Amendment and the Purchase and Sale Agreement shall be binding upon and inure to the benefit of Sellers, Purchaser and their respective heirs, successors and assigns.

     26. Capitalized Terms. All capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the Purchase and Sale Agreement.

     27. Ratification. Except as hereby amended, the Purchase and Sale Agreement is hereby ratified and shall continue in full force and effect in accordance with its terms. In the event of any conflict or inconsistency between the terms and provisions of this Second Amendment and the Purchase and Sale Agreement, this Second Amendment shall control.

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     28. Counterpart Execution and Electronic Distribution. This Second Amendment and the Purchase and Sale Agreement may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one instrument. The parties agree that the execution and delivery by facsimile or other electronic means shall have the full force and effect as if it had been executed and delivered in the original.

     29. Governing Law. This Second Amendment shall be governed by and construed in accordance with the laws of the State of Delaware. If any legal action is necessary to enforce the terms and conditions of this Second Amendment, the parties hereby agree that the courts in the State of Delaware shall be the sole jurisdiction and venue for the bringing of the action.

[Signatures appear on following pages.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed as of the date first written above.

PURCHASER: BLC ACQUISITIONS, INC.
By:	/s/ T. Andrew Smith
	Name:	T. Andrew Smith
	Title:	Executive Vice President

SELLERS: SUNRISE OF SANTA ROSA Sunrise Assisted Living Limited Partnership VIII, L.P.
By:	Sunrise Senior Living Investments, Inc., its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
Sunrise Chanate Assisted Living, L.P.
By:	Sunrise Senior Living Investments, Inc., its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF COLORADO SPRINGS Karrington of Colorado Springs Ltd.
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

[Signatures continue on next page.]

SUNRISE OF WEST HARTFORD Sunrise West Hartford Assisted Living, LLC
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF WILTON Sunrise Wilton Assisted Living, L.L.C.
By:	Sunrise Development, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF AUGUSTA Sunrise Augusta Assisted Living Limited Partnership
By:	Sunrise Senior Living Investments, Inc., its general partner
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF CARMEL Sunrise Carmel Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

SUNRISE AT FALL CREEK Sunrise Fall Creek Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF FORT WAYNE Sunrise Fort Wayne Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE AT WILLOW LAKE Sunrise Willow Lake Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF ANN ARBOR Sunrise Ann Arbor Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

SUNRISE OF ALBUQUERQUE Karrington of Albuquerque Ltd.
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF SOUTH CHARLOTTE Sunrise South Charlotte NC Senior Living, LLC
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE OF BATH Sunrise Bath Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF ENGLEWOOD Karrington of Englewood Ltd.
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

[Signatures continue on next page.]

SUNRISE AT FINNEYTOWN Karrington of Finneytown Ltd.
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE AT KENWOOD Karrington of Kenwood Ltd.
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary
SUNRISE AT OAKWOOD Karrington of Oakwood Ltd. Liability Co.
By:	Karrington Operating Company, Inc., its sole member
By:	/s/ David Haddock
	Name: David Haddock
	Title:   Vice President & Secretary
SUNRISE OF WOOSTER Sunrise Wooster Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President

[Signatures continue on next page.]

SUNRISE OF MONROEVILLE Sunrise Monroeville Assisted Living, L.L.C.
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
VIRGINIA BEACH ESTATES Sunrise Virginia Beach Estates, LLC
By:	Sunrise Senior Living Investments, Inc., its sole member
By:	/s/ Gregory Neeb
	Name:	Gregory Neeb
	Title:	President
SUNRISE OF SOUTH HILLS Karrington Operating Company, Inc.
By:	/s/ David Haddock
	Name:	David Haddock
	Title:	Vice President & Secretary

EXHIBIT “A”

PROPERTIES AND SELLERS

	Facility	Property Owner	Ownership
1	Sunrise of Santa Rosa	Sunrise Assisted Living Limited	SSLII — 1% SSLI — 99%
	3250 Chanate Road	Partnership VIII, L.P.
	Santa Rosa, CA 95404
	(707) 575-7503	Sunrise Chanate Assisted Living, L.P.	SSLII — 1% SSLI — 99%
2	Sunrise of Colorado Springs	Karrington of Colorado Springs Ltd.	KOC — 100%
	10 West Monument Street
	Colorado Springs, CO 80903
	(719) 635-6300
3	Sunrise of West Hartford	Sunrise West Hartford Assisted	SSLII — 100%
	22 Simsbury Road	Living, LLC
	West Hartford, CT 06117
	(860) 523-9899
4	Sunrise of Wilton	Sunrise Wilton Assisted Living,	SDI — 100%
	96 Danbury Road	L.L.C.
	Wilton, CT 06897
	(203) 761-8999
5	Sunrise of Augusta	Sunrise Augusta Assisted Living	SSLII — 1% SSLI — 99%
	326 Boy Scout Road	Limited Partnership
	Augusta, GA 30909
	(706) 738-6003
6	Sunrise of Carmel	Sunrise Carmel Assisted Living,	SSLII — 100%
	301 Executive Drive	L.L.C.
	Carmel, IN 46032
	(317) 580-0389
7	Sunrise at Fall Creek	Sunrise Fall Creek Assisted Living,	SSLII — 100%
	5011 Kessler Boulevard, East	L.L.C.
	Indianapolis, IN 46220
	(317) 251-1300
8	Sunrise of Fort Wayne	Sunrise Fort Wayne Assisted Living,	SSLII — 100%
	3110 East Coliseum Boulevard	L.L.C.
	Fort Wayne, IN 46805
	(260) 471-3110
9	Sunrise at Willow Lake	Sunrise Willow Lake Assisted Living,	SSLII — 100%
	2725 Lake Circle Drive	L.L.C.
	Indianapolis, IN
	46268
	(317) 334-9400
10	Sunrise of Ann Arbor	Sunrise Ann Arbor Assisted Living,	SSLII — 100%
	2190 Ann Arbor-Saline Road	L.L.C.

	Facility	Property Owner	Ownership
	Ann Arbor, MI 48103
	(734) 327-1350
11	Sunrise of Albuquerque	Karrington of Albuquerque Ltd.	KOC -- 100%
	4910 Tramway Ridge Drive, NE
	Albuquerque, NM 87111
	(505) 271-9600
12	Sunrise of South Charlotte	Sunrise South Charlotte NC Senior	KOC — 100%
	5515 Rea Road	Living, LLC
	Charlotte, NC 28226
	(704) 544-2094
13	Sunrise of Bath	Sunrise Bath Assisted Living, L.L.C.	SSLII — 100%
	101 N. Cleveland Massillon Road
	Akron, OH 44333
	(330) 666-7011
14	Sunrise of Englewood	Karrington of Englewood Ltd.	KOC — 100%
	95 West Wenger Road
	Englewood, OH 45322
	(937) 836-9617
15	Sunrise at Finneytown	Karrington of Finneytown Ltd.	KOC — 100%
	9101 Winton Road
	Cincinnati, OH 45231
	(513) 729-5233
16	Sunrise at Kenwood	Karrington of Kenwood Ltd.	KOC — 100%
	9090 Montgomery Road
	Cincinnati, OH 45242
	(513) 745-9292
17	Sunrise at Oakwood	Karrington of Oakwood Ltd. Liability	KOC — 100%
	1701 Far Hills Avenue	Co.
	Dayton, OH 45419
	(937) 294-1772
18	Sunrise of Wooster	Owner: Hills and Dales, Inc.	SSLII — 100%
	(Ground Lease)	Ground Lessee: Sunrise Wooster
	1615 Cleveland Road	Assisted Living, L.L.C.
	Wooster, OH 44691
	(330) 262-1615
19	Sunrise of Monroeville	Sunrise Monroeville Assisted Living,	SSLII — 100%
	2589 Mosside Boulevard	L.L.C.
	Monroeville, PA 15146
	(412) 380-2589
20	Virginia Beach Estates	Sunrise Virginia Beach Estates, LLC	SSLII — 100%
	937 Diamond Spring Rd.
	Virginia Beach, VA 23455

	Facility	Property Owner	Ownership
21	Sunrise of South Hills	Karrington Operating Company, Inc.	KHI — 100%
	1320 Greentree Road
	Pittsburgh, PA 15220

SSLI = Sunrise Senior Living, Inc., a Delaware corporation
SSLII = Sunrise Senior Living Investments, Inc., a Virginia corporation
SDI = Sunrise Development, Inc., a Virginia corporation
KOC = Karrington Operating Company, Inc., an Ohio corporation (owned 100% by KHI)
KHI = Karrington Health, Inc., an Ohio corporation (owned 100% by SSLI)

EX-10.1

Exhibit 10.1

SETTLEMENT AGREEMENT

     This Settlement Agreement (“Agreement”) is made this 12th day of June, 2009, by and between KRG Capital Fund II, L.P. (“KRG Fund II”), KRG Capital Fund II (FF), L.P. (“KRG Capital (FF)”), KRG Capital Fund II (PA), L.P. (“KRG Capital (PA)”), KRG Co-Investment, LLC (“KRG Co-Invest”) (KRG Fund II, KRG Capital (FF), KRG Capital (PA) and KRG Co-Invest, collectively, the “KRG Parties”), Sunrise Senior Living, Inc. (“Sunrise”), and Trinity Hospice, Inc. (“Trinity”) (Sunrise and Trinity, collectively, the “Sunrise Parties”) (hereafter, the KRG Parties, ACS and the Sunrise Parties are referred to jointly and collectively as the “Parties,” or any of them individually as a “Party”).

PREAMBLE

     WHEREAS, KRG Fund II, KRG Capital (FF) and KRG Capital (PA) are Delaware limited partnerships;

     WHEREAS, KRG Co-Invest is a Colorado limited liability company;

     WHEREAS, the KRG Entities maintain a principal place of business in Denver, Colorado;

     WHEREAS, Sunrise is a Delaware corporation with a principal place of business in McLean, Virginia;

     WHEREAS, Trinity is a dissolved Delaware corporation with a former principal place of business in Dallas, Texas;

     WHEREAS, on or about June 20, 2002, the KRG Entities acquired a majority interest in Trinity and ACS acquired a minority interest in Trinity;

     WHEREAS, under the terms of that certain Agreement and Plan of Merger dated as of August 2, 2006 (the “Merger Agreement”) by and among Sunrise, Trinity, the KRG Entities and

SETTLEMENT AGREEMENT — Page 1 of 13

ACS, Sunrise acquired ownership of Trinity and Trinity became a wholly-owned subsidiary of Sunrise (the “Merger”);

     WHEREAS, Sunrise has made allegations against the KRG Parties that the KRG Parties recklessly, negligently and/or fraudulently misrepresented and omitted material facts in connection with the Merger;

     WHEREAS, the Sunrise Parties threatened to sue the KRG Parties for fraud and misrepresentation in connection with the Merger Agreement claiming at various times to have suffered substantial damages as a result of the alleged misrepresentations;

     WHEREAS, on January 13, 2009, the KRG Entities filed a lawsuit against the Sunrise Parties in the Superior Court of the State of Delaware in and for New Castle County, Civil Action No. 09C-01-092 JRJ (the “Delaware Action”) seeking a declaration limiting its liability to the Sunrise Parties as a matter of law;

     WHEREAS, the Parties entered into a Standstill Agreement with respect to the Delaware Action on February 2, 2009; and

     WHEREAS, to avoid the uncertainty, time and expense associated with protracted litigation, the Parties desire to compromise, resolve and settle the claims, counterclaims, and causes of action between them, including asserted and unasserted claims finally and forever;

     NOW, THEREFORE, in consideration of the covenants and mutual promises and agreements herein contained, and other valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the Parties agree as follows:

     1. Whereas Clauses. The recitals contained in the foregoing prefatory Whereas clauses shall have the same force and effect as if set forth in full in the body of this Agreement.

SETTLEMENT AGREEMENT — Page 2 of 13

     2. Compromises. The Parties hereby agree that neither the giving of any consideration hereunder nor its acceptance shall operate as or be evidence of any admission of liability for any claim hereby released, and further agree that, by the execution of this Agreement, the Parties do not admit the truthfulness of any of the claims or allegations made by any opposing Party; rather, such claims, allegations and liability have been, and are hereby, expressly denied by each of the Parties.

     3. Settlement Consideration. The KRG Parties agree to pay to Sunrise the gross amount of Nine Million Eight Hundred Thirty-Five Thousand Nine Hundred Fifty-One Dollars and No/100 ($9,835,951.00) as follows: Within two (2) business days of the Effective Date, the KRG Parties shall cause to wire transfer to Sunrise the sum of Six Million Seven Hundred Forty-Nine Thousand Nine Hundred Ninety-Nine and 44/100 ($6,749,999.44) and also deliver joint written authorization (in the form attached hereto as Exhibit “A”) to the United Bank as Escrow Agent (as defined pursuant to the Merger Agreement, Section 3.01(b)), instructing the Escrow Agent to release to Sunrise the sum of Three Million Eighty-Five Thousand Nine Hundred Fifty-One Dollars and 56/100 ($3,085,951.56) (as of May 31, 2009) (together with any other interest accrued thereunder through and as of the date of release).

     4. Releases by the Sunrise Parties. In exchange for the consideration provided in this Agreement, and effective when the First Payment described in Section 3(a) of this Agreement is received by Sunrise, Sunrise and Trinity, jointly and severally, on behalf of themselves, and their respective current and former officers, administrators, directors, managers, owners, members, shareholders, general or limited partners, representatives, agents, employees, attorneys, predecessors or successors (by merger or otherwise), and assigns, if any, as well as their parents, affiliates and subsidiaries, divisions and partnerships, past, present and future

SETTLEMENT AGREEMENT — Page 3 of 13

(collectively, the “Sunrise Releasing Parties”) hereby forever release, acquit and discharge each of KRG Fund II, KRG Capital (FF), KRG Capital (PA), KRG Co-Invest, KRG Capital Management, L.P. and each of its series, KRG Capital, LLC and each of its series and American Capital, Ltd., formerly known as American Capital Strategies, Ltd. (“ACS”), and their respective current and former officers, administrators, directors, managers, owners, members, shareholders, general or limited partners, clients, representatives, agents, employees, attorneys, predecessors or successors (by merger or otherwise), and assigns, if any, as well as their parents, affiliates and subsidiaries, divisions and partnerships, past, present and future (collectively, the “KRG Released Parties”) from any and all claims, rights, accountings, debts, dues, covenants, contracts, suits, counterclaims, demands, actions, causes of action, other liabilities, and/or damages, if any, which the Sunrise Releasing Parties have, may have or claim to have now, whether known or unknown, asserted now or in the future, of whatsoever kind or nature whether at law or in equity, against any or all of the KRG Released Parties relating to or arising from any matters from the beginning of time to the date of this Agreement, provided that, however, nothing in this Paragraph 4 shall preclude or be interpreted as precluding the Sunrise Parties from asserting any claim arising as a result of the alleged failure of performance under this Agreement.

     5. Releases by the KRG Parties. In exchange for the consideration provided in this Agreement, and effective when the First Payment described in Section 3(a) of this Agreement is received by Sunrise, KRG Fund II, KRG Capital (FF), KRG Capital (PA), and KRG Co-Invest, on behalf of themselves, KRG Capital Management, L.P. and each of its series, KRG Capital, LLC and each of its series, and their respective current and former officers, administrators, directors, managers, owners, members, shareholders, general or limited partners, clients, representatives, agents, employees, attorneys, predecessors or successors (by merger or

SETTLEMENT AGREEMENT — Page 4 of 13

otherwise), and assigns, if any, as well as their parents, affiliates and subsidiaries, divisions and partnerships, past, present and future (collectively, the “KRG Releasing Parties”) hereby forever release, acquit and discharge each of Sunrise and Trinity and their respective current and former officers, administrators, directors, managers, owners, members, shareholders, general or limited partners, representatives, agents, employees, attorneys, predecessors or successors (by merger or otherwise), and assigns, if any, as well as their parents, affiliates and subsidiaries, divisions and partnerships, past, present and future (collectively, the “Sunrise Released Parties”) from any and all claims, rights, accountings, debts, dues, covenants, contracts, suits, counterclaims, demands, actions, causes of action, other liabilities, and/or damages, if any, which the KRG Releasing Parties have, may have or claim to have now, whether known or unknown, asserted now or in the future, of whatsoever kind or nature whether at law or in equity, against any or all of the Sunrise Released Parties relating to or arising from any matters from the beginning of time to the date of this Agreement, provided that, however, nothing in this Paragraph 5 shall preclude or be interpreted as precluding the KRG Parties from asserting any claim arising as a result of the alleged failure of performance under this Agreement.

     6. Confidentiality of Settlement. The Parties acknowledge that the terms and conditions of this Agreement and the Exhibits hereto are considered confidential, and it is understood that this agreement of confidentiality is part of the consideration for this Agreement. Upon and after the Effective Date of this Agreement, none of the Parties, nor their attorneys, or other representatives, will, directly or indirectly, disclose the existence of or the terms and conditions of this Agreement, or the Exhibits hereto, to third parties or publicize in the media other than as specified herein, including but not limited to newspapers, magazines, radio, television, or the internet, except: (a) as necessary to enforce this Agreement; (b) as may be

SETTLEMENT AGREEMENT — Page 5 of 13

required by law, including any applicable securities laws, or in order to comply with a lawfully issued subpoena from a court of competent jurisdiction; (c) as reasonably necessary in connection with audits, regulatory or compliance inquiries, or financial or legal due diligence or claims for insurance coverage; (d) as may be required to the Parties’ attorneys and other professional advisors for the purpose of seeking their advice; (e) as may be required for the KRG Parties to make necessary disclosures to the partners in their investment funds and with respect to fundraising activities if subject to nondisclosure restraints; and (f) as may be required to Sunrise’s senior lenders or their advisors, provided however, that the recipient (other than a government regulator) is instructed to maintain the confidentiality of any information disclosed to it.

     Sunrise will provide to the KRG Entities at least three (3) business days in advance of filing for their review the proposed language that will appear in any filing on Form 8-K that Sunrise files with the United States Securities and Exchange Commission describing this Agreement. If required to file the Settlement Agreement itself, Sunrise will file it as an exhibit to its next required filing on Form 10-Q. Sunrise will in good faith consider incorporating any comments from the KRG Entities with respect to such filings.

     7. Dismissal of Delaware Action. Upon the execution of this Agreement and payment of the Settlement Consideration, counsel for KRG shall execute and promptly file the Notice of Voluntary Dismissal With Prejudice of the Delaware Action attached hereto as Exhibit “B” and made a part hereof dismissing the Delaware Action with prejudice and asking the Court to retain jurisdiction for purposes of enforcing any provision of this Agreement. Filing counsel shall promptly provide as-filed copies to opposing counsel.

SETTLEMENT AGREEMENT — Page 6 of 13

     8. Non-Disparagement. The Parties shall not knowingly make any disparaging or derogatory statements or comments, in any material respect, either directly or indirectly, to any third persons regarding each other; except, however, with respect to statements and comments that (a) are made for lawful competitive reasons or for personnel-related actions involving any Party and its employees, agents, contractors or consultants in the ordinary course of business or (b) are made under legal compulsion and are believed to be factually correct.

     9. No Reliance. In executing this Agreement, the Parties have not seen, heard or relied upon any promises, statements, representations, covenants, or warranties, whether express or implied, made by one another or by any representative or other person or entity, except to the extent that a matter is expressly stated in this Agreement.

     10. Authorization to Execute. The signatories for the corporate Parties hereto represent and warrant that they have been granted specific authority by their respective principals to execute the Agreement on behalf of the corporate party.

     11. Entire Agreement. Each Party hereby acknowledges that such Party is a sophisticated company and each Party and their counsel have reviewed, fully understand, and voluntarily consent to this Agreement without relying on any representations, oral or written, of the other Party or its counsel not contained therein.  It is further understood and agreed that no subsequent amendment, change or addition to this Agreement shall be binding upon any of the Parties hereto unless reduced to writing and signed by all the Parties. 

     12. Execution in Counterpart. This Agreement may be executed in any number of counterparts and facsimiles, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

SETTLEMENT AGREEMENT — Page 7 of 13

     13. Severability. Should any provision of this Agreement become or be held unlawful, unenforceable or invalid by reason of any statute, ordinance, law and/or decision of any court of law or equity, the same shall be ineffective to that extent, without in any way invalidating or affecting the remaining provisions of this Agreement.

     14. Cooperation. The Parties shall immediately cause to be prepared and executed any and all other pleadings or other documents reasonably necessary to complete and consummate the settlement contemplated by this Agreement, if requested.

     15. Notices. Notices to be given under this Agreement shall be in writing and shall be sent to the addresses set forth below (unless subsequently changed by any Party in writing) by any of the following methods: (i) by certified or registered mail, return receipt requested, (ii) by hand, (iii) by electronic mail (with confirmation of receipt and a hard copy by first class mail), (iv) by facsimile transaction (with confirmation of receipt and a hard copy by first class mail), and (v) by overnight courier service, with such notice being deemed received on the first business day after being sent by hand, by electronic mail with confirmation of receipt, by facsimile transaction, or by overnight courier service, or on the day of receipt or rejection for certified or registered mail, return receipt requested.

(a) If to the KRG Parties:

Charles R. Gwirtsman, Managing Director
Theresa D. Shelton, Chief Operating Officer
KRG Capital Management, L.P.
1515 Arapahoe Street
Tower One, Suite 1500
Denver, CO 80202

And

SETTLEMENT AGREEMENT — Page 8 of 13

Blank Rome LLP
One Logan Square
130 N. 18^th Street
Philadelphia, PA 19103
Attention: James T. Smith, Esquire

(b) If to the Sunrise Parties:

Sunrise Senior Living, Inc.
7902 Westpark Drive
McLean, Virginia 22102
Attention: Charles Corbin, Esquire

And

GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, DC 20036-5306
Attention: Lewis H. Ferguson, Esquire

     16. Choice of Law and Venue. The Parties each agree that the laws of the State of Delaware shall govern the enforceability, interpretation and legal effect of this Agreement and any claim arising from or related to this Agreement. The Parties also agree that exclusive jurisdiction and exclusive venue of any action to enforce, construe or validate the provisions of this Agreement, or any document executed in connection herewith, shall be in a court of competent jurisdiction in the State of Delaware. The Parties further agree that they shall have available all remedies at law and equity to enforce a breach by any Party hereto of the provisions of this Agreement. Notwithstanding the foregoing, the Parties each agree that they shall not seek rescission, cancellation or termination of this Agreement in a future proceeding under this Section.

     17. Effective Date. The “Effective Date” of this Agreement shall be the date upon which the last Party executes and delivers this Agreement.

SETTLEMENT AGREEMENT — Page 9 of 13

     18. Prevailing Party. In the event that any Party shall pursue any action against any other Party relating to or arising out of this Agreement, the prevailing Party shall be entitled to recover its reasonable attorneys’ fees (including, if applicable, reasonable and documented charges for in-house counsel and expert witness fees), court costs and other legal expenses from the losing Party under such laws as may govern any such dispute. This provision includes any award of injunctive relief or monetary damages.

     19. Reasonableness of Settlement:     The Parties to this Agreement acknowledge and agree that the settlement set forth in this Agreement represents a fair, adequate and reasonable compromise of claims under all of the circumstances, including with respect to the complexity, expense and likely duration of litigation, the risks of establishing liability and damages, the uncertainty of the outcome of litigation, the probability of recovery and all other attendant risks to litigation, and that they have determined to enter into this Agreement after investigation and consideration sufficient to inform themselves of the merits of the Settlement.

     20. Allocation. The Parties have considered the allegations, the undisputed facts, the theories of liability and the relative exposure of KRG, Sunrise and Trinity in connection with the subject matter of the Delaware Action and agree that a fair and proper allocation of the Settlement Amount is as follows:  KRG 100 %, Sunrise 0 % and Trinity 0 %.

     IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the Effective Date.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SETTLEMENT AGREEMENT — Page 10 of 13

SUNRISE PARTIES:
SUNRISE SENIOR LIVING, INC.
By: Name:	/s/ Mark S. Ordan Mark S. Ordan
Title:	Chief Executive Officer
TRINITY HOSPICE, INC.
By: Name:	/s/ Walton E. Bell Walton E. Bell
Title:	President

SETTLEMENT AGREEMENT — Page 11 of 13

KRG PARTIES:
KRG CAPITAL FUND II, L.P.
KRG CAPITAL FUND II (FF), L.P.
KRG CAPITAL FUND II (PA), L.P.
By: KRG Capital Management, L.P., with respect to its
Class II-QP and Class II-FF Series, its general partner
By: KRG Capital, LLC, with respect to its Class II-QP and
Class II-FF Series, its general partner
By: Name:	/s/ Charles R. Gwirtsman Charles R. Gwirtsman
Title:	Managing Director
KRG CO-INVESTMENT, LLC
By: Capital Resources Growth, Inc., a managing member
By: Name:	/s/ Charles R. Gwirtsman Charles R. Gwirtsman
Title:	Managing Director

SETTLEMENT AGREEMENT — Page 12 of 13

EXHIBIT LIST FOR SETTLEMENT AGREEMENT

     A. Letter to United Bank authorizing release of Escrow Fund

     B. Delaware Notice of Voluntary Dismissal with Prejudice

SETTLEMENT AGREEMENT — Page 13 of 13

EX-10.2

Exhibit 10.2

Loan No. 105093

LOAN AGREEMENT

THIS LOAN AGREEMENT (“Agreement”) is executed as of September 28, 2007, by and between SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company, and SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware Limited Partnership, jointly and severally, (both referred to as “Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

RECITALS

A.	Borrower owns or will own certain real property described in Exhibit A hereto (individually and collectively, “Property”).
B.	Borrower has requested from Lender a loan for the purpose of financing the Property.
NOW, THEREFORE, Borrower and Lender agree as follows:

ARTICLE 1. LOAN

1.1	LOAN. By and subject to the terms of this Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from Lender the principal sum of TWENTY-ONE MILLION NINE HUNDRED SIX THOUSAND NINE HUNDRED FIFTY AND NO/100 DOLLARS ($21,906,950.00) (“Loan”), said sum to be evidenced by a Promissory Note Secured by Deed of Trust of even date herewith (“Note”). The Note shall be secured, in part, by a Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement of even date herewith, executed by Borrower for the benefit of Lender, as hereafter amended, supplemented, replaced or modified (“Deed of Trust”), encumbering certain real property and improvements as legally defined therein. The obligations of the Borrower under the Loan will be guaranteed in whole or in part by SUNRISE SENIOR LIVING, INC., a Delaware Corporation, (“Guarantor”) pursuant to a guaranty agreement of even date herewith (“Guaranty”). Amounts disbursed to or on behalf of Borrower pursuant to the Note shall be used to finance the Property and for such other purposes and uses as may be permitted under this Agreement and the other Loan Documents, as described below.
1.2	FEES. Borrower shall pay to Lender, at Loan closing, a non-refundable loan fee in the amount of TWO HUNDRED NINETEEN THOUSAND SIXTY-NINE AND 50/100 DOLLARS ($219,069.50).
1.3	LOAN DOCUMENTS; EFFECTIVE DATE. Borrower shall deliver to Lender concurrently with this Agreement the Note, the Deed of Trust and any other documents required by Lender, as hereafter amended, supplemented, replaced or modified, each properly executed and in recordable form, as applicable, described in Exhibit B (“Loan Documents”) together with those documents described in Exhibit B as other related documents. The effective date (“Effective Date”) of the Loan Documents shall be the date of this Agreement as set forth on page 1 above.
1.4	MATURITY DATE. The maturity date of the Loan shall be October 1, 2009 (“Maturity Date”).
1.5	FULL REPAYMENT AND SATISFACTION. In addition to the partial release option set forth in this Section 1.5, Borrower may prepay the Loan in whole or in part at any time and from time to time upon five (5) days written notice to Lender, subject to any breakage fee incurred by Lender. Upon receipt of all sums owing and outstanding under the Loan Documents, Lender shall issue a full reconveyance of the Property and

Loan No. 105093

	improvements from the lien of the Deed of Trust; provided, however, that each of the following conditions shall be satisfied at the time of, and with respect to, such reconveyance: (a) Lender shall have received all escrow, closing and recording costs, the costs of preparing and delivering such satisfaction and any sums then due and payable under the Loan Documents; (b) Lender shall have received a written release satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to any surety, governmental agency or any other party in connection with the Loan and/or the Property; and (c) Lender’s obligation to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such reconveyance, and any commitment of Lender to lend any undisbursed portion of the Loan shall be cancelled.
	Notwithstanding anything to the contrary in this Loan Agreement, the parties anticipate that either Property I or Property II, as defined in Exhibit A hereto, covered by the Deed of Trust may be released prior to the Maturity Date of the Loan, as long as the conditions in this paragraph are satisfied. So long as there exist no Defaults (as defined in the Loan Documents) or any event, omission or failure of condition, which would constitute a Default after Notice or lapse of time, or both, Lender shall issue a partial satisfaction of Deed of Trust covering the specific Property upon the following conditions: (a) receipt of $18,656,950.00, for Property I or receipt of $3,250,000.00 for Property II and remaining loan balance is not more than 65% of the remaining collateral value, as determined solely in the discretion of the Lender; and (b) Lender shall have received a written release satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to any surety, governmental agency or any other party in connection with the Loan and/or the Property and improvements.
1.6	OPTION TO EXTEND. Borrower shall have no option to extend the term of the Loan.

ARTICLE 2. DISBURSEMENT

2.1 CONDITIONS PRECEDENT. Lender’s obligation to make the disbursement of the Loan shall be subject to satisfaction of each of the following conditions precedent:

a.	Lender shall have received fully executed originals of all Loan Documents, the Guaranty and any other documents, instruments, policies, and other materials requested by Lender under the terms of this Agreement or any of the other Loan Documents.
b.	There shall exist no Default as defined in this Agreement or any of the other Loan Documents or any event, omission or failure of condition which would constitute a Default after notice or lapse of time, or both.

2.2 FUNDS TRANSFER DISBURSEMENTS.

a. Borrower hereby authorizes Lender to disburse the proceeds of the Loan made by Lender or its affiliate pursuant to the Loan Documents as requested by an authorized representative of the Borrower to any of the accounts designated in Exhibit D. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower’s name and accepted by Lender in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Lender may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to effect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by the Borrower. Lender is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Lender takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that no matter how many times Lender takes these actions Lender will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement

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Loan No. 105093

	between Lender and Borrower. Borrower agrees to notify Lender of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after Lender’s confirmation to Borrower of such transfer.
b.	Lender will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Lender may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization; (ii) require use of a bank unacceptable to Lender or prohibited by government authority; (iii) cause Lender to violate any Federal Reserve or other regulatory risk control program or guideline; or (iv) otherwise cause Lender to violate any applicable law or regulation.
c.	Lender shall not be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower’s transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Lender, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Lender’s control, or (iii) any special, consequential, indirect or punitive damages, whether or not (A) any claim for these damages is based on tort or contract or (B) Lender or Borrower knew or should have known the likelihood of these damages in any situation. Lender makes no representations or warranties other than those expressly made in this Agreement.

ARTICLE 3. INSURANCE

Borrower shall, while any obligation of Borrower or any Guarantor under any Loan Document remains outstanding, maintain at Borrower’s sole expense, with licensed insurers approved by Lender, the following policies of insurance in form and substance satisfactory to Lender. Capitalized terms used in this Article shall have the same meaning as such terms are commonly and presently defined in the insurance industry:

3.1	TITLE INSURANCE. An extended coverage ALTA Lender’s Policy of Title Insurance (“Title Policy”), together with any endorsements which Lender may require, insuring Lender, in the principal amount of the Loan, of the validity and the priority of the lien of the Deed of Trust upon the Property and the improvements, subject only to matters approved by Lender in writing. During the term of the Loan, Borrower shall deliver to Lender, within ten (10) days of Lender’s written request, such other endorsements to the Title Policy as Lender may reasonably require with respect to the Property.
3.2	FLOOD HAZARD INSURANCE. If applicable, a policy of flood insurance, as required by applicable governmental regulations, or as deemed necessary by Lender, in an amount required by Lender, but in no event less than the amount sufficient to meet the requirements of applicable law and governmental regulation.
3.3	LIABILITY INSURANCE. A policy of Commercial General Liability insurance on a claims made basis, with coverages and limits as required by Lender, insuring against liability for injury and/or death to any person and/or damage to any property occurring on the Property and/or in the improvements. Lender may require that Borrower be named as an additional insured on any such policy.
3.4	OTHER COVERAGE. Borrower shall provide to Lender evidence of such other reasonable insurance in such reasonable amounts as Lender may from time to time request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. Such coverage requirements may include, but are not limited to, coverage for earthquake, acts of terrorism, mold, business income, delayed business income, rental loss, sink hole, soft costs, tenant improvement or environmental.
3.5	GENERAL. Borrower shall ensure that the Property is fully insured at all times; Borrower shall provide to Lender insurance certificates or other evidence of coverage in form acceptable to Lender, with coverage

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Loan No. 105093

amounts, deductibles, limits and retentions as required by Lender, within a reasonable time. All insurance policies shall provide that insurance provider will endeavor to provide at least ten (10) days prior written notice to Lender of any cancellation for nonpayment of premiums, or material modification and not less than 30 days prior written notice to Lender prior to any other cancellation or any modification (including a reduction in coverage). Lender shall be named under a Lender’s Loss Payable Endorsement (form #438BFU or equivalent) on all insurance policies which Borrower actually maintains with respect to the Property and improvements. All insurance policies shall be issued and maintained by insurers approved to do business in the state in which the Property is located and must have an A.M. Best Company financial rating of A-VII or better, and policyholder surplus acceptable to Lender.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES

As a material inducement to Lender’s entry into this Agreement, Borrower represents and warrants to Lender as of the Effective Date and continuing thereafter that:

4.1	AUTHORITY/ENFORCEABILITY. Borrower is in compliance with all laws and regulations applicable to its organization, existence and transaction of business and has all necessary rights and powers to own and operate the Property as contemplated by the Loan Documents.
4.2	BINDING OBLIGATIONS. Borrower is authorized to execute, deliver and perform its obligations under the Loan Documents, and such obligations are the valid and binding obligations of Borrower.
4.3	COMPLIANCE WITH LAWS. Borrower has, and at all times shall have, all permits, licenses, exemptions, and approvals necessary to occupy and market the Property, and shall maintain compliance with all governmental requirements applicable to the Property, and all other applicable statutes, laws, regulations and ordinances necessary for the transaction of its business. The Property is a legal parcel lawfully created in full compliance with all subdivision laws and ordinances.
4.4	LITIGATION. Except as disclosed to Lender in writing, there are no claims, actions, suits, or proceedings pending, or to Borrower’s knowledge threatened, against Borrower or any Guarantors or affecting the Property.
4.5	FINANCIAL CONDITION. Except as set forth in Section 7.3(a)(iv) with respect to Guarantor and to the extent Section 7.3(a)(iv) effects Sunrise Senior Living Investments, Inc., Guarantor’s wholly owned subsidiary, all financial statements and information heretofore and hereafter delivered to Lender by Borrower, including, without limitation, information relating to the financial condition of Borrower, the Property, the partners, joint venturers or members of Borrower, and/or any Guarantors, fairly and accurately represent the financial condition of the subject thereof and have been prepared (except as noted therein) in accordance with generally accepted accounting principles consistently applied. Borrower acknowledges and agrees that Lender may request and obtain additional information from third parties regarding any of the above, including, without limitation, credit reports.
4.6	ACCURACY. All reports, documents, instruments, information and forms of evidence delivered to Lender concerning the Loan or security for the Loan or required by the Loan Documents are accurate, correct and sufficiently complete to give Lender true and accurate knowledge of their subject matter, and do not contain any misrepresentation or omission.
4.7	UTILITIES. All utility services, including, without limitation, gas, water, sewage, electrical and telephone, necessary for the occupancy of the Property are available at the Property.
4.8	BUSINESS LOAN. The Loan is a business loan transaction in the stated amount solely for the purpose of carrying on the business of Borrower and none of the proceeds of the Loan will be used for the personal, family or agricultural purposes of Borrower.

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4.9 COMMENCEMENT OF CONSTRUCTION. Prior to the date of this Agreement, no construction work or activity has been conducted at the Property or with respect to the improvements and no contractor, subcontractor or materialman has performed any construction work or other services or delivered any materials to or for the benefit of Borrower, the Property or the improvements.

ARTICLE 5. HAZARDOUS MATERIALS

5.1 SPECIAL REPRESENTATIONS AND WARRANTIES. Without in any way limiting the other representations and warranties set forth in this Agreement, and after reasonable investigation and inquiry, Borrower hereby specially represents and warrants to the best of Borrower’s knowledge as of the date of this Agreement as follows:

a.

Hazardous Materials. Except as previously disclosed to Lender in that certain Final Environmental Impact Report I, Environmental Site Assessment report dated December, 2006, for Property I and in that certain Phase I Environmental Site Assessment report dated July 24, 2007, for Property II (both reports referred to as the “Report”; Property I and Property II are specifically defined in Exhibit A hereto), the Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants or contaminants” under the Hazardous Materials Laws, as described below, and/or any other applicable environmental laws, ordinances and regulations (collectively, the “Hazardous Materials”). “Hazardous Materials” shall not include commercially reasonable amounts of such materials used in the ordinary course of operation of the Property which are used and stored in accordance with all applicable environmental laws, ordinances and regulations.

b.

Hazardous Materials Laws. The Property is in compliance with all laws, ordinances and regulations relating to Hazardous Materials (“Hazardous Materials Laws”), including, without limitation: any and all applicable federal, state or local directive, statute, law, rule, regulation, ordinance or rule of common law in effect and any judicial or administrative decisions, including any judicial or administrative order, consent decree or judgment, relating to the control of any pollutant or hazardous material, the protection of the environment or the effect of the environment on human health, including the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1252 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; the Hazardous Materials Transportation Act, as amended 49 U.S.C. Section 1801 et seq.; the Atomic Energy Act, as amended, 42 U.S.C. Section 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq.; the Occupational Safety and Health Act, as amended, 20 U.S.C. Section 651 et seq.; the Emergency Planning and Community Right to Know Act, as amended, 42 U.S.C. Section 11001 et seq.; Chapter 6 of the California Health and Safety Code; California Health and Safety Code Sections 25100 et seq. and Sections 25280 et seq.; the Safe Drinking Water and Toxic Enforcement Act of 1986, as amended (Proposition 65); and Title 22 of the California Code of Regulations (Division 4, Chapter 30); each as now and hereafter amended, and the regulations thereunder, and any other local, state and/or federal laws or regulations that govern (i) the existence, cleanup and/or remedy of contamination on Property; (ii) the protection of the environment from released, spilled, deposited or otherwise emplaced contamination; (iii) the control of hazardous wastes; or (iv) the use, generation, transport, treatment, removal or recovery of Hazardous Materials, including any and all building materials.

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c.

Hazardous Materials Claims. There are no claims or actions (“Hazardous Materials Claims”) known to, pending or threatened against Borrower or the Property by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws.

d.

Border Zone Property. There has been no occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated through the migration of Hazardous Materials onto, above or under the Property, and the Property has not been designated as Border Zone Property under the laws where such Property is located or any regulation adopted in accordance therewith.

5.2 HAZARDOUS MATERIALS COVENANTS. Borrower agrees as follows:

a.	No Hazardous Activities. Borrower shall not cause or permit the Property to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials.
b.	Compliance. Borrower shall comply and cause the Property to comply with all Hazardous Materials Laws.
c.	Notices. Borrower shall immediately notify Lender in writing of: (i) the discovery of any Hazardous Materials on, under or about the Property; (ii) any knowledge by Borrower that the Property do not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims; and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated with Hazardous Materials.
d.	Removal and/or Remedial Action. In response to the presence of any Hazardous Materials on, under or about the Property, Borrower shall immediately take, at Borrower’s sole expense, all actions required by any Hazardous Materials Laws or any regulatory agency, governing body, judgment, consent decree, settlement or compromise with respect to any Hazardous Materials Claims.

5.3	INSPECTION BY LENDER. Upon reasonable prior notice to Borrower, Lender, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Property for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any Hazardous Materials into, onto, beneath or from the Property.
5.4	HAZARDOUS MATERIALS INDEMNITY. Borrower hereby agrees to defend, indemnify and hold harmless Lender, its directors, officers, employees, agents, successors and assigns from and against any and all losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including, without limitation, attorneys’ fees and expenses) which Lender may incur as a direct or indirect consequence of the use, generation, release, manufacture, storage, disposal, threatened disposal, transportation or presence of Hazardous Materials in, on, under or about the Property. Borrower shall immediately pay to Lender upon demand any amounts owing under this indemnity, together with interest from the date the indebtedness arises until paid at the rate of interest applicable to the principal balance of the note. Borrower’s duty and obligations to defend, indemnify and hold harmless Lender shall survive the cancellation of the Note and the release, reconveyance or partial reconveyance of the Deed of Trust.
	The foregoing indemnity and agreement to defend and hold harmless shall not apply to the extent any losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses arise out of or result from Hazardous Materials that first come into existence on the Property or improvements after the earlier of (a) the full repayment of the Loan and indefeasible satisfaction of all of Borrower’s obligations under the Loan Documents or (b) any foreclosure under the Deed of Trust or transfer of the Property by deed-in-lieu thereof;

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	provided, however, that the foregoing limitation shall cease to apply if any amount repaid or required to be repaid by Borrower under any of the Loan Documents or any of Borrower’s other obligations thereunder is at any time voided or otherwise rendered unenforceable pursuant to any state or federal bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance or preference law, act, statute or regulation.
5.5	LEGAL EFFECT OF SECTION. Borrower and Lender agree that: (a) this Article 5 is intended as Lender’s written request for information (and Borrower’s response) concerning the environmental condition of the real property security as required by California Code of Civil Procedure §726.5; and (b) each provision in this Article (together with any indemnity applicable to a breach of any such provision) with respect to the environmental condition of the real property security is intended by Lender and Borrower to be an “environmental provision” for purposes of California Code of Civil Procedure §736, and as such it is expressly understood that Borrower’s duty to indemnify Lender hereunder shall survive: (i) any judicial or non-judicial foreclosure under the Deed of Trust, or transfer of the Property in lieu thereof; (ii) the release and reconveyance or cancellation of the Deed of Trust; and (iii) the satisfaction of all of Borrower’s obligations under the Loan Documents.
5.6	ENVIRONMENTAL IMPAIRMENT. If any portion of the Property is determined to be “environmentally impaired” (as “environmentally impaired” is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an “affected parcel” (as “affected parcel” is defined in California Code of Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the Lender’s or the Trustee’s rights and remedies under this Deed of Trust, the Lender may elect to exercise its right under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected parcel or portion of the Property and (2) exercise (i) the rights and remedies of an unsecured creditor, including reduction of its claim against the Borrower to judgment, and (ii) any other rights and remedies permitted by law. For purposes of determining the Lender’s right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Borrower shall be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant or user of any portion of the Property and the Borrower knew or should have known of the activity by such lessee, occupant or user which caused or contributed to the release or threatened release. All costs and expenses, including, without limitation, attorneys’ fees, incurred by the Lender in connection with any action commenced under this Section, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the default rate of interest set forth in the Note until paid, shall be added to the obligations secured by this Deed of Trust and shall be due and payable to the Lender upon its demand made at any time following the conclusion of such action.

ARTICLE 6. COVENANTS OF BORROWER

6.1

EXPENSES. Borrower shall immediately pay to Lender upon demand: (a) all costs and expenses incurred by Lender in connection with the administration of this Agreement, the other Loan Documents and any other documents required by Lender during the term of the Loan; and (b) the enforcement or satisfaction by Lender of any of Borrower’s or Guarantor’s obligations under this Agreement, the other Loan Documents and the Guaranty. For all purposes of this Agreement, Lender’s costs and expenses shall include, without limitation, all appraisal fees, cost engineering and inspection fees, legal fees and expenses, accounting fees, environmental consultant fees, auditor fees, and the cost to Lender of any title insurance premiums, title surveys, recording fees, Deed of Trust registration taxes, reconveyance and notary fees. If any of the services described above are provided by an employee of Lender, Lender’s costs and expenses for such services shall be calculated in accordance with Lender’s standard charge for such services.

Lender hereby confirms and agrees that not withstanding anything else to the contrary in this Agreement or any of the Loan Documents, Borrower shall not be liable for any cost or expense related to transactions engaged in by Lender pursuant to Section 9.5 of this Agreement, unless those costs and expenses are caused by Borrower’s failure or refusal to cooperate.

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6.2	LEASING. To the extent any such space exists and is leased, Borrower shall use its best efforts to maintain all leasable space in the Property leased at no less than fair market rental rates.
6.3	FURTHER ASSURANCES. Upon Lender’s request and at Borrower’s sole cost and expense, Borrower shall execute, acknowledge and deliver any other instruments and perform any other acts necessary, desirable or proper, as determined by Lender, to carry out the purposes of this Agreement and the other Loan Documents or to perfect and preserve any liens created by the Loan Documents.
6.4	ASSIGNMENT. Without the prior written consent of Lender, Borrower shall not assign Borrower’s interest under any of the Loan Documents, or in any monies due or to become due thereunder, and any assignment without such consent shall be void, provided, however, that this restriction will not be applicable to a change in control of Guarantor provided the conditions set forth in Section 7.3 (b)(i) are satisfied. In this regard, Borrower acknowledges that Lender would not make this Loan except in reliance on Borrower’s expertise, reputation, prior experience in developing and constructing commercial real property, Lender’s knowledge of Borrower, and Lender’s understanding that this Agreement is more in the nature of an agreement involving personal services than a standard loan where Lender would rely on security which already exists.
6.5	INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES) WHICH LENDER MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;(C) ANY FAILURE AT ANY TIME OF ANY OF BORROWER’S REPRESENTATIONS OR WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, CONSTITUENT PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO ANY OF THE PROPERTY. BORROWER SHALL IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER’S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER SHALL SURVIVE CANCELLATION OF THE NOTE AND THE RELEASE OR RECONVEYANCE OF THE DEED OF TRUST.

ARTICLE 7. REPORTING COVENANTS

7.1

FINANCIAL INFORMATION. Except for such financial reports referenced in Section 7.3(a)(iv), Borrower shall deliver to Lender as soon as available, but in no event later than 120 days after Borrower’s fiscal year end, Borrower’s current financial statement (including without limitation, an income and expense statement and balance sheet) and Borrower’s current tax return signed by Borrower together with any other financial information including, without limitation, to the extent Borrower generates such reports in the ordinary course of business, quarterly financial statements, annual financial statements, cash flow projections, and quarterly operating statements requested by Lender. Borrower shall also deliver to Lender, as soon as available, but in no event later than 120 days after Guarantor(s) fiscal year end, Guarantor(s) current financial statement (including, without limitation, a balance sheet).

Within 30 days of Lender’s request, Borrower shall also deliver to Lender such quarterly and other financial information regarding any persons or entities in any way obligated on the Loan as Lender may specify, to the extent Borrower generates such reports in the ordinary course of business. If audited financial information is prepared, Borrower shall deliver to Lender copies of that information within 15 days of its final preparation. Except as otherwise agreed to by Lender, all such financial information shall be prepared in accordance with generally accepted accounting principles consistently applied.

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7.2	LEASING REPORTS AND OPERATING STATEMENTS. To the extent any exist, Borrower shall deliver to Lender quarterly rent rolls, leasing schedules and reports, operating statements and/or such other leasing information as Lender shall request with respect to the Property, each in form and substance satisfactory to Lender.
7.3	FINANCIAL CONDITION. Guarantor shall maintain its financial condition during the term of this Agreement according to the following schedules, using generally accepted accounting principles, consistently applied:

(a) FINANCIAL COVENANTS of Guarantor: Each of the following financial covenants, or such other financial covenants as maybe hereafter required by that certain Credit Agreement between Guarantor and Bank of America (“B of A”) dated December 2, 2005 (Guarantor must provide Lender with notice of the change in financial covenants before such change will alter the terms of this provision and (i) Lender must consent to any deletion of any covenants or (ii) Guarantor must continue to satisfy any deleted covenants), will be measured annually at the conclusion of the Guarantor’s fiscal years, provided, however, that so long as B of A has waived or extended this date of compliance, Guarantor will not be required to deliver any financial statements until such statements have been made publicly available by the Securities and Exchange Commission (“SEC”):

(i)	CONSOLIDATED NET WORTH. The Guarantor will at all times maintain, a Consolidated Net Worth of not less than the sum of $450,000,000 (Consolidated Net Worth is defined as eighty percent (80%) of Consolidated GAAP shareholder equity as of the date hereof) plus seventy-five percent (75%) of the net proceeds to the Guarantor of any equity capital transaction received during any subsequent quarter (except for all exercises of employee stock options, issuance or sale of restricted stock and operation of the employee stock purchase program), less $110,000,000 associated with stock repurchases.
(ii)	LEVERAGE RATIO. The Guarantor will maintain a ratio of Total Funded Indebtedness to Consolidated EBITDA so that it is not more than 4.25 to 1.0.
(iii)	FIXED CHARGE COVERAGE RATIO. The Guarantor will maintain a ratio of Consolidated EBITDAR to Consolidated Fixed Charges of not less than 1.75 to 1.0.
(iv)	Lender acknowledges that Guarantor is in the process of restating certain Financial Statements for periods of time prior to December 31, 2005. As part of the restatement process, Guarantor has not filed any Financial Statements subsequent to December 31, 2005. On September 18, 2007, B of A amended the covenants under the line of credit so that Guarantor is not required to provide any quarterly Financial Statements until January 31, 2008. Guarantor will certify covenants compliance when audited statements are provided.

(b) Additionally, the following covenants are included:

(i) A change in control of Guarantor does not require Lender’s consent if the following terms are met:

(a)	The ownership of the Borrower does not change.
(b)	Guarantor, Sunrise Senior Living Investments, Inc., Sunrise Senior Living Management, Inc. and Sunrise Development, Inc. all continue to exist.
(c)	Guarantor does not change its business away from managing and developing senior living facilities.
(d)	Guarantor has a management team with senior housing experience and a reputation favorably comparable to Guarantor’s current management team.

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(e) The acquirer of Guarantor meets all regulatory requirements required by federal law and provides Lender will all information necessary to fully comply with the US Patriot Act.

(c) DEFINITIONS. Capitalized terms in this paragraph are defined as;

     (i) “CAPITALIZED CASH INTEREST EXPENSE” means capitalized interest on construction or development loans, to the extent not funded from an interest reserve as part of third party construction financing.

     (ii) “COMPANY ” means Guarantor.

     (iii) “CONSOLIDATED EBITDA” means the sum of: (a)(i) net income; (ii) Consolidated Interest Expense; (iii) income taxes; (iv) depreciation and amortization; (v) the non-cash component of any unusual or non-recurring item of loss or expense which was deducted in determining net income (in accordance with GAAP), and (vi) income (or loss) in respect of minority interest (assuming it was deducted in the calculation of net income); minus (b) “other income-operating properties” as shown on the Company’s financial statements in accordance with GAAP as of the date hereof (or as such category may be categorized in future financial statements) in each case for the Borrower and is Subsidiaries on a consolidated basis. For purposes of calculating the Leverage Ratio only, Consolidated EBITDA will be adjusted to reflect actual transition costs (post-closing) or pre-closing on a pro forma basis to reflect (i) material acquisitions and dispositions of property and (ii) material acquisitions and dispositions of management contracts, provided that documentation of such acquisitions and dispositions satisfactory to Wells Fargo Bank, N.A. in its sole discretion is delivered to Wells Fargo Bank, N.A., Transition costs shall be subject to the approval of Wells Fargo Bank, N.A.

     (iv) “CONSOLIDATED EBITDAR” means the sum of: (a) Consolidated EBITDA plus (b) rent paid or payable under all operating leases as determined in accordance with GAAP.

     (v) “CONSOLIDATED FIXED CHARGES” means the sum of: (a) Consolidated Interest Expense, (b) Capitalized Cash Interest Expense (c) scheduled payments of principal on Total Funded Indebtedness (excluding balloon payments), (d) rent payable under all operating leases (other than capital leases) as determined in accordance with GAAP, and (e) dividends payable on stock.

     (vi) “CONSOLIDATED INTEREST EXPENSE” means total interest expense (whether paid or accrued), including the amortization of debt discounts and premiums as well as the interest component under capital leases, on a consolidated basis in accordance with GAAP.

     (vii) “CONSOLIDATED NET WORTH” means Shareholders’ Equity of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.

     (viii) “CONTINUING CARE RETIREMENT COMMUNITY” means a Senior Living Facility which provides or arranges housing and health-related services that are effective for the life of the resident or for an extended, specified period in excess of one year, including mutually terminable contracts, in consideration for the payment of an entrance fee, which services are provided on a comprehensive continuum of care basis which includes a skilled nursing facility.

     (ix) “CONVERTIBLE DEBT” means the $125,000,000 convertible subordinated notes of the Borrower which was due February 1, 2009, and paid off in advance of this Loan.

     (x) “DEVELOPMENT JOINT VENTURE INVESTMENTS” means (a) Investments which are (i) less than fifty percent (50%) owned and unconsolidated by any of the Loan Parties and (ii) have a ratio of EBITDAR to Fixed Obligations of less then 1.20 to 1.0 for any fiscal quarter plus (b) any amounts funded by any of the Loan Parties under operating deficit guaranties or construction completion guaranties.

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     (xi) “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

     (xii) “GOVERNMENTAL AUTHORITY” means the government of the Untied States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supranational bodies such as the European Union or the European Central Bank).

     (xiii) “LIFECARE BOND” means a surety bond, irrevocable letter of credit or other financial assurance required by a Governmental Authority as evidence of the financial responsibility of the owner or operator of a Continuing Care Retirement Community.

     (xiv) “PERSON” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     (xv) “SHAREHOLDERS’ EQUITY” means, as of any date of determination, consolidated shareholders’ equity of the Company and its Subsidiaries as of that date determined in accordance with GAAP.

     (xvi) “SUBSIDIARY” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interest having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company.

     (xvii) “TOTAL FUNDED INDEBTEDNESS” means all indebtedness and guarantees including recourse and non-recourse mortgage debt, capitalized leases, letters of credit, unsecured debt, guarantees (including all debt guarantees, but excluding all development completion guarantees and operating deficit guarantees which will be captured in the limitation on Development Joint Venture), purchase obligations treated as liabilities per GAAP, subordinated debt, unfunded obligations (including total Lifecare Bond obligations at GAAP book value, subject to certain exclusions as discussed below), all as defined in accordance with GAAP. Total Funded Indebtedness shall not include security deposits, accounts payable, accrued liabilities, any prepaid rent and any outstanding balance under the Convertible Debt only to the extent that the Company’s common stock market price remains at least $2.50 per share above the Convertible Debt conversion price. Furthermore, certain Lifecare Bond obligations may be excluded from Total Funded Indebtedness to the extent the Guarantor is not obligated to refund these obligations prior to receiving proceeds of new Lifecare Bonds. Total Funded Indebtedness will be reduced by unrestricted cash balances, cash equivalents and short-term marketable securities in excess of $50,000,000.

ARTICLE 8. DEFAULTS AND REMEDIES

8.1 DEFAULT. The occurrence of any one or more of the following shall constitute an event of default (“Default”) under this Agreement and the other Loan Documents:

a. Monetary. Borrower’s failure to pay when due any sums payable under the Note or any of the other Loan Documents or Borrower’s failure to deposit any Borrower’s Funds as and when required under this Agreement within ten (10) business days of when the sums are due; or

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b.	Performance of Obligations. Borrower’s failure to perform any obligation, covenant or condition under the Note or any of the other Loan Documents; provided, however, that if a cure period is provided for the remedy of such failure, Borrower’s failure to perform will not constitute a Default until such date as the specified cure period expires, or if no cure period is provided, Borrower shall have thirty (30) days upon written notice from Lender within which to cure the Default; provided, however, if Default cannot be cured through Borrower’s diligent attempts to cure within the thirty (30) days, that period shall be extended until such time as the Default can be cured, but in no event longer than ninety (90) days; or
c.	Lien; Attachment; Condemnation. (i) The recording or service upon Lender of any claim of lien against the Property and the continuance of such claim of lien for 20 days after such recording or service for ten (10) calendar days after Lender’s demand, whichever occurs first, without discharge, satisfaction or provision for payment being made by Borrower in a manner satisfactory to Lender; or (ii) the condemnation, seizure or appropriation of or occurrence of an uninsured casualty with respect to, any material portion of the Property; or (iii) the sequestration or attachment, or any levy or execution upon, any of the Property or any other collateral provided by Borrower or any other party under any of the Loan Documents is not released, expunged or dismissed within 20 days; or
d.	Representations and Warranties. (i) The failure of any representation or warranty of Borrower in any of the Loan Documents or by any Guarantor in the Guaranty and the continuation of such failure for more than 10 days after written notice to Borrower from Lender requesting that Borrower cure such failure; or (ii) any material adverse change in the financial condition of Borrower from the financial condition represented to Lender or a violation of any of the covenants previously set forth in Section 7.3 by Guarantor or any indemnitor as of the later of: (A) the Effective Date; or (B) the date upon which the financial condition of such party was first represented to Lender; or
e.	Bankruptcy; Insolvency; Dissolution. (i) The filing of by Borrower, any Guarantor or any partner or member of Borrower of a petition for relief under the Bankruptcy Reform Act of 1978 (11 USC Section 101-1330) as now or hereafter amended or recodified (“Bankruptcy Code”), or under any other present or future state or federal law regarding bankruptcy, reorganization or other debtor relief law; (ii) the filing against Borrower, Guarantor or any partner or member of Borrower of an involuntary proceeding under the Bankruptcy Code or other debtor relief law and the failure of Borrower to effect a full dismissal of such proceeding within 30 days after the date of filing such proceeding; (iii) a general assignment by Borrower, Guarantor or any partner or member of Borrower for the benefit of creditors; or (iv) Borrower, Guarantor or any partner or member of Borrower applying for, or the appointment of, a receiver, trustee, custodian or liquidator of Borrower or any of its property; or
f.	Transfer of Assets. The sale, assignment, pledge, hypothecation, mortgage or transfer of all or a substantial portion of the assets of Borrower.
g.	Transfer of Assets. Except as specifically allowed for in paragraph 7.3 above, the sale, assignment, pledge, hypothecation, mortgage or transfer of all or a substantial portion of assets of Guarantor other than in the ordinary course of business of said entity; or
h.	Other Obligations. Borrower shall default in any obligation to Lender, whether direct or indirect, absolute or contingent.

8.2 ACCELERATION UPON DEFAULT; REMEDIES. Upon the occurrence of any Default specified herein, Lender may, at its sole option, declare all sums owing to Lender under the Note, this Agreement and the other Loan Documents immediately due and payable. Upon such acceleration, Lender may, in addition to all other remedies permitted under the Note and this Agreement and the other Loan Documents and at law or equity, apply Borrower’s Funds, if any, to the sums owing under the Loan Documents and any and all obligations of Lender to fund further disbursements under the Loan shall terminate.

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Loan No. 105093

8.3	DISBURSEMENTS TO THIRD PARTIES. Upon the occurrence of a Default occasioned by Borrower’s failure to pay money to a third party as required by this Agreement, Lender may but shall not be obligated to make such payment from the Loan proceeds or other funds of Lender. If such payment is made from proceeds of the Loan, Borrower shall immediately deposit with Lender, upon written demand, an amount equal to such payment. If such payment is made from funds of Lender, Borrower shall immediately repay such funds upon written demand of Lender. In either case, the Default with respect to which any such payment has been made by Lender shall not be deemed cured until such deposit or repayment (as the case may be) has been made by Borrower to Lender.
8.4	SET OFF. Upon the occurrence of a Default, Lender may set off any and all amounts due by Borrower against any indebtedness or obligation of Lender to Borrower.
8.5	RIGHTS CUMULATIVE; NO WAIVER. All Lender’s rights and remedies provided in this Agreement, the other Loan Documents and the Guaranty, together with those granted by law or at equity, are cumulative and may be exercised by Lender at any time. Lender’s exercise of any right or remedy shall not constitute a cure of any Default unless all sums then due and payable to Lender under the Loan Documents are repaid and Borrower has cured all other Defaults. No waiver shall be implied from any failure of Lender to take, or any delay by Lender in taking, action concerning any Default or failure of condition under the Loan Documents, or from any previous waiver of any similar or unrelated Default or failure of condition. Any waiver or approval under any of the Loan Documents must be in writing and shall be limited to its specific terms. Any funds expended by Lender in the exercise of its rights or remedies under this Agreement and the other Loan Documents shall be payable to Lender upon demand, together with interest at the rate applicable to the principal balance of the Note from the date the funds were expended.

ARTICLE 9. MISCELLANEOUS PROVISIONS

9.1	NOTICES. All notices, demands, or other communications under this Agreement and the other Loan Documents shall be in writing and shall be delivered in accordance with the notice provisions contained in the Deed of Trust.
9.2	RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender under the Loan Documents is, and shall at all times remain, solely that of borrower and lender, and Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any third party with respect to the Property, except as expressly provided in this Agreement and the other Loan Documents.
9.3	ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged by Lender to enforce or defend any provision of this Agreement, any of the other Loan Documents or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, and including, without limitation, any fees and expenses incurred in any bankruptcy proceeding of Borrower or in connection with any appeal of a lower court decision, then Borrower shall immediately pay to Lender, upon demand, the amount of all attorneys’ fees and expenses and all costs incurred by Lender in connection therewith.
9.4	IMMEDIATELY AVAILABLE FUNDS. All amounts payable by Borrower to Lender shall be (a) payable only in United States currency in immediately available funds, and (b) received by Lender at the Disbursement and Operations Center in El Segundo, California, or at such other places as may be designated in writing by Lender, no later than 11 AM Pacific Standard Time or Pacific Daylight Time, as applicable. Any amounts received after such time shall be credited the next business day.
9.5	LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Borrower agrees that Lender may elect, at any time, to sell, assign or grant participations in all or any portion of its rights and obligations under the Loan Documents, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Borrower further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s)

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Loan No. 105093

	all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Borrower, any partner of Borrower, any constituent partner or member of Borrower, any Guarantor, any indemnitor and any non-borrower mortgagor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. The indemnity obligations of Borrower under the Loan Documents shall also apply with respect to any purchaser, assignee or participant.
9.6	LENDER’S AGENTS. Lender may designate an agent or independent contractor to exercise any of Lender’s rights under this Agreement and any of the other Loan Documents. Any reference to Lender in any of the Loan Documents shall include Lender’s agents, employees or independent contractors. Borrower shall pay the costs of such agent or independent contractor either directly to such person or to Lender in reimbursement of such costs, as applicable.
9.7	WAIVER OF RIGHT TO TRIAL BY JURY. TO THE MAXIMUM EXTENT ALLOWABLE UNDER CALIFORNIA LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
9.8	SEVERABILITY. If any provision or obligation under this Agreement and the other Loan Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that provision shall be deemed severed from the Loan Documents and the validity, legality and enforceability of the remaining provisions or obligations shall remain in full force as though the invalid, illegal, or unenforceable provision had never been a part of the Loan Documents, provided, however, that if the rate of interest or any other amount payable under the Note or this Agreement or any other Loan Document, or the right of collectibility therefor, are declared to be or become invalid, illegal or unenforceable, Lender’s obligations to make advances under the Loan Documents shall not be enforceable by Borrower.
9.9	HEIRS, SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided under the terms and conditions of this Agreement, the terms of the Loan Documents shall bind and inure to the benefit of the heirs, successors and assigns of the parties.
9.10	ATTORNEY IN FACT. Borrower hereby irrevocably appoints and authorizes Lender, as Borrower’s attorney in fact, which agency is coupled with an interest, to execute and/or record in Lender’s or Borrower’s name any notices, instruments or documents that Lender deems appropriate to protect Lender’s interest under any of the Loan Documents.
9.11	TAX SERVICE. If the Maturity Date and any extension thereof is 18 months or longer from the date hereof, Lender is authorized to obtain a tax service contract with a third party vendor which shall provide tax information on the Property satisfactory to Lender, and Borrower will pay up to $1,000.00 per year of the costs due under such contract.
9.12	TIME. Time is of the essence of each and every term of this Agreement.

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Loan No. 105093

9.13	GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the state where the Property is located, except to the extent preempted by federal laws. Borrower and all persons and entities in any manner obligated to Lender under the Loan Documents consent to the jurisdiction of any federal or state court within the state where the Property is located having proper venue and also consent to service of process by any means authorized by the law of such state or federal law.
9.14	INTEGRATION: INTERPRETATION. The Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. The Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Lender in writing.
9.15	JOINT AND SEVERAL LIABILITY. The liability of all persons and entities obligated in any manner under this Agreement and any of the Loan Documents shall be joint and several.
9.16	FORM OF DOCUMENTS. The form and substance of all documents, instruments, and forms of evidence to be delivered to Lender under the terms of this Agreement and any of the other Loan Documents shall be subject to Lender’s approval and shall not be modified, superseded or terminated in any respect without Lender’s prior written approval.
9.17	NO THIRD PARTIES BENEFITED. No person other than Lender and Borrower and their permitted successors and assigns shall have any right of action under any of the Loan Documents.
9.18	ACTIONS. Borrower agrees that Lender, in exercising the rights, duties or liabilities of Lender or Borrower under the Loan Documents, may commence, appear in or defend any action or proceeding purporting to affect the Property or the Loan Documents and Borrower shall immediately reimburse Lender upon demand for all such expenses so incurred or paid by Lender, including, without limitation, attorneys’ fees and expenses and court costs.
9.19	LENDER’S CONSENT. Wherever in this Agreement there is a requirement for Lender’s consent and/or a document to be provided or an action taken “to the satisfaction of Lender”, it is understood by such phrase that, except as expressly modified herein, Lender shall exercise its consent, right or judgment in a reasonable manner given the specific facts and circumstance applicable at the time.
9.20	HEADINGS. All articles, sections or other headings appearing in this Agreement and any of the other Loan Documents are for convenience of reference only and shall be disregarded in construing this Agreement and any of the other Loan Documents.
9.21	COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.
9.22	EXHIBITS INCORPORATED. Exhibits A, B, and C attached hereto, are hereby incorporated into this Agreement.

IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the date appearing on the first page of this Agreement.

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Loan No. 105093

“LENDER” WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Jennifer Tyler
	Jennifer Tyler
	Its: Vice President
Lender’s Address: WELLS FARGO BANK, NATIONAL ASSOCIATION 580 State Street, 2nd Floor Salem, OR 97301 Attn: Jennifer Tyler “BORROWER” SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company
By:	SUNRISE SENIOR LIVING INVESTMENTS,
	INC., a Virginia Corporation, Member
By:	/s/ Carl Adams
	Name: Carl Adams
	Its: Vice President
SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware Limited Partnership
By:	SUNRISE PLEASANTON GP, LLC, a Delaware
	Limited Liability Company, its General Partner
	By:  SUNRISE SENIOR LIVING INVESTMENTS,
	INC., a Virginia Corporation, its Sole Member
	By:  /s/ Carl Adams
	Name: Carl Adams
	Its: Vice President
Borrower’s Address: 7902 Westpark Drive McLean, VA 22102 Attn: James S. Pope

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Loan No. 105093

EXHIBIT A

DESCRIPTION OF PROPERTY

Exhibit A to LOAN AGREEMENT between SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company, and SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware Limited Partnership, jointly and severally, both referred to as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”, dated as of September 28, 2007.

PROPERTY I:

All the certain real property located in the County of Los Angeles, State of California, described as follows:

PARCEL 1:

LOTS 4 AND 5 OF HULETT C. MERRITT TERRACE, IN THE CITY OF PASADENA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 6 PAGE 141 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID LOS ANGELES COUNTY.

TOGETHER WITH THAT PORTION OF TERRACE DRIVE, 50 FEET IN WIDTH, VACATED BY RESOLUTION NO. 402, A COPY OF WHICH RECORDED SEPTEMBER 23, 1969 AS INSTRUMENT NO. 2152 IN BOOK D4505 PAGE 223 OF OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, TITLE TO WHICH WOULD PASS WITH A LEGAL CONVEYANCE OF THE ABOVE MENTIONED LOTS AND TOGETHER WITH THAT PORTION OF OLCOTT PLACE, 40 FEET IN WIDTH, VACATED BY RESOLUTION NO. 8701, A COPY OF WHICH RECORDED OCTOBER 31, 1966 IN BOOK D3469 PAGE 638 OF OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, TITLE TO WHICH WOULD PASS WITH A LEGAL CONVEYANCE OF THE ABOVE MENTIONED LOTS.

PARCEL 2:

LOT 3 OF KERNAGHAN AND ARNOLD’S SUBDIVISION OF THE NORTH 7 ACRES OF LOT 2 IN DIVISION C AND THE SOUTH 1.82 ACRES OF LOT 3 OF BERRY AND ELLIOTT’S SUBDIVISION OF DIVISION “C” OF THE LANDS OF THE SAN GABRIEL GROVE ASSOCIATION, IN THE CITY OF PASADENA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON MAP RECORDED IN BOOK 16 PAGE 92 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

TOGETHER WITH THAT PORTION OF TERRACE DRIVE, 50 FEET IN WIDTH VACATED BY RESOLUTION NO. 402, A COPY OF WHICH RECORDED SEPTEMBER 23, 1969 AS INSTRUMENT NO. 2152 IN BOOK D4505 PAGE 223 OF OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, TITLE TO WHICH WOULD PASS WITH A LEGAL CONVEYANCE OF THE ABOVE MENTIONED LOTS AND TOGETHER WITH THAT PORTION OF OLCOTT PLACE, 40 FEET IN WIDTH, VACATED BY RESOLUTION NO. 8701, A COPY OF WHICH RECORDED OCTOBER 31, 1966 IN BOOK D3469 PAGE 638 OF OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, TITLE TO WHICH WOULD PASS WITH A LEGAL CONVEYANCE OF THE ABOVE MENTIONED LOTS.

EXCEPT THEREFROM, ANY PORTION OF SAID LAND DESCRIBED IN THE DEED TO THE CITY OF PASADENA RECORDED OCTOBER 31, 1966 AS INSTRUMENT NO. 2225 OF OFFICIAL RECORDS.

EXHIBIT A

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Loan No. 105093

PARCEL 3:

LOT 13 (A PORTION OF WHICH WAS FORMERLY WITHIN TERRACE DRIVE, 50 FEET IN WIDTH, VACATED BY RESOLUTION NO. 402, A COPY OF WHICH RECORDED SEPTEMBER 23, 1969 AS INSTRUMENT NO. 2152, IN BOOK D-4505 PAGE 223 OF OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, AND LOTS 14, 15, 16,17 AND 18 OF DR. CONGAR’S HOME TRACT, AS PER MAP RECORDED IN BOOK 14 PAGE 52 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT THOSE PORTIONS OF SAID LOTS LYING NORTHERLY OF THE SOUTHERLY BOUNDARY OF THE LAND DESCRIBED IN PARCEL 12 OF THE DEED RECORDED OCTOBER 31, 1966 AS INSTRUMENT NO. 2225, OF OFFICIAL RECORDS.

PARCEL 4:

LOTS 15, 16, 17, 18, 19 AND 20 OF KERNAGHAN AND ARNOLD’S SUBDIVISION OF THE NORTH 7 ACRES OF LOT 2 IN DIVISION “C” AND THE SOUTH 11.82 ACRES OF LOT 3 OF BERRY AND ELLIOTT’S SUBDIVISION OF DIVISION “C” OF THE LANDS OF THE SAN GABRIEL ORANGE GROVE ASSOCIATION, IN THE CITY OF PASADENA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 92 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, TOGETHER WITH THAT PORTION OF CAMDEN STREET, 50 FEET IN WIDTH, VACATED BY RESOLUTION NO. 8627, A COPY OF WHICH RECORDED MAY 14, 1965 AS INSTRUMENT NO. 4702, IN BOOK D-2905 PAGE 560, OF OFFICIAL RECORDS, AND THAT PORTION OF TERRACE DRIVE, 50 FEET IN WIDTH, VACATED BY RESOLUTION NO. 402, A COPY OF WHICH RECORDED SEPTEMBER 23, 1969 AS INSTRUMENT NO. 2152, IN BOOK D-4505 PAGE 223 OF OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, TITLE TO WHICH WOULD PASS WITH A LEGAL CONVEYANCE OF THE ABOVE MENTIONED LOTS.

PARCEL 5:

THE NORTH HALF OF LOT 75 AND LOTS 76, 77, 78, 79 AND 80 OF THE DR. CONGAR TRACT, IN THE CITY OF PASADENA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 7 PAGE 74 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,TOGETHER WITH THAT PORTION OF CAMDEN STREET, 50 FEET IN WIDTH (FORMERLY THE SOUTH HALF OF LOT 75 AND THE NORTH HALF OF LOT 74), VACATED BY RESOLUTION NO. 8627, A COPY OF WHICH RECORDED MAY 14, 1965 AS INSTRUMENT NO. 4702, IN BOOK D-2905 PAGE 560, OFFICIAL RECORDS, IN SAID OFFICE OF THE COUNTY RECORDER, TITLE TO WHICH WOULD PASS WITH A LEGAL CONVEYANCE OF LOT 75.

EXCEPT FROM SAID LANDS THOSE PORTIONS WITHIN AS DESCRIBED IN A FINAL DECREE OF CONDEMNATION RECORDED IN BOOK 6143 PAGE 305 OF OFFICIAL RECORDS, AND ALSO WITHIN AS DESCRIBED IN A DEED RECORDED OCTOBER 31, 1966 AS INSTRUMENT NO. 2225 OF OFFICIAL RECORDS.

ALSO EXCEPT THE EASTERLY 10 FEET OF SAID LOTS.

Assessor’s Tax Account Number for Property I: 5713-012-015 (Portion), 5713-016-016 and 573-016-017

Property I Address: SW Corner Green Street and St. Johns Avenue, Pasadena, California

PROPERTY II:

All the certain property located in the County of Alameda, State of California, described as follows:

EXHIBIT A

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Loan No. 105093

PARCEL B, PARCEL MAP 696, FILED MAY 4, 1971, BOOK 69 OF MAPS, PAGE 45, ALAMEDA COUNTY RECORDS.

EXCEPTING THEREFROM THAT PORTION DESCRIBED IN THE DEED TO THE CITY OF PLEASANTON, A MUNICIPAL CORPORTION, RECORDED MAY 25, 1978, REEL 5410, IMAGE 20 SERIES NO. 78-98522, OFFICIAL RECORDS.

Assessor’s Tax Account Number for Property II: 941-1201-015-02

Property II Address: 5700 Pleasant Hills Road, Pleasanton, California

EXHIBIT A

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Loan No. 105093

EXHIBIT B

DOCUMENTS

Exhibit B to LOAN AGREEMENT between SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company, and SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware Limited Partnership, jointly and severally, both referred to as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”, dated as of September 28, 2007 (“Agreement”).

1. LOAN DOCUMENTS. The documents listed below, numbered 1.1 through 1.8, inclusive, below of even date herewith (unless otherwise specified), and amendments, modifications and supplements thereto which have received the prior written consent of Lender, together with any documents executed in the future that are approved by Lender and that recite that they are “Loan Documents” for purposes of this Agreement are collectively referred to herein as the Loan Documents.

1.1	This Agreement.
1.2	Note.
1.3	Deed of Trust.
1.4	Two Uniform Commercial Code National Financing Statement Form UCC 1, dated September ____, 2007.
1.5	Limited Liability Company Borrowing Certificate executed by SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company.
1.6	Limited Partnership Borrower Certificate executed by SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware Limited Partnership.
1.7	Corporate Resolution Authorizing Execution of Guaranty executed by SUNRISE SENIOR LIVING, INC., a Delaware Corporation.
1.8	Agreement for Disbursement prior to recording.

2. OTHER RELATED DOCUMENTS (WHICH ARE NOT LOAN DOCUMENTS)

2.1	Guaranty executed by SUNRISE SENIOR LIVING, INC., a Delaware Corporation as Guarantor in favor of Lender.
2.2	Unsecured Hazardous Materials Indemnity Agreement dated September                    , 2007 executed by and between SUNRISE SENIOR LIVING, INC. as Indemnitor and Lender.
2.3	Opinion of Borrower’s Legal Counsel dated                     , executed by                     on behalf of                                         .

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Loan No. 105093

EXHIBIT C

TRANSFER AUTHORIZER DESIGNATION

(For Disbursement of Loan Proceeds by Funds Transfer)

§ NEW o REPLACE PREVIOUS DESIGNATION o ADD o CHANGE o DELETE LINE NUMBER __

The following representatives of SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company, and SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware Limited Partnership, jointly and severally, (both referred to as “Borrower”) are authorized to request the disbursement of Loan Proceeds and initiate funds transfers for Loan Number 105093 dated September 28, 2007 between Wells Fargo Bank, National Association (“Bank”) and Borrower. Bank is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrower, even in the event that any or all of the foregoing information may have changed.

			Maximum Wire
	Name	Title	Amount1
1.	James S. Pope	Vice President	$	21,906,950.00
2.	Carl G. Adams	Vice President	$	21,906,950.00
3.
4.
5.

Beneficiary Bank and Account Holder Information

1.
Transfer Funds to (Receiving Party Account Name):
SUNRISE PASADENA CA SENIOR LIVING, LLC, a California Limited Liability Company, and/or SUNRISE PLEASANTON CA SENIOR LIVING, LP, a California Limited Partnership
Receiving Party Account Number:
Receiving Bank Name, City and State:	Receiving Bank Routing (ABA) Number
Bank of America, Richmond, VA	026009593
Maximum Transfer Amount:
$521,906,950.00
Further Credit Information/Instructions:
2.
Transfer Funds to (Receiving Party Account Name):
Receiving Party Account Number:
Receiving Bank Name, City and State:	Receiving Bank Routing (ABA) Number

¹ Maximum Wire Amount may not exceed the Loan Amount.

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Loan No. 105093

Maximum Transfer Amount:
Further Credit Information/Instructions:
3.
Transfer Funds to (Receiving Party Account Name):
Receiving Party Account Number:
Receiving Bank Name, City and State:	Receiving Bank Routing (ABA) Number
Maximum Transfer Amount:
Further Credit Information/Instructions:
Date:
“BORROWER’

SUNRISE PASADENA CA SENIOR LIVING, LLC,			SUNRISE PLEASANTON CA SENIOR LIVING, LP,
a California Limited Liability Company			a Delaware Limited Partnership
	By:	SUNRISE SENIOR LIVING		By:	SUNRISE PLEASANTON GP, LLC, a Delaware
		INVESTMENTS, INC., a Virginia			Limited Liability Company, its General Partner
		Corporation, Member
					By:	SUNRISE SENIOR LIVING INVESTMENTS,
						INC., a Virginia Corporation, its Sole Member
	By:	/s/ Carl Adams			By:	/s/ Carl Adams
	Name:  Carl Adams				Name:	Carl Adams
	Its:	Vice President			Its:	Vice President

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Loan No. 105093

DRAW AUTHORIZATION

Any one of the following individuals is authorized to sign each draw authorization on behalf of the Borrower under Loan No. 105093.

Printed Name	Signature
James S. Pope, Vice President
Carl G. Adams, Vice President	/s/ Carl G. Adams

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EX-10.3

Exhibit 10.3

[WFB Letterhead]

October 1, 2009

Sunrise Pleasanton CA Senior Living, LP
c/o Sunrise Senior Living Investments, Inc.
7902 Westpark Drive
McLean, VA 22102

Sunrise Pasadena CA Senior Living, LLC
c/o Sunrise Senior Living Investments, Inc.
7902 Westpark Drive
McLean, VA 22102

Sunrise Senior Living Investments, Inc.
7902 Westpark Drive
McLean, VA 22102
Attn: General Counsel

RE: SUNRISE PASADENA CA SENIOR LIVING, LLC, a California limited liability company, SUNRISE PLEASANTON CA SENIOR LIVING, LP, a Delaware limited partnership (both referred to collectively as “Borrower”), and SUNRISE SENIOR LIVING, INC., a Delaware corporation (“Guarantor”)
Wells Fargo Bank Loan #105093

Dear Ladies and Gentlemen:

          This Letter Agreement (“Letter Agreement”) is made by and among Borrower, Guarantor and Wells Fargo Bank, National Association (“Lender”).

          Reference is hereby made to that certain Loan Agreement dated September 28, 2007 by and between Borrower and Lender (as amended, the “Loan Agreement”) and all other documents and instruments executed by Borrowers in connection with the Loan as described in the Loan Agreement. Capitalized terms used but not defined herein have the meanings given to such terms in the Loan Agreement. Guarantor has guaranteed certain obligations of Borrower in connection with the Loan. All documents, instruments executed in connection with the Loan (including the Loan Agreement), together with all modifications and amendments thereto and any document required hereunder, are collectively referred to herein as the “Loan Documents”.

          As you know, the Loan is scheduled to mature on October 1, 2009. Upon the satisfaction of, and in consideration of, the following terms and conditions, Lender has agreed to (i) extend the Maturity Date to November 16, 2009 (the “Extended Maturity Date”) and (ii) forbear from enforcing its rights or remedies with respect to the Financial Covenant Defaults (defined below) until the earlier to occur of (a) the Extended Maturity Date or (b) other than the Financial

1

Covenant Defaults, a Default or any event or condition which, with the giving of notice or the passage of time, constitutes a Default:

a) No Defaults. Except with respect to breaches of covenants contained in Sections 7.3(a)(i)-(iii) of the Loan Agreement (the “Financial Covenant Defaults”), the undersigned hereby represents and warrants, that as of the date of this Letter Agreement, no Default shall have occurred and be continuing and no event or condition which, with the giving of notice or the passage of time or both, would constitute a Default shall have occurred and be continuing.

b)

Waiver of Claims. Each of Borrower and Guarantor knowingly (and after having had an opportunity to consult its own legal counsel), consciously, intentionally and fully waives and releases any and all claims, defenses, counterclaims or other charges, offsets or rights of action, known or unknown, contingent or direct, patent or latent, and arising on or before the date hereof, against Lender in any way, directly or indirectly, connected to or arising out of the transactions and activities that are covered by or associated with the Loan Documents. Further, each of Borrower and Guarantor, by acceptance of this Letter Agreement and its terms, acknowledges and agrees that, as of the date hereof, each of Borrower and Guarantor has no basis for any claim for loss, damages, injury or wrongdoing of any kind (negligent, intentional or otherwise) against Lender in connection with the transactions, activities or matters that have any connection with or to the Loan Documents and the transactions, activities, acts and subject matter thereof. Each of Borrower and Guarantor agrees not to assert any such claim arising on or before the date hereof, whether by way of defense, counterclaim, offset, independent claim or otherwise. The waivers and estoppel assertions set forth herein are intended to be comprehensive in their breadth and application and apply to acts, actions, omissions, statements, representations, commitments, covenants, promises, agreements and any and all other sources of liability or claim of any kind arising on or before the date hereof. Without limiting the generality of the foregoing, each of Borrower and Guarantor specifically waives the benefits of California Civil Code Section 1542 (or any similar provisions) which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

c) Title Costs. Borrower shall, within seven (7) days of written demand therefor by Lender, reimburse Lender for charges related to an additional endorsement for each of Lender’s policies of title insurance obtained in connection with the Loan.

          Except as expressly provided herein, nothing in this Letter Agreement shall alter or affect any provision, condition or covenant contained in the Loan Documents. From and after the date hereof, this Letter Agreement shall be deemed a “Loan Document” as such term is defined in the Loan Agreement.

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          Nothing in this Letter Agreement imposes a commitment or obligation of any kind on the part of the Lender to negotiate, enter into or otherwise provide any further forbearance, loan extension or loan modification of any kind. Unless and except as expressly stated herein, this Letter Agreement is not intended to limit or waive, nor shall it be deemed in any way to limit or waive, any of Lender’s right or remedies under the Loan Documents or otherwise. In the event that a Default other than the Financial Covenant Defaults occurs at any time prior to the Extended Maturity Date, Lender may immediately exercise its rights and remedies in any manner it chooses in its sole and absolute discretion. The Loan Documents shall remain in full force and effect as modified by this Letter Agreement.

          Please confirm your agreement to the foregoing by executing a counterpart of the Letter Agreement below and returning such counterpart to Lender. Upon satisfaction of the terms and conditions listed above, all references in the Loan Documents to the Maturity Date shall mean November 16, 2009.

Please feel free to contact me with any questions.

Sincerely,

“LENDER”

WELLS FARGO BANK, NATIONAL ASSOCIATION

By: Name:	/s/ Martia Kontak Martia Kontak
Its:	Senior Vice President

BORROWER AND GUARANTOR EACH HEREBY ACKNOWLEDGE AND AGREE TO THE FOREGOING.

“BORROWER”

SUNRISE PASADENA CA SENIOR LIVING, LLC,
a California limited liability company
	By:	Sunrise Senior Living Investments, Inc.,
		a Virginia corporation, Member
		By: Name:	/s/ Edward Burnett Edward Burnett
		Its:	Vice President

[SIGNATURE PAGE CONTINUES]

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SUNRISE PLEASANTON CA SENIOR LIVING, LP,
a Delaware limited partnership
	By:	Sunrise Pleasanton GP, LLC, a Delaware
		limited liability company, its General Partner
		By:	Sunrise Senior Living Investments, Inc.,
			a Virginia corporation, its Sole Member
		By: Name:	/s/ Edward Burnett Edward Burnett
		Its:	Vice President

“GUARANTOR”

SUNRISE SENIOR LIVING, INC., a Delaware corporation

By: Name:	/s/ Julie A. Pangelinan Julie A. Pangelinan
Its:	Chief Financial Officer

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EX-10.4

Exhibit 10.4

LOAN AND SECURITY AGREEMENT

(Loan A)

     THIS LOAN AND SECURITY AGREEMENT (the “Agreement”) is made as of August 28, 2007, by and among SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (“Borrower”), and CHEVY CHASE BANK, F.S.B., a federally chartered savings bank (“Agent” or in its individual capacity, “Chevy Chase”), as Agent for the lenders party hereto (individually a “Lender” and collectively, “Lenders”).

RECITALS

     A. Borrower has applied to Lenders for a term loan in the principal amount of Thirty Million Dollars ($30,000,000) (the “Loan”), to be used by Borrower to (i) refinance existing indebtedness which is secured by a lien on a 100 unit assisted living facility located at 5111 Connecticut Avenue, N.W., Washington, D.C., and known as “Sunrise of Connecticut Avenue” (the “Facility”) and (ii) finance a portion of the costs of acquisition of membership interests in Borrower.

     B. Sunrise Senior Living, Inc., a Delaware corporation, has executed a Guaranty of Payment — Loan A in favor of Agent pursuant to which it guarantees repayment and performance of all of Borrower’s obligations to Agent and Lenders under the documents evidencing or securing the Loan (the “Financing Documents”).

     C. Lenders are willing to make the loan to Borrower, each upon the terms and subject to the conditions hereinafter set forth.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Agent and Lenders hereby agree as follows:

ARTICLE I
DEFINITIONS

     Section 1.1 Certain Defined Terms.

     As used herein, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings:

     “Account,” individually, and, “Accounts,” collectively, mean all presently existing or hereafter acquired or created accounts, accounts receivable, health care insurance receivables, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods, all rights to receive

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the payment of money or other consideration under present or future contracts arising out of or relating to the Facility (including, without limitation, all rights to receive the payment of money or other consideration from, or on behalf of, any private pay patient), or by virtue of services rendered, loans and advances made or other considerations given, by or set forth in, or arising out of, any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts, agreements which gave rise to any or all of the foregoing insofar as they pertain to the Facility, including all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including real property mortgages and deeds of trust) given by any Person with respect to any of the foregoing, including, without limitation, all rights to receive payment of money or other consideration from, or on behalf of, any private pay patient, all rights to receive payments under all Resident Agreements, and all third-party payor contracts (including Medicare and Medicaid to the extent permitted by Law), including, but not limited to, the Veterans Administration, Participation Agreements, and any and all depository accounts (other than resident trust accounts) into which the proceeds of all or any portion of such accounts may be now or hereafter deposited, and all proceeds (cash and non-cash) of the foregoing.

     “Account Debtor” means any Person who is obligated on a Receivable and “Account Debtors” mean all Persons who are obligated on the Receivables.

     “Act of Bankruptcy” means the filing of a petition in bankruptcy under the Bankruptcy Code or the other commencement of a proceeding under any other applicable law concerning insolvency, reorganization or bankruptcy, now or hereafter in effect.

     “Affiliate” means an entity with either revenues or assets in excess of $750,000 in which an entity has an ownership interest equal to or greater than twenty-five percent (25%).

     “Agent” means the Person defined as the “Agent” in the preamble of this Agreement and shall also include any successor Agent appointed pursuant to Section 11.7.3 (Successor Agent).

     “Agent’s Obligations” shall mean any and all Obligations payable solely to and for the exclusive benefit of Agent by Borrower under the terms of this Agreement and/or any of the other Financing Documents.

     “Agreement” means this Loan and Security Agreement (Loan A) and all amendments, modifications and supplements hereto which may from time to time become effective in accordance with the provisions of Section 12.2 (Amendments; Waivers).

     “Assignee” means any Person to which any Lender assigns all or any portion of its interests under this Agreement, any Commitment, and any Loan, in accordance with the provisions of Section 12.5 (Assignments by Lenders), together with any and all successors and assigns of such Person; “Assignees” means the collective reference to all Assignees.

     “Bankruptcy Code” Title 11 of the United States Code, as amended from time to time, and any successor Laws.

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     “Business Day” shall mean any day that is not a Saturday, Sunday or banking holiday in the State and must also be a day in which dealings are carried on in the applicable interbank Eurodollar market.

     “Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

     “Chattel Paper” means a writing or writings which evidence both a monetary obligation and a security interest in or lease of specific goods, any returned, rejected or repossessed goods covered by any such writing or writings and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods, and all proceeds (cash and non-cash) of the foregoing but only to the extent that any of the foregoing relates to the Facility.

     “Closing Date” means the date of the closing of the Loans.

     “Collateral” shall mean all of Borrower’s Accounts, Chattel Paper, Equipment, General Intangibles, documents, Instruments and Inventory, all right, title and interest of Borrower in and to the Operating Agreements and Management Contracts (including, without limitation, the Management Agreement), Resident Agreements, Physician Contracts, Participation Agreements, the Licenses (whether or not designated with initial capital letters), as those terms are defined herein and in the Uniform Commercial Code as presently adopted and in effect in the State, and shall also cover, without limitation, (a) any and all property specifically included in those respective terms in this Agreement or in the Financing Documents, (b) all right, title and interest of Borrower in and to Leases or subleases, rents, royalties, issues, profits, revenues, earnings, income or other benefits of the Property, or arising from the use or enjoyment of the Property, or from any lease or other use and occupancy agreement pertaining to the Property, (c) any and all property and/or collateral described in any of the Security Documents, and (d) all proceeds (cash and non-cash, including, without limitation, insurance proceeds), of the foregoing.

     “Commitment” means with respect to each Lender, such Lender’s Term Loan Commitment, and “Commitments” means the Term Loan Commitments of all of Lenders.

     “Committed Amount” means with respect to each Lender, such Lender’s Term Loan Committed Amount.

     “Commonly Controlled Entity” shall mean an entity, whether or not incorporated, which is under common control with Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended and the regulations promulgated or issued thereunder.

     “Debt Service” means for any period of determination thereof an amount equal to the total of the aggregate amount of all payments of principal and interest with respect to the Term Loan, excluding any balloon payment.

     “Debt Service Ratio” means a ratio of Net Operating Income to Debt Service.

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     “Deed of Trust” means the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) of even date herewith, covering the Property, executed by Borrower in favor of Agent as collateral for Loan A, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “Default” means, with respect to each Financing Document, a default which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

     “Enforcement Costs” means all expenses, charges, costs and fees whatsoever (including, without limitation, reasonable attorney’s fees and expenses) of any nature whatsoever paid or incurred by or on behalf of Agent in connection with (a) the collection or enforcement of any or all of the Obligations, (b) the preparation of or changes to this Agreement, the Note, the Security Documents and/or any of the other Financing Documents, (c) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, including, without limitation, those sums paid or advanced, and costs and expenses, more specifically described in Section 10.5 (Performance by Agent) and Section 12.10 (Enforcement Costs), and (d) the monitoring, administration, processing, servicing of any or all of the Obligations and/or the Collateral.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

     “Equipment” shall mean all equipment, machinery, furniture and fixtures and supplies of every nature pertaining to the Facility, presently existing or hereafter acquired or created and wherever located, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary for the operation and use of such personal property, whether or not the same shall be deemed to be affixed to real property, and all rights under or arising out of present or future contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing.

     “Event(s) of Default” shall mean the occurrence of any one or more of the events specified in ARTICLE IX (Events of Default) or in the Deed of Trust and the continuance of such event beyond the applicable grace and/or cure periods therefor, if any, set forth in ARTICLE IX.

     “Facility” has the meaning described in the Recitals of this Agreement.

     “Federal Funds Rate” means for any day of determination, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day) by the Federal Reserve Bank for the next preceding Business Day) by the Federal Reserve Bank of Richmond or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by Agent from three (3) federal funds brokers of recognized standing selected by Agent.

     “Financing Documents” means at any time collectively this Agreement, the Note, the Deed of Trust, the Security Documents, and any other instrument, agreement or document

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previously, simultaneously or hereafter executed and delivered by Borrower and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with any of the Obligations and/or in connection with this Agreement, the Note and/or any of the Security Documents, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “GAAP” shall mean generally accepted accounting principles in effect in the United States of America in effect from time to time.

     “General Intangibles” shall mean any and all general intangibles of every nature, whether presently existing or hereafter acquired or created arising out of or relating to the Facility, including without limitation all books, correspondence, credit files, records, computer programs, computer tapes, cards and other papers and documents in the possession or control of Borrower, claims (including without limitation all claims for income tax and other refunds), choses in action, judgments, patents, patent licenses, trademarks (excluding the “Sunrise” trademark or tradename), trademark licenses, licensing agreements, rights in intellectual property, goodwill, as that term is defined in accordance with GAAP (including all goodwill of Borrower’s businesses symbolized by, and associated with, any and all trademarks, trademark licenses, copyrights and/or service marks), royalty payments, contractual rights, rights as lessee under any lease of real or personal property, literary rights, copyrights, service names, service marks, logos, trade secrets, all amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures or general or limited partnerships, all Licenses, construction permits, Operating Agreements and Management Contracts, Participation Agreements and Resident Agreements, and all proceeds (cash and non-cash) of the foregoing.

     “Governmental Authority or Authorities” shall mean any nation or government, the District of Columbia, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

     “Guarantor” means SSLI, and its successors and assigns.

     “Guaranty” means the Guaranty of Payment dated of even date herewith executed by SSLI in favor of Agent for the ratable benefit of Lenders, as amended, modified, substituted, extended, and renewed from time to time.

     “Hazardous Materials” means any flammable explosives, radioactive materials, hazardous waste, toxic substances or related materials, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde, radon, and any substance defined as or included in the definition of (a) any “hazardous waste” as defined by the Resource Conservation Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder; (b) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; (c) any “toxic substance” as defined by the Toxic Substances Control Act, as amended from time to time, and regulations promulgated thereunder; (d) any hazardous or infectious medical waste including, but not limited to, cultures and stocks of infectious agents and associated biologicals, pathological wastes, human and animal blood specimens and blood

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products, anatomical materials, blood, blood-soiled articles, contaminated materials, microbiological laboratory wastes, sharps, chemical wastes, infectious wastes, chemotherapeutic wastes, and radioactive wastes; (e) any substance, the presence of which on any property now or hereafter owned, operated or acquired by any Borrower is prohibited or regulated under any applicable Federal or state laws or regulations; and (f) any other substance, pollutant, contaminant, chemical, or industrial toxic hazardous substance or waste, including without limitation hazardous materials, which by law is prohibited or is otherwise regulated as a hazardous material.

     “Hazardous Materials Contamination” means the contamination (whether presently existing or occurring after the date of the Deed of Trust) of the Improvements, facilities, soil, ground water, air or other elements on, in or constituting a part of, the Property by Hazardous Materials, or the contamination of the buildings, facilities, soil, ground water, air or other elements on, in or constituting a part of, any other property as a result of Hazardous Materials at any time (whether before or after the date of the Deed of Trust) emanating from the Property.

     “Improvements” shall have the meaning given to that term in the Deed of Trust.

     “Instruments” means any and all notes, notes receivable, drafts, acceptances, and similar instruments or documents, both now owned or hereafter created or acquired arising out of or relating to the Facility (or any part thereof).

     “Inventory” means any and all inventory of Borrower and all right, title and interest of Borrower in, and to, all of its now owned and hereafter acquired goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease arising out of or relating to the Facility, including, without limitation, all supplies of any kind, nature or description which are used or consumed in Borrower’s business and all documents of title or documents representing the same and all proceeds (cash and non-cash) and products of the foregoing.

     “Investment Property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract or commodity account and all Proceeds of, and Supporting Obligations with respect to, the foregoing.

     “Laws” means all ordinances, statutes, rules, regulations, orders, injunctions, writs or decrees of any Governmental Authority or any court or similar entity established by any thereof.

     “Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.

     “Licenses” means any and all licenses, certificates of need, operating permits, franchises, and other licenses, authorizations, certifications, permits, or approvals, other than construction permits, issued by, or on behalf of, any Governmental Authority now existing or at any time hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing, ownership management and/or operation of the Facility, accreditation of the Facility, and/or the participation or eligibility for participation in any third party payment or reimbursement programs (but specifically excluding any and all third-party payor participation or

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reimbursement agreements now or at any time hereafter existing for the benefit of Borrower to the extent required by Law), any and all operating licenses issued by any state Governmental Authority, any and all pharmaceutical licenses and other licenses related to the purchase, dispensing, storage, prescription or use of drugs, medications, and other “controlled substances,” any and all licenses relating to the operation of food or beverage facilities or amenities, if any, and any and all certifications and eligibility for participation in Medicare, Medicaid, Blue Cross and/or Blue Shield, or any of the Managed Care Plans, private insurer, employee assistance programs or other third party payment or reimbursement programs as the same may from time to time be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified.

     “Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, lien or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, consensual or non-consensual, including, without limitation, any conditional sale or other title retention agreement, filed or unfiled tax liens, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction.

     “Loan B” means a term loan in the principal amount of $10,000,000 made by Chevy Chase to Borrower and evidenced by a Deed of Trust Note — Loan B of even date herewith executed by Borrower in favor of Chevy Chase (“Note B”) and secured as provided in Note B.

     “Managed Care Plans” shall mean any health maintenance organization, preferred provider organization, individual practice association, competitive medical plan, or similar arrangement, entity, organization, or Person.

     “Management Agreement” shall mean the Management Agreement dated April 1, 2002, by and between Borrower and the Management Company relating to the management of the Facility, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “Management Company” means SSLMI, its successors and assigns and any other Person which may become the manager of the Facility.

     “Material Adverse Change” means a significant adverse change in a Person’s financial position or capacity including but not limited to significant adverse changes in (a) liquidity (b) gross revenues (c) total expenses (d) such Person’s net worth or (e) ability to meet payment obligations under such Person’s existing funded debt, existing Indebtedness, the Obligations and/or existing contingent liabilities.

     “Multi-employer Plan” shall mean a Plan which is a multi-employer plan as defined in Section 4001(a)(3) of ERISA.

     “Net Operating Income” means for any period of determination thereof an amount equal to the total of the sum of operating revenues less operating expenses plus depreciation and amortization and a reserve of $300 per unit per annum.

     “Note” and “Notes” shall have the meanings set forth in Section 2.l(b) (The Loan).

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     “Notice” means a written communication delivered by hand, or sent by overnight courier, or by certified or registered mail, postage prepaid, return receipt requested, to the Person to whom such communication is to be given, at the addresses set forth in Section 12.1 (Notices).

     “Obligations” means all present and future debts, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of Borrower to Agent and Lenders under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, the Notes, each Security Document, and any of the other Financing Documents, any Swap Contract or the Loan, including, without limitation, the principal of, and interest on, the Note, late charges, Enforcement Costs, and other prepayment penalties (if any), letter of credit fees or fees charged with respect to any guaranty of any letter of credit, any and all recording, transfer or other taxes and costs of any kind required or incurred in connection with the recordation of a ground lease of the Property (as defined in the Deed of Trust) and also means all other present and future indebtedness, liabilities and obligations, whether now existing or contemplated or hereafter arising, of Borrower to Agent of any nature whatsoever regardless of whether such debts, obligations and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or contingent, and any and all renewals, extensions and rearrangements of any such debts, obligations and liabilities.

     “Operating Agreements and Management Contracts” means any and all contracts and agreements previously, now or at any time hereafter entered into by Borrower and/or the Management Company other than Resident Agreements with respect to the acquisition, construction, renovation, expansion, ownership, operation, maintenance, use or management of the Property or otherwise concerning the operations and business of the Property, any and all service and maintenance contracts, any employment contracts, any and all management agreements, any and all consulting agreements, laboratory servicing agreements, pharmaceutical contracts, physician, other clinician or other professional services provider contracts, patient admission agreements, Resident Agreements, food and beverage service contracts, and other contracts for the operation and maintenance of, or provision of services to, the Property, as the same may from time to time be amended, restated or substituted from time to time.

     “Participation Agreements” means any and all third party payor participation or reimbursement agreements now or at any time hereafter existing for the benefit of Borrower relating to rights to payment or reimbursement from, and claims against, private insurers, Managed Care Plans, material employee assistance programs, Blue Cross and/or Blue Shield, federal, state and local Governmental Authorities, including without limitation, Medicare and Medicaid, and other third party payors, as the same may from time to time be amended, restated, extended, supplemented or modified.

     “Permitted Liens” means: (a) Liens for Taxes which are not delinquent or which Agent has determined in the good faith exercise of its sole and absolute discretion (i) are being diligently contested in good faith and by appropriate proceedings, (ii) Borrower have the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting Borrower, and (iii) are not, and will not be with appropriate filing, the giving of notice and/or the passage of time, entitled to priority over any Lien of Agent; (b) deposits or pledges to secure obligations under workers’ compensation, social security or similar laws, or under unemployment insurance in the ordinary course of business; (c) Liens in favor of Agent or

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Lenders; (d) judgment Liens to the extent the entry of such judgment does not constitute an Event of Default under the terms of this Agreement or result in the sale of, or levy of execution on, any of the Collateral; and (e) Liens approved by Agent and Lenders which have been created to secure permitted subordinated debt on a junior lien basis; and (f) such other Liens, if any, as are identified as Permitted Encumbrances as defined in the Deed of Trust.

     “Person” shall mean and include an individual, a corporation, a partnership, a limited liability company, a joint venture, a trust, an unincorporated association, any Governmental Authority or any other entity.

     “Pledge Assignment and Security Agreement” means the Pledge, Assignment and Security Agreement of even date herewith executed by SSLII in favor of Agent, pursuant to which SSLII has pledged and assigned all of its interests in Borrower to Agent for the ratable benefit of Lenders as additional security for the Loan.

     “Post Default Rate” means the interest rate on the Note plus three percent (3%) per annum.

     “Property” shall have the meaning given to that term in the Deed of Trust.

     “Receivables” means all of Borrower’s now or hereafter owned, acquired or created Accounts, Chattel Paper, Contract Rights, General Intangibles and Instruments, and all cash and non-cash proceeds and products thereof.

     “Reportable Event” shall mean any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder.

     “Requisite Lenders” means at any time of determination one or more Lenders holding at least sixty-six and two thirds percent (66 2/3%) of the Commitments; provided, however, so long as there are only two (2) Lenders, “Requisite Lenders” shall mean both Lenders.

     “Resident Agreements” means any and all contracts, authorizations, agreements and/or consents executed by or on behalf of any resident or other person seeking services from the Management Company or Borrower pursuant to which the Management Company or Borrower provides or furnishes health or assisted living care and related services at the Property, including the consent to treatment, assignment of payment of benefits by third party, as amended, restated or substituted from time to time.

     “SSLI” means Sunrise Senior Living, Inc., a Delaware corporation.

     “SSLII” means Sunrise Senior Living Investments, Inc., a Virginia corporation.

     “SSLMI” means Sunrise Senior Living Management, Inc., a Virginia corporation.

     “Security Documents” shall mean, collectively, any assignment, including, without limitation, the Pledge, Assignment and Security Agreement, the Guaranty and any assignment, pledge agreement, security agreement, mortgage, deed of trust, leasehold mortgage, leasehold deed of trust, deed to secure debt, financing statement and any similar instrument, document or

9

agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, Agent on any collateral to secure the Obligations, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “State” means the Commonwealth of Virginia.

     “Sunrise Bank Group” means the lenders from time to time under the Sunrise Senior Financing Agreement.

     “Sunrise Senior Financing Agreement” means the Credit Agreement dated as of December 2, 2005 by and among Guarantor, certain subsidiaries of Guarantor, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the lenders named therein or any senior credit facility substituted therefor from time to time.

     “Supporting Obligation” means a Letter-of-credit right, secondary obligation or obligation of a secondary obligor or that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument or investment property.

     “Swap Contract” means any document, instrument or agreement between Borrower and Agent or any affiliate of Agent, now existing or entered into in the future, relating to an interest rate swap transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar transaction, any option to enter into any of the foregoing, and any combination of the foregoing, which agreement may be oral or in writing, including, without limitation, any master agreement relating to or governing any or all of the foregoing and any related schedule or confirmation, each as amended from time to time.

     “Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority on Borrower or any of their properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

     “Term Loan” and “Term Loans” have the meanings described in Section 2.1 (a) (The Term Loan).

     “Term Loan Commitment” and ‘Term Loan Commitments” have the meanings described in Section 2.1 (a) (The Term Loan).

     “Term Loan Committed Amount” has the meaning described in Section 2.1 (a) (The Term Loan).

     “Term Loan Facility” means the facility established by Lenders pursuant to Section 2.1 (The Term Loan).

     “Term Loan Pro Rata Share” has the meaning described in Section 2.1 (a) (The Term Loan).

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     “Total Term Loan Committed Amount” has the meaning described in Section 2.1 (a) (The Term Loan).

     “Uniform Commercial Code” means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other jurisdiction, as applicable.

     Section 1.2 Accounting Terms and Other Definitional Provisions.

     Unless otherwise defined in this Agreement, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined in this Agreement, and accounting terms only partly defined in this Agreement, to the extent not defined, shall have the respective meanings given to them under GAAP. Unless otherwise defined in this Agreement, all terms used in this Agreement which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, section, subsection, schedule and exhibit references are references to sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used in this Agreement, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neutered gender shall include all genders, as the context may require. Reference to any one or more of the Financing Documents and any of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified.

ARTICLE II
BORROWING

     Section 2.1 The Term Loan.

          (a) Subject to and upon the provisions of this Agreement, each Lender severally agrees to make a loan (each a “Term Loan”; and collectively, the “Term Loans”) to Borrower on the Closing Date in the principal amount set forth below opposite such Lender’s name (herein called such Lender’s “Term Loan Committed Amount”). The total of each Lender’s Term Loan Committed Amount is herein called the “Total Term Loan Committed Amount”. The proportionate share set forth below opposite each Lender’s name is herein called such Lender’s “Term Loan Pro Rata Share”:

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	Term Loan
Lender	Committed Amount		Term Loan Pro Rata Share
Chevy Chase Bank, F.S.B.	$	20,000,000		66.6666667	%
MB Financial Bank, N.A.	$	10,000,000		33.3333333	%
Total Term Loan Committed Amount	$	30,000,000		100	%

          The obligation of each Lender to make a Term Loan is several and is limited to its Term Loan Committed Amount, and such obligation of each Lender is herein called its “Term Loan Commitment”. The Term Loan Commitment of each Lender are herein collectively referred to as the “Term Loan Commitments”. Agent shall not be responsible for the Term Loan Commitment of any Lender, except to the extent Agent acts as a Lender; and similarly, none of Lenders shall be responsible for the Term Loan Commitment of any of the other Lenders; the failure, however, of any Lender to perform its Term Loan Commitment shall not relieve any of the other Lenders from the performance of their respective Term Loan Commitments.

          (b) The obligation of Borrower to pay the Term Loans with interest shall be evidenced by a series of promissory notes (each as from time to time extended, amended, restated, supplemented or otherwise modified, the “Note” and collectively, the “Notes”) substantially in the form of EXHIBIT A attached hereto and made a part hereof with appropriate insertions. Each Note shall be dated as of the Closing Date, shall be payable to the order of a Lender at the times provided in the Note, and shall be in the principal amount of such Lender’s Term Loan Committed Amount.

          (c) Borrower may voluntarily prepay the principal sum outstanding only in accordance with the terms of the Note. Sums borrowed and repaid may not be readvanced.

     Section 2.2 Settlement Among Lenders.

          (a) Agent shall pay to each Lender on each payment date, such Lender’s ratable share of all payments received by Agent in immediately available funds on account of the Term Loans, net of any amounts payable by such Lender to Agent, by wire transfer of same day funds; the amount payable to each Lender shall be based on the principal amount of the Term Loan owing to such Lender.

          (b) All other amounts received by Agent on account of, or applied by Agent to the payment of, any Obligation owed to Lenders (including, without limitation, fees payable to Lenders and proceeds from the sale of, or other realization upon, all or any part of the Collateral following an Event of Default) that are received by Agent not later than 11:00 a.m. (Eastern Time) on a Business Day will be paid by Agent to each Lender on the same Business Day, and

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any such amounts that are received by Agent after 11:00 a.m. (Eastern Time) will be paid by Agent to each Lender on the following Business Day.

          (c) Unless Agent shall have received notice from Borrower prior to the date on which any payment is due to Agent that Borrower will not make such payment in full, Agent may assume that Borrower has made such payment in full to Agent on such date and Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Borrower shall not have so made such payment in full to Agent and Agent shall have distributed to any Lender all or any portion of such amount, such Lender shall repay to Agent on demand the amount so distributed to such Lender, together with interest thereon at the Federal Funds Rate, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to Agent.

ARTICLE III
GENERAL FINANCING PROVISIONS

     Section 3.1 Computation of Interest and Fees.

     All applicable fees and interest shall be calculated on the basis of a year of 365 days for the actual number of days elapsed pursuant to the terms of the Note and Borrower’s election of interest rate options thereunder and interest shall be payable in arrears.

     Section 3.2 Payment and Performance of Obligations.

     All payments of the Obligations shall be paid by Borrower without setoff or counterclaim to Agent (except as otherwise provided herein) at Agent’s office specified in Section 12.1 (Notices) in immediately available funds not later than 2:00 p.m. (Eastern Time) on the due date of such payment. All payments received by Agent after such time shall be deemed to have been received by Agent for purposes of computing interest and fees and otherwise as of the next Business Day. Payments shall not be considered received by Agent until such payments are paid to Agent in immediately available funds.

     Section 3.3 Liens; Setoff.

     Borrower hereby grants to Agent and to Lenders a continuing Lien for all of the Obligations (including, without limitation, Agent’s Obligations) upon any and all monies, Investment Property, and other property of Borrower and the proceeds thereof, now or hereafter held or received by or in transit to, Agent, any of Lenders, and/or any Affiliate of Agent and/or any of Lenders, from or for the account of Borrower, and also upon any and all deposit accounts (general or special) and credits of Borrower, if any, with Agent, any of Lenders or any Affiliate of Agent or any of Lenders, at any time existing, excluding any deposit accounts held by Borrower in its capacity as trustee for Persons who are not Affiliates of Borrower. Without implying any limitation on any other rights Agent and/or Lenders may have under the Financing Documents or applicable Laws, during the continuance of an Event of Default, Agent and the each of Lenders, respectively, is hereby authorized by Borrower at any time and from time to time, without notice to Borrower, to set off, appropriate and apply any or all items hereinabove referred to against all Obligations (including, without limitation, Agent’s Obligations) then

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outstanding (whether or not then due), all in such order and manner as shall be determined by Agent in its sole and absolute discretion.

     Section 3.4 Requirements of Law.

     In the event that any Lender shall have determined in good faith that (i) the adoption of any Capital Adequacy Regulation, or (ii) any change in any Capital Adequacy Regulation or in the interpretation or application thereof or (iii) compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender, as a consequence of the obligations of such Lender hereunder to a level below that which such Lender or any corporation controlling such Lender would have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender and the corporation controlling such Lender, with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to Borrower of a written request therefor and a statement of the basis for such determination, Borrower shall pay to such Lender such additional amount or amounts in order to compensate such Lender or its controlling corporation for such reduction. If rates have been increased pursuant to the foregoing, and thereafter there is a change which has the effect of increasing the rate of return to a Lender, then any additional amount that had been charged will appropriately reduce.

ARTICLE IV
COLLATERAL

     Section 4.1 Collateral.

     As security for the payment of all of the Obligations and for Borrower’s performance of, and compliance with, all of the terms, covenants, conditions, stipulations and agreements contained in the Financing Documents, Borrower hereby assigns, grants and conveys to Agent, for the ratable benefit of Lenders, and agrees that Agent, for the ratable benefit of Lenders, shall have, to the extent permitted by law a perfected, continuing security interest in, all of the Collateral. Borrower further agrees that Agent shall have in respect of the Collateral all of the rights and remedies of a secured party under the Uniform Commercial Code and under other applicable Laws as well as those provided in this Agreement. Borrower covenants and agrees to execute and deliver such financing statements and other instruments and filings as are necessary in the opinion of Agent to perfect such security interest. Notwithstanding the fact that the proceeds of the Collateral constitute a part of the Collateral, Borrower may not dispose of the Collateral, or any part thereof, other than in the ordinary course of its business or as otherwise may be permitted by this Agreement.

     Section 4.2 Assignment of Ownership Interests.

     The Obligations are further secured by the Pledge, Assignment and Security Agreement pursuant to which SSLII has assigned to Agent, for the ratable benefit of Lenders, one hundred percent (100%) of its ownership interests in Borrower.

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     Section 4.3 Costs.

     Borrower agrees to pay on demand, to the fullest extent permitted by applicable laws, all reasonable fees, commissions, costs, charges and other expenses incurred by Agent in connection with the taking, perfection, preservation, protection and/or release of any security interest or lien on any of the Collateral.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Agent and Lenders as follows:

     Section 5.1 Good Standing.

     Borrower (a) is a limited liability company duly organized, existing and in good standing under the laws of the Commonwealth of Virginia, (b) has the power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary.

     Section 5.2 Power and Authority.

     Borrower has full power and authority to execute and deliver this Agreement and each of the other Financing Documents executed and delivered by it and to incur the Obligations, all of which have been duly authorized by all proper and necessary action. No consent or approval of owners of, or lenders to, Borrower, and no consent or approval of any Governmental Authority or any third party payor on the part of Borrower, is required as a condition to the validity or enforceability of this Agreement or any of the other Financing Documents executed and delivered by Borrower or to the payment or performance by Borrower of the Obligations.

     Section 5.3 Binding Agreements.

     This Agreement and each of the other Financing Documents executed and delivered by Borrower have been properly executed by Borrower, constitute valid and legally binding obligations of Borrower, and are fully enforceable against Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applications affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law.

     Section 5.4 Litigation.

     There are no proceedings pending before any court or arbitrator or before or by any Governmental Authority which, in any one case or in the aggregate, will materially adversely affect the financial condition or operations of Borrower or the authority of Borrower to enter into this Agreement or any of the other Financing Documents executed and delivered by Borrower. There is no pending revocation, suspension, termination, probation, restriction, limitation or non-renewal of any License, Participation Agreement or any similar accreditation or approval from any organization or Governmental Authority regulating healthcare providers, including, without limitation, the issuance of any provisional License or other License with a term of less than twelve (12) months, as a consequence of any sanctions imposed by any Governmental Authority,

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nor is there any pending assessment of any civil or criminal penalties by any Governmental Authority, the outcome of which, if determined adversely to Borrower, could materially impair Borrower’s ability to pay the Obligations. Borrower has no appeals regarding rates or reimbursements currently pending or contemplated before any Governmental Authority or any administrator of any third party payor or preferred provider program or referral source, the outcome of which, if determined adversely to Borrower, could materially impair Borrower’s ability to pay the Obligations. There are no Medicare or Medicaid recoupments or recoupments of any other third party payor being sought, requested or claimed, against Borrower, the outcome of which, if determined adversely to Borrower could materially impair Borrower’s ability to pay the Obligations, except as otherwise disclosed in writing to, and approved by, Agent.

     Section 5.5 No Conflicting Agreements.

     There is (a) no provision of the operating agreement of Borrower and no provision of any existing mortgage, indenture, contract or agreement binding on Borrower or affecting its property, and (b) to the knowledge of Borrower no provision of law or order of court binding upon Borrower, which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by Borrower, or which would be violated as a result of such execution, delivery or performance, or, if so, all necessary consents have been obtained.

     Section 5.6 Financial Information.

     All financial statements or information hereto furnished to Agent and Lenders with respect to Borrower and the Facility is complete and correct in all material respects and fairly presents the financial position of Borrower and the financial condition of the Facility. There are no liabilities, direct or indirect, fixed or contingent, of Borrower which are not reflected in Borrower’s financial statements or in the notes thereto. There has been no Material Adverse Change in the financial condition or operations of Borrower or the Facility since the date of such financial statements and information (and to Borrower’s knowledge, no such adverse change is pending), and Borrower has not guaranteed the obligations of, or made any investments in or advances to, any company, individual or other entity, except as disclosed in such information.

     Section 5.7 No Default.

     Borrower is not in default under or with respect to any obligation under any agreement to which Borrower is a party in any respect which could materially adversely affect the ability of Borrower to perform the Obligations. There is no Event of Default hereunder.

     Section 5.8 Taxes.

     Borrower has filed or has caused to have been filed all federal, state and local tax or informational returns which are required by law to be filed, and have paid or caused to have been paid all Taxes as shown on such returns or on any assessment received by Borrower, to the extent that such Taxes have become due, or which are required by law to be paid, unless and to the extent only that such Taxes, assessments and governmental charges are currently contested in good faith and by appropriate proceedings by Borrower and adequate reserves therefor have been established as required under GAAP.

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     Section 5.9 Place(s) of Business and Location of Collateral.

     Borrower warrants that the address of its chief executive office is as specified in EXHIBIT B attached hereto and made a part hereof and that the address of each of its other places of business, if any, is as disclosed to Agent and Lenders in EXHIBIT B. The Collateral and all books and records pertaining to the Collateral are and will be located at the addresses indicated on EXHIBIT B. Borrower will immediately advise Agent and Lenders in writing of the opening of any new place of business or the closing of any existing place of business, and of any change in the location of the places where the Collateral, or any part thereof, or the books and records concerning the Collateral, or any part thereof, are kept.

     Section 5.10 Title to Properties.

     Borrower has good and marketable title to all of its properties, including, without limitation, the Collateral owned by it, and the Collateral is free and clear of mortgages, pledges, liens, charges and other encumbrances other than the Permitted Liens.

     Section 5.11 Margin Stock.

     None of the Loan proceeds will be used, directly or indirectly, by Borrower for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry, any “margin security” within the meaning of Regulation G (12 CFR Part 207), or “margin stock” within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System (herein called “margin security” and “margin stock”) or for any other purpose which might make the transactions contemplated herein a “purpose credit” within the meaning of said Regulation G or Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any rules or regulations promulgated under any of such statutes.

     Section 5.12 ERISA.

     With respect to any “pension plan”, as defined in Section 3(2) of ERISA, which plan is now or previously has been maintained or contributed to by Borrower and/or by any Commonly Controlled Entity: (a) no “accumulated funding deficiency” as defined in Code §412 or ERISA §302 has occurred, whether or not that accumulated funding deficiency has been waived, that would materially adversely affect the ability of Borrower to pay the Obligations; (b) no “reportable event” as defined in ERISA §4043 has occurred with respect to which notice has not been waived under 29 C.F.R. § 4043; (c) no termination of any plan subject to Title IV of ERISA has occurred that would materially adversely affect the ability of Borrower to pay the Obligations; (d) neither Borrower nor any Commonly Controlled Entity has incurred a “complete withdrawal” within the meaning of ERISA §4203 from any multi-employer plan; (e) neither Borrower nor any Commonly Controlled Entity has incurred a “partial withdrawal” within the meaning of ERISA §4205 with respect to any multi-employer plan; (f) no multi-employer plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute is in “reorganization” within the meaning of ERISA §4241 nor has notice been received by Borrower or any Commonly Controlled Entity that such a multi-employer plan will be placed in “reorganization”.

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     Section 5.13 Governmental Consent.

     Neither the nature of Borrower or of its business or properties, nor any relationship between Borrower and any other Person, nor any circumstance in connection with the making of the Loan, or the offer, issue, sale or delivery of the Note is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority, on the part of Borrower, as a condition to the execution and delivery of this Agreement or any of the other Financing Documents, the borrowing of the principal amount of the Loan or the offer, issue, sale or delivery of the Note.

     Section 5.14 Full Disclosure.

     The financial statements referred to in this ARTICLE V do not, nor does this Agreement, nor do any written statements furnished by Borrower to Agent in connection with the making of the Loan, contain any untrue statement of fact or knowingly omit a material fact necessary to make the statements contained therein or herein not materially misleading. Borrower has not, to the best of its knowledge, failed to disclose any fact to Agent in writing which materially adversely affects or, will or could prove to materially adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of Borrower or the ability of Borrower to perform this Agreement.

     Section 5.15 Business Names and Addresses.

     Borrower has not conducted business under any name other than its current name, and has not conducted its business in any jurisdiction other than the District of Columbia. Borrower intends to operate the Facility under the name “Sunrise of Connecticut Avenue”. Borrower shall promptly notify Agent of any change in the name of the Facility.

     Section 5.16 Licenses.

     Borrower further represents and warrants to Agent that, with respect to any License: (a) no Default or Event of Default has occurred or is continuing under the terms of any of the Licenses, or any condition to the issuance, maintenance, renewal and/or continuance of any License, (b) Borrower has paid all fees, charges and other expenses to the extent due and payable with respect to, and has provided all information and otherwise complied with all material conditions precedent to, the issuance, maintenance, renewal, and continuance of all Licenses, (c) Borrower has not received any notice from any Governmental Authority relating to any actual or pending suspension, revocation, restriction, or imposition of any probationary use, of any License, nor has any License been materially amended, supplemented, rescinded, terminated, or otherwise modified except as otherwise disclosed in writing to, and approved by, Agent, (d) Borrower has not made any previous assignment of any of the Licenses to any Person, and (e) no financing statement covering any of the Licenses is on file in any public office except financing statements in favor of Agent. The foregoing notwithstanding, Borrower, Agent and Lenders acknowledge and agree that the District of Columbia does not currently require a license for the operation of an assisted living facility. At such time as the District of Columbia implements laws or establishes regulations governing the operation of the Facility which require licensure, Borrower shall provide Agent with a copy of the License issued by the District of Columbia and comply with this Section 5.16 in all respects.

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     Section 5.17 Operating Agreements and Management Contracts.

     Borrower has furnished or caused SSLMI to furnish to Agent photocopies of all material Operating Agreements and Management Contracts entered into with respect to the Facility, and all amendments, supplements and modifications thereto including, without limitation, the Management Agreement. Borrower further represents and warrants to Agent that (a) all of the material Operating Agreements and Management Contracts are or will be at the time of execution and delivery thereof valid and binding on the parties thereto and in full force and effect, (b) no Default or Event of Default has occurred or is continuing under the terms of any of the material Operating Agreements and Management Contracts, and no party thereto has attempted or threatened to terminate any Operating Agreement and Management Contract, (c) Borrower has not made any previous assignment of the Operating Agreements and Management Contracts to any Person, and (d) no financing statement covering any of the Operating Agreements and Management Contracts is on file in any public office except financing statements in favor of Agent, for the ratable benefit of Lenders.

     Section 5.18 Participation Agreements and Resident Agreements.

     Borrower has furnished or caused SSLMI to furnish to Agent, on or before the Closing Date, the form of Resident Agreement used with respect to the Facility and, if requested by Agent, copies of all current, executed Resident Agreements.

     Borrower further covenants to Agent that:

          (a) With respect to the Participation Agreements, if any, (i) to the best of its knowledge, all Participation Agreements will be at the time of execution and delivery thereof valid and binding on the parties thereto and in full force and effect, and (ii) all Participation Agreements will provide for payment to or for the benefit of Borrower or the Management Company for services rendered to residents of the Facility. Borrower represents and warrants that as of the date hereof it has not entered any Participation Agreement for the Facility.

          (b) To the extent Borrower participates or will participate in Medicare or Medicaid payment and reimbursement programs, Borrower has complied and will comply with all notice and other requirements under Title XVIII and Title XIX of the Social Security Act to enable Borrower to participate in the Medicare and Medicaid payment and reimbursement programs.

     Section 5.19 Compliance with Laws.

     Borrower is not in violation of any applicable laws of any Governmental Authority pertaining to employment practices, health standards or controls, environmental and occupational standards or controls or order of any court or arbitrator, the violation of which, considered in the aggregate, would materially adversely affect the ability of Borrower to pay the Obligations. Borrower is in compliance with all accreditation standards and requirements to which it is subject. Borrower has obtained all Licenses necessary to the ownership of its property or to the conduct of its activities which, if not obtained, would materially adversely affect the ability of Borrower to conduct its activities of operating the Facility as an assisted living facility, including, without limitation if and as required by any Governmental Authorities for the dispensing, storage, prescription, disposal, and use of drugs, medications and other “controlled

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substances” and for the maintenance of cafeteria and other food and beverage facilities or services or the condition (financial or otherwise) of Borrower. The foregoing notwithstanding, Borrower, Agent and Lenders acknowledge and agree that the District of Columbia does not currently require a license for the operation of an assisted living facility. At such time as the District of Columbia implements laws or establishes regulations governing the operation of the Facility which require licensure, Borrower shall provide Agent with a copy of the License issued by the District of Columbia and comply with this Section 5.19 in all respects.

     Section 5.20 Presence of Hazardous Materials or Hazardous Materials Contamination.

     Borrower has not placed Hazardous Materials on the Property. To the best of Borrower’s knowledge, no Hazardous Materials are located on the Property, except for reasonable quantities of necessary supplies for use by SSLMI in the ordinary course of its current line of business and stored, used and disposed of in accordance with applicable Laws, and, to the best of Borrower’s knowledge, the Property has never been used as a manufacturing, storage, or dump site for Hazardous Materials nor is the Property affected in any materially adverse way by Hazardous Materials Contamination.

     Section 5.21 Nature of Loan; Usury; Disclosures.

     Borrower is a business or commercial organization, and the Loan is being made solely for the purpose of carrying on or acquiring a business or commercial enterprise. The rates of interest charged on the Loan do not, and will not, violate any usury Law or interest rate limitation. The Loan is not subject to the federal Consumer Credit Protection Act (15 U.S.C. §1601 et. seq.) nor any other federal or state disclosure or consumer protection laws. The Loan is being transacted solely for business or commercial purposes and not for personal, family or household purposes.

     Section 5.22 Accounts.

     With respect to all of Borrower’s Accounts and to the best of Borrower’s knowledge (a) they are genuine, and in all respects what they purport to be, and are not evidenced by a judgment, an instrument, or chattel paper (unless such judgment has been assigned and such instrument or chattel paper has been endorsed and delivered to Agent); (b) they represent undisputed, bona fide transactions completed in accordance with the terms and provisions contained in the invoices relating thereto; (c) the services rendered which resulted in the creation of the Accounts have been delivered or rendered to and accepted by the Account Debtor; (d) the amounts shown on Borrower’s books and records, with respect thereto are actually and absolutely owing to Borrower and are not contingent for any reason; (e) there are no set-offs, counterclaims or disputes known by Borrower or asserted with respect thereto, and Borrower has made no agreement with any Account Debtor thereof for any deduction or discount of the sum payable thereunder except regular discounts allowed by Borrower in the ordinary course of its business for prompt payment; (f) there are no facts, events or occurrences known to Borrower which in any way impair the validity or enforcement thereof or tend to reduce the amount payable thereunder; (g) all Account Debtors thereof, to the best of Borrower’s knowledge, have the capacity to contract; (h) the services furnished giving rise thereto are not subject to any Liens other than Permitted Liens; (i) Borrower has no knowledge of any fact or circumstance which would impair the validity or collectibility thereof; and (j) there are no proceedings or actions known to Borrower which are pending against any Account Debtor which might result in any material adverse change in its financial condition.

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     Section 5.23 Survival; Updates of Representations and Warranties.

     All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the date of this Agreement and the Loan made hereunder. Each of Agent and Lenders acknowledges and agrees that any and all representations and warranties contained in, or made under, or in connection with, this Agreement may be amended, changed or otherwise modified by Borrower at any time and from time to time after the date of this Agreement so as to accurately reflect the matters represented and warranted therein; provided, that such amendments, changes and/or modifications are disclosed in writing to Agent. Neither Agent nor Lenders shall have an obligation to waive any Event of Default due to any present or future inaccuracy of such representation or warranty or to agree to any amendment, change or modification of any such representation or warranty.

     Section 5.24 Compliance with Health Care Laws.

          (a) Without limiting the generality of any other provision of this Agreement, including, without limitation, any other representation or warranty made herein, Borrower, SSLMI and the Property and, to Borrower’s knowledge, each of Borrower’s or SSLMI’s licensed employees and contractors (other than contracted agencies) in the exercise of their respective duties on behalf of Borrower or SSLMI (with respect to its operation of the Property) or any portion of the Property, is in material compliance with all applicable statutes, laws, ordinances, rules and regulations of any federal, state or local governmental authority with respect to regulatory matters primarily relating to patient healthcare and/or patient healthcare information, including without limitation, if applicable, the Health Insurance Portability and Accountability Act of 1996, as amended, and the rules and regulations promulgated thereunder (“HIPAA”) (collectively, “Healthcare Laws”)). Borrower and/or SSLMI, as applicable, has maintained in all material respects all records required to be maintained by any governmental agency or authority or otherwise under the Healthcare Laws and, to the knowledge of Borrower, there are no presently existing circumstances which would result or likely would result in material violations of the Healthcare Laws. Borrower and/or SSLMI, as applicable, and its or their respective Affiliates have such permits, licenses, franchises, certificates and other approvals or authorizations of governmental or regulatory authorities as are necessary under applicable law to own or lease, their respective Projects and to conduct their respective business in connection with the Projects (including without limitation such permits as are required under such the Healthcare Laws).

          (b) To the extent that and for so long as (i) Borrower or SSLMI is a “covered entity” within the meaning of HIPAA or (ii) Borrower or SSLMI (with respect to its operation of the Property) and/or their respective business and operations (with respect to the Property) are subject to or covered by the so-called “Administrative Simplification” provisions of HIPAA, such entity (A) has undertaken or will undertake in a timely manner all necessary surveys, audits, inventories, reviews, analyses and/or assessments (including any necessary risk assessments) or all areas of its business and operations required by HIPAA and/or that could adversely affected by the failure of such entity to be HIPAA Compliant (as defined below); (B) has developed or will develop in a timely manner a detailed plan and time line for becoming HIPAA Compliant (a “HIPAA Compliance Plan”); and (C) has implemented or will implement those provisions of such HIPAA Compliance Plan in all material respects necessary to ensure that such entity is or becomes HIPAA Compliant. For purposes hereof, “HIPAA Compliant” shall mean that

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Borrower or SSLMI, as applicable (1) is or will be in compliance with each of the applicable requirements of the so-called “Administrative Simplification” provisions of HIPAA on and as of each date that any part thereof, or any final rule or regulation thereunder, becomes effective in accordance with its or their terms, as the case may be (each such date, a “HIPAA Compliance Date”) and (2) is not and could not reasonably be expected to become, as of any date following any such HIPAA Compliance Date, the subject of any civil or criminal penalty, process, claim, action or proceeding, or any administrative or other regulatory review, survey, process or proceeding, (other than routine surveys or reviews conducted by any governmental health plan or other accreditation entity) that could result in any of the foregoing or that could reasonably be expected to adversely affect Borrower’s or SSLMI’s business, operations, assets, properties or condition (financial or otherwise), in connection with any actual or potential violation by any such entity of the then effective provisions of HIPAA.

ARTICLE VI
CONDITIONS OF LENDING

     The making of the Loan is subject to the following conditions precedent:

     Section 6.1 Opinion of Counsel for Borrower.

     On the date hereof, Agent shall receive one or more written opinions of counsel for Borrower and SSLI satisfactory in all respects to Agent. Counsel to Borrower will also provide adequate assurance that the Facility holds any necessary Licenses for its operation.

     Section 6.2 Approval of Counsel for Agent.

     All legal matters incident to the Loan and all documents necessary in the opinion of Agent to make the Loan shall be satisfactory in all material respects to counsel for Agent.

     Section 6.3 Supporting Documents.

     Agent shall receive on the date hereof: (a) a certificate of the managing member of Borrower in a form acceptable to Agent in all respects, dated as of the date hereof and certifying (i) that attached thereto is a true, complete and correct copy of resolutions duly adopted by the members of Borrower authorizing the execution and delivery of the Financing Documents to which it is a party, the borrowing thereunder, and the performance of the Obligations, and (ii) as to the incumbency and specimen signature of the authorized officer of the managing member of Borrower or SSLI executing the Financing Documents to which it is a party; (b) a copy of the resolutions, dated November 15, 2002, duly adopted by the board of directors of SSLI generally authorizing the execution and delivery of the Financing Documents to which it is a party and the guarantee of the Loan; (c) such other documents as Agent may reasonably require Borrower, SSLI, the managing member of Borrower to execute, in form and substance acceptable to Agent; and (d) such additional information, instruments, opinions, documents, certificates and reports as Agent may reasonably deem necessary.

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     Section 6.4 Financing Documents.

     All of the Financing Documents required by Agent shall be executed and delivered to Agent. The Deed of Trust and financing statements shall be recorded at the sole expense of Borrower.

     Section 6.5 Insurance.

     Agent shall have received all policies of insurance required by the terms hereof and by the other Financing Documents to be in effect from a company or companies and in form and amount reasonably satisfactory to Agent, including without limitation, flood insurance (in the amount of the Loan or the maximum limit of coverage available on the Property, whichever is less or evidence that flood insurance is not available or otherwise required with respect to the Property), together with written evidence, in form and substance satisfactory to Agent, that all fees and premiums due on account thereof have been paid in full.

     Section 6.6 Security Documents.

     In order to perfect the lien and security interest created by this Agreement, Borrower shall have executed and delivered to Agent all Security Documents (in form and substance acceptable to Agent in its sole discretion) deemed necessary by Agent, in a sufficient number of counterparts for recordation, and, at Borrower’s sole expense, shall record all such financing statements and Security Documents, or cause them to be recorded, in all public offices deemed necessary by Agent.

     Section 6.7 Commitment Fee.

     In consideration for the making of the Loan, Borrower shall pay to Agent on or prior to the Closing Date, a commitment fee in the amount of $187,500.00.

     Section 6.8 Management Agreement.

     Borrower shall have delivered to Agent an executed management agreement for the Facility by and between Borrower and SSLMI, in all respects satisfactory to Agent and its counsel.

     Section 6.9 Title and Survey Matters.

     Agent shall have received a paid policy of title insurance (American Land Title Association Standard Form “B” Loan Policy — Current Edition) or a valid and enforceable commitment to issue the same from a company satisfactory to Agent in the amount of the Loan and which may be endorsed or assigned to the successors and assigns of Agent without additional cost, insuring the lien of the Deed of Trust to be a valid first lien on the Property, free and clear of all defects, exceptions and encumbrances except Permitted Liens. Agent shall also have received and approved a copy of a current as-built survey of the Property certified to Agent and to the title insurance company and any recorded subdivision plat of the Property.

     Section 6.10 Appraisal.

     Agent shall have received and approved an appraisal of the Property in all respects satisfactory to Agent.

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     Section 6.11 Environmental Reports.

     Agent shall have received evidence satisfactory to it regarding the current and past pollution control practices at the Property in connection with the discharge, emission, handling, disposal or existence of materials and substances controlled by federal, state or local laws and regulations.

ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER

     So long as any of the Obligations shall be outstanding hereunder, Borrower agrees with Agent and Lenders as follows:

     Section 7.1 Financial Statements.

     Borrower shall furnish or cause to be furnished to Agent and Lenders:

          (a) As soon as available, but in no event more than twenty-five (25) days after the close of each month, Borrower’s monthly operating and census reports, certified by Borrower.

          (b) As soon as available but in no event more than thirty (30) days after the date of filing, the federal and state income tax returns for Borrower for the year in question as well as any requests for extensions filed in connection therewith.

          (c) As soon as available but in no event later than the dates indicated, consolidated, draft, internally-prepared financial statements of Guarantor for the fiscal quarter ending June 30, 2007, no later than September 30, 2007 and for the fiscal quarter ending September 30, 2007, no later than December 31, 2007 and for each fiscal quarter thereafter, within ninety (90) days thereafter and income and expense statements of Guarantor for such periods certified as to accuracy to the best of his or her knowledge by the chief financial officer of Guarantor, subject to additional adjustments that may arise as a result of final quarterly closing procedures and adjustments as a result of the pending Ernst & Young audit. Adjustments arising from final quarterly closing procedures will be reported to Agent within ninety (90) days of the date on which such statements were delivered.

          (d) As soon as available, but not later than June 30, 2008. restated audited statements for any periods through fiscal year 2007.

          (e) Such additional information, reports or statements as Agent may from time to time reasonably request.

     Section 7.2 Taxes and Claims.

     Borrower shall pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or any of its income or properties prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a lien or charge upon any of its properties; provided, however, Borrower shall not be required to pay any such tax,

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assessment, charge, levy or claim, the payment of which is being contested in good faith and by proper proceedings.

     Section 7.3 Legal Existence.

     Borrower shall maintain its existence as a limited liability company in good standing in the Commonwealth of Virginia and in each jurisdiction where it is required to register or qualify to do business.

     Section 7.4 Conduct of Business and Compliance with Laws.

     Borrower shall:

          (a) do or cause to be done all things necessary to obtain, enter into, preserve and to keep in full force and effect its material rights and any trade names, patents, trademarks and Licenses, Participation Agreements, and Operating Agreements and Management Contracts which are necessary for the operation of the Facility as an adult assisted living facility as contemplated by Borrower and (b) comply with all applicable Laws, including, without limitation, regulations issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA’87) (Pub.L.No. 100-203), as amended, and observe the valid requirements of Governmental Authorities, and perform the terms of all Participation Agreements to which it is a party, the non- compliance with or the non-observance of which might materially interfere with the performance of its Obligations or the proper or prudent conduct of its business or the Property.

          (b) at such time as required by the District of Columbia, obtain and maintain in full force and effect all Licenses necessary to the acquisition and/or ownership and/or operation of the Facility including, without limitation, Licenses and other approvals related to the storage, dispensation, use, prescription and disposal of drugs, medications and other “controlled substances” and, to the extent offered by Borrower, the maintenance of cafeteria and other food and beverage facilities or services;

          (c) administer, maintain and operate (or will cause to be administered, maintained and operated) the Facility as a revenue-producing assisted living facility;

          (d) to the extent Borrower participates in any such programs, maintain and operate the Facility to meet the standards and requirements and to provide healthcare of such quality and in such manner as would enable Borrower to participate in, and provide services in connection with, recognized medical and healthcare insurance programs;

          (e) at such time as required by the District of Columbia, obtain, maintain and comply with all conditions for the continuance of, all Licenses, including without limitation, Licenses which may at any time be required by the District of Columbia or other appropriate governmental entity, necessary or desirable for the operation of the Facility as an adult assisted living facility; and

          (f) to the extent Borrower presently participates or in the future will participate in such programs, obtain, maintain and comply with all conditions for the continuance of certification from each applicable Governmental Authority that Borrower meet all conditions for participation in the Medicare and Medicaid programs.

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     Section 7.5 Use of Proceeds.

     Borrower shall use the proceeds of the Loan for the purpose or purposes set forth in Recital A above and Section 2.1 (a) (The Term Loan) and, without the prior written consent of Lenders, for no other purpose or purposes.

     Section 7.6 Insurance.

     Borrower shall maintain in full force and effect at all times during the term of the Loan, such policies of insurance as may be required by the terms of the Financing Documents from a company or companies, and in form and amounts satisfactory to Agent including, by way of example and not by way of limitation, at least the following:

          (a) During any period of construction in or on the Property, “builder’s risk” insurance, including vandalism and malicious mischief and collapse endorsements in amounts not less than the replacement cost of the Improvements being constructed or of the Property and naming Agent as a loss payee in the mortgagee clause thereof;

          (b) Casualty or physical damage insurance coverage for the Property affording protection against loss or damage by fire or other hazards covered by the standard all-risk fire and hazard insurance policy with lender’s loss payable endorsement and such other risks as shall be customarily covered with respect to projects similar in construction, location and use as the Property, or as Agent may from time to time otherwise require in amounts not less than the greater of the full insurable value of the Improvements (as defined in the Deed of Trust) or the aggregate principal amount of the Obligations; no policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise; the term “full insurable value” means the actual replacement cost of the Property (as defined in the Deed of Trust) (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items);

          (c) General public liability insurance in amounts usually carried by similar operations against claims for bodily injury or death and property damage insurance for claims for damage to property (including loss of use) occurring upon, in or about the Property, with such insurance to afford protection to the limit of not less than $5,000,000 for the aggregate of all occurrences during any given annual policy period;

          (d) Workers’ compensation insurance in accordance with the requirements of applicable law or regulation;

          (e) Business interruption insurance with respect to the Facility in an amount equal to at least twelve (12) months’ debt service on the Loan; and

          (f) To the extent that healthcare professionals are employed by Borrower, medical liability, malpractice and other healthcare professional liability insurance protecting Borrower and their employees against claims arising from the professional services performed by Borrower and their employees with limits of (i) not less than One Million Dollars ($1,000,000.00) with respect to injury or death for each person or occurrence, and (ii) not less than Three Million Dollars ($3,000,000.00) in the aggregate for claims made for injury or death in any one year, and an umbrella policy insuring against such liability in an aggregate amount of

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Five Million Dollars ($5,000,000). In addition, Borrower shall ensure that all healthcare providers with whom Borrower contract to provide services at the Facility are insured against claims arising from such services with limits as set forth in clauses (i) and (ii) above.

     Borrower shall cause SSLMI to file with Agent, upon its request, a detailed list of the insurance then in effect and stating the names of the insurance companies, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. Each policy of insurance shall (A) be issued by one or more recognized, financially sound and responsible insurance companies approved by Agent and which are qualified or authorized by the laws of the District of Columbia to assume the risk covered by such policy, (B) with respect to the insurance described under the preceding subsections (a), (b) and (e) have attached thereto standard noncontributing, non-reporting mortgagee clauses in favor of and entitling Agent without contribution to collect any and all proceeds payable under such insurance, (C) provide that such policy shall not be canceled or modified without at least thirty (30) days prior written notice to the named insured, who will in turn within five (5) days notify Agent, and (D) provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Borrower which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Unless an escrow account has been established for insurance premiums pursuant to the provisions of the Deed of Trust, Borrower shall promptly pay all premiums when due on such insurance and, not less than ten (10) days prior to the expiration date of each such policy, Borrower will deliver to Agent evidence of payment satisfactory to Agent. Borrower will immediately give Agent notice of any cancellation of, or change in, any insurance policy. Agent shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (i) the existence, nonexistence, form or legal sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of losses.

     Section 7.7 Flood Insurance.

     If required by applicable law or regulation, Borrower shall maintain and provide evidence to Agent of a separate policy of flood insurance in the aggregate amount of the Loan or the maximum limit of coverage available with respect to the Property, whichever is the lesser, from a company or companies satisfactory to Agent and written in strict conformity with the Flood Disaster Protection Act of 1973, as amended, and all applicable regulations adopted pursuant thereto. In the event that flood insurance is not required by applicable law or regulation to be provided in connection with the Loan or is not otherwise available with respect to the Property, Borrower shall supply Agent with written evidence, in form and substance satisfactory to Agent, to that effect. Lender acknowledges receipt of such written evidence by Borrower. Any such policy shall provide that the policy may not be surrendered, canceled or substantially modified (including, without limitation, cancellation for nonpayment of premiums) without at least thirty (30) days’ prior written notice to the named insured, who will in turn within five (5) days notify Agent.

     Section 7.8 Maintenance of Properties.

     Borrower shall keep its properties, whether owned in fee or otherwise, or leased, including, without limitation, the Property, in good operating condition; make all proper repairs, renewals, replacements, additions and improvements thereto needed to maintain such properties in good operating condition; comply with the provisions of all leases to which it is a party or

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under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder; and comply with all laws, rules, regulations and orders applicable to its properties or business or any part thereof.

     Section 7.9 Maintenance of the Collateral.

     Borrower shall not permit anything to be done to the Collateral which may impair the value thereof. Upon notice thereof, Agent or an agent designated by Agent, shall be permitted to enter the premises of Borrower and examine, audit and inspect the Collateral at any reasonable time and from time to time. Agent shall not have any duty to, and Borrower hereby releases Agent from, all claims of loss or damage caused by the delay or failure to collect or enforce any of the Accounts or Receivables or to preserve any rights against any other party with an interest in the Collateral.

     Section 7.10 Other Liens, Security Interests, etc.

     Borrower shall keep the Collateral and the Property free from all liens, security interests and claims of every kind and nature, other than Permitted Liens.

     Section 7.11 Defense of Title and Further Assurances.

     Borrower shall, at its expense, defend the title to the Collateral (or any part thereof), and promptly upon request execute, acknowledge and deliver any financing statement, renewal, affidavit, deed, assignment, continuation statement, security agreement, certificate or other document Agent may reasonably require in order to perfect, preserve, maintain, protect, continue and/or extend the lien or security interest granted to Agent under this Agreement and its priority. Borrower shall pay to Agent, on demand all taxes, costs and expenses incurred by Agent, in connection with the preparation, execution, recording and filing of any such document or instrument.

     Section 7.12 Subsequent Opinion of Counsel as to Recording Requirements.

     Borrower shall provide to Agent a subsequent opinion of counsel as to the filing, recording and other requirements with which Borrower has complied to maintain the lien and security interest in favor of Agent in the Collateral in the event that Borrower shall transfer its principal place of business or the office where it keeps its records pertaining to the Accounts and Receivables.

     Section 7.13 Books and Records.

     Borrower shall (a) keep and maintain accurate books and records, (b) make entries on such books and records in form reasonably satisfactory to Agent disclosing Agent’s assignment of, and security interest in and lien on, the Collateral and all collections received by Borrower on its Accounts, (c) furnish to Agent promptly upon request such information, reports, contracts, invoices, lists of purchases of Inventory (showing names, addresses and amount owing) and other data concerning Account Debtors and Borrower’s Accounts and Inventory and all contracts and collection(s) relating thereto as Agent may from time to time specify, (d) unless Agent shall otherwise consent in writing, keep and maintain all such books and records mentioned in (a) above only at the addresses listed in EXHIBIT B, and (e) upon notice thereof, permit any person

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designated by Agent to enter the premises of Borrower and examine, audit and inspect the books and records at any reasonable time and from time to time.

     Section 7.14 Collections.

     Until such time as Agent shall notify Borrower of the revocation of such privilege following an Event of Default, Borrower shall (a) at its own expense have the privilege for the account of and in trust for Agent of collecting its Accounts and receiving in respect thereto all items of payment and shall otherwise completely service all of the Accounts including (i) the billing, posting and maintaining of complete records applicable thereto, and (ii) the taking of such action with respect to such Accounts as Agent may reasonably request or in the absence of such request, as Borrower may deem advisable; and (b) in its discretion, grant, in the ordinary course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to an Account. Agent may, at its option but solely in accordance with applicable law, at any time or from time to time after the occurrence of an Event of Default hereunder, revoke the collection privilege given to Borrower herein by either giving notice of its assignment of, and lien on the Collateral, subject to the provisions of Section 4.1 (Collateral), to the Account Debtors or giving notice of such revocation to Borrower.

     Section 7.15 Notice to Account Debtors and Escrow Account.

     In the event that (a) a Default or an Event of Default exists, or (b) demand has been made for any or all of the Obligations, Borrower shall promptly upon the request of Agent in such form and at such times as reasonably specified by Agent, give notice of Agent’s lien on the Accounts to the Account Debtors requiring those Account Debtors which are permitted by applicable law to make payments thereon directly to Agent.

     Section 7.16 Business Names.

     Borrower shall immediately notify Agent of any change in the name under which they conduct their business.

     Section 7.17 ERISA.

     With respect to any pension plan which Borrower and/or any Commonly Controlled Entity maintains or contributes to, either now or in the future, Borrower covenants that: (a) such bonding as is required under ERISA §412 will be maintained; (b) as soon as practicable and in any event within fifteen (15) days after Borrower or any Commonly Controlled Entity knows or has reason to know that a “reportable event,” with respect to which notice has not been waived under 29 C.F.R. § 4043, has occurred or is likely to occur, Borrower will deliver to Agent a certificate signed by its chief financial officer setting forth the details of such “reportable event”; (c) neither Borrower nor any Commonly Controlled Entity will: (i) knowingly engage in or permit any “prohibited transaction” (as defined in ERISA §406 or Code §4975) to occur; (ii) cause any “accumulated funding deficiency” as defined in ERISA §302 and/or Code §412 if such deficiency would materially adversely affect the ability of Borrower to pay the Obligations; (iii) terminate any pension plan in a manner which could result in the imposition of a lien on the property of Borrower pursuant to ERISA §4068 if such termination would materially adversely

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affect the ability of Borrower to pay the Obligations; (iv) terminate or consent to the termination of any multi-employer plan; (v) incur a complete or partial withdrawal with respect to any multi-employer plan within the meaning of ERISA §§4203 and 4205; and (d) within fifteen (15) days after notice is received by Borrower or any Commonly Controlled Entity that any multi-employer plan has been or will be placed in “reorganization” within the meaning of ERISA §4241, Borrower will notify Agent to that effect. Upon Agent’s request, Borrower will deliver to Agent a copy of the most recent actuarial report, financial statements and annual report completed with respect to any “defined benefit plan”, as defined in ERISA §3(35).

     Section 7.18 Change in Management.

     Borrower shall not change the Management Company for the Facility without the prior written consent of Agent.

     Section 7.19 Management.

     Subject to the terms of that certain Management Fee Subordination Agreement by and among Borrower, SSLMI and Agent of even date herewith, Borrower shall subordinate payment of any management fees under, or in connection with, the Management Agreement (the “Management Fees”) to payment of the Obligations, in accordance with the terms and conditions of one or more subordination agreements in form and content acceptable to Agent in its reasonable discretion, and (a) not amend, restate, supplement, terminate, cancel or otherwise modify any of the terms or conditions of such Management Agreement, in any material respect, without the prior written consent of Agent, and (b) following Borrower’s failure to make any payment due under the Loan Documents, which failure continues for more than sixty (60) days or the occurrence of any event which causes the District of Columbia to require the Facility to close or to cease operations as an assisted living facility, terminate the Management Agreement upon receipt of notice from Agent directing Borrower to terminate the Management Agreement after the occurrence of an Event of Default, and, if requested to do so by Agent, enter into a management agreement for the management of the Facility with an independent manager.

     Section 7.20 Fees and Expenses; Indemnity.

     Borrower shall pay all reasonable fees, charges, costs and expenses required to satisfy the conditions of the Financing Documents. Borrower shall hold Agent and Lenders harmless and indemnify Agent and Lenders against all claims of brokers and “finders” arising by reason of the execution and delivery of the Financing Documents or the consummation of the transaction contemplated hereby.

     Section 7.21 Surveys.

     Borrower shall furnish or cause SSLMI to furnish to Agent, within thirty (30) days of receipt thereof, copies of any and all annual surveys or inspections performed by any Governmental Authority or accreditation or certification organization with respect to the Facility.

     Section 7.22 Cost Reports.

     Borrower shall prepare and file or cause SSLMI to prepare and file all applicable cost reports to all third-party payors, if any, to the extent required by any such third-party payor and, within thirty (30) days thereafter, notify Agent of any settlement of any cost report disclosed to

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Agent as being open or unsettled as of the Closing Date to the extent any such cost report would have a materially adverse effect on Borrower. Copies of any such cost reports shall be furnished to Agent.

     Section 7.23 Notification of Certain Events, Events of Default and Adverse Developments.

     Borrower shall promptly notify Agent upon obtaining knowledge of the occurrence of any of the following:

               (a) any Event of Default under the Financing Documents;

               (b) any event, development or circumstance whereby the financial statements furnished under the Financing Documents fail in any material respect to present fairly, the financial condition and operational results of Borrower;

               (c) any judicial, administrative or arbitral proceeding commenced or pending against Borrower which, if adversely decided, could cause a Material Adverse Change in Borrower;

               (d) (i) the revocation, suspension, probation, restriction, limitation or refusal to renew, or the pending, revocation, suspension, probation, restriction, limitation, or refusal to renew, of any License, or (ii) the decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew, or the pending, decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew any participation or eligibility in any third party payor program in which Borrower elects to participate, including, without limitation, Medicare, Medicaid or any accreditation of Borrower, or (iii) the issuance or pending issuance of any License for a period of less than twelve (12) months, as a consequence of sanctions imposed by any Governmental Authority, or (iv) the assessment or pending assessment, of any civil or criminal penalties by any Government Authority, any third party payor or any accreditation organization or Person, which could materially adversely affect the financial condition or operations of Borrower or an Affiliate (present or prospective) as determined by Agent, in its sole but reasonable discretion;

               (e) any other development in the business or affairs of Borrower results in a Material Adverse Change; and

               (f) any action, including, but not limited to, the filing of any certificate of need application if required by law, the amendment of any facility license or certification, or the issuance of any new license or certification for the Facility, under which Borrower proposes (i) to develop a new facility or service and/or (ii) eliminate, materially expand or materially reduce any service;

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in each case listed in clauses (a) through (f), inclusive, of this Section 7.23 describing in detail satisfactory to Agent the nature thereof and, in the case, if any, of notification under clause (a), the action Borrower proposes to take with respect thereto or a statement that Borrower intends to take no action and an explanation of the reasons for such inaction. In addition, Borrower will furnish to Agent immediately after receipt thereof copies of all administrative notices material to Borrower’s business and operation of the Facility and all responses by or on behalf of Borrower with respect to such administrative notices.

     Section 7.24 Compliance with Environmental Laws.

     If any Hazardous Materials are used, present or generated on the Property, Borrower shall use, process, distribute, handle, maintain, treat, store, dispose of and transport such substance in compliance with all applicable laws, including, but not limited to, those regulating PCBs, underground storage tanks, radon and medical waste tracking, as well as any laws that are enacted after the date of this Agreement.

     Section 7.25 Hazardous Materials; Contamination.

     Borrower shall (a) give notice to Agent within five (5) business days of Borrower acquiring actual knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous Materials Contamination with a full description thereof, except for reasonable quantities of necessary supplies for use by Borrower in the ordinary course of its current line of business and stored, used and disposed of in accordance with applicable Laws; (b) promptly comply with any laws requiring special handling, maintenance, servicing, removal, treatment or disposal of Hazardous Materials or Hazardous Materials Contamination and provide Agent upon request with satisfactory evidence of such compliance; (c) provide Agent, within thirty (30) days after a demand by Agent, with a bond, letter of credit or similar financial assurance evidencing to Agent’s satisfaction that funds are available to pay the cost of removing, treating, and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any lien which may be established as a result thereof on any property owned, operated or controlled by Borrower or for which Borrower is responsible; and (d) defend, indemnify and hold harmless Agent and each of its agents, employees, trustees, successors and assigns from any and all claims which may now or in the future (whether before or after the termination of this Agreement) be asserted as a result of the presence of any Hazardous Materials on the Property.

     Section 7.26 Participation in Reimbursement Programs.

     In the event Borrower elects to participate in any or all plans and/or programs for third party payment and/or reimbursement, and the revenues derived from a single plan or program exceed ten percent (10%) of the gross revenues of the Facility, Borrower shall continue its participation in any and all such plans and/or programs for third party payment and/or reimbursement from, and claims against, private insurers or programs for payment and/or reimbursement from federal, state and local governmental agencies and/or private or quasi-public insurers, including, without limitation, Managed Care Plans, Medicaid and Medicare and the Veterans Administration (as determined by Borrower in the good faith exercise of its prudent and commercially reasonable business judgment). While participating in such plans, Borrower shall comply with any and all rules, regulations, standards, procedures and decrees necessary to maintain Borrower’s participation in any such third party payment or reimbursement program or plan.

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     Section 7.27 Inspection and Other Reports and Notices.

     Borrower will or will promptly cause SSLMI to furnish to Agent copies of any and all annual inspections performed by any Governmental Authority or accreditation or certification organization with respect to the Facility. Borrower will also furnish to Agent copies of all reports or notices from any Governmental Authority or other organization pertaining to the licensure of or Participation Agreements or Operating Agreements for the Facility which (a) cite any deficiency, (b) indicate that a penalty will be imposed unless a corrective action is taken, (c) impose a penalty (including, but not limited to, a monetary penalty, a ban on admissions or a suspension of a license) or (d) would be otherwise materially adverse to the business or operations of the Facility, together with Borrower’s written response to any such report or notice.

     Section 7.28 Subordination of Distributions and Management Fees.

     Borrower shall subordinate, and cause the members of Borrower to subordinate:

          (a) any distributions of Borrower to principal and interest payments on the Loan; and

          (b) the payment of management fees with respect to the Facility pursuant to the terms of that certain Management Fee Subordination Agreement of even date herewith (as the same may be modified from time to time) by and among Borrower, Agent and the Management Company.

     Section 7.29 Debt Service Ratio.

     Commencing with the quarter ending December 31, 2007, Borrower shall maintain, tested as of the end of each fiscal quarter during the term of the Loan, a Debt Service Ratio for the Facility of not less than 1.20 to 1.0.

     Section 7.30 Occupancy Covenant.

     Borrower shall maintain at all times, tested as of the end of each fiscal quarter during the term of the Loan, a minimum average daily occupancy of eighty-five percent (85%), measured on a unit basis.

ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER

     Until payment in full and the performance of all of the Obligations, without the prior written consent of Agent and Lenders, Borrower will not directly or indirectly:

     Section 8.1 Borrowings.

     Other than Loan B, create, incur, assume or suffer to exist any liability for borrowed money other than unsecured loans from Affiliates bearing interest at a rate no higher than that then applicable to the Loan which are fully subordinated to the Loan under the terms of subordination agreements acceptable to Agent. The proceeds of any loans obtained by Borrower from Affiliates shall be used only to cover operating deficits, capital improvement or working

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capital for the Facility and may be repaid only if no Event of Default exists or would result from such payment.

     Section 8.2 Merger or Acquisition.

     Enter into any merger or consolidation or amalgamation, windup or dissolve themselves (or suffer any liquidation or dissolution) or acquire all or substantially all the assets of any Person.

     Section 8.3 Deeds of Trust and Pledges.

     Other than as security for Loan B, create, incur, assume or suffer to exist any deed of trust, mortgage, pledge, lien or other encumbrance of any kind upon, or any security interest in, any of its property or assets, whether now owned or hereafter acquired. Agent agrees to review requests for such encumbrances but shall not be bound to formally consider them.

     Section 8.4 Sale or Transfer of Assets.

     Other than cash distributions to its members, enter into any arrangement whereby Borrower shall sell, lease, transfer, or otherwise dispose of more than $25,000 worth of its assets in any one year or $100,000 in the aggregate during the term of the Loan, unless replaced with assets of equivalent or greater value.

     Section 8.5 Advances and Loans.

     Make loans or advances to any Person, including, without limitation, partners and employees of Borrower. Borrower shall disclose in writing to Agent any advances of loans described in this section which are outstanding as of the date hereof.

     Section 8.6 Contingent Liabilities.

     Assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any Person, except by the endorsement of negotiable instruments for deposit and collection or similar transactions in the ordinary course of business and contingent obligations in the aggregate not exceeding $25,000 at any time.

     Section 8.7 Licenses.

     Allow any Licenses, permit, right, franchise or privilege necessary for the ownership or operation of the Facility for the purposes for which the Facility is intended to be used to lapse, be suspended, be revoked, be denied renewal, be forfeited or be placed on probation.

     Section 8.8 ERISA Compliance.

     (a) Restate or amend any pension plan established and maintained by Borrower or any Commonly Controlled Entity and subject to the requirements of ERISA, in a manner designed to disqualify such plan and its related trusts under the applicable requirements of the Code; (b) permit any officers of Borrower or any Commonly Controlled Entity to materially adversely affect the qualified tax-exempt status of any pension plan or related trusts of Borrower or any Commonly Controlled Entity under the Code; (c) knowingly engage in or permit any Commonly Controlled Entity to engage in any “prohibited transaction” (as defined in ERISA §406 or Code

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§4975) with respect to any pension plan established and maintained by Borrower or any Commonly Controlled Entity; (d) incur or permit any Commonly Controlled Entity to incur any “accumulated funding deficiency” (as defined in ERISA §302 or Code §412), whether or not waived, in connection with any pension plan, if such deficiency would materially adversely affect the ability of Borrower to pay the Obligations; (e) take or permit any Commonly Controlled Entity to take any action or fail to take any action which causes a termination of any Plan in a manner which could result in the imposition of a lien on the property of Borrower or any Commonly Controlled Entity pursuant to Section 4068 of ERISA if such termination would materially adversely affect the ability of Borrower to pay the Obligations; (f) fail to notify Agent that notice has been received of a “termination” (as defined in ERISA) of any Multi-employer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute; (g) incur or permit any Commonly Controlled Entity to incur a “complete withdrawal” or “partial withdrawal” (as defined in ERISA) from any Multi-employer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute; or (h) fail to notify Agent that notice has been received from the administrator of any Multi-employer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute that any such Plan will be placed in “reorganization” (as defined in ERISA).

     Section 8.9 Transfer of Collateral.

     Transfer, or permit the transfer, to another location of any of the Collateral or the books and records related to any of the Collateral; provided, however, that Borrower may transfer the Collateral or the books and records related thereto to another location if Borrower shall have provided to Agent prior to such transfer an opinion of counsel addressed to Agent to the effect that Agent’s perfected security interest shall not be affected by such move or if it shall be affected, setting forth the steps necessary to continue Agent’s perfected security interest together with the commencement of such steps by Borrower at its expense.

     Section 8.10 Sale of Accounts or Receivables.

     Sell, discount, transfer, assign or otherwise dispose of any of their Accounts or Receivables, such as accounts receivable, notes receivable, installment or conditional sales agreements or any other rights to receive income, revenues or moneys, however evidenced.

     Section 8.11 Amendments; Terminations.

     Amend or terminate or agree to amend or terminate any License, the Management Agreement or, except in the ordinary course of business or as otherwise agreed to herein, any participation agreement, or any other Management Contracts and Operating Agreements, or consent to or waive any material provisions thereof.

     Section 8.12 Prohibition on Hazardous Materials.

     Place, manufacture or store or permit to be placed, manufactured or stored, any Hazardous Materials on the Property, except for reasonable quantities of necessary supplies for use by Borrower in the ordinary course of its current line of business and stored, used and disposed of in accordance with applicable Laws.

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     Section 8.13 Subsidiaries.

     Create or otherwise acquire any subsidiaries if such creation or acquisition would result in a Material Adverse Change.

     Section 8.14 Single Purpose Entity.

     Engage in any activity which would cause Borrower to be other than a single purpose entity for the purpose of the Loan.

     Section 8.15 Distributions.

     Pay distributions to members of Borrower.

ARTICLE IX
EVENTS OF DEFAULT

     The occurrence of one or more of the following events shall be “Events of Default” under this Agreement, and the terms “Event of Default” shall mean, whenever they are used in this Agreement, any one or more of the following events:

     Section 9.1 Failure to Pay and/or Perform the Obligations.

     Borrower shall fail to pay any of the Obligations including but not limited to the Expense Payments and Liquidation Costs when due and payable. Agent shall endeavor to give notice of such failure to Borrower; however, failure to give such notice shall not impair the rights of Lenders hereunder.

     Section 9.2 Breach of Representations and Warranties.

     Any material representation or warranty made in this Agreement or in any report, certificate, opinion, financial statement or other instrument furnished in connection with the Obligations or with the execution and delivery of any of the Financing Documents, shall prove to have been false or misleading when made in any material respect.

     Section 9.3 Failure to Comply with Certain Covenants.

     Borrower shall fail to perform, observe or comply with any covenant, condition or agreement contained in Sections 7.1, 7.6, 7.7, 7.10, 7.15, 7.18, 7.19, 7.21, 7.22, 7.23, 7.25, 7.26, 7.27, 7.28, 7.29, 7.30 and all Article VIII of this Agreement.

     Section 9.4 Failure to Comply with Other Covenants.

     Borrower shall fail to perform, observe or comply with any other covenant, condition or agreement contained in this Agreement, except those expressly described in other sections of this Article IX, which failure continues for thirty (30) days after written notice thereof.

     Section 9.5 Default Under Other Financing Documents.

     A Default shall occur under any of the other Financing Documents, and such Default is not cured within any applicable grace period provided therein.

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     Section 9.6 Receiver; Bankruptcy.

     An Act of Bankruptcy occurs with respect to Borrower or Borrower becomes generally unable to pay its debts as they become due; provided, however, if a proceeding with respect to an Act of Bankruptcy is filed or commenced against Borrower, the same shall not constitute an Event of Default if such proceeding is dismissed within ninety (90) days from the date of such Act of Bankruptcy.

     Section 9.7 Judgment.

     Any judgment against Borrower of $25,000 or more or any attachment or other levy against the property of Borrower remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty (30) days.

     Section 9.8 Execution; Attachment.

     Any execution or attachment shall be levied against the Collateral, or any part thereof, and such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days after the same shall have been levied.

     Section 9.9 Default Under Other Borrowings.

     Default shall be made by Borrower with respect to any evidence of indebtedness or liability for borrowed money (other than the Loan) if the effect of such default is to accelerate the maturity of such evidence of indebtedness or liability or to permit the holder or obligee thereof to cause any indebtedness to become due prior to its stated maturity; provided, however, the Event of Default in Section 9.16 (Change of Control of Guarantor) of the Loan and Security Agreement executed in connection with Loan B shall not constitute an Event of Default under this Agreement.

     Section 9.10 Material Adverse Change.

     If Agent in its reasonable discretion determines that a Material Adverse Change has occurred in the financial condition of Borrower.

     Section 9.11 Impairment of Position.

     If Agent in its reasonable discretion determines that an event has occurred which impairs the prospect of payment of the Obligations and/or the value of the Collateral.

     Section 9.12 Change in Status or Ownership.

     Borrower is dissolved, merged, consolidated or reorganized, or any change occurs in the ownership or control of Borrower, without the prior written consent of Agent.

     Section 9.13 Zoning.

     Any change in any zoning ordinance or any other public restriction is enacted, limiting or defining the uses which may be made of the Property or a part thereof, such that the current use of the Property, as specified herein, would be in violation of such restriction or zoning change, and not permitted as a prior non-conforming use.

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     Section 9.14 Change in Management.

     The Management Agreement is terminated without the prior written consent of Agent.

     Section 9.15 Licenses.

     The involuntary, imposed or required revocation, suspension, probation, restriction, limitation or refusal to renew, or the pending revocation, suspension, probation, restriction, limitation, of, or refusal to renew, of any License; other than in the ordinary course of business or to the extent that Borrower deems such action to be, in the exercise of prudent business judgment, in the best interest of Borrower; the decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew, or the pending, decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew any participation or eligibility in any third party payor program in which Borrower elects to participate, including, without limitation, the Medicaid or Medicare programs; or the issuance or pending issuance of any License for a period of less than twelve (12) months as a consequence of any sanctions imposed by any Governmental Authority; or the assessment or pending assessment, of any civil or criminal penalties against Borrower by any Governmental Authority, any third party payor or any accreditation organization or person.

     Section 9.16 Compliance with Law.

     Borrower fails to comply with any material requirement of any Governmental Authority having jurisdiction within the time required by such Governmental Authority; or any proceeding is commenced or action taken against Borrower to enforce any remedy for a material violation of any requirement of a Governmental Authority or any restrictive covenant affecting the Property or any part thereof, an adverse decision as to which would have a material adverse effect on Borrower.

ARTICLE X
RIGHTS AND REMEDIES UPON DEFAULT

     Upon the occurrence of any Event of Default, Agent shall, at the direction of the Requisite Lenders, at any time thereafter exercise any one or more of the following rights, powers or remedies.

     Section 10.1 Acceleration.

     Agent may declare any or all of the Obligations to be immediately due and payable, notwithstanding anything contained in this Agreement or in any of the other Financing Documents to the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other notice of any kind, all of which Borrower hereby waives.

     Section 10.2 Uniform Commercial Code.

     Agent shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code and other applicable Laws. Upon demand by Agent, Borrower shall assemble the Collateral and make it available to Agent, at a place designated by Agent. Agent or its agents may without notice from time to time enter upon Borrower’s premises to take

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possession of the Collateral, to remove it, to render it unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it.

     Any written notice of the sale, disposition or other intended action by Agent with respect to the Collateral which is sent by regular mail, postage prepaid, to Borrower at the address set forth in Section 12.1 (Notices), or such other address of Borrower which may from time to time be shown on Agent’s records, at least ten (10) days prior to such sale, disposition or other action, shall constitute commercially reasonable notice to Borrower. Agent may alternatively or additionally give such notice in any other commercially reasonable manner. Nothing in this Agreement shall require Agent to give any notice not required by applicable Laws.

     If any consent, approval, or authorization of any state, municipal or other Governmental Authority or of any other Person or of any Person having any interest therein, should be necessary to effectuate any sale or other disposition of the Collateral, Borrower agrees to execute all such applications and other instruments, and to take all other action, as may be required in connection with securing any such consent, approval or authorization.

     Borrower recognizes that Agent may be unable to effect a public sale of all or a part of the Collateral consisting of Investment Property by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and other applicable Federal and state Laws. Agent may, therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws and may, for example, at any sale of the Collateral consisting of securities restrict the prospective bidders or purchasers as to their number, nature of business and investment intention, including, without limitation, a requirement that the Persons making such purchases represent and agree to the satisfaction of Agent that they are purchasing such securities for their account, for investment, and not with a view to the distribution or resale of any thereof. Borrower covenants and agrees to do or cause to be done promptly all such acts and things as Agent may request from time to time and as may be necessary to offer and/or sell the securities or any part thereof in a manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale or disposition, Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral consisting of securities so sold.

     Section 10.3 Specific Rights With Regard to Collateral.

     In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, Agent may (but shall be under no obligation to), without notice to Borrower, and Borrower hereby irrevocably appoints Agent as its attorney-in-fact, with power of substitution, in the name of Agent and/or any or all of Lenders and/or in the name of Borrower or otherwise, for the use and benefit of Agent and Lenders, but at the cost and expense of Borrower and without notice to Borrower:

               (a) assign any and all Operating Agreements and Management Contracts to any Person designated by Agent, and/or exercise all rights and privileges of Borrower under such contracts and agreements for the purpose of realizing on the Collateral and to the extent and for the time required to realize the value of the Collateral;

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               (b) to the extent permitted by applicable law, assume such management, operation and control of the Property to the extent and for the time necessary to realize the value of the Collateral;

               (c) cause Borrower to engage, contract with, and/or hire qualified service, billing, collection and other such agents, organizations and companies acceptable to Agent to collect and/or realize upon any or all of the Collateral and to remit the proceeds to Agent;

               (d) subject to applicable state and federal laws pertaining to resident confidentiality, request any Account Debtor obligated on any of the Accounts to make payments thereon directly to Agent to the extent permitted by applicable law, with Agent taking control of the cash and non-cash proceeds thereof and/or direct Borrower to (and Borrower shall) turn over to Agent immediately following receipt all payments with respect to the Collateral in the form received (with the addition of all necessary endorsements) and not to deposit, negotiate or otherwise deal with those payments;

               (e) compromise, extend or renew any of the Collateral or deal with the same as it may deem advisable;

               (f) make exchanges, substitutions or surrenders of all or any part of the Collateral;

               (g) remove from Borrower’s places of business all books, records, ledger sheets, correspondence, invoices and documents, relating to or evidencing any of the Collateral or without cost or expense to Agent, make such use of Borrower’s place of business as may be reasonably necessary to administer, control and collect the Collateral;

               (h) demand, collect, receipt for and give renewals, extensions, discharges and releases of any of the Collateral;

               (i) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral;

               (j) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any of the Collateral or any legal proceedings brought in respect thereof;

               (k) endorse the name of Borrower upon any items of payment relating to the Collateral or on any Proof of Claim in Bankruptcy against an Account Debtor; and

               (l) notify the Post Office authorities to change the address for the delivery of mail to Borrower to such address or Post Office Box as Agent may designate and receive and open all mail addressed to Borrower.

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     In addition, Borrower shall, following an Event of Default which remains uncured beyond any applicable grace period, promptly, upon request, execute and deliver to Agent written assignments, to the extent permitted by applicable law, in form and content acceptable to Agent, of specific Accounts or groups of Accounts; provided, however, that the lien and/or security interest granted to Agent under this Agreement shall not be limited in any way to or by the inclusion or exclusion of Accounts within such assignments. Such Accounts shall secure payment of the Obligations and are not sold to Agent whether or not any assignment thereof, which is separate from this Agreement, is in form absolute.

     Without limiting Agent’s other rights and remedies under the Loan Documents, following Borrower’s failure to make any payment due under the Loan Documents, which failure continues for more than sixty (60) days or the occurrence of any event which causes the District of Columbia to require the Facility to close or to cease operations as an assisted living facility, Agent may also direct Borrower to appoint a manager for the Facility and enter into a management agreement with a management company approved by Agent, the terms of which agreement shall be approved by Agent.

     Section 10.4 Application of Proceeds.

     Any proceeds of sale or other disposition of the Collateral will be applied by Agent to the payment first of any and all Agent’s Obligations, then to any and all Enforcement Costs, and any balance of such proceeds will be remitted to Lenders in like currency and funds received ratably in accordance with their respective Term Loan Pro Rata Shares of such balance. Each Lender shall apply any such proceeds received from Agent to its Obligations in such order and manner as such Lender shall determine. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, Borrower shall remain liable to Agent and Lenders for any deficiency.

     Section 10.5 Performance by Agent.

     Agent without notice to or demand upon Borrower and without waiving or releasing any of the Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of Borrower, and may enter upon the premises of Borrower for that purpose and take all such action thereon as Agent may consider necessary or appropriate for such purpose and Borrower hereby irrevocably appoints Agent as its attorney-in-fact to do so, with power of substitution, in the name of Agent, in the name of any or all of Lenders, or in the name of Borrower or otherwise, for the use and benefit of Agent, but at the cost and expense of Borrower and without notice to Borrower. All sums so paid or advanced by Agent together with interest thereon from the date of payment, advance or incurring until paid in full at the Post-Default Rate and all costs and expenses, shall be deemed part of the Enforcement Costs, shall be paid by Borrower to Agent on demand, and shall constitute and become a part of Agent’s Obligations.

     Section 10.6 Other Remedies.

     Agent may from time to time proceed to protect or enforce the rights of Agent and/or any of Lenders by an action or actions at law or in equity or by any other appropriate proceeding, whether for the specific performance of any of the covenants contained in this Agreement or in any of the other Financing Documents, or for an injunction against the violation of any of the terms of this Agreement or any of the other Financing Documents, or in aid of the exercise or

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execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws. Agent and each of Lenders is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of Borrower now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, Agent, any of Lenders or any Affiliate of Agent or any of Lenders.

     Section 10.7 Receiver or Other Court Order.

     Following an uncured Event of Default, as a matter of right, following ten (10) days notice and without regard to the adequacy of the security, and upon application to a court of competent jurisdiction, Agent shall be entitled to the immediate appointment of a receiver for all or any part of the Collateral, and of the payments and proceeds thereof and therefrom, whether such receivership be incidental to a proposed sale of the Collateral or otherwise, and Borrower hereby consents to the appointment of such a receiver and to an order of court directing that payments, including Medicare and Medicaid payments, be made directly to the receiver. Borrower will pay to Agent, upon demand, all expenses, including reasonable receiver’s fees, reasonable attorney’s fees, costs and agents compensation, advanced by Borrower and incurred pursuant to the provisions contained in this Section.

ARTICLE XI
AGENT

     Section 11.1 Appointment.

     Each Lender hereby designates and appoints Chevy Chase as its agent under this Agreement and the Financing Documents, and each Lender hereby irrevocably authorizes Agent to take such action or to refrain from taking such action on its behalf under the provisions of this Agreement and the Financing Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions contained in this ARTICLE XI. The provisions of this ARTICLE XI are solely for the benefit of Agent and Lenders and neither Borrower nor any Person shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as an administrative representative of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Lenders, Borrower or any Person. Agent may perform any of its duties hereunder, or under the Financing Documents, by or through its agents or employees.

     Section 11.2 Nature of Duties.

          11.2.1 In General

          Agent shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement or in the Financing Documents. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Each Lender shall make its own independent investigation of the financial condition and affairs of Borrower in connection with the extension of credit hereunder and shall make its own appraisal of the credit worthiness of Borrower, and

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Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the Closing Date or at any time or times thereafter. If Agent seeks the consent or approval of any of Lenders to the taking or refraining from taking of any action hereunder, then Agent shall send notice thereof to each Lender. Agent shall promptly notify each Lender any time that the applicable percentage of Lenders has instructed Agent to act or refrain from acting pursuant hereto.

          11.2.2 Express Authorization

          Agent is hereby expressly and irrevocably authorized by each of Lenders, as agent on behalf of itself and the other Lenders:

               (a) to receive on behalf of each of Lenders any payment or collection on account of the Obligations and to distribute to each Lender its Term Loan Pro Rata Share of all such payments and collections so received as provided in this Agreement;

               (b) to receive all documents and items to be furnished to Lenders under the Financing Documents (nothing contained herein shall relieve Borrower of any obligation to deliver any item directly to Lenders to the extent expressly required by the provisions of this Agreement);

               (c) to act or refrain from acting in this Agreement and in the other Financing Documents with respect to those matters so designated for Agent;

               (d) to act as nominee for and on behalf of Lenders in and under this Agreement and the other Financing Documents;

               (e) to arrange for the means whereby the funds of Lenders are to be made available to Borrower;

               (f) to distribute promptly to Lenders, if required by the terms of this Agreement, all written information, requests, notices, payments, prepayments, documents and other items received from Borrower or other Person;

               (g) to amend, modify, or waive any provisions of this Agreement or the other Financing Documents on behalf of Lenders subject to the requirement that certain of Lenders’ consent be obtained in certain instances as provided in Section 12.2.2 (Circumstances Where Consent of all of Lenders is Required);

               (h) to deliver to Borrower and other Persons, all requests, demands, approvals, notices, and consents received from any of Lenders;

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               (i) to exercise on behalf of each Lender all rights and remedies of Lenders upon the occurrence of any Event of Default and/or Default specified in this Agreement and/or in any of the other Financing Documents or applicable Laws;

               (j) to execute any of the Security Documents and any other documents on behalf of Lenders as the secured party for the benefit of Agent and Lenders; and

               (k) to take such other actions as may be requested by the Requisite Lenders.

     Section 11.3 Rights, Exculpation, Etc.

     Neither Agent nor any of its officers, directors, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Financing Documents, or in connection herewith or therewith, except that Agent shall be obligated on the terms set forth herein for performance of its express obligations hereunder, and except that Agent shall be liable with respect to its own gross negligence or willful misconduct. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them). Agent shall not be responsible to any Lender for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectible, or sufficiency of this Agreement or any of the Financing Documents or the transactions contemplated thereby, or for the financial condition of any Person. Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Financing Documents or the financial condition of any Person, or the existence or possible existence of any Default or Event of Default. Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Financing Documents Agent is permitted or required to take or to grant, and Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Financing Documents until it shall have received such instructions from the applicable percentage of Lenders. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Financing Documents in accordance with the instructions of the applicable percentage of Lenders and notwithstanding the instructions of Lenders, Agent shall have no obligation to take any action if it, in good faith believes that such action exposes Agent to any liability.

     Section 11.4 Reliance.

     Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, telex,

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telecopy or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Financing Documents and its duties hereunder or thereunder, upon advice of counsel selected by it. Agent may deem and treat the original Lenders as the owners of the respective Notes for all purposes until receipt by Agent of a written notice of assignment, negotiation or transfer of any interest therein by Lenders in accordance with the terms of this Agreement. Any interest, authority or consent of any holder of any of the Notes shall be conclusive and binding on any subsequent holder, transferee, or assignee of such Notes. Agent shall be entitled to rely upon the advice of legal counsel, independent accountants, and other experts selected by Agent in its sole discretion.

     Section 11.5 Indemnification.

     Each Lender, severally, agrees to reimburse and indemnify Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements including, without limitation, Enforcement Costs, of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any of the Financing Documents or any action taken or omitted by Agent under this Agreement for any of the Financing Documents, in proportion to each Lender’s Term Loan Pro Rata Share, all of the foregoing as they may arise, be asserted or be imposed from time to time; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements resulting from Agent’s gross negligence or willful misconduct. The obligations of Lenders under this Section 11.5 shall survive the payment in full of the Obligations and the termination of this Agreement. Notwithstanding the foregoing, if Agent, after having received any such reimbursement from any or all of Lenders, shall later recover, from a source other than a Lender, all or any portion of the amount reimbursed, Agent shall share such recovery with the reimbursing Lenders in proportion to their contribution to such reimbursement.

     Section 11.6 Chevy Chase Individually.

     With respect to its Commitments and the Loans made by it, and the Note issued to it, Chevy Chase shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms “Lenders” or “Requisite Lenders” or any similar terms shall, unless the context clearly otherwise indicates, include Chevy Chase in its individual capacity as a Lender or one of the Requisite Lenders. Chevy Chase and its Affiliates may lend money to, accept deposits from and generally engage in any kind of banking, trust or other business with Borrower, any Affiliate of Borrower, or any other Person or any of their officers, directors and employees as if Chevy Chase were not acting as Agent pursuant hereto and Agent may accept fees and other consideration from Borrower, any Affiliate of Borrower or any of their officers, directors and employees for services in connection with this Agreement or otherwise without having to account for or share the same with Lenders.

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     Section 11.7 Successor Agent.

          11.7.1 Resignation.

          Agent may resign from the performance of all its functions and duties hereunder at any time by giving at least thirty (30) Business Days’ prior written notice to Borrower and Lenders. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to Section 11.7.2 (Appointment of Successor) or as otherwise provided below.

          11.7.2 Appointment of Successor.

          Upon any such notice of resignation pursuant to Section 11.7.1 (Resignation), the Requisite Lenders shall appoint a successor to Agent. If a successor to Agent shall not have been so appointed within said thirty (30) Business Day period, Agent retiring, upon notice to Borrower, shall then appoint a successor Agent who shall serve as Agent until such time, as the Requisite Lenders appoint a successor Agent as provided above.

          11.7.3 Successor Agent.

          Upon the acceptance of any appointment as Agent under the Financing Documents by a successor Agent, such successor to Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of Agent retiring, and Agent retiring shall be discharged from its duties and obligations under the Financing Documents. After any Agent’s resignation as Agent under the Financing Documents, the provisions of this Section 11.7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Financing Documents.

     Section 11.8 Collateral Matters.

          11.8.1 Release of Collateral.

          Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release any Lien granted to or held by Agent upon any property covered by this Agreement or the Financing Documents:

               (a) upon termination of the Commitments and payment and satisfaction of all Obligations;

               (b) constituting property being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance with the provisions of this Agreement (and Agent may rely in good faith conclusively on any such certificate, without further inquiry);

               (c) constituting property leased to Borrower under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by Borrower to be, renewed or extended; or

               (d) constituting property covered by Permitted Liens with lien priority superior to those Liens in favor or for the benefit of Lenders.

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          11.8.2 Confirmation of Authority, Execution of Releases.

          Without in any manner limiting Agent’s authority to act without any specific or further authorization or consent by Lenders as set forth in Section 11.8.1 (Release of Collateral), each Lender agrees to confirm in writing, upon request by Borrower, the authority to release any property covered by this Agreement or the Financing Documents conferred upon Agent under Section 11.8.1 (Release of Collateral). So long as no Event of Default is then continuing, upon receipt by Agent of confirmation from the requisite percentage of Lenders, of its authority to release any particular item or types of property covered by this Agreement or the Financing Documents, and upon at least five (5) Business Days prior written request by Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to Agent for the benefit of Lenders herein or pursuant hereto upon such Collateral; provided, however, that (a) Agent shall not be required to execute any such document on terms that, in Agent’s opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (b) such release shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of any Person, in respect of), all interests retained by any Person, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part of the property covered by this Agreement or the Financing Documents.

          11.8.3 Absence of Duty.

          Agent shall have no obligation whatsoever to any Lender, Borrower or any other Person to assure that the property covered by this Agreement or the Financing Documents exists or is owned by Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent on behalf of Lenders herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Section 11.8.3 or in any of the Financing Documents, it being understood and agreed that in respect of the property covered by this Agreement or the Financing Documents or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in property covered by this Agreement or the Financing Documents as one of Lenders and that Agent shall have no duty or liability whatsoever to any of the other Lenders.

     Section 11.9 Agency for Perfection.

     Each Lender hereby appoints Agent and each other Lender as agent for the purpose of perfecting Lenders’ Liens in Collateral which, in accordance with Article 9 of the Uniform Commercial Code in any applicable jurisdiction or otherwise, can be perfected only by possession. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefore, shall deliver such Collateral to Agent or in accordance with Agent’s instructions.

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     Section 11.10 Exercise of Remedies.

     Each Lender agrees that it will not have any right individually to enforce or seek to enforce this Agreement or any Financing Document or to realize upon any collateral security for the Loans, it being understood and agreed that such rights and remedies may be exercised only by Agent.

     Section 11.11 Consents.

     In the event Agent requests the consent of a Lender and does not receive a written denial thereof, or a written notice from a Lender that due course consideration of the request requires additional time, in each case, within ten (10) Business Days after such Lender’s receipt of such request, then such Lender will be deemed to have given such consent.

     Section 11.12 Dissemination of Information.

     Agent will provide Lenders with any information received by Agent from Borrower which is required to be provided to Agent or to Lenders hereunder; provided, however, that Agent shall not be liable to any one or more Lenders for any failure to do so, except to the extent that such failure is attributable to Agent’s gross negligence or willful misconduct.

ARTICLE XII
MISCELLANEOUS

     Section 12.1 Notices.

     All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows:

Agent/Chevy Chase:	Chevy Chase Bank, F.S.B.,
	7926 Jones Branch Drive
	Suite 230
	McLean, VA 22102
	Attn:   Richard L. Amador
	Group Vice President
With a courtesy copy to:	Margaret Ann Brown, Esquire
	Troutman Sanders Mays & Valentine LLP
	1660 International Drive, Suite 600
	McLean, Virginia 22102

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MB Financial:	MB Financial Bank, N.A.
	6111 North River Road
	Rosemont, Illinois 60018
	Attn: Jack H. Sharp, Senior Vice President
Borrower:	Sunrise Connecticut Avenue Assisted Living, L.L.C.
	c/o Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attn: James S. Pope
and:	Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attn: General Counsel
With a Courtesy Copy to:	Wayne G. Tatusko, Esquire
	Wayne G. Tatusko, PC
	3016 Williams Drive
	Suite 200
	Fairfax, VA 22031

          Section 12.2 Amendments; Waivers.

          12.2.1 In General.

          This Agreement and the other Financing Documents may not be amended, modified, or changed in any respect except by an agreement in writing signed by Agent, the Requisite Lenders and Borrower, and, to the extent provided in Section 12.2.2 (Circumstances Where Consent of all of Lenders is Required), by an agreement in writing signed by Agent, all of Lenders and Borrower. No waiver of any provision of this Agreement or of any of the other Financing Documents, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing signed by the Requisite Lenders. No course of dealing between Borrower and Agent and/or any of Lenders and no act or failure to act from time to time on the part of Agent and/or any of Lenders shall constitute a waiver, amendment or modification of any provision of this Agreement or any of the other Financing Documents or any right or remedy under this Agreement, under any of the other Financing Documents or under applicable Laws. Without implying any limitation on the foregoing, and subject to the provisions of Section 12.2.2 (Circumstances Where Consent of all of Lenders is Required):

          (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as Agent and Lenders may specify in any such instrument.

          (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto.

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          (c) No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstance.

          (d) No failure or delay by Lenders to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude Lenders from exercising any such right, power or remedy at any time or times.

          (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, Lenders shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount.

          12.2.2 Circumstances Where Consent of all of Lenders is Required.

               Notwithstanding anything to the contrary contained herein, no amendment, modification, change or waiver shall be effective without the consent of all of Lenders to:

          (a) extend the maturity of the principal of, or interest on, any Note or of any of the other Obligations;

          (b) reduce the principal amount of any Note or of any of the other Obligations, the rate of interest thereon or the fees due to Lenders, except as expressly permitted therein;

          (c) change the aggregate Commitments;

          (d) change the date of payment of principal of, or interest on, any Note or of any of the other Obligations;

          (e) change the method of calculation utilized in connection with the computation of interest and fees;

          (f) change the manner of pro rata application by Agent of payments made by Borrower, or any other payments required hereunder or under the other Financing Documents;

          (g) modify this Section, Section 11.8.1 (Release of Collateral), Section 11.12 (Dissemination of Information), or the definition of “Requisite Lenders”;

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          (h) release or agree to subordinate any material portion of any Collateral or Financing Document (except to the extent provided herein or therein); or

          (i) waive the performance, observance or compliance with or amend Section 7.29 (Debt Service Ratio) or Section 7.30 (Occupancy Covenant).

     Additionally, no change may be made to the amount of a Leader’s Commitment or to Lender’s percentage of all Commitments without the prior written consent of that Lender.

     Section 12.3 Cumulative Remedies.

     The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as Agent shall determine, subject to the provisions of this Agreement, and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle Agent to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing and subject to the terms of this Agreement, Agent may:

          (a) proceed against Borrower with or without proceeding against any other Person (including, without limitation, any one or more of the Guarantors) who may be liable (by endorsement, guaranty, indemnity or otherwise) for all or any part of the Obligations;

          (b) proceed against Borrower with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations;

          (c) without reducing or impairing the obligation of Borrower and without notice, release or compromise with any guarantor or other Person liable for all or any part of the Obligations under the Financing Documents or otherwise;

          (e) without reducing or impairing the obligations of Borrower and without notice thereof:

               (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral;

               (ii) approve the making of advances under the Revolving Loan under this Agreement;

               (iii) waive any provision of this Agreement or the other Financing Documents;

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               (iv) exercise or fail to exercise rights of set-off or other rights; or

               (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations.

     Section 12.4 Severability.

     In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action:

          (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby;

          (b) the obligation to be fulfilled shall be reduced to the limit of such validity;

          (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of Agent, all of the Obligations of Borrower to Agent and Lenders shall become immediately due and payable; and

          (d) if the affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect.

     Section 12.5 Assignments by Lenders.

     Any Lender may, with the prior written consent of Agent (which consent shall not be unreasonably withheld), but without notice to or consent of Borrower, assign to any Person (each an “Assignee” and collectively, the “Assignees”) all or a portion of such Lender’s Commitments; provided that, unless such Lender has assigned all of its Commitments, after giving effect to such assignment, such Lender must continue to hold a Pro Rata Share of the Commitments at least equal to Five Million Dollars ($5,000,000). Any Lender that elects to make such an assignment shall pay to Agent, for the exclusive benefit of Agent, an administrative fee for processing each such assignment in the amount of Three Thousand Five Hundred Dollars ($3,500.00). Such Lender and its Assignee shall notify Agent and Borrower in writing of the date on which the assignment is to be effective (the “Adjustment Date”). On or before the Adjustment Date, the assigning Lender, Agent, Borrower and the respective Assignee shall execute and deliver a written assignment agreement in a form acceptable to Agent, which shall constitute an amendment to this Agreement to the extent necessary to reflect such assignment. Upon the request of any assigning Lender following an assignment made in accordance with this Section 12.5, Borrower shall issue new Notes to the assigning Lender and its Assignee reflecting such assignment, in exchange for the existing Notes held by the assigning Lender. Agent will

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continue to hold at least a fifty-one percent (51%) Pro Rata Share of the Commitments and at no time shall there be more than three (3) Lenders including Agent and MB Financial Bank, N.A..

     In addition, notwithstanding the foregoing, any Lender may at any time pledge all or any portion of such Lender’s rights under this Agreement, any of the Commitments or any of the Obligations to a Federal Reserve Bank.

     Section 12.6 Participations by Lenders.

     Any Lender may at any time sell to one or more financial institutions participating interests in any of such Lender’s Obligations or Commitments; provided, however, that (a) no such participation shall relieve such Lender from its obligations under this Agreement or under any of the other Financing Documents to which it is a party, (b) such Lender shall remain solely responsible for the performance of its obligations under this Agreement and under all of the other Financing Documents to which it is a party, and (c) Borrower, Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Documents.

     Section 12.7 Disclosure of Information by Lenders.

     In connection with any sale, transfer, assignment or participation by any Lender in accordance with Section 12.5 (Assignments by Lenders) or Section 12.6 (Participations by Lenders), each Lender shall have the right to disclose to any actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and/or any of the other Financing Documents or otherwise.

     Section 12.8 Successors and Assigns.

     This Agreement and all other Financing Documents shall be binding upon and inure to the benefit of Borrower, Agent and Lenders and their respective heirs, personal representatives, successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Agent and the Requisite Lenders of Lenders.

     Section 12.9 Continuing Agreements.

     All covenants, agreements, representations and warranties made by Borrower in this Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant hereto or thereto shall survive the making by Lenders of the Loans and the execution and delivery of the Notes, shall be binding upon Borrower regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon Agent’s request, and as a condition of the release of any one or more of the Security Documents, Borrower and other Persons obligated with respect to the Obligations shall provide Agent with such acknowledgments and agreements as Agent may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against Agent, any or all of Lenders, and/or any of its or their agents and others, or to the extent there are, the same are waived and released.

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     Section 12.10 Enforcement Costs.

     Borrower agrees to pay to Agent on demand all Enforcement Costs, together with interest thereon from the date incurred or advanced until paid in full at a per annum rate of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be immediately due and payable at the time Borrower received notice that Enforcement Costs have been advanced or incurred, whichever is earlier. Without implying any limitation on the foregoing, Borrower agrees, as part of the Enforcement Costs, to pay upon demand any and all stamp and other Taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other Financing Documents and to save Agent and Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions of this Section shall survive the execution and delivery of this Agreement, the repayment of the other Obligations and shall survive the termination of this Agreement.

     Section 12.11 Applicable Law; Jurisdiction.

          12.11.1 Applicable Law.

          Borrower acknowledges and agrees that the Financing Documents, including, this Agreement, shall be governed by the Laws of the State, as if each of the Financing Documents and this Agreement had each been executed, delivered, administered and performed solely within the State even though for the convenience and at the request of Borrower, one or more of the Financing Documents may be executed elsewhere. Agent and Lenders acknowledge, however, that remedies under certain of the Financing Documents that relate to property outside the State may be subject to the laws of the state in which the property is located.

          12.11.2 Submission to Jurisdiction.

          Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. Borrower irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon Borrower and may be enforced in any court in which Borrower is subject to jurisdiction, by a suit upon such judgment, provided that service of process is effected upon Borrower in one of the manners specified in this Section or as otherwise permitted by applicable Laws.

          12.11.3 Appointment of Agent for Service of Process.

          Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as Borrower’s authorized agent to receive on Borrower’s behalf service of any and all process that may be served in any suit, action or proceeding of the nature referred to in this Section in any state or federal court sitting in the State. If such agent shall cease so to act, Borrower shall irrevocably designate and appoint without delay another such agent in the State satisfactory to Agent and shall promptly deliver to

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Agent evidence in writing of such other agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          12.11.4 Service of Process.

          Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by (a) the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to Borrower at Borrower’s address designated in or pursuant to Section 12.1 (Notices), and (b) serving a copy thereof upon Agent, if any, designated and appointed by Borrower as Borrower’s agent for service of process by or pursuant to this Section. Borrower irrevocably agrees that such service (y) shall be deemed in every respect effective service of process upon Borrower in any such suit, action or proceeding, and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon Borrower. Nothing in this Section shall affect the right of Agent to serve process in any manner otherwise permitted by law or limit the right of Agent otherwise to bring proceedings against Borrower in the courts of any jurisdiction or jurisdictions.

     Section 12.12 Duplicate Originals and Counterparts.

     This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument.

     Section 12.13 Headings.

     The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

     Section 12.14 No Agency.

     Nothing herein contained shall be construed to constitute Borrower as agent of Agent or any of Lenders for any purpose whatsoever or to permit Borrower to pledge any of the credit of Agent or any of Lenders. Neither Agent nor any of Lenders shall be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. Neither Agent nor any of Lenders shall, by anything herein or in any of the Financing Documents or otherwise, assume any of Borrower’s obligations under any contract or agreement assigned to Agent and/or Lenders, and neither Agent nor any of Lenders shall be responsible in any way for the performance by Borrower of any of the terms and conditions thereof.

     Section 12.15 Date of Payment.

     Should the principal of or interest on the Notes become due and payable on other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in the case of principal, interest shall be payable thereon at the rate per annum specified in the Notes during such extension.

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     Section 12.16 Entire Agreement.

     This Agreement is intended by Agent, Lenders and Borrower to be a complete, exclusive and final expression of the agreements contained herein. Neither Agent, Lenders nor Borrower shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement.

     Section 12.17 Waiver of Trial by Jury.

     BORROWER, AGENT AND LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND AGENT AND/OR ANY OR ALL OF LENDERS MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.

     This waiver is knowingly, willingly and voluntarily made by Borrower, Agent and Lenders, and Borrower, Agent and Lenders hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Borrower, Agent and Lenders further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel.

     Section 12.18 Liability of Agent and Lenders.

     Borrower hereby agrees that neither Agent nor any of Lenders shall be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by Agent and/or any of Lenders in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations.

     By inspecting the Collateral or any other properties of Borrower or by accepting or approving anything required to be observed, performed or fulfilled by Borrower or to be given to Agent and/or any of Lenders pursuant to this Agreement or any of the other Financing Documents, neither Agent nor any of Lenders shall be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Agent and/or Lenders.

     Section 12.19 Indemnification.

     Borrower agrees to indemnify and hold harmless, Agent, Lenders, the respective parent and Affiliates of Agent and Lenders and the respective parent’s and Affiliates’ officers, directors, shareholders, employees and agents (each an “Indemnified Party,” and collectively, the “Indemnified Parties”), from and against any and all claims, liabilities, losses, damages, costs

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and expenses (whether or not such Indemnified Party is a party to any litigation), including without limitation, reasonable attorney’s fees and costs and costs of investigation, document production, attendance at depositions or other discovery, incurred by any Indemnified Party with respect to, arising out of or as a consequence of (a) this Agreement or any of the other Financing Documents, including without limitation, any failure of Borrower to pay when due (at maturity, by acceleration or otherwise) any principal, interest, fee or any other amount due under this Agreement or the other Financing Documents, or any other Event of Default; (b) the use by Borrower of any proceeds advanced hereunder; (c) the transactions contemplated hereunder; or (d) any claim, demand, action or cause of action being asserted against (i) Borrower or any of its Affiliates by any other Person, or (ii) any Indemnified Party by Borrower in connection with the transactions contemplated hereunder. Notwithstanding anything herein or elsewhere to the contrary, Borrower shall not be obligated to indemnify or hold harmless any Indemnified Party from any liability, loss or damage resulting from the gross negligence, willful misconduct or unlawful actions of such Indemnified Party. Any amount payable to Agent and/or Lenders under this Section will bear interest at the Post- Default Rate from the due date until paid.

     Section 12.20 Electronic Transmission of Data.

     Agent, Lenders and Borrower agree that certain data related to the Loans (including confidential information, documents, applications and reports) may be transmitted electronically, including transmission over the Internet. This data may be transmitted to, received from or circulated among agents and representatives of Borrower and/or Agent and Lenders and their affiliates and other Persons involved with the subject matter of this Agreement. Borrower acknowledges and agrees that (a) there are risks associated with the use of electronic transmission and that neither Agent nor any Lender controls the method of transmittal or service providers, (b) neither Agent nor any Lender has any obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt or third party interception of any such transmission, and (c) Borrower will release, hold harmless and indemnify Agent and each Lender from any claim, damage or loss, including that arising in whole or part from Agent or a Lender’s strict liability or sole, comparative or contributory negligence, which is related to the electronic transmission of data.

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     IN WITNESS WHEREOF, the parties hereto have signed and sealed this Agreement on the day and year first above written.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED
	LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member

/s/ Kelly L. Hayden	By:	/s/ James Pope	(SEAL)
		Name : James Pope
		Title: Vice President

	LENDERS:
WITNESS:	CHEVY CHASE BANK, F.S.B., as Agent and Lender
/s/ Kelly L. Hayden	By:	/s/ Richard L. Amador	(SEAL)
		Richard L. Amador
		Group Vice President

WITNESS:	MB FINANCIAL BANK, N.A., as Lender
/s/	By:	/s/ Jack Sharp	(SEAL)
		Name: Jack Sharp
		Title: Senior Vice President

LIST OF EXHIBITS

A            Form of Note

B            Places of Business

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EXHIBIT A

FORM OF NOTE

$                     McLean, Virginia
                    , ___

     FOR VALUE RECEIVED, SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (the “Borrower”), promises to pay to the order of                      , a                     , its successors and assigns (the “Lender”), the principal sum of                      ($                    ) (the “Principal Sum”), together with interest thereon at the rate hereinafter provided, in accordance with the Loan Agreement (as hereinafter defined) and the following:

     1. Interest.

     Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 175 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.

     2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows:

     (a) Commencing on                     , ___ and continuing on the same day of each and every month thereafter, to and including                      ,___, interest only;

     (b) Commencing on                    , ___and continuing on the same day of each and every month thereafter, to and including                    , ___, principal shall be due and payable in equal monthly payments of $                    , plus all accrued and unpaid interest on the outstanding principal balance; and

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     (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on August 28, 2009.

     3. Default Interest.

     Upon the occurrence of an Event of Default (as hereinafter defined) the unpaid Principal Sum shall bear interest thereafter until such Event of Default is cured at the Post Default Rate (as defined in the Loan Agreement).

     4. Late Charges.

     In the event that any payment due under the terms of this Note is not received by the Lender within fifteen (15) days of the date such payment is due (inclusive of the date when due), the Borrower shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment.

     5. Application and Place of Payments.

     All payments made on account of this Note, including prepayments, shall be applied first to the payment of any prepayment fee due hereunder, second to any late charge then due hereunder, third to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid Principal Sum, with application first made to all principal installments then due hereunder, next to the outstanding principal balance due at maturity and thereafter to the unpaid principal installments in the inverse order of maturity. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Chevy Chase, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower.

     6. Prepayment.

     (a) The Borrower may prepay the Principal Sum in whole or in part, at any time or from time to time, upon ten (10) days prior written notice to the Lender, without premium or penalty.

     (b) Payment of the indebtedness evidenced by this Note in whole or in part subsequent to the occurrence of an Event of Default shall be deemed to be a prepayment of the Principal Sum subject to any prepayment fee due hereunder.

     7. Other Financing Documents.

     The term “Financing Documents” as used in this Note shall mean collectively this Note, the Deed of Trust (as hereinafter defined) and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with this Note or the Principal Sum evidenced hereby.

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     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) of even date herewith from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee, trustees (the “Deed of Trust”), covering the Borrower’s fee simple interest in certain real property located in the District of Columbia, described in Exhibit A attached hereto and made a part hereof and all other property, real and personal, more particularly described in the Deed of Trust (the “Property”).

     9. Events of Default.

     The occurrence of any one or more of the following events shall constitute an event of default (individually, an “Event of Default” and collectively, the “Events of Default”) under the terms of this Note:

          (a) The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note; or

          (b) The occurrence of a default or an event of default under the terms and conditions of any of the other Financing Documents, which default or event of default remains uncured beyond any applicable grace and/or cure period provided therefor.

     10. Remedies.

     Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender without notice to the Borrower or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrower and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrower, guarantors and endorsers.

     11. Consent to Jurisdiction.

     The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a suit upon such judgment provided that service of process is effected upon the Borrower as provided in this Note or as otherwise permitted by applicable law.

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     12. Service of Process.

          (a) The Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as the Borrower’s authorized agent to accept and acknowledge on the Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Virginia satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          (b) The Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (i) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Borrower and (ii) serving a copy thereof upon the agent, if any, hereinabove designated and appointed by the Borrower as the Borrower’s agent for service of process. The Borrower irrevocably agrees that such service shall be deemed to be service of process upon the Borrower in any such suit, action, or proceeding. Nothing in this Note shall affect the right of the Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of the Lender otherwise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions.

     13. Expenses.

     The Borrower promises to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, all reasonable attorneys’ fees and expenses and all court costs.

     14. Notices.

     Any notice, request, or demand to or upon the Borrower or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 9.3 of the Deed of Trust.

     15. Miscellaneous.

     Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due

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date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note.

     16. Partial Invalidity.

     In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable.

     17. Captions.

     The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note.

     18. Governing Law.

     The provisions of this Note shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     19. Waiver of Trial by Jury.

     The Borrower and the Lender hereby waive trial by jury in any action or proceeding to which the Borrower and the Lender may be parties, arising out of or in any way pertaining to (a) this Note, (b) the other Financing Documents or (c) the Property. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Note. This waiver is knowingly, willingly and voluntarily made by the Borrower, and the Borrower hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower further represents that it has been represented in the signing of this Note and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

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     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under seal by its duly authorized member as of the date first written above.

WITNESS OR ATTEST	SUNRISE CONNECTICUT AVENUE ASSISTED
	LIVING, L.L.C.
		By:
			Sunrise Senior Living Investments,
			Inc., sole Member

By:		(SEAL)
	Name:
	Title:

     THIS IS TO CERTIFY that this is a Deed of Trust Note A described in the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee, trustees, securing the Lender and bearing even date herewith, said Deed of Trust Note and Deed of Trust, Assignment, Security Agreement and Fixture Filing having been executed in my presence.

Notary Public

My Commission expires:

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

     EXHIBIT B

PLACES OF BUSINESS

Borrower’s Chief Executive Office is:	7902 Westpark Drive
	McLean, Virginia 22102
Location of Borrower’s Collateral:	511 Connecticut Avenue, NW
	Washington, D.C.

EX-10.5

Exhibit 10.5

GUARANTY OF PAYMENT

(Loan A)

     THIS GUARANTY OF PAYMENT (this “Agreement”) is made as of August 28, 2007, by SUNRISE SENIOR LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) in favor of CHEVY CHASE BANK, F.S.B., a federal savings bank, its successors and assigns, as Agent (“Agent”) for Lenders (individually a “Lender” and collectively, “Lenders”) party to the Loan Agreement (as hereinafter defined).

     IN ORDER to induce Lenders to make a loan in the principal amount of $30,000,000 (the “Loan”) to Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (“Borrower”) and in connection therewith to accept one or more Deed of Trust Notes (as amended, extended, restated, supplemented or otherwise modified from time to time, collectively, the “Note”) and a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Deed of Trust”), all of even date herewith, made by Borrower in the aggregate principal sum of $30,000,000, which Loan is to be advanced pursuant to the terms of a Loan and Security Agreement (Loan A) of even date herewith by and among Borrower, Agent and Lenders named therein and party thereto (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), Guarantor hereby covenants and agrees with Agent and Lenders as follows:

     1. Guaranty.

     Guarantor hereby unconditionally and irrevocably guarantees to Agent and Lenders: (a) the due and punctual payment in full (and not merely the collectibility) of the principal of the Note and the interest thereon, in each case when due and payable, whether on any installment payment date or at the stated or accelerated maturity, all according to the terms of the Note and the Deed of Trust; and (b) the due and punctual payment in full (and not merely the collectibility) of all other sums and charges which may at any time be due and payable in accordance with, or secured by, the Note, the Deed of Trust or any other document evidencing or securing the Loan (together with the Note and the Deed of Trust, the “Financing Documents”); and (c) the due and punctual performance of all of the other terms, covenants and conditions contained in the Note and the other Financing Documents, on the part of Borrower or any subsequent owner of the property more particularly described in the Deed of Trust (the “Property”) to be performed.

     2. Guaranty Unconditional.

     Guarantor expressly agrees that Agent may, in its sole and absolute discretion, without notice to or further assent of Guarantor, except as specifically set forth herein, and without in any way releasing, affecting or impairing the obligations and liabilities of Guarantor hereunder: (a) waive compliance with, or any defaults under, or grant any other indulgences with respect to, the Financing Documents; (b) with Guarantor’s prior written consent, modify, amend, change or terminate any provisions of the Financing Documents; (c) with Guarantor’s prior written consent, grant extensions or renewals of or with respect to the Note or the other Financing Documents; (d) with Guarantor’s prior written consent, effect any release, subordination,

compromise or settlement in connection with the Note and the other Financing Documents; (e) with Guarantor’s prior written consent, agree to the substitution, exchange, release or other disposition of all or any part of the Property, or any other collateral for the Loan; (f) make advances for the purpose of performing any term or covenant contained in any of the Financing Documents with respect to which Borrower or the then owner of the Property shall be in default; (g) with Guarantor’s prior written consent, assign or otherwise transfer the Financing Documents or this Agreement or any interest therein or herein; and (h) deal in all respects with Borrower or the then owner of the Property as if this Agreement were not in effect. The obligations of Guarantor under this Agreement shall be unconditional, irrespective of the genuineness, validity, regularity or enforceability of the Note or the Deed of Trust, or any security given therefor or in connection therewith, or any other circumstances which might otherwise constitute a legal or equitable discharge of a surety or guarantor.

     3. Guaranty Primary.

     The obligations and liability of Guarantor under this Agreement shall be primary, direct and immediate; shall not be conditional or contingent upon pursuit by Agent of any remedies it may have against Borrower with respect to the Financing Documents, whether pursuant to the terms thereof or by law; and shall not be subject to any counterclaim, recoupment, set-off, reduction or defense based upon any claim that Guarantor may have against Borrower, Agent or any Lender. Without limiting the generality of the foregoing, Agent shall not be required to make any demand on Borrower and/or the then owner of the Property, or to sell at foreclosure or otherwise pursue or exhaust its remedies against the Property or any part thereof and/or against Borrower or the then owner of the Property, before, simultaneously with or after enforcing its rights and remedies hereunder against Guarantor. Any one or more successive and/or concurrent actions may be brought hereon against Guarantor either in the same action, if any, brought against Borrower and/or the then owner of the Property or in separate actions, as often as Agent may deem advisable.

     4. Waivers by Guarantor.

     Guarantor hereby unconditionally and irrevocably waives: (a) presentment and demand for payment of the principal of or interest on the Note and protest of non-payment; (b) notice of acceptance of this Agreement and of presentment, demand and protest; (c) except as set forth below, notice of any default under this Agreement or any of the Financing Documents and notice of all indulgences; (d) except as set forth below, demand for observance, performance, or enforcement of any terms or provisions of this Agreement or any of the Financing Documents; (e) any right or claim of right to cause a marshalling of the assets of Borrower; and (f) all other notices and demands otherwise required by law which Guarantor may lawfully waive.

     5. Reimbursement for Expenses.

     If Agent shall commence any action or proceeding for the enforcement of this Agreement, Guarantor shall reimburse Agent promptly upon demand, for all expenses incurred in connection therewith, including, without limitation, reasonable attorneys’ fees.

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     6. Acceleration.

     Anything in this Agreement or in any of the Financing Documents to the contrary notwithstanding, Agent, at its option, may, as to Guarantor, accelerate the indebtedness evidenced and secured by the Financing Documents in the event of: (a) the making by Guarantor of an assignment for the benefit of creditors; (b) the appointment of a custodian for Guarantor, or for any property of Guarantor; (c) the commencement of any proceeding by Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment, receivership or like law or statute; or (d) the commencement of any proceeding against Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment, receivership or like law or statute which is not discharged or dismissed within ninety (90) days after institution thereof; or (e) the termination, dissolution or, liquidation of Guarantor, without the prior written consent of Agent. A change of control of Guarantor will not be a default hereunder or under any other Financing Document for this Loan so long as Guarantor continues to own one hundred percent (100%) of Sunrise Senior Living Management, Inc., Sunrise Senior Living Investments, Inc. and Sunrise Development, Inc. and the contracts between these entities and the Borrower remain in full force and effect.

     7. Subordination; Subrogation.

     If Guarantor shall advance any sums to Borrower or if Borrower shall hereafter become indebted to Guarantor, such sums and indebtedness shall be subordinate in all respects to the amounts then or thereafter due and owing to Lenders under the Financing Documents. Nothing herein contained shall be construed to give Guarantor any right of subrogation in and to the Note or the Deed of Trust or all or any part of Lenders’ interest therein, until all amounts owing to Lenders shall have been paid in full. Notwithstanding any provision of this Paragraph to the contrary, if Guarantor is or becomes an “insider” (as defined from time to time in Section 101 of the Federal Bankruptcy Code) with respect to Borrower, then Guarantor irrevocably and absolutely waives any and all rights of subrogation, contribution, indemnification, reimbursement or any similar rights against Borrower with respect to this Agreement, whether such rights arise under an express or implied contract or by operation of law. It is the intention of the parties hereto that Guarantor shall not be deemed to be a “creditor” (as defined in Section 101 of the Federal Bankruptcy Code) of Borrower by reason of the existence of this Agreement in the event that Borrower becomes a debtor in any proceeding under the Federal Bankruptcy Code.

     8. Representations and Warranties.

     Guarantor represents and warrants to Agent as follows:

          (a) Good Standing. Guarantor (a) is a corporation duly organized, existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary.

          (b) Power and Authority. Guarantor has full corporate power and authority to execute and deliver this Agreement and the other Financing Documents to which it is a party and

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to incur and perform the Obligations (as defined in the Deed of Trust) whether under this Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by all proper and necessary corporate action. No consent or approval of shareholders or any creditors of Guarantor, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of Guarantor, is required as a condition to the execution, delivery, validity or enforceability of this Agreement or the other Financing Documents or the performance by Guarantor of the Obligations.

          (c) Binding Agreements. This Agreement and the other Financing Documents executed and delivered by Guarantor have been properly executed and delivered and constitute the valid and legally binding obligations of Guarantor and are fully enforceable against Guarantor in accordance with their respective terms.

          (d) No Conflicts. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by Guarantor nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (i) the charter or bylaws of Guarantor, (ii) any existing mortgage, indenture, contract or agreement binding on Guarantor or affecting its property, or (iii) any Laws.

          (e) Compliance with Laws. Guarantor is not in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator or any Governmental Authority affecting Guarantor or its properties, the violation of which, considered in the aggregate, are reasonably likely to materially adversely affect the business, operations or properties of Guarantor.

          (f) Litigation. Except as shown on the Form 8K provided to Lender, there are no proceedings, actions or investigations pending or, so far as Guarantor knows, threatened before or by any court, arbitrator or any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of Guarantor, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of Guarantor.

          (g) Financial Condition. On the date delivered, the draft financial statements of Guarantor dated June 30, 2006 were complete and correct and fairly presented the financial position of Guarantor and the results of its operations and transactions in its surplus accounts as of the date and for the period referred to and were prepared in accordance with GAAP applied on a consistent basis throughout the period involved. Subsequently the Guarantor provided additional information including cash and debt levels as of June 30, 2007 and there has been no material adverse change in the cash or debt levels of Guarantor since such reports. The representations and warranties contained in this Section shall also cover financial statements furnished from time to time to Agent pursuant to the Loan Agreement. Notwithstanding the foregoing, except as provided in Section 7.1 of the Loan Agreement, Guarantor will not be required to deliver financial statements or operating statement until ten (10) days after such statements have been made publicly available by the Securities and Exchange Commission.

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          (h) Full Disclosure. The financial statements referred to in Section 8(g), and the statements, reports or certificates furnished by Guarantor in connection with this Agreement (i) do not contain any untrue statement of a material fact and (ii) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to Guarantor which Guarantor has not disclosed to Agent in writing prior to the date of this Agreement which materially and adversely affects or in the future could, in the reasonable opinion of Guarantor materially adversely affect the condition, financial or otherwise, results of operations, business, or assets of Guarantor.

          (i) Financial Interest. Financial Interest. Guarantor will derive a benefit from the credit facilities extended to and the Obligations incurred by Borrower, and hereby waives any claim that Agent violated the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) in connection with the Loan, any of the Financing Documents or any of the other Obligations or security for any obligation which is the subject thereto.

     9. Covenants.

          (a) Guarantor covenants and agrees that until the Obligations are repaid in full Guarantor shall at all times directly or indirectly own one hundred percent (100%) or more of the membership interests of Borrower.

          (b) Guarantor covenants and agrees that until the Obligations are repaid in full Guarantor or an entity controlled by Guarantor shall operate and manage the Property.

          (c) Guarantor hereby covenants and agrees that it will comply with (i) the following financial covenants contained in the Sunrise Senior Financing Agreement (as defined in the Loan Agreement) provided that Lenders hereby agree that it will consent to any waiver or modification of such covenants to which the Sunrise Bank Group (as defined in the Loan Agreement) consents so long as Agent is a member of the Sunrise Bank Group and Guarantor, Borrower and Lenders shall negotiate replacement covenants acceptable to Lenders if Agent ceases to be a member of the Sunrise Bank Group:

          (i) Consolidated Net Worth. Guarantor will at all times maintain, tested as of the end of each of the Borrower’s fiscal quarters beginning with the quarter ending December 31, 2007, a Consolidated Net Worth of not less than the sum of $450,000,000 (which is eighty percent (80%) of consolidated GAAP Shareholder Equity as of the date hereof) plus seventy-five percent (75%) of the net proceeds to Guarantor of any equity capital transaction received during any subsequent quarter (except for all exercises of employee stock options, issuance or sale of restricted stock and operation of the employee stock purchase program), less $110,000,000 associated with stock repurchases.

          (ii) Leverage Ratio. Guarantor will maintain, tested as of the end of each of Guarantor’s fiscal quarters beginning with the quarter ending December 31, 2007, a ratio of Total Funded Indebtedness to Consolidated EBITDA so that it is not more than 4.25 to 1.0.

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          (iii) Fixed Charge Coverage Ratio. Guarantor will maintain, tested as of the end of each of the Guarantor’s fiscal quarters beginning with the quarter ending December 31, 2007, a ratio of Consolidated EBITDAR to Consolidated Fixed Charges of not less than 1.75 to 1.0.

The following definitions shall apply to this Section 9(c):

  “Capitalized Cash Interest Expense” means capitalized interest on construction or development loans, to the extent not funded from an interest reserve as part of third party construction financing.

  “Consolidated EBITDA” means the sum of: (a) (i) net income; (ii) Consolidated Interest Expense; (iii) income taxes; (iv) depreciation and amortization; (v) the non-cash component of any unusual or non-recurring item of loss or expense which was deducted in determining net income (in accordance with GAAP), and (vi) income (or loss) in respect of minority interest (assuming it was deducted in the calculation of net income); minus (b) “other income — operating properties” as shown on Guarantor’s financial statements in accordance with GAAP as of the date hereof (or as such category may be categorized in future financial statements) in each case for Guarantor and its Subsidiaries on a consolidated basis. For purposes of calculating the leverage ratio only, Consolidated EBITDA will be adjusted to reflect actual transition costs (post-closing) or pre-closing on a pro forma basis to reflect (i) material acquisitions and dispositions of property and (ii) material acquisitions and dispositions of management contracts, provided that documentation of such acquisitions and dispositions satisfactory to the Agent in its sole discretion is delivered to the Agent. Transition costs shall be subject to the approval of the Agent.

  “Consolidated EBITDAR” means the sum of: (a) Consolidated EBITDA plus (b) rent paid or payable under all operating leases as determined in accordance with GAAP.

  “Consolidated Fixed Charges” means the sum of: (a) Consolidated Interest Expense, (b) Capitalized Cash Interest Expense (c) scheduled payments of principal on Total Funded Indebtedness (excluding balloon payments), (d) rent payable under all operating leases (other than capital leases) as determined in accordance with GAAP, and (e) dividends payable on stock.

  “Consolidated Interest Expense” means total interest expense (whether paid or accrued), including the amortization of debt discounts and premiums as well as the interest component under capital leases, on a consolidated basis in accordance with GAAP.

  “Consolidated Net Worth” means Shareholders’ Equity of Guarantor and its Subsidiaries on a consolidated basis in accordance with GAAP.

  “Continuing Care Retirement Community” means a senior living facility which provides or arranges housing and health-related services that are effective for the life of the resident or for an extended, specified period in excess of one year, including mutually terminable contracts, in consideration for the payment of an entrance fee, which services are provided on a comprehensive continuum of care basis which includes a skilled nursing facility.

  “Development Joint Venture” means an entity which owns a Development Joint Venture Investment.

  “Development Joint Venture Investments” means (a) Investments which are (i) less than fifty percent (50%) owned and unconsolidated by any of the Loan Parties and (ii) have a ratio of

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EBITDAR (as defined by GAAP) to Fixed Obligations (as defined by GAAP) of less than 1.20 to 1.0 for any fiscal quarter plus (b) any amounts funded by any of the Loan Parties under operating deficit guaranties or construction completion guaranties.

  “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

  “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the carrying value of such Investment determined in accordance with GAAP.

  “Lifecare Bond” means a surety bond, irrevocable letter of credit or other financial assurance required by a Governmental Authority as evidence of the financial responsibility of the owner or operator of a Continuing Care Retirement Community.

  “Loan Parties” means, collectively, Guarantor, each Subsidiary Guarantor (as defined in the Sunrise Financing Agreement), and each Designated Borrower.

  “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

  “Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Company and its Subsidiaries as of that date determined in accordance with GAAP.

  “Total Funded Indebtedness” means all indebtedness and guarantees including recourse and non-recourse mortgage debt, capitalized leases, letters of credit, unsecured debt, guarantees (including all debt guarantees, but excluding all development completion guarantees and operating deficit guarantees which will be captured in the limitation on Development Joint Ventures), purchase obligations treated as liabilities per GAAP, subordinated debt, unfunded obligations (including total Lifecare Bond obligations at GAAP book value, subject to certain exclusions as discussed below), all as defined in accordance with GAAP. Total Funded Indebtedness shall not include security deposits, accounts payable, accrued liabilities, any prepaid rent and any outstanding balance under the Convertible Debt only to the extent that the Company’s common stock market price remains at least $2.50 per share above the Convertible Debt conversion price. Furthermore, certain Lifecare Bond obligations may be excluded from Total Funded Indebtedness to the extent the Borrower is not obligated to refund these obligations prior to receiving proceeds of new Lifecare Bonds. Total Funded Indebtedness will be reduced by unrestricted cash balances, cash equivalents and short-term marketable securities in excess of $50,000,000.

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     10. Financial Statements.

     Guarantor shall provide to Agent, the financial statements of Guarantor more fully described in Section 7.1 of the Loan Agreement.

     Guarantor also agrees to provide Agent with such other financial information at such other times as may be reasonably requested by Agent.

     11. Governing Law.

     The provisions of this Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     12. Consent to Jurisdiction.

     Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Agreement. Guarantor irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon Guarantor and may be enforced in any court to whose jurisdiction Guarantor is subject, by a suit upon such judgment provided that service of process is effected upon Guarantor in a manner specified in this Agreement or as otherwise permitted by applicable law.

     13. Service of Process.

     Guarantor hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as its authorized agent to accept and acknowledge on its behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Agreement in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, Guarantor shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Virginia satisfactory to Agent and shall promptly deliver to Agent evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

     Guarantor hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Agreement by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to it at its address designated herein and (b) serving a copy thereof upon Agent, hereinabove designated and appointed by Guarantor as Guarantor’s agent for service of process. Guarantor irrevocably agrees that such service shall be deemed in every respect to be effective service of process in any such suit, action, or proceeding. Nothing in this Agreement shall affect the right of Agent to serve process in any manner otherwise permitted by law and nothing in this Agreement will limit the right of Agent otherwise to bring proceedings against Guarantor, in the courts of any other appropriate jurisdiction or jurisdictions.

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     14. Waiver of Jury Trial.

     Guarantor and Agent hereby, jointly and severally, waive trial by jury in any action or proceeding to which Guarantor and Agent may be parties, arising out of or in any way pertaining to (a) this Agreement, (b) the Loan or (c) the other Financing Documents. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Agreement. This waiver is knowingly, willingly and voluntarily made by Guarantor, and Guarantor hereby represents and warrants that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Guarantor further represents and warrants that it has been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

     15. Voidable Preference; Fraudulent Conveyance.

     If at any time any payment, or portion thereof, made by, or for the account of, Guarantor on account of any of the obligations and liabilities hereunder is set aside by any court or trustee having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored or returned by Agent under any insolvency, bankruptcy or other federal and/or state laws or as a result of any dissolution, liquidation or reorganization of Borrower or upon, or as a result of, the appointment of any receiver, intervenor or conservator of, or trustee or similar officer for, Borrower or any substantial part of its properties or assets, Guarantor hereby agrees that this Agreement shall continue and remain in full force and effect or be reinstated, as the case may be, all as though such payment(s) had not been made.

     16. Notices.

     Notice, demand, request or other communication which either party may desire to give to the other with respect to this Agreement, shall be deemed to have been properly given if in writing and delivered by hand, sent by overnight courier or mailed by certified mail, postage prepaid, addressed as follows:

Agent:	Chevy Chase Bank, F.S.B.
	7926 Jones Branch Drive
	McLean, VA 22102
	Attention:     Richard L. Amador
	Group Vice President
If to Guarantor, at:	Sunrise Senior Living, Inc.
	c/o Sunrise Senior Living Investments, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attention:     James S. Pope
and:	Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attn:   General Counsel

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With a Courtesy Copy to:	Wayne G. Tatusko, Esquire
	Wayne G. Tatusko, PC
	3016 Williams Drive
	Suite 200
	Fairfax, VA 22031

     Any of the parties hereto may designate a change of address by notice in writing to the other parties. Whenever in this Agreement the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

     17. Remedies Cumulative.

     All rights and remedies afforded to Agent by reason of this Agreement, the Financing Documents, or by law are separate and cumulative and the exercise of one shall not in any way limit or prejudice the exercise of any other such rights or remedies. Every right, power and remedy given by this Agreement to Agent shall be concurrent and may be pursued separately, successively or together against Guarantor; and each such right, power and remedy may be exercised from time to time as often as Agent may deem expedient. No delay or omission by Agent in exercising any such right or remedy shall operate as a waiver thereof. No waiver of any rights and remedies hereunder, and no modification or amendment hereof, shall be deemed made by Agent unless in writing and duly signed by Agent. Any such written waiver shall apply only to the particular instance specified therein and shall not impair the further exercise of such right or remedy or of any other right or remedy of Agent and no single or partial exercise of any right or remedy hereunder shall preclude any other or further exercise thereof or any other right or remedy.

     18. Severability.

     If any provision (or any part of any provision) contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had never been contained herein but only to the extent it is invalid, illegal or unenforceable.

     19. Successors and Assigns.

     This Agreement shall inure to the benefit of, and be enforceable by, Agent and its successors and assigns as holder of the Note, and shall be binding upon, and enforceable against, Guarantor and its successors and assigns.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     WITNESS the signature and seal of Guarantor as of the day and year first above written.

WITNESS OR ATTEST:	SUNRISE SENIOR LIVING, INC.
/s/ Kelly L. Hayden	By:	/s/ Carl Adams		(SEAL)
		Name:	Carl Adams
		Title:	Treasurer

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     I HEREBY CERTIFY, that on this 28^th day of August, 2007, before me, the undersigned Notary Public of said Commonwealth, personally appeared Carl Adams, who acknowledged himself to be the Treasurer of Sunrise Senior Living, Inc., a corporation, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained as the duly authorized Treasurer of said corporation by signing the name of the corporation by himself as Treasurer.

     WITNESS my hand and Notarial Seal.

	/s/ Marguerite W. Capen
	Notary Public

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EX-10.6

Exhibit 10.6

DEED OF TRUST NOTE A

$10,000,000	McLean, Virginia
	August 28, 2007

     FOR VALUE RECEIVED, SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (the “Borrower”), promises to pay to the order of MB FINANCIAL BANK, N.A. a national banking association, its successors and assigns (the “Lender”), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the “Principal Sum”), together with interest thereon at the rate hereinafter provided, in accordance with the Loan Agreement (as hereinafter defined) and the following:

     1. Interest.

     Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 175 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.

     2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows:

          (a) Commencing on October 1, 2007 and continuing on the same day of each and every month thereafter, to and including September 1, 2008, interest only;

          (b) Commencing on October 1, 2008 and continuing on the same day of each and every month thereafter, to and including August 1, 2009, principal shall be due and payable in equal monthly payments of $11,000.00, plus all accrued and unpaid interest on the outstanding principal balance; and

          (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on August 28, 2009.

     3. Default Interest.

     Upon the occurrence of an Event of Default (as hereinafter defined) the unpaid Principal Sum shall bear interest thereafter until such Event of Default is cured at the Post Default Rate (as defined in the Loan Agreement).

     4. Late Charges.

     In the event that any payment due under the terms of this Note is not received by the Lender within fifteen (15) days of the date such payment is due (inclusive of the date when due), the Borrower shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment.

     5. Application and Place of Payments.

     All payments made on account of this Note, including prepayments, shall be applied first to the payment of any prepayment fee due hereunder, second to any late charge then due hereunder, third to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid Principal Sum, with application first made to all principal installments then due hereunder, next to the outstanding principal balance due at maturity and thereafter to the unpaid principal installments in the inverse order of maturity. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office at 6111 North River Road, Rosemont, Illinois 60018 or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower.

     6. Prepayment.

          (a) The Borrower may prepay the Principal Sum in whole or in part, at any time or from time to time, upon ten (10) days prior written notice to the Lender, without premium or penalty.

          (b) Payment of the indebtedness evidenced by this Note in whole or in part subsequent to the occurrence of an Event of Default shall be deemed to be a prepayment of the Principal Sum subject to any prepayment fee due hereunder.

     7. Other Financing Documents.

     The term “Financing Documents” as used in this Note shall mean collectively this Note, the Deed of Trust (as hereinafter defined) and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with this Note or the Principal Sum evidenced hereby.

     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) of even date herewith from the Borrower to Alexandra

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Johns and Ellen-Elizabeth Lee, trustees (the “Deed of Trust”), covering the Borrower’s fee simple interest in certain real property located in the District of Columbia, described in Exhibit A attached hereto and made a part hereof and all other property, real and personal, more particularly described in the Deed of Trust (the “Property”).

     9. Events of Default.

     The occurrence of any one or more of the following events shall constitute an event of default (individually, an “Event of Default” and collectively, the “Events of Default”) under the terms of this Note:

          (a) The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note; or

          (b) The occurrence of a default or an event of default under the terms and conditions of any of the other Financing Documents, which default or event of default remains uncured beyond any applicable grace and/or cure period provided therefor.

     10. Remedies.

     Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender without notice to the Borrower or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrower and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrower, guarantors and endorsers.

     11. Consent to Jurisdiction.

     The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a suit upon such judgment provided that service of process is effected upon the Borrower as provided in this Note or as otherwise permitted by applicable law.

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     12. Service of Process.

          (a) The Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as the Borrower’s authorized agent to accept and acknowledge on the Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Virginia satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          (b) The Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (i) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Borrower and (ii) serving a copy thereof upon the agent, if any, hereinabove designated and appointed by the Borrower as the Borrower’s agent for service of process. The Borrower irrevocably agrees that such service shall be deemed to be service of process upon the Borrower in any such suit, action, or proceeding. Nothing in this Note shall affect the right of the Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of the Lender otherwise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions.

     13. Expenses.

     The Borrower promises to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, all reasonable attorneys’ fees and expenses and all court costs.

     14. Notices.

     Any notice, request, or demand to or upon the Borrower or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 9.3 of the Deed of Trust.

     15. Miscellaneous.

     Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due

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date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note.

     16. Partial Invalidity.

     In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable.

     17. Captions.

     The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note.

     18. Governing Law.

     The provisions of this Note shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     19. Waiver of Trial by Jury.

     The Borrower and the Lender hereby waive trial by jury in any action or proceeding to which the Borrower and the Lender may be parties, arising out of or in any way pertaining to (a) this Note, (b) the other Financing Documents or (c) the Property. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Note. This waiver is knowingly, willingly and voluntarily made by the Borrower, and the Borrower hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower further represents that it has been represented in the signing of this Note and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under seal by its duly authorized member as of the date first written above.

WITNESS OR ATTEST	SUNRISE CONNECTICUT AVENUE ASSISTED   LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., sole Member

/s/ Kelly L. Hayden	By:	/s/ James S. Pope		(SEAL)
		Name:	James S. Pope
		Title:	Vice President

     THIS IS TO CERTIFY that this is a Deed of Trust Note A described in the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee, trustees, securing the Lender and bearing even date herewith, said Deed of Trust Note and Deed of Trust, Assignment, Security Agreement and Fixture Filing having been executed in my presence.

/s/

Notary Public

My Commission expires:

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

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EX-10.7

Exhibit 10.7

DEED OF TRUST NOTE A

$20,000,000	McLean, Virginia
	August 28, 2007

     FOR VALUE RECEIVED, SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (the “Borrower”), promises to pay to the order of CHEVY CHASE BANK, F.S.B., a federally chartered savings bank, its successors and assigns (the “Lender”), the principal sum of TWENTY MILLION DOLLARS ($20,000,000) (the “Principal Sum”), together with interest thereon at the rate hereinafter provided, in accordance with the Loan Agreement (as hereinafter defined) and the following:

     1. Interest.

     Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 175 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.

     2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows:

          (a) Commencing on October 1, 2007 and continuing on the same day of each and every month thereafter, to and including September 1, 2008, interest only;

          (b) Commencing on October 1, 2008 and continuing on the same day of each and every month thereafter, to and including August 1, 2009, principal shall be due and payable in equal monthly payments of $22,000.00, plus all accrued and unpaid interest on the outstanding principal balance; and

          (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on August 28, 2009.

     3. Default Interest.

     Upon the occurrence of an Event of Default (as hereinafter defined) the unpaid Principal Sum shall bear interest thereafter until such Event of Default is cured at the Post Default Rate (as defined in the Loan Agreement).

     4. Late Charges.

     In the event that any payment due under the terms of this Note is not received by the Lender within fifteen (15) days of the date such payment is due (inclusive of the date when due), the Borrower shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment.

     5. Application and Place of Payments.

     All payments made on account of this Note, including prepayments, shall be applied first to the payment of any prepayment fee due hereunder, second to any late charge then due hereunder, third to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid Principal Sum, with application first made to all principal installments then due hereunder, next to the outstanding principal balance due at maturity and thereafter to the unpaid principal installments in the inverse order of maturity. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Chevy Chase, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower.

     6. Prepayment.

          (a) The Borrower may prepay the Principal Sum in whole or in part, at any time or from time to time, upon ten (10) days prior written notice to the Lender, without premium or penalty.

          (b) Payment of the indebtedness evidenced by this Note in whole or in part subsequent to the occurrence of an Event of Default shall be deemed to be a prepayment of the Principal Sum subject to any prepayment fee due hereunder.

     7. Other Financing Documents.

     The term “Financing Documents” as used in this Note shall mean collectively this Note, the Deed of Trust (as hereinafter defined) and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with this Note or the Principal Sum evidenced hereby.

     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) of even date herewith from the Borrower to Alexandra

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Johns and Ellen-Elizabeth Lee, trustees (the “Deed of Trust”), covering the Borrower’s fee simple interest in certain real property located in the District of Columbia, described in Exhibit A attached hereto and made a part hereof and all other property, real and personal, more particularly described in the Deed of Trust (the “Property”).

     9. Events of Default.

     The occurrence of any one or more of the following events shall constitute an event of default (individually, an “Event of Default” and collectively, the “Events of Default”) under the terms of this Note:

          (a) The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note; or

          (b) The occurrence of a default or an event of default under the terms and conditions of any of the other Financing Documents, which default or event of default remains uncured beyond any applicable grace and/or cure period provided therefor.

     10. Remedies.

     Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender without notice to the Borrower or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrower and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrower, guarantors and endorsers.

     11. Consent to Jurisdiction.

     The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a suit upon such judgment provided that service of process is effected upon the Borrower as provided in this Note or as otherwise permitted by applicable law.

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     12. Service of Process.

          (a) The Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as the Borrower’s authorized agent to accept and acknowledge on the Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Virginia satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          (b) The Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (i) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Borrower and (ii) serving a copy thereof upon the agent, if any, hereinabove designated and appointed by the Borrower as the Borrower’s agent for service of process. The Borrower irrevocably agrees that such service shall be deemed to be service of process upon the Borrower in any such suit, action, or proceeding. Nothing in this Note shall affect the right of the Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of the Lender otherwise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions.

     13. Expenses.

     The Borrower promises to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, all reasonable attorneys’ fees and expenses and all court costs.

     14. Notices.

     Any notice, request, or demand to or upon the Borrower or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 9.3 of the Deed of Trust.

     15. Miscellaneous.

     Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due

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date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note.

     16. Partial Invalidity.

     In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable.

     17. Captions.

     The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note.

     18. Governing Law.

     The provisions of this Note shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     19. Waiver of Trial by Jury.

     The Borrower and the Lender hereby waive trial by jury in any action or proceeding to which the Borrower and the Lender may be parties, arising out of or in any way pertaining to (a) this Note, (b) the other Financing Documents or (c) the Property. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Note. This waiver is knowingly, willingly and voluntarily made by the Borrower, and the Borrower hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower further represents that it has been represented in the signing of this Note and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under seal by its duly authorized member as of the date first written above.

WITNESS OR ATTEST	SUNRISE CONNECTICUT AVENUE ASSISTED   LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., sole Member

/s/ Kelly L. Hayden	By:	/s/ James S. Pope		(SEAL)
		Name:	James S. Pope
		Title:	Vice President

     THIS IS TO CERTIFY that this is a Deed of Trust Note A described in the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee, trustees, securing the Lender and bearing even date herewith, said Deed of Trust Note and Deed of Trust, Assignment, Security Agreement and Fixture Filing having been executed in my presence.

/s/

Notary Public

My Commission expires:

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

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EX-10.8

Exhibit 10.8

DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING

(Loan A)

This document serves as a Fixture Filing under the District of Columbia Uniform Commercial Code.

Grantor’s Organizational Identification Number is S037833.

     THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING is made as of August 28, 2007, by SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (“Grantor”), ALEXANDRA JOHNS and ELLEN-ELIZABETH LEE, as Trustees either of whom may act (the “Individual Trustees”), and CHEVY CHASE BANK, F.S.B., a federally chartered savings bank, as Agent (“Beneficiary”).

RECITALS

     A. Grantor, Beneficiary and certain lenders named therein (individually a “Lender” and collectively, “Lenders”) are parties to a Loan and Security Agreement (Loan A) dated of even date herewith (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”). Pursuant to the Loan Agreement the Lenders have agreed to make a loan (herein referred to as the “Loan”) to Grantor in the principal amount of $30,000,000. The Loan will be evidenced by Grantor’s Deed of Trust Notes of even date herewith (as amended, extended, restated, supplemented or otherwise modified from time to time, herein referred to collectively as the “Note”).

     B. As a condition precedent to making the Loan to Grantor, Lenders and Beneficiary required that Grantor secure the payment and performance of all obligations of Grantor arising out of, or in connection with, the Loan by the execution of this Deed of Trust.

     NOW, THEREFORE, in order to induce Lenders to make the Loan to Grantor, Grantor agrees as follows:

ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION

     Section 1.1 Definitions.

     As used in this Deed of Trust, Assignment, Security Agreement and Fixture Filing, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the meanings indicated:

     “Accounts” means all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods, all rights to receive the payment of money or other consideration under present or future contracts

(including, without limitation, all rights to receive the payment of money or other consideration from, or on behalf of, Medicare or Medicaid, except to the extent prohibited by law, any private pay patient, and all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of services rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts or agreements which gave rise to any or all of the foregoing, including all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including real property mortgages) given by any person with respect to any of the foregoing, all rights to receive payment under all admission agreements and all third-party payor contracts (including Medicare and Medicaid except to the extent prohibited by law), and any and all depository accounts, except resident trust accounts, into which the proceeds of all or any portion of such accounts may be now or hereafter deposited, and all proceeds (cash and non-cash) of the foregoing.

     “Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.

     “Casualty” means any act or occurrence of any kind or nature that results in damage, loss or destruction to the Property.

     “Claim” means any liability, suit, action, claim, demand, loss, expense (including, without limitation, attorney’s fees) or cost of any kind or nature whatsoever.

     “Condemnation” means any taking of title, of use, or of any other property interest under the exercise of the power of eminent domain, whether temporarily or permanently, by any Governmental Authority or by any Person acting under Governmental Authority.

     “Condemnation Awards” means any and all judgments, awards of damages (including, but not limited to, severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.

     “Contracts of Sale” means any contracts for the sale of all or any part of the Property or any interest therein, whether now or hereafter executed, including, without limitation, all of the Proceeds thereof, any funds deposited thereunder to secure performance by the purchasers of their obligations and the right, after the occurrence of an Event of Default, to receive and collect all payments due under any contracts of sale.

     “Deed of Trust” means this Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) executed by Grantor for the benefit of Beneficiary, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

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     “Default” means an event which, with the giving of Notice or lapse of time, or both, could or would constitute an Event of Default under the provisions of this Deed of Trust.

     “Encumbrance” means any Lien, easement, right of way, roadway (public or private), common area, condominium regime, cooperative housing regime, restrictive covenant, Lease or other matter of any nature that would affect title to the Property.

     “Environmental Assessment” means a report of an environmental assessment of the Property of such scope (including but not limited to the taking of soil borings and air and groundwater samples and other above and below ground testing) as Beneficiary may request, prepared by a recognized environmental consulting firm acceptable to Beneficiary in all respects and sufficient in detail to comply with Beneficiary’s established guidelines and the guidelines of any appropriate Governmental Authority.

     “Environmental Requirement” means any Law or other agreement or restriction, whether public or private (including but not limited to any condition or requirement imposed by any insurer or surety company), now existing or hereafter created, issued or enacted and all amendments thereto, modifications thereof and substitutions therefor, which in any way pertains to human health, safety or welfare, Hazardous Materials, Hazardous Materials Contamination or the environment (including but not limited to ground, air, water or noise pollution or contamination, and underground or above ground tanks) and shall include without limitation, the Resource Conservation and Recovery Act (the Solid Waste Disposal Act), 42 U.S.C. § 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq. (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”); the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.

     “Equipment” means all building materials, fixtures, equipment and other tangible personal property of every kind and nature whatsoever (other than consumable goods, and trade fixtures or other personal property owned by tenants occupying the Improvements), now or hereafter located or contained in or upon, or attached to, the Real Property, whether now owned or hereafter acquired by Grantor, together with all Additions to the Equipment and Proceeds thereof.

     “Event of Default” means the occurrence of any one or more of the events specified in ARTICLE VI (Events of Default) and the continuance of such event beyond the applicable cure periods, if any, set forth in ARTICLE VI.

     “Expenses” means all costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or the Trustees in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Financing Documents, including, without limitation, reasonable attorney’s fees, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.

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     “Facility” means an assisted living facility located on the Property and known as “Sunrise of Connecticut Avenue.”

     “Financing Documents” means this Deed of Trust, the Note, the Loan Agreement, the Guaranty and any and all other documents which Grantor, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee all or any portion of the Obligations, as the same may from time to time be extended, amended, restated or substituted from time to time.

     “Governmental Authority” means any governmental or quasi-governmental entity, including, without limitation, any department, commission, board, bureau, agency, administration, service or other instrumentality of any governmental entity.

     “Guarantor” means Sunrise Senior Living, Inc. and its successors and assigns.

     “Guaranty” means the Guaranty of Payment (Loan A) of even date hereof executed by Guarantor for the benefit of the Agent and Lenders, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

     “Hazardous Materials” means any and all hazardous or toxic substances, wastes or materials which, because of their quantity, concentration, or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard or nuisance to human health, safety or welfare or to the environment when used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled, including without limitation, any substance, waste or material which is or contains asbestos, radon, polychlorinated biphenyls, urea formaldehyde, explosives, radioactive materials or petroleum products.

     “Hazardous Materials Contamination” means the contamination (whether presently existing or occurring after the date of this Deed of Trust) of the Improvements, facilities, soil, ground water, air or other elements on, in or constituting a part of, the Property by Hazardous Materials, or the contamination of the buildings, facilities, soil, ground water, air or other elements on, in or constituting a part of, any other property as a result of Hazardous Materials at any time (whether before or after the date of this Deed of Trust) emanating from the Property.

     “Improvements” means the Facility and all other buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, or in any way used in connection with the use, enjoyment, occupancy or operation of the Land.

     “Land” means the land described in Exhibit A attached hereto, together with (a) all estates, title interests, title reversion rights, increases, issues, profits, rights of way or uses, additions, accretions, servitudes, gaps, gores, liberties, privileges, water rights, water courses, alleys, streets, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements and other rights, now or hereafter owned by Grantor, as lessee, and belonging or appertaining to the Land, (b) all Claims whatsoever of Grantor with respect to the Land, either in law or in equity, in possession or in expectancy, and (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to, the Land.

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     “Laws” means federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

     “Leases” means all leases, excluding Resident Agreements, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property, together with all options therefor, amendments thereto and renewals, modifications and guarantees thereof, including, without limitation, any cash or securities deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or securities are to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due.

     “Licenses” means any and all licenses, certificates of need, operating permits, franchises, and other licenses, authorizations, certifications, permits, or approvals, other than construction permits, issued by, or on behalf of, any Governmental Authority now existing or at any time hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing, ownership and/or operation of the Property, accreditation of the Property, and/or the participation or eligibility for participation in any third party payment or reimbursement programs (but specifically excluding any and all third-party payor participation or reimbursement agreements now or at any time hereafter existing for the benefit of the Borrower), any and all operating licenses issued by any state Governmental Authority, any and all pharmaceutical licenses and other licenses related to the purchase, dispensing, storage, prescription or use of drugs, medications, and other “controlled substances,” any and all licenses relating to the operation of food or beverage facilities or amenities, if any, as the same may from time to time be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified.

     “Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, lien or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.

     “Loan Agreement” means the Loan and Security Agreement (Loan A) of even date herewith among Grantor, Lenders and Beneficiary which sets forth, among other things, the terms and conditions upon which the Loan proceeds will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

     “Manager” means Sunrise Senior Living Management, Inc., a Virginia corporation, and its successors and assigns, in its capacity as Manager and operator of the Facility.

     “Material Lease” means a Lease that generates $30,000 per year or more in revenue.

     “Net Proceeds”, when used with respect to any Condemnation Awards or insurance proceeds allocable to the Property, means the gross proceeds from any Casualty or Condemnation remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such gross proceeds.

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     “Note” has the meaning set forth in the Recitals hereto.

     “Notice” means a written communication delivered by hand, or sent by overnight courier, or by certified or registered mail, postage prepaid, return receipt requested, to the Person to whom such communication is to be given, at the addresses as follows:

Beneficiary:	Chevy Chase Bank, F.S.B.,
	7926 Jones Branch Drive
	McLean, VA 22102
	Attn: Richard L. Amador
	Group Vice President
and:	MB Financial, N.A.
	6111 North River Road
	Rosemont, Illinois 60018
	Attn: Jack H. Sharp
	Senior Vice President
Grantor:	Sunrise Connecticut Avenue Assisted Living, L.L.C.
	c/o Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attn: James S. Pope
Guarantor:	Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attention: General Counsel
With a Courtesy Copy to:	Wayne G. Tatusko, Esquire
	Wayne G. Tatusko, PC
	3016 Williams Drive
	Suite 200
	Fairfax, VA 22031
Trustees:	c/o Chevy Chase Bank, F.S.B.,
	7501 Wisconsin Avenue
	Bethesda, MD 20814

or at such other address as any party shall have notified the others of in the manner set forth in this definition.

     “Obligations” means all present and future debts, obligations and liabilities of Grantor to Beneficiary and/or the Trustees arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Note, the Guaranty, any Swap Contract and any of the other Financing Documents, including, without limitation, the obligations to (a) pay all principal (including, again without limitation, any principal advanced after the date of this Deed of Trust and any principal

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that is repaid and readvanced), interest, late charges and prepayment premiums (if any) due at any time under the Note, and (b) pay all Expenses, indemnification payments and other sums due at any time under this Deed of Trust together with interest thereon as provided in Section 4.19 (Reimbursement; Interest), and (c) perform, observe and comply with all of the terms, covenants and conditions, expressed or implied, with which Grantor and/or Guarantor is required by this Deed of Trust and any of the other Financing Documents, to perform, observe or comply.

     “Operating Agreements and Management Contracts” means any and all contracts and agreements previously, now or at any time hereafter entered into by Grantor and/or Manager other than Resident Agreements with respect to the acquisition, construction, renovation, expansion, ownership, operation, maintenance, use or management of the Property or otherwise concerning the operations and business of the Property, any and all service and maintenance contracts, any employment contracts, any and all management agreements, any and all consulting agreements, laboratory servicing agreements, pharmaceutical contracts, physician, other clinician or other professional services provider contracts, patient admission agreements, Resident Agreements, food and beverage service contracts, and other contracts for the operation and maintenance of, or provision of services to, the Property, as the same may from time to time be amended, restated or substituted from time to time.

     “Permitted Encumbrances” means (a) the Encumbrances set forth in the Commitment for Title Insurance No. NCS-311032-DC72 issued by First American Title Insurance Company and furnished to Beneficiary in connection with this Deed of Trust, as updated to the date of this Deed of Trust, (b) this Deed of Trust, (c) any Leases so long as such Leases are subject and subordinate to this Deed of Trust, (d) liens for Property Assessments which are either (i) not delinquent, or (ii) being contested in accordance with the provisions of Section 4.20 (Permitted Contests) and (e) a second lien Deed of Trust, Assignment, Security Agreement and Fixture Filing of even date herewith granted by Grantor to Trustees to secure Loan B (as defined in the Loan Agreement).

     “Person” means an individual, a corporation, a partnership, a limited liability company, a joint venture, a trust, an unincorporated association, any Governmental Authority or any other entity.

     “Personalty” means all of Grantor’s interest in personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of, the Property, including, without limitation, (a) the Equipment, (b) the Accounts, (c) all Licenses and all Operating Agreements and Management Contracts (provided all of such agreements with non-affiliated parties that are for more than one (1) year in duration shall be subordinate to this Deed of Trust, and Beneficiary shall have no responsibility for the performance of Grantor’s obligations thereunder), and (d) all plans and specifications, contracts and subcontracts for the construction or repair of the Improvements, sewer and water taps, allocations and agreements for utilities, bonds, permits, licenses, guarantees, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, refunds of fees or deposits paid to any Governmental Authority, letters of credit and policies of insurance, together with all Additions to the Personally and Proceeds thereof.

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     “Proceeds”, when used with respect to any of the collateral described in this Deed of Trust, means all proceeds within the meaning of the Uniform Commercial Code of the State and shall also include the proceeds of any and all insurance policies.

     “Property” means the Land, the Improvements and the Personalty, and all Additions to, and Proceeds of, all of the foregoing.

     “Property Assessments” means all taxes, payments in lieu of taxes, water rents, sewer rents, ground rents, assessments, condominium charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.

     “Real Property” means the Land and the Improvements, and all Additions to, and Proceeds of, each of the foregoing.

     “Reimbursement Rate” means the Post Default Rate as defined in the Loan Agreement.

     “Rents” means Grantor’s right to any of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, or from any Lease or other use, or occupancy pertaining to the Property.

     “Resident Agreements” means any and all contracts, authorizations, agreements and/or consents executed by or on behalf of any resident or other person seeking services from Grantor or Manager pursuant to which Grantor and/or Manager provides or furnishes health or assisted living care and related services at the Property, including the consent to treatment, assignment of payment of benefits by third party, as amended, restated or substituted from time to time.

     “State” means the District of Columbia.

     “Swap Contract” means any document, instrument or agreement between Grantor and Beneficiary or any affiliate of Beneficiary, now existing or entered into in the future, relating to an interest rate swap transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar transaction, any option to enter into any of the foregoing, and any combination of the foregoing, which agreement may be oral or in writing, including, without limitation, any master agreement relating to or governing any or all of the foregoing and any related schedule or confirmation, each as amended from time to time.

     “Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

     “Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including, without limitation, any contract or agreement to sell, assign, convey or transfer, whether made with or without consideration.

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     “Uniform Commercial Code” means the Uniform Commercial Code as adopted by the State, as amended.

     “Trustees” means the Individual Trustees or their successors in trust who may be acting under and pursuant to this Deed of Trust from time to time.

     Section 1.2 Rules of Construction.

     The words “hereof”, “herein”, “hereunder”, “hereto”, and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants”. The headings of this Deed of Trust are for convenience only and shall not define or limit the provisions hereof. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (d) to Section numbers are to the respective Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust has the meaning given to that term in the Uniform Commercial Code of the State, as in effect from time to time, when used in this Deed of Trust. However, if a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term has the meaning specified in Article 9.

ARTICLE II
GRANTING CLAUSES; CONDITION OF GRANT

     In order to secure the prompt payment and performance of the Obligations, Grantor (a) grants, bargains, sells and conveys the Real Property unto the Trustees in trust for the benefit of Beneficiary, to have and to hold the Real Property unto the Trustees in fee simple forever; provided that, Grantor may retain possession of the Real Property until the occurrence of an Event of Default; and (b) grants Beneficiary a lien on, and security interest in, the Personalty; and (c) unconditionally and absolutely assigns the Leases and Rents to Beneficiary (but subject to the license for collection of Rents described in Section 4.14(b) (Leases)); and (d) assigns to, and grants Beneficiary a security interest in, any Contracts of Sale; and (e) assigns to Beneficiary all Condemnation Awards and any insurance proceeds payable with respect to any Casualty. If and when Grantor has paid and performed all of the Obligations, the Trustees, upon request by Beneficiary, will provide a release of this Deed of Trust to Grantor. Grantor shall be responsible for the recordation of such release and payment of any recording costs.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

     Grantor makes the following representations and warranties to Beneficiary:

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     Section 3.1 Organization, Power and Authority of Grantor; Financing Documents.

     Grantor (a) is a limited liability company duly organized, and existing and in good standing under the laws of the jurisdiction in which it is organized, and is duly qualified to do business and in good standing in the State and in any other state in which Grantor conducts business, and (b) has the power, authority and legal right to own its property and carry on the business now being conducted by it and to engage in the transactions contemplated by the Financing Documents. The execution and delivery of, and the carrying out of the transactions contemplated by, the Financing Documents executed by Grantor, and the performance and observance of the terms and conditions of such Financing Documents, have been duly authorized by all necessary action of Grantor. The Financing Documents to which Grantor is a party constitute the valid and legally binding obligations of Grantor and are fully enforceable against Grantor in accordance with their respective terms.

     Section 3.2 Other Documents; Laws.

     The execution and performance of the Financing Documents executed by Grantor and the consummation of the transactions contemplated thereby will not conflict with, result in any breach of, or constitute a default under the operating agreement of Grantor, or any contract, agreement, document or other instrument to which Grantor is a party or by which Grantor may be bound or affected, and do not and will not violate or contravene any Law to which Grantor is subject.

     Section 3.3 Taxes.

     Grantor has filed all federal, state, county and municipal Tax returns required to have been filed by Grantor and has paid all Taxes which have become due pursuant to such returns or pursuant to any Tax assessments received by Grantor.

     Section 3.4 Legal Actions.

     There are no (a) Claims pending or, to the best of Grantor’s knowledge and belief, threatened, against or affecting Grantor, Grantor’s business or the Property, or (b) investigations at law or in equity, before or by any court or Governmental Authority, pending or, to the best of Grantor’s knowledge and belief, threatened, against or affecting Grantor, Grantor’s business or the Property. Grantor is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority affecting Grantor or the Property.

     Section 3.5 Nature of Loan; Usury; Disclosures.

     Grantor is a business or commercial organization, and the Loan is being made solely for business or investment purposes. The rate of interest charged on the Loan does not, and will not, violate any usury Law or interest rate limitation. The Loan is not subject to the federal Consumer Credit Protection Act (15 U.S.C. §1601 et. seq.) nor any other federal or state disclosure or consumer protection laws.

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     Section 3.6 Trade Names.

     Grantor conducts its business solely under the name set forth in the Preamble to this Deed of Trust and makes use of no trade names in connection therewith, unless such trade names have been previously disclosed to Beneficiary in writing.

     Section 3.7 Warranty of Title.

     Grantor is (a) the owner of the fee simple legal title to the Real Property, (b) except for the Permitted Encumbrances, the owner of all of the beneficial and/or equitable interest in and to the Real Property and (c) lawfully seized and possessed of the Real Property. Grantor has the right and authority to convey the Real Property and does hereby warrant specially, and agrees to defend, the Real Property and the title thereto, whether now owned or hereafter acquired, against all Claims by any Person claiming by, through, or under Grantor. The Real Property is subject to no Encumbrances other than the Permitted Encumbrances.

     Section 3.8 Property Assessments.

     The Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that the Real Property shall never become subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.

     Section 3.9 Independence of the Real Property.

     No building or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. The Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.

     Section 3.10 Existing Improvements.

     The existing Improvements, if any, were constructed, and are being maintained, in accordance with all applicable Laws, including, without limitation, zoning Laws.

     Section 3.11 Personalty.

     Grantor has good title to the Equipment, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances.

     Section 3.12 Leases, Rents, Contracts of Sale.

     The Leases, Rents and Contracts of Sale are not subject to any Encumbrance other than the Permitted Encumbrances.

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     Section 3.13 Presence of Hazardous Materials or Hazardous Materials Contamination; Compliance with Environmental Requirements.

     To the best of Grantor’s knowledge and belief, (a) no Hazardous Materials are currently located on the Property, nor is the Property affected by any Hazardous Materials Contamination, (b) the Property has never been used as a manufacturing, storage, treatment, processing, recycling or disposal site for Hazardous Materials, and (c) no property in the vicinity of the Real Property has ever been used as a manufacturing, storage, treatment, processing, recycling or disposal site for Hazardous Materials, nor is any such property affected by Hazardous Materials Contamination. The present condition and uses of, and activities on, the Property do not violate any Environmental Requirement and the uses of the Property which Grantor and each tenant and subtenant, if any, intend in the future to make of the Property comply and will comply with all applicable Environmental Requirements. Neither Grantor, nor to Grantor’s knowledge, any tenant or subtenant, has obtained or is required to obtain any permit or other authorization to construct, occupy, operate, use or conduct any activity on, the Property by reason of any Environmental Requirement. Grantor has received no notice, and is not aware, of any Claim involving a violation of any Environmental Requirement with respect to the Property or any parcel in the vicinity of the Real Property or any operation conducted on the Property or on any parcel in the vicinity of the Real Property. There is no Environmental Requirement which requires any work, repair, construction, capital expenditure, or other remedial work of any nature whatsoever to be undertaken with respect to the Property.

     Section 3.14 Financial Statements.

     The financial statements heretofore delivered by Grantor and any other party or parties to Beneficiary are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof. No material adverse change has occurred in the financial conditions reflected therein since the respective dates thereof and no material additional liabilities have been incurred by Grantor or any such other party or parties since the date thereof other than the borrowings contemplated herein or as approved in writing by Beneficiary.

ARTICLE IV
AFFIRMATIVE COVENANTS

     Section 4.1 Obligations.

     Grantor agrees to promptly pay and/or perform all of the Obligations, time being of the essence in each case.

     Section 4.2 Insurance.

     Grantor shall maintain the following insurance at its sole cost and expense:

               (a) Insurance against Casualty to the Property under a policy or policies covering such risks as are ordinarily insured against by similar businesses, but in any event including fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Unless

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otherwise agreed in writing by Beneficiary, such insurance shall be for the full replacement cost of the Property. The deductible amount under such policy or policies shall not exceed $25,000. No policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise. The term “full replacement cost” means the actual replacement cost of the Property (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items). The “full replacement cost” shall be determined from time to time at the request of Beneficiary (but not more frequently than once every three (3) years) by a third party appraiser or appraisal company or one of the insurers, who shall be selected and paid for by Grantor but subject to Beneficiary’s approval. A combination of primary and umbrella policies can be used to satisfy the limit requirements.

               (b) Comprehensive general public liability insurance for bodily injuries to Persons and damage to property, in limits of not less than $2,000,000 for any one occurrence and $5,000,000 for the aggregate of all occurrences during any given annual policy period. Such insurance shall name Beneficiary as an additional insured.

               (c) Workers’ compensation insurance for all employees of Grantor in such amount as is required by Law.

               (d) During any period of construction upon the Property, Grantor shall maintain, or cause others to maintain, builder’s risk insurance (non-reporting form) of the type customarily carried in the case of similar construction for the full replacement cost of work in place and materials stored at or upon the Property.

               (e) If at any time the Property is in an area that has been identified as having special flood and mudslide hazards, and flood insurance is available in such area, Grantor shall purchase and maintain a flood insurance policy in form and amount acceptable to Beneficiary. In the event that the Property is not in an area having special flood and mudslide hazards, Grantor shall deliver to Beneficiary upon request evidence satisfactory to Beneficiary stating that the Property is not in such a flood or mudslide hazard area.

               (f) Business interruption insurance in an amount acceptable to Beneficiary.

               (g) Grantor will obtain and keep in force such other and further insurance as may be required from time to time by Beneficiary in order to comply with regular requirements and practices of Beneficiary in similar transactions.

               (h) To the extent that health care professionals are employed by Manager, medical liability, malpractice and other health care professional liability insurance protecting Manager, as the case may be, against claims arising from the professional services performed by Manager, as the case may be, with limits of (A) not less than One Million Dollars ($1,000,000) with respect to bodily injury or death for each person or occurrence, and (B) not less than Three Million Dollars ($3,000,000) in the aggregate for claims made for injury or death in any one year, and an umbrella policy insuring against such liability in an aggregate amount of Five Million Dollars ($5,000,000).

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               (i) Each policy of insurance shall (i) be issued by one or more recognized, financially sound and responsible insurance companies, (ii) with respect to the insurance described under the preceding subsections (a), (d), (e) and (f), have attached thereto standard non-contributing, non-reporting mortgagee clauses in favor of and entitling Beneficiary without contribution to collect any and all proceeds payable under such insurance, (iii) provide that such policy shall not be canceled or modified without at least thirty (30) days prior written notice to Beneficiary, and (iv) provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Grantor which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Unless an escrow account has been established for insurance premiums pursuant to Section 4.5 (Property Assessments; Escrow), Grantor shall promptly pay all premiums when due on such insurance and, not less than thirty (30) days prior to the expiration dates of each such policy, Grantor will deliver to Beneficiary evidence of payment satisfactory to Beneficiary. Grantor will within five (5) days give Beneficiary Notice of any cancellation of, or change in, any insurance policy. Beneficiary shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (i) the existence, nonexistence, form or legal sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of losses.

     Section 4.3 Adjustment of Condemnation and Insurance Claims.

     Grantor shall give prompt Notice to Beneficiary of any Casualty or any Condemnation or threatened written Condemnation. Beneficiary is authorized, at its sole option, to commence, appear in and prosecute, in its own or Grantor’s name, any action or proceeding relating to any Condemnation or Casualty, and to settle or compromise any Claim in connection therewith. In such case, Beneficiary may also deduct from any payment all of its Expenses. Beneficiary agrees, however, that, so long as no Event of Default has occurred and is continuing, it will not settle or compromise any such Claim without the prior written consent of Grantor, which consent shall not be unreasonably withheld or delayed. If Beneficiary elects not to adjust a Claim, Grantor agrees to promptly pursue the settlement and compromise of the Claim subject to Beneficiary’s approval that will not be unreasonably withheld or delayed. If, prior to the receipt by Beneficiary of any Condemnation Award or insurance proceeds, the Property shall have been sold pursuant to the provisions of Section 7.2 (Foreclosure), Beneficiary shall have the right to receive such funds to the extent of (a) any deficiency found to be due upon such sale with interest thereon (whether or not a deficiency judgment on this Deed of Trust shall have been sought or recovered or denied), and (b) necessary to reimburse Beneficiary for its Expenses. Grantor agrees to execute and deliver from time to time, upon the request of Beneficiary, such further instruments or documents as may be requested by Beneficiary to confirm the grant and assignment to Beneficiary of any Condemnation Awards or insurance proceeds.

     Section 4.4 Application of Net Proceeds.

     Net Proceeds must be applied to either (a) the payment of the Obligations, or (b) the restoration of the Property. If either an Event of Default has occurred or the cost to repair or restore the Property exceeds $3,000,000, Beneficiary shall determine, in its sole discretion, the manner in which Net Proceeds are to be applied. If no Event of Default has occurred and the cost to repair or restore the Property is $3,000,000 or less, Grantor shall determine the manner in which Net Proceeds are to be applied. In the event that, and to the extent that, Net Proceeds are

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to be applied to the restoration of the Property, each of the following conditions must also be met and complied with if and to the extent required by Beneficiary:

               (a) An escrow account shall have been established with Beneficiary composed of Net Proceeds, and, if necessary, additional deposits made by Grantor, which, in the sole judgment of Beneficiary, is sufficient to restore the Property to its use, value and condition immediately prior to the Casualty or Condemnation. Beneficiary shall be entitled, at the expense of Grantor, to consult such professionals as Beneficiary may deem necessary, in its sole discretion, to determine the total costs of restoring the Property. Interest will be paid on funds in the escrow account. Grantor hereby assigns to, and grants Beneficiary a security interest in, such escrow account and the funds therein to secure the payment and performance of the Obligations.

               (b) Either:

               (i) All Material Leases must continue in full force and effect (subject to rent abatement during restoration as may be provided in the Material Leases) or, if terminated, the terminated Material Leases must have been replaced with Material Leases of equal quality in the reasonable judgment of Beneficiary. Any tenant having the right to terminate its Material Lease due to the Casualty or Condemnation, and which has not exercised that right, shall have confirmed in writing to Beneficiary its irrevocable waiver of such termination right, or

               (ii) Proceeds from business interruption insurance must be available to Grantor in such amounts as Beneficiary, in its reasonable judgment, considers sufficient to pay the amortization under the Loan, and all Property Assessments, insurance premiums and other sums becoming due from Grantor pursuant to this Deed of Trust during the time required for restoration.

               (c) All restoration will be conducted under the supervision of an architect or engineer, or both, selected and paid for by Grantor and approved in advance by Beneficiary, and by a general contractor who shall be approved by Beneficiary and shall have executed a fixed price contract.

               (d) The restoration will be performed pursuant to the original plans and specifications approved by Beneficiary.

               (e) If required by Beneficiary at its sole option, the contractor or contractors responsible for the restoration shall have obtained payment and performance bonds from a corporate surety acceptable to Beneficiary and naming Beneficiary as dual obligee.

               (f) Grantor shall have provided Beneficiary with reasonably satisfactory evidence that there has been no adverse change in the economic viability of the Property since the date of this Deed of Trust, such evidence to include, among other things, an appraisal and market study prepared by a firm or firms acceptable to Beneficiary, but at Grantor’s expense.

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If any of the foregoing conditions are not satisfied, Beneficiary may, in its sole discretion, apply Net Proceeds to the payment of the Obligations.

     If applied to restoration, Net Proceeds (and any other funds required to be deposited with Beneficiary) shall be disbursed from time to time in accordance with the terms and conditions of the construction loan agreement most commonly used by Beneficiary or other regionally recognized construction lenders, at the time of the Casualty or Condemnation for major commercial construction loans, and subject also to the following conditions (which shall control in the event of any conflict with the provisions of such construction loan agreement):

               (a) Restoration shall commence within sixty (60) days following receipt of the Net Proceeds by Beneficiary or such additional time as may be required by Grantor in obtaining the necessary licenses, permits or approvals from the applicable Governmental Authorities provided Grantor has and continues to diligently pursue obtaining the necessary licenses, permits and approvals, and shall be completed within such time as may be determined by Beneficiary in view of the extent of the Casualty or Condemnation but, in any event, shall be completed within a reasonable period after the date the Net Proceeds are received.

               (b) At the time of each disbursement,

               (i) (1) no Leases (if any) shall have been terminated which either singularly or in the aggregate affect more than ten percent (10%) of the leasable area of the Property unless the same have been replaced with Leases of equal quality, in the reasonable judgment of Beneficiary, and (2) no Default shall have occurred, or

               (ii) Proceeds from business interruption insurance or other moneys of Grantor must be available to Grantor in such amounts as Beneficiary, in its reasonable judgment, considers sufficient to pay the amortization under the Loan and all Property Assessments, insurance premiums and other sums becoming due from Grantor pursuant to this Deed of Trust during the time required for restoration.

               (c) Restoration shall be performed in accordance with the requirements of Section 5.4 (Additional Improvements).

               (d) With respect to each disbursement and accompanying each request therefor, there shall be delivered to Beneficiary (i) a certificate addressed to Beneficiary from the architect or engineer supervising the restoration stating that such disbursement is to pay the cost of restoration not paid previously by any prior disbursement, that all restoration completed to the date of such certificate has been completed in accordance with applicable Laws and the approved plans and specifications, and that the amount of such disbursement, together with all other disbursements, does not exceed ninety percent (90%) of the requisition for direct construction costs until such time as fifty percent (50%) of the restoration has been completed, then such disbursements shall not exceed ninety-five percent (95%) of the requisition for direct construction costs, and (ii) evidence satisfactory to Beneficiary that all Claims then existing for

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labor, services and materials have been paid in full or will be paid in full from the proceeds of the disbursement requested.

               (e) The final holdback shall be disbursed only upon delivery to Beneficiary, in addition to the items required in paragraph (d) above, of the following:

               (i) Final waivers of Liens from all contractors and subcontractors.

               (ii) A certificate of the architect or engineer stating that the restoration has been completed in a good and workmanlike manner, in accordance with the plans and specification approved by Beneficiary and in accordance with all applicable Laws.

               (iii) An estoppel affidavit from each tenant occupying or leasing space under a Material Lease in the Property stating that its Lease is in full force and effect.

               (f) Immediately upon the occurrence of any Event of Default, Beneficiary may apply Net Proceeds and any other sums deposited with Beneficiary to the repayment of the Obligations.

     Section 4.5 Property Assessments; Escrow.

               (a) Unless an escrow account for payment of Property Assessments is created pursuant to subsection (c) below, Grantor will (i) promptly pay in full and discharge all Property Assessments, and (ii) exhibit to Beneficiary, upon demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalties commence to accrue thereon.

               (b) In the event of the passage of any Law subsequent to the date of this Deed of Trust in any manner changing or modifying the Laws now in force governing the taxation of deeds of trust or debts secured by deeds of trust or the manner of collecting any such taxes so as to adversely affect Beneficiary (including, without limitation, a requirement that internal revenue stamps be affixed to this Deed of Trust or any of the other Financing Documents), Grantor will promptly pay any such tax. If Grantor fails to make such prompt payment, or if any Law prohibits Grantor from making such payment or would penalize Beneficiary if Grantor makes such payment, then the entire unpaid balance of the Obligations shall, without Notice, immediately become due and payable at the sole option of Beneficiary. In no event, however, shall any income taxes of Beneficiary or franchise taxes of Beneficiary measured by income, or taxes in lieu of such income taxes or franchise taxes, be required to be paid by Grantor.

               (c) At any time following the occurrence and during the continuance of an Event of Default, Beneficiary reserves the right to require Grantor to pay to Beneficiary monthly, on any date selected by Beneficiary, such amount as Beneficiary from time to time estimates will generate sufficient funds to pay all Property Assessments and premiums for

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the insurance required by Section 4.2 (Insurance) prior to the date such Property Assessments or insurance premiums next become due. Beneficiary’s estimates shall be based on the amounts actually payable or, if unknown, on the amounts actually paid for the year preceding that for which such payments are being made. Any deficiencies shall be promptly paid by Grantor to Beneficiary on demand. Grantor shall transmit or cause to be transmitted bills for the Property Assessments and insurance premiums to Beneficiary as soon as received by Grantor. When Beneficiary has received from Grantor, or on its account, funds sufficient to pay the same, Beneficiary shall, except as provided below following an Event of Default, pay such bills. Payments for such purposes may be made by Beneficiary at its discretion even though subsequent owners of the Property may benefit thereby. Upon foreclosure or release of this Deed of Trust or, to the extent permitted by Law, upon the occurrence of an Event of Default, Beneficiary may apply any sums so deposited to the payment of the Obligations. If from time to time funds are accumulated under the terms of this Section in excess of the amount needed to pay the Property Assessments and such insurance premiums, Grantor at least annually shall be given the option of (i) receiving a refund of the excess funds, (ii) applying the excess funds to the payment of the Obligations (provided prepayment is then permitted without penalty pursuant to the Note), or (iii) permitting the excess funds to remain in the escrow account established pursuant to this Section. If Grantor fails to give Notice to Beneficiary of its intent with respect to the application of the excess funds as provided in this Section within sixty (60) days from the date Beneficiary mailed notice of the accumulation of the excess funds, Beneficiary shall promptly return the excess funds to Grantor. Within sixty (60) days after receipt from Grantor of a Notice requesting a refund, Beneficiary shall also return excess funds to Grantor.

     Section 4.6 Compliance with Laws.

     Grantor will comply with and not violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.

     Section 4.7 Maintenance and Repair of the Property.

     Grantor, at Grantor’s sole expense, will (a) keep and maintain the Improvements and the Equipment in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to the Improvements and Equipment, so that each part of the Improvements and all of the Equipment shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.

     Section 4.8 Additions to Security.

     All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Equipment hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to the Trustees and/or Beneficiary such further documents as may be required pursuant to Section 9.2 (Further Assurances).

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     Section 4.9 Inspection.

     Upon reasonable advance notice thereof by Beneficiary, Grantor will permit Beneficiary, or any Person authorized by Beneficiary, to enter and make inspections of the Property at all reasonable times and as often as may be requested by Beneficiary.

     Section 4.10 Management.

     Grantor shall at all times provide for the competent and responsible management and operation of the Property. Each management contract affecting the Property must be approved in writing by Beneficiary prior to the execution of the same.

     Section 4.11 Books and Records.

     Grantor will keep and maintain full and accurate records and books administered in accordance with generally accepted accounting principles, consistently applied, showing in detail the earnings and expenses of the Property and the operation thereof. Grantor shall permit Beneficiary, or any Person authorized by Beneficiary, to inspect and examine such records and books (regardless of where maintained) and all supporting vouchers and data and to make copies and extracts therefrom at all reasonable times and as often as may be requested by Beneficiary. In addition, Grantor will furnish or cause to be furnished to Beneficiary the financial information required under the Loan Agreement.

     Section 4.12 Estoppel Certificates.

     Within ten (10) days after any written request by Beneficiary or a proposed assignee or purchaser of the Loan, Grantor shall certify in writing to Beneficiary, or to such proposed assignee or purchaser, the then unpaid balance of the Loan and whether Grantor has any right of defense or setoff to the payment or performance of any of the Obligations.

     Section 4.13 Subrogation.

     To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary to pay or discharge any Lien.

     Section 4.14 Leases.

               (a) Beneficiary shall approve any Material Lease executed after the date of this Deed of Trust as to form, content and financial strength of the tenant. At any time, within thirty (30) days after Notice from Beneficiary, Grantor will deliver to Beneficiary a written description in such reasonable detail as Beneficiary may request of all of the Leases, including, without limitation, the names of all tenants, the terms of all Leases and the Rents payable under all Leases. If any Material Lease provides for the giving by the tenant of certificates with respect to the status of such Lease, Grantor shall exercise its right to require such certificate within ten (10) days after any request by Beneficiary. Following the occurrence of an Event of Default and notice from Beneficiary, Grantor will notify all tenants under existing Leases, and agrees to notify all tenants under future Leases, that (i) Grantor collects and receives

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all Rents pursuant to the license granted to it hereunder, and (ii) upon Notice from Beneficiary that such license has been revoked, the tenants shall pay all unpaid Rent directly to Beneficiary.

               (b) So long as no Event of Default has occurred, Grantor shall have a license (which license shall terminate automatically and without Notice upon the occurrence of an Event of Default) to collect upon, but not prior to accrual, the Rents under the Leases and, where applicable, subleases, such Rents to be held in trust for Beneficiary. Each month, provided no Event of Default has occurred, Grantor may retain such Rents and proceeds from Resident Agreements as were collected that month and held in trust for Beneficiary. Upon revocation of such license and following notification to the tenants under the Leases by Beneficiary or the Trustees that Rents are to be paid to Beneficiary, all Rents shall be paid directly to Beneficiary and not through Grantor. A demand by Beneficiary on any tenant for the payment of Rent shall be sufficient to warrant such tenant to make future payments of Rent to Beneficiary without the necessity of further consent by Grantor.

               (c) Grantor, at its sole cost and expense, will use its best efforts to enforce or secure, or cause to be enforced or secured, the performance of each and every obligation and undertaking of the respective tenants under any Leases and will appear in and defend, at its sole cost and expense, any action or proceeding arising under, or in any manner connected with, such Leases.

               (d) Grantor will not assign the whole or any part of the Leases or Rents without the prior written consent of Beneficiary, and any assignment without such consent shall be null and void.

               (e) Grantor will promptly perform all of its obligations under any Leases. Grantor will not, without the prior written consent of Beneficiary, (i) cancel, terminate, accept a surrender of, reduce the payment of rent under any Material Leases, or accept any prepayment of rent for more than one (1) month in advance under, any Lease or Resident Agreements, (ii) modify, amend or substitute any Material Leases, or (iii) permit a Lien on the Property superior to any Lease, other than this Deed of Trust. Beneficiary acknowledges that the community fee paid in connection with a Resident Agreement is not a prepayment of rent.

               (f) If any Leases are subordinate (either by their date, their express terms, or by subsequent agreement of the tenant) to this Deed of Trust, such Leases shall be subject to the condition (and this Deed of Trust so authorizes) that, in the event of any sale of the Property pursuant to the provisions of Section 7.2 (Foreclosure), the Leases shall, at the sole option of Beneficiary or any purchaser at such sale, either (i) continue in full force and effect as set forth in the required advertisement of sale, and the tenant or tenants thereunder will, upon request, attorn to and acknowledge in writing the purchaser or purchasers at such sale or sales as landlord thereunder, or (ii) upon notice to such effect from Beneficiary, the Trustees or any purchaser or purchasers, terminate within ninety (90) days from the date of sale. As to any Lease, neither Beneficiary nor any purchaser or purchasers at foreclosure shall be bound by any payment of rent for more than one (1) month in advance or by any amendment or modification of the Lease made without the prior written consent of Beneficiary or, subsequent to a foreclosure sale, such purchaser or purchasers.

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               (g) Neither the Trustees nor Beneficiary shall be obligated to perform or discharge any obligation of Grantor under any Lease. This assignment of the Leases in no manner places on Beneficiary or the Trustees any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown). Grantor agrees to indemnify the Trustees and Beneficiary for, and forever hold them harmless from, any and all Claims arising out of, or in connection with, any Leases or any assignment thereof.

               (h) Unless otherwise agreed to by Beneficiary, each Lease shall (i) be at market rents, (ii) be subordinate to the lien of this Deed of Trust, (iii) contain attornment language requiring each tenant to attorn to any subsequent purchaser of the Property, (iv) not contain non-disturbance language entitling such tenant to remain at the Property after any sale of the Property except as specifically agreed to by Beneficiary in connection with specified Leases, and shall be in all respects acceptable to Beneficiary and its counsel. Approved Material Leases may not be amended, modified or terminated without the prior written consent of Beneficiary.

     Section 4.15 Contracts of Sale.

     Following the occurrence and during the continuance of an Event of Default, Grantor irrevocably authorizes Beneficiary, at its sole option, to collect, in the name of Grantor or in its own name as assignee, all payments due or to become due under any Contract of Sale. Grantor agrees that it will facilitate in every reasonable way the collection by Beneficiary of such payments, and will, upon written request by Beneficiary, execute a written notice and deliver the same to each purchaser directing the purchaser to make such payments to Beneficiary. In no event shall Beneficiary be accountable for more moneys than it actually receives pursuant to a Contract of Sale, nor shall Beneficiary be liable for any failure to collect payments under any Contract of Sale. The right to determine the method of collection and the extent to which the enforcement of collection shall be prosecuted is reserved to the sole discretion of Beneficiary. Grantor, without the prior written consent of Beneficiary, will not execute any assignment of any Contract of Sale or the payments due thereunder. Grantor shall furnish to Beneficiary, within ten (10) days after a written request from Beneficiary, a written certification containing the names of all contract purchasers of the Property and shall attach to such certification a copy of any Contract of Sale. Nothing contained in this Section shall (a) be construed as a consent by Beneficiary to any Transfer of the Property, or (b) constitute a delegation to Beneficiary of any of Grantor’s duties or obligations under any Contract of Sale. Grantor agrees to indemnify Beneficiary and the Trustees for, and forever hold them harmless from, any Claim arising out of, or in connection with, any Contract of Sale.

     Section 4.16 Taxes.

     Grantor shall pay and discharge all Taxes prior to the date on which penalties are attached thereto unless and to the extent only that such Taxes are contested in accordance with Section 4.20 (Permitted Contests).

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     Section 4.17 Hazardous Materials; Contamination.

          (a) The Grantor agrees to (i) give Notice to the Beneficiary immediately upon the Grantor’s acquiring knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous Materials Contamination or of any Claim made or threatened against the Grantor or the Property with respect to any Environmental Requirement with a full description thereof; (ii) at the Grantor’s sole cost and expense, promptly comply with any and all Environmental Requirements relating to the Property or such Hazardous Materials or Hazardous Materials Contamination and provide the Beneficiary with satisfactory evidence of such compliance; (iii) provide the Beneficiary, within thirty (30) days after a demand by the Beneficiary, with a bond, letter of credit or similar financial assurance evidencing to the Beneficiary’s satisfaction that the necessary funds are available to pay the cost of complying with such Environmental Requirements and removing, treating and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any Lien which may be established on the Property as a result thereof; and (iv) take whatever other action as the Beneficiary may deem necessary or appropriate to restore to the Grantor the full use and benefit of the Property as contemplated by the Financing Documents.

          (b) The Grantor shall immediately upon the receipt of Notice from the Beneficiary, which may be given at any time and from time to time by the Beneficiary in its sole discretion (but not more frequently than once during any twelve (12) month period), cause an Environmental Assessment to be undertaken with respect to the Property and furnish the same to the Beneficiary within thirty (30) days after the date of the Beneficiary’s request. The cost of any such Environmental Assessment shall be borne exclusively by the Grantor. The Grantor shall cooperate with each environmental consulting firm engaged to make any such Environmental Assessment and shall supply to each such environmental consulting firm, from time to time and promptly on request, all information available to the Grantor to facilitate the completion of the Environmental Assessment. Notwithstanding the foregoing, the Beneficiary shall be under no duty to require the preparation of any Environmental Assessment of the Property, and in no event shall any such Environmental Assessment by the Beneficiary be or give rise to any representation or warranty by the Beneficiary that Hazardous Materials are or are not present on the Property, or that there has been compliance by the Grantor or any other Person with any Environmental Requirement.

          (c) The Grantor shall protect, indemnify, defend and hold the Beneficiary, the Trustees, any Persons owned or controlled by, owning or controlling, or under the common control of or affiliated with, the Beneficiary and/or the Trustees, any participants in the Loan, the directors, officers, employees and agents of the Beneficiary, and/or such other Persons, and the heirs, personal representatives, successors and assigns of each of the foregoing, harmless from and against any and all Claims of any kind or nature whatsoever arising out of or in any way connected with any investigative, enforcement, cleanup, removal, containment, remedial or other private, governmental or regulatory action at any time threatened, instituted or completed pursuant to any applicable Environmental Requirement against the Grantor or the Beneficiary or against or with respect to the Property or any condition, use or activity on the Property or at any time threatened or made by any Person against the Grantor or the Beneficiary or against or with respect to the Property or any condition, use or activity on the Property relating to any damage, contribution, cost recovery, compensation, loss or injury resulting from or in any way arising in

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connection with any Hazardous Materials or Hazardous Materials Contamination. Upon demand by the Beneficiary, the Grantor shall diligently defend any such Claim which affects the Property or is made or commenced against the Beneficiary, whether alone or together with the Grantor or any other Person, all at the Grantor’s sole cost and expense and by counsel to be approved by the Beneficiary in the exercise of its reasonable judgment. In the alternative, the Beneficiary may at any time elect to conduct its own defense through counsel selected by the Beneficiary and at the cost and expense of the Grantor.

     Section 4.18 Right to Perform.

     If the Grantor fails to promptly pay or perform any of the Obligations, the Beneficiary, without Notice to or demand upon the Grantor, and without waiving or releasing any Obligation or Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Grantor. The Beneficiary may enter upon the Property for that purpose and take all action thereon as the Beneficiary considers necessary or appropriate. All Expenses incurred by the Beneficiary pursuant to this Section, together with interest thereon at the Reimbursement Rate, shall be paid by the Grantor to the Beneficiary as provided in Section 4.19 (Reimbursement; Interest).

     Section 4.19 Reimbursement; Interest.

     If Beneficiary or the Trustees shall incur any Expenses or pay any Claims to which Beneficiary or the Trustees become a party by reason of this Deed of Trust or the rights and remedies provided hereunder (regardless of whether this Deed of Trust expressly provides for an indemnification against such Claims by Grantor), such Expenses and Claims shall be (a) paid by Grantor to Beneficiary on demand, together with interest thereon from the date incurred until paid in full by Grantor at the Reimbursement Rate and (b) a part of the Obligations. Notwithstanding the foregoing, however, in any action or proceeding to foreclose this Deed of Trust or to recover or collect the Obligations, the provisions of Law governing the recovery of costs, disbursements and allowances shall prevail unaffected by this Section. Whenever this Deed of Trust provides for interest to be paid by Grantor at the Reimbursement Rate, the Reimbursement Rate shall be calculated on the basis of a 365-day year factor applied to actual days elapsed.

     Section 4.20 Permitted Contests.

     Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary nor the Trustees are subjected to any Claim, and (d) Grantor provides assurances satisfactory to Beneficiary (including, without limitation, the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary and Trustees harmless against all Claims in connection therewith. Promptly after

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the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

     Section 4.21 Security Agreement.

     This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from the Grantor to the Beneficiary under the Uniform Commercial Code of the State. This Deed of Trust constitutes a fixture filing under the Uniform Commercial Code of the State, as amended or recodified from time to time, and covers property which includes goods that are or are to become fixtures on the Property. “Fixtures” shall include all articles of personal property now or hereafter attached to, placed upon for an indefinite term or used in connection with said real property, appurtenances and improvements, together with all goods and other property which are or at any time become so related to the Property that an interest in them arises under real estate law. The respective mailing addresses of Grantor and Beneficiary are set forth in the definition of “Notices” in Section 1.1 (Definitions).

     The Grantor hereby authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable law, required by Beneficiary to establish or maintain the validity, perfection and priority of the security interest granted in this Deed of Trust. For purposes of such filings, Grantor agrees to furnish any information requested by Beneficiary promptly upon request by Beneficiary. Grantor also ratifies its authorization for Beneficiary to have filed any like initial financing statements, amendment thereto or continuation statements if filed prior to the date of this Deed of Trust.

     Grantor shall pay all fees and costs that Beneficiary may incur in filing this or any other documents in public offices and in obtaining such record searches as Beneficiary may reasonably require. If any financing statement or other document is filed in the records normally pertaining to personal property, that filing shall never be construed as in any way derogating from or impairing this Deed of Trust or the rights or obligations of the parties under it. The Grantor hereby agrees to execute and deliver on demand, and hereby irrevocably constitutes and appoints the Beneficiary the attorney-in-fact of the Grantor, to execute, deliver and, if appropriate, to file with the appropriate filing office or offices, such financing statements or other instruments as the Beneficiary may request or require in order to perfect the security interest granted hereby or to continue the effectiveness of the same.

     Section 4.22 Access Law.

               (a) Grantor agrees to use its best efforts to ensure that the Property shall at all times comply with and remain in compliance with the requirements of the Americans with Disabilities Act of 1990, all state and local Laws and ordinances related to handicapped access and all rules, regulations, and orders issued pursuant to any of the foregoing, including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities, all to the extent applicable to the Property (collectively, “Access Laws”).

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               (b) Notwithstanding any provisions set forth herein or in any other document regarding Beneficiary’s approval of alterations of the Property, Grantor shall not alter the Property in any manner which would increase Grantor’s responsibilities for compliance with the applicable Access Laws without the prior written approval of Beneficiary. The foregoing shall apply to tenant improvements constructed by Grantor or by any of its tenants. Beneficiary may condition any such approval upon receipt of a certificate of Access Law compliance from an architect, engineer, or other person acceptable to Beneficiary.

               (c) Grantor agrees to give prompt notice to Beneficiary of the receipt by Grantor of any complaints related to violations of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with applicable Access Laws.

     Section 4.23 Appraisals.

     Beneficiary shall have the right, upon an Event of Default, but not the obligation to require annual updated appraisals of the Property, which appraisals shall be prepared by an appraiser or appraisers designated by Beneficiary and shall be in all respects acceptable to Beneficiary. The basis of the appraisal calculations shown on such appraisal reports and all other aspects of the appraisal reports must be satisfactory to Beneficiary in all respects. A copy of such appraisal reports shall be released to Grantor. Grantor shall reimburse Beneficiary upon demand for all costs and expenses incurred by Beneficiary with respect to the preparation and review of all future appraisals required pursuant to the terms hereof; provided, however, Grantor shall not be obligated to reimburse Beneficiary for more than one (1) appraisal during the term of the Loan.

ARTICLE V
NEGATIVE COVENANTS

     Section 5.1 Encumbrances.

     Without the prior written consent of Beneficiary, Grantor will not permit the Real Property or the Personalty, or the Leases, Rents and Contracts of Sale, to become subject to any Encumbrances other than the Permitted Encumbrances. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure.

     Section 5.2 Transfer of the Property.

     Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for Transfers of the Equipment permitted by Section 5.3 (Removal, etc. of Equipment).

     Section 5.3 Removal, etc. of Equipment.

     Except to the extent permitted by the following sentence, none of the Improvements or Equipment shall be removed, demolished or materially altered, without the prior written consent of the Beneficiary. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Equipment as from time to time becomes worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Equipment is replaced with other Equipment

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which is free from Liens other than Permitted Encumbrances and has a value at least equal to that of the replaced Equipment (and by such removal and replacement Grantor shall be deemed to have subjected such Equipment to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without penalty pursuant to the Note, such Equipment is sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan.

     Section 5.4 Additional Improvements.

     Grantor will not construct or permit to be constructed any Improvements for which costs exceed $1,000,000 in the aggregate other than those presently on the Land without the prior written consent of Beneficiary, which consent shall not be unreasonably withheld. Grantor will complete and pay for, within a reasonable time, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right of way or upon the land of others, and (d) wholly within any building restriction lines applicable to the Land.

     Section 5.5 Restrictive Covenants, Zoning, etc.

     Without the prior written consent of Beneficiary, which consent shall not be unreasonably withheld, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions, limiting or defining the uses which may be made of the Property. Grantor will (a) promptly perform and observe, and cause to be performed and observed, all of the terms and conditions of all material agreements affecting the Property, and (b) do or cause to be done all things necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.

     Section 5.6 Prohibition on Hazardous Materials.

     The Grantor will not cause, commit, permit or allow to continue any violation of any Environmental Requirement by any Person on or with respect to the Property. The Grantor will not place, install, store, spill, leak, dispose of or release, or cause, commit, permit, or allow the placement, installation, storage, spilling, leaking, disposal or release of, any Hazardous Materials on the Property and will keep the Property free of all Hazardous Materials Contamination.

ARTICLE VI
EVENTS OF DEFAULT

     The occurrence of any one or more of the following shall constitute an “Event of Default” under this Deed of Trust:

     Section 6.1 Representations and Warranties.

     Any representation or warranty contained in this Deed of Trust, or in any other document, certificate or opinion delivered to Beneficiary in connection with the Loan, proves at any time to be incorrect or misleading in any material respect.

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     Section 6.2 Payment Obligations.

     Grantor fails to promptly pay any of the Obligations when and as provided in the Financing Documents, subject to the notice and cure provisions contained in the Financing Documents.

     Section 6.3 Transfer of the Property; Encumbrances.

     Grantor fails to comply with Section 5.1 (Encumbrances) or Section 5.2 (Transfer of the Property).

     Section 6.4 Insurance Obligations.

     Grantor fails to promptly perform or comply with any of Grantor’s obligations in Section 4.2 (Insurance).

     Section 6.5 Hazardous Materials.

     Grantor fails to promptly perform or comply with any of the terms and conditions set forth in Section 4.17 (Hazardous Materials; Contamination) or Section 5.6 (Prohibition on Hazardous Materials).

     Section 6.6 Other Obligations.

     Grantor fails to promptly perform or comply with any of the Obligations (other than those expressly described in other Sections of this ARTICLE VI), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless the nature of the failure is such that (a) it cannot be cured within the thirty (30) day period, (b) Grantor institutes corrective action within the thirty (30) day period and (c) Grantor diligently pursues such action and completes the cure within ninety (90) days or as promptly as reasonably possible under the circumstances.

     Section 6.7 Event of Default Under Other Financing Documents.

     An Event of Default (as defined therein) occurs under any of the Financing Documents other than this Deed of Trust.

     Section 6.8 Change in Zoning or Public Restriction.

     Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented, that limits or defines the uses which may be made of the Property such that the present or intended use of the Property as a Facility, would be in violation of such zoning ordinance or regulation or public restriction, as changed, and not permitted as a pre-existing, non-conforming use.

     Section 6.9 Default Under Other Lien Documents.

     A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion of the Property, including, without limitation, any Permitted Encumbrances.

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     Section 6.10 Voluntary Bankruptcy, etc.

     Grantor or Guarantor (a) applies for, or consents in writing to, the appointment of a receiver, trustee or liquidator of Grantor or Guarantor or the Property or of all or substantially all of Grantor’s or Guarantor’s other assets, or (b) files a voluntary petition in bankruptcy or admits in writing its inability to pay its debts as they become due, or (c) makes a general assignment for the benefit of creditors, or (d) files a petition or an answer seeking a reorganization (other than a reorganization not involving the liabilities of Grantor or Guarantor) or an arrangement with creditors or takes advantage of any bankruptcy or insolvency law, or (e) files an answer admitting the material allegations of a petition filed against Grantor or Guarantor in any bankruptcy, reorganization or insolvency proceeding.

     Section 6.11 Involuntary Bankruptcy, etc.

     An order, judgment or decree is entered by any court of competent jurisdiction on the application of a creditor adjudicating Grantor or Guarantor as bankrupt or insolvent, or appointing a receiver, trustee or liquidator of Grantor, Guarantor or of the Property, or of all or substantially all of Grantor’s or Guarantor’s other assets, and such order, judgment or decree continues unstayed and in effect for a period of ninety (90) days from the date entered.

     Section 6.12 Execution; Attachment.

     Any execution or attachment is levied against the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.

     Section 6.13 Judgment.

     Unless adequately covered by insurance in the opinion of Beneficiary, the entry of a final, non-appealable judgment for the payment of money involving more than $100,000 against Grantor or Guarantor and the failure by Grantor or Guarantor, respectively, to discharge the same, or cause it to be discharged, or bonded off to Beneficiary’s satisfaction, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered.

     Section 6.14 Change in Business Status.

     Unless the written consent of Beneficiary is previously obtained, the sale of all or substantially all of the business assets of Grantor, or the commencement of any proceeding to dissolve or liquidate Grantor, or the occurrence of any change in the form of business entity through which Grantor presently conducts its business, or the occurrence of any merger or consolidation involving Grantor.

     Section 6.15 Default Under Other Indebtedness.

     Grantor fails to pay any indebtedness of Grantor (other than the Loan) owed to Beneficiary when and as due and payable (whether by acceleration or otherwise).

     Section 6.16 Swap Default.

     An event occurs which gives the Beneficiary the right or option to terminate any Swap Contract which is secured by this Deed of Trust.

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     Section 6.17 Dissolution of Grantor, etc.

     Without Beneficiary’s prior express written consent thereto, (a) Grantor is dissolved either pursuant to the provisions of its operating agreement, by operation of law, or in any other manner, voluntarily or otherwise; (b) the operating agreement of Grantor is terminated pursuant to any of its provisions or by operation of law, or amended or modified in any material respect; (c) if any member of Grantor either directly or indirectly sells, assigns, mortgages, pledges, hypothecates, transfers or otherwise encumbers or permits to be encumbered any or all of his, her or its interest in Grantor (other than for the benefit of Beneficiary) or withdraws voluntarily or involuntarily (by operation of law or otherwise) from Grantor; or (d) any new member is admitted to Grantor.

     Section 6.18 Management of the Facility.

     Sunrise Senior Living Management, Inc. or an entity controlled by Sunrise Senior Living, Inc. ceases to operate and manage the Facility.

     Section 6.19 Appraisals.

     Grantor fails to promptly perform or comply with any of the terms and conditions set forth in Section 4.23 (Appraisals).

ARTICLE VII
RIGHTS AND REMEDIES

     Upon the occurrence of any Event of Default, Beneficiary, or the Trustees at the direction of Beneficiary, may at any time thereafter exercise any of the following rights, powers or remedies:

     Section 7.1 Acceleration.

     Beneficiary may declare (without Notice to Grantor and without presentment, demand, protest or notice of protest or of dishonor, all of which Grantor hereby waives) the Obligations to be immediately due and payable.

     Section 7.2 Foreclosure.

     The Trustees, personally or by their agent or attorneys, may sell the Property, or any part or parts thereof, and all estate, right, title, interest, claim and demand therein, at public auction at such time and place and upon such terms and conditions as the Trustees may deem appropriate or as may be required or permitted by applicable law, after having first advertised the time, place and terms of sale in accordance with applicable law. In the event of any such sale, the Beneficiary may bid for and purchase the Property (or such portion thereof as may be offered for sale) and shall be entitled to apply all or any part of the amount secured by this Deed of Trust as a credit to the purchase price. At any foreclosure sale, such portion of the Property as is offered for sale may, at the Beneficiary’s option, be offered for sale for one total price, and the proceeds of such sale accounted for in one account without distinction between the items of security or without assigning to them any proportion of such proceeds, the Grantor hereby waiving the application of any doctrine of marshalling. If less than all of the Property is sold at foreclosure and any of the

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Obligations remain outstanding after the sale proceeds are applied thereto, this Deed of Trust shall continue as a lien on the Property remaining unsold, and the Beneficiary may at any time thereafter direct the Trustees to sell the same as provided above.

     Section 7.3 Application of Proceeds.

     In the event of a foreclosure sale of the Property, either judicially or by private power of sale, the proceeds of said sale shall be applied, unless applicable statutes shall specify otherwise, first, to the expenses of such sale and of all proceedings in connection therewith, including attorneys’; and trustee’s fees, then to insurance premiums, liens, assessments, taxes and charges including utility charges advanced by the Beneficiary together with interest at the interest rate provide in the Note, this Deed of Trust or the Financing Documents, and finally the remainder, if any, shall be paid to the Grantor or as otherwise may be required by the provisions of applicable law.

     Section 7.4 No Reinstatement.

     Except as otherwise provided by applicable law, if a Default shall have occurred and the Beneficiary or the Trustees shall have commenced to exercise any of the remedies permitted hereunder, then a tender of payment by the Grantor or by anyone on behalf of the Grantor of the amount necessary to satisfy all sums due hereunder, or the acceptance by the Beneficiary of any such payment so tendered, shall not, without the prior consent of the Beneficiary, constitute a reinstatement of the Note or this Deed of Trust.

     Section 7.5 Taking Possession or Control of the Property.

     As a matter of right without regard to the adequacy of the security, and to the extent permitted by law without Notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver. In addition, to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without Notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.

     Section 7.6 Management of the Property.

     Upon obtaining possession of the Property or upon the appointment of a receiver as described in Section 7.5 (Taking Possession or Control), Beneficiary, the Trustees or the receiver, as the case may be, may, at their sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, (c) receive all Rents, and (d) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name (the cost of completing the Improvements shall be Expenses secured by this Deed of Trust and accrue interest as set forth in Section 4.19

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(Reimbursement; Interest)). In so doing, Beneficiary, the Trustees or such receiver shall have the right to manage the Property and to carry on the business of Grantor and may exercise all of the rights and powers of Grantor, including, but without limiting the generality of the foregoing, the right to lease the Property, to cancel, modify, renew or extend any Lease or sub-lease of the Property and to carry on any contracts entered into by Grantor with respect to the Property. Beneficiary, the Trustees or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for willful misconduct. Any Rents received shall be applied (a) first, to pay all Expenses, and (b) the balance, if any, to payment of the other Obligations. Grantor shall pay on demand to Beneficiary, the receiver or the Trustees (as the case may be) the amount of any deficiency between (a) the Rents received by Beneficiary, the receiver or the Trustees, and (b) all Expenses incurred together with interest thereon at the Reimbursement Rate as provided in Section 4.19 (Reimbursement; Interest). The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.

     Section 7.7 Uniform Commercial Code.

     Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Equipment and make the same available within the Improvements. Any notification required by the Uniform Commercial Code with respect to a sale or other disposition of Personalty shall be deemed reasonably and properly given if sent in accordance with the Notice provision of this Deed of Trust at least ten (10) days before any such sale or disposition. Disposition of the Personalty shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. Proceeds from any such sale shall be applied as follows: (a) first, to pay all Expenses incurred in connection with the sale, and (b) the balance, if any, to payment of the other Obligations.

     Section 7.8 Other Remedies.

     Beneficiary shall have the right from time to time to enforce any legal or equitable remedy against Grantor and to sue Grantor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Deed of Trust, as the same become due), without regard to whether or not any other of the Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce any appropriate remedy against Grantor, including, without limitation, an action of foreclosure or an action for specific performance for a Default by Grantor existing at the time such earlier action was commenced.

     Section 7.9 Remedies, etc. Cumulative.

     Each right, power and remedy of Beneficiary or the Trustees as provided for in this Deed of Trust, or in any of the other Financing Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy

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provided for in this Deed of Trust, or in any of the other Financing Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or the Trustees of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or the Trustees of any or all such other rights, powers or remedies.

     Section 7.10 No Waiver by Beneficiary etc.

     No course of dealing or conduct between Beneficiary, the Trustees and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Financing Documents. No failure or delay by Beneficiary or the Trustees to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or the Trustees from exercising any such right, power or remedy at any later time or times. By accepting payment after the due date of any of the Obligations, Beneficiary or the Trustees shall not be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary extending the time of payment or modifying the terms of this Deed of Trust or any of the other Financing Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations, and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Financing Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Financing Documents in such order and manner as Beneficiary may elect in its sole discretion.

     Section 7.11 Waivers and Agreements Regarding Remedies.

     To the full extent Grantor may do so, Grantor hereby:

               (a) agrees that it will not at any time plead, claim or take advantage of any Laws now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and waives and releases all rights of redemption, valuation, appraisement, stay of execution, extension and notice of election to accelerate the Obligations;

               (b) waives all rights to a marshalling of the assets of Grantor, including without limitation, the Property, or to a sale in the inverse order of alienation in the

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event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;

               (c) waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action;

               (d) waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties; and

               (e) any requirement that the Beneficiary or the Trustees present evidence or otherwise proceed before any court, clerk or other judicial or quasi-judicial body before exercising the power of sale contained in this Deed of Trust.

     Section 7.12 Setoff.

     Beneficiary may set off against and apply any funds of Grantor on deposit with, or under the control of, Beneficiary to the payment of the Obligations, without Notice and without resort to any judicial proceeding.

ARTICLE VIII
THE TRUSTEES

     Section 8.1 Liability of the Trustees.

     The Trustees shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Financing Documents or the description, value or status of title to the Property. The Trustees shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by them to be genuine and to have been signed by the party or parties purporting to sign the same. The Trustees shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of law or fact, nor for anything which the Trustees may do or refrain from doing in good faith, nor generally shall either of the Trustees have any accountability hereunder except for willful misconduct and/or gross negligence. The powers and duties of the Trustees hereunder may be exercised through such attorneys, agents or servants as they may appoint, and the Trustees shall have no liability or responsibility for any act, failure to act,

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negligence or willful conduct of such attorney, agent or servant, so long as they were selected with reasonable care. In addition, the Trustees may consult with legal counsel selected by them and the Trustees shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. The Trustees may act hereunder and may sell or otherwise dispose of the Property or any part thereof as herein provided, although the Trustees have been, may now be or may hereafter be, attorneys, officers, agents or employees of Beneficiary, in respect of any matter of business whatsoever. The Trustees, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by them hereunder except upon the demand of Beneficiary.

     Section 8.2 Substitution of Trustees, etc.

     Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee or Trustees. Such power may be exercised at any time without notice, without cause and without specifying any reason therefor, by filing for record in the office where this Deed of Trust is recorded a Deed of Appointment. The power of appointment of a successor Trustee or Trustees may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. Upon the recordation of such Deed or Deeds of Appointment, the Trustee or Trustees so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of their, his or its predecessor in the trust hereunder with like effect as if originally named as Trustees or as one of the Trustees hereunder. Whenever in this Deed of Trust reference is made to the Trustees, it shall be construed to mean the Trustee or Trustees for the time being, whether original or successors or successor in trust. All title, estate, rights, powers, trusts and duties hereunder given or appertaining to or devolving upon the Trustees shall be in each of the Trustees so that any action hereunder or purporting to be hereunder of any one of the original or any successor Trustees shall for all purposes be considered to be, and as effective as, the action of all the Trustees.

ARTICLE IX
MISCELLANEOUS

     Section 9.1 Application of Moneys.

     Whenever it is provided in this Deed of Trust for any moneys to be applied to payment of the Obligations, and no express order of payment is set forth, such moneys shall be applied to the Obligations in such order and manner as Beneficiary may determine in its sole discretion.

     Section 9.2 Further Assurances.

     At any time, and from time to time, upon request by Beneficiary, Grantor will, at Grantor’s expense, (a) correct any defect, error or omission which may be discovered in the form or content of any of the Financing Documents, and (b) make, execute, deliver and record, or cause to be made, executed, delivered and recorded, any and all further instruments, certificates, and other documents as may, in the opinion of Beneficiary, be necessary or desirable in order to complete, perfect or continue and preserve the Lien of this Deed of Trust. Upon any failure by Grantor to do so, Beneficiary may make, execute and record any and all such instruments,

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certificates and documents for and in the name of Grantor, all at the sole expense of Grantor, and Grantor hereby irrevocably appoints Beneficiary the agent and attorney-in-fact of Grantor to do so, this appointment being coupled with an interest. With respect to any financing statement, Grantor agrees that a carbon, photographic or other reproduction of a security agreement or a financing statement is sufficient as a financing statement for purposes of Section 28.9-402 of the Uniform Commercial Code of the State.

     Section 9.3 Notices.

     All Notices shall be deemed to have been received when delivered by hand, when delivered to an overnight courier, or three (3) days following deposit of such Notice in the mail in the manner provided for in the definition of Notices in ARTICLE I (Definitions; Rules of Construction).

     Section 9.4 Successors and Assigns.

     All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of the Trustees.

     Section 9.5 No Warranty by Beneficiary or Trustees.

     By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or the Trustees pursuant to this Deed of Trust or any of the other Financing Documents, Beneficiary and the Trustees shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or the Trustees.

     Section 9.6 Amendments.

     This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.

     Section 9.7 Illegality.

     If fulfillment of any provision of this Deed of Trust or any transaction related hereto shall at any time involve transcending the limit of validity prescribed by Law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein contained, other than the provisions requiring Grantor to pay the Obligations, operates or would prospectively operate to invalidate this Deed of Trust in whole or in part, then such clause or provision only shall be void, as though not herein contained, and the remainder of this Deed of Trust shall remain operative and in full force and effect; and if such clause or provision requires Grantor to pay any of the Obligations, then at the sole option of Beneficiary, all of the Obligations shall become due and payable.

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     Section 9.8 Assignments by Beneficiary.

     Beneficiary may, without notice to, or consent of, Grantor, sell, assign or transfer to or participate with any Person or Persons all or any part of the Obligations, and each such Person or Persons shall have the right to enforce the provisions of this Deed of Trust and any of the other Financing Documents as fully as Beneficiary, provided that Beneficiary shall continue to have the unimpaired right to enforce the provisions of this Deed of Trust and any of the other Financing Documents as to so much of the Obligations that Beneficiary has not sold, assigned or transferred. In connection with the foregoing, Beneficiary shall have the right to disclose to any such actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and any of the other Financing Documents or otherwise. Notwithstanding the foregoing provisions of this Section 9.8, Beneficiary shall give notice to Grantor of any sale, assignment, transfer or participation to a Person who is an affiliate or successor of Beneficiary either before or after the transaction has occurred as Beneficiary shall determine; however, Beneficiary shall give notice to Grantor in advance of any such transaction with a non-affiliate.

     Section 9.9 Governing Law.

     This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State.

     Section 9.10 Counterparts.

     This Deed of Trust may be executed in any number of duplicate originals, each of which shall be an original but all of which together shall constitute one and the same instrument.

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     IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed under seal as of the day and year first written above.

WITNESS OR ATTEST:	GRANTOR:
	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member

/s/ Kelly L. Hayden	By:	/s/ James S. Pope		(SEAL)
		Name:	James S. Pope
		Title:	Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August ___, 2007, before me,                                         , a Notary Public in and for the Commonwealth shown above, appeared                                         , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as                                          of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Notary Public

My Commission Expires:                                        

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

Names and Addresses of All Parties to Deed of Trust:

Grantor:	Sunrise Connecticut Avenue Assisted Living L.L.C.
	c/o Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
Trustee(s):	Alexandra Johns and Ellen-Elizabeth Lee
	7926 Jones Branch Drive
	McLean, VA 22102
Grantee:	Chevy Chase Bank, F.S.B.
	7926 Jones Branch Drive
	McLean, VA 22102

EX-10.9

Exhibit 10.9

LOAN AND SECURITY AGREEMENT

(Loan B)

     THIS LOAN AND SECURITY AGREEMENT (the “Agreement”) is made as of August 28, 2007, by and among SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (“Borrower”), and CHEVY CHASE BANK, F.S.B., a federally chartered savings bank “Lender”).

RECITALS

     A. Borrower has applied to Lender for a term loan in the principal amount of Ten Million Dollars ($10,000,000) (the “Loan”), to be used by Borrower to (i) refinance existing indebtedness which is secured by a lien on a 100 unit assisted living facility located at 5111 Connecticut Avenue, N.W., Washington, D.C., and known as “Sunrise of Connecticut Avenue” (the “Facility”), and (ii) finance a portion of the costs of acquisition of membership interests in Borrower.

     B. Sunrise Senior Living, Inc., a Delaware corporation, has executed a Guaranty of Payment — Loan B in favor of Lender pursuant to which it guarantees repayment and performance of all of Borrower’s obligations to Lender under the documents evidencing or securing the Loan (the “Financing Documents”).

     C. Lender is willing to make the loan to Borrower upon the terms and subject to the conditions hereinafter set forth.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows:

ARTICLE I
DEFINITIONS

     Section 1.1 Certain Defined Terms.

     As used herein, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings:

     “Account,” individually, and, “Accounts,” collectively, mean all presently existing or hereafter acquired or created accounts, accounts receivable, health care insurance receivables, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods, all rights to receive the payment of money or other consideration under present or future contracts arising out of or

relating to the Facility (including, without limitation, all rights to receive the payment of money or other consideration from, or on behalf of, any private pay patient), or by virtue of services rendered, loans and advances made or other considerations given, by or set forth in, or arising out of, any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts, agreements which gave rise to any or all of the foregoing insofar as they pertain to the Facility, including all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including real property mortgages and deeds of trust) given by any Person with respect to any of the foregoing, including, without limitation, all rights to receive payment of money or other consideration from, or on behalf of, any private pay patient, all rights to receive payments under all Resident Agreements, and all third-party payor contracts (including Medicare and Medicaid to the extent permitted by Law), including, but not limited to, the Veterans Administration, Participation Agreements, and any and all depository accounts (other than resident trust accounts) into which the proceeds of all or any portion of such accounts may be now or hereafter deposited, and all proceeds (cash and non-cash) of the foregoing.

     “Account Debtor” means any Person who is obligated on a Receivable and “Account Debtors” mean all Persons who are obligated on the Receivables.

     “Act of Bankruptcy” means the filing of a petition in bankruptcy under the Bankruptcy Code or the other commencement of a proceeding under any other applicable law concerning insolvency, reorganization or bankruptcy, now or hereafter in effect.

     “Affiliate” means an entity with either revenues or assets in excess of $750,000 in which an entity has an ownership interest equal to or greater than twenty-five percent (25%).

     “Agreement” means this Loan and Security Agreement (Loan B) and all amendments, modifications and supplements hereto which may from time to time become effective in accordance with the provisions of Section 11.2 (Amendments; Waivers).

     “Assignee” means any Person to which Lender assigns all or any portion of its interests under this Agreement, any Commitment, and any Loan, in accordance with the provisions of Section 11.5 (Assignments by Lender), together with any and all successors and assigns of such Person; “Assignees” means the collective reference to all Assignees.

     “Bankruptcy Code” Title 11 of the United States Code, as amended from time to time, and any successor Laws.

     “Business Day” shall mean any day that is not a Saturday, Sunday or banking holiday in the State and must also be a day in which dealings are carried on in the applicable interbank Eurodollar market.

     “Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

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     “Change of Control” has the meaning given to such term in the Sunrise Senior Financing Agreement.

     “Chattel Paper” means a writing or writings which evidence both a monetary obligation and a security interest in or lease of specific goods, any returned, rejected or repossessed goods covered by any such writing or writings and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods, and all proceeds (cash and non-cash) of the foregoing but only to the extent that any of the foregoing relates to the Facility.

     “Closing Date” means the date of the closing of the Loans.

     “Collateral” shall mean all of Borrower’s Accounts, Chattel Paper, Equipment, General Intangibles, documents, Instruments and Inventory, all right, title and interest of Borrower in and to the Operating Agreements and Management Contracts (including, without limitation, the Management Agreement), Resident Agreements, Physician Contracts, Participation Agreements, the Licenses (whether or not designated with initial capital letters), as those terms are defined herein and in the Uniform Commercial Code as presently adopted and in effect in the State, and shall also cover, without limitation, (a) any and all property specifically included in those respective terms in this Agreement or in the Financing Documents, (b) all right, title and interest of Borrower in and to Leases or subleases, rents, royalties, issues, profits, revenues, earnings, income or other benefits of the Property, or arising from the use or enjoyment of the Property, or from any lease or other use and occupancy agreement pertaining to the Property, (c) any and all property and/or collateral described in any of the Security Documents, and (d) all proceeds (cash and non-cash, including, without limitation, insurance proceeds), of the foregoing.

     “Commitment” means Lender’s Term Loan Commitment.

     “Committed Amount” means Lender’s Term Loan Committed Amount.

     “Commonly Controlled Entity” shall mean an entity, whether or not incorporated, which is under common control with Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended and the regulations promulgated or issued thereunder.

     “Debt Service” means for any period of determination thereof an amount equal to the total of the aggregate amount of all payments of principal and interest with respect to the Term Loan, excluding any balloon payment.

     “Debt Service Ratio” means a ratio of Net Operating Income to Debt Service.

     “Deed of Trust” means the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) of even date herewith, covering the Property, executed by Borrower in favor of Lender as collateral for the Loan, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “Default” means, with respect to each Financing Document, a default which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

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     “Enforcement Costs” means all expenses, charges, costs and fees whatsoever (including, without limitation, reasonable attorney’s fees and expenses) of any nature whatsoever paid or incurred by or on behalf of Lender in connection with (a) the collection or enforcement of any or all of the Obligations, (b) the preparation of or changes to this Agreement, the Note, the Security Documents and/or any of the other Financing Documents, (c) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, including, without limitation, those sums paid or advanced, and costs and expenses, more specifically described in Section 10.5 (Performance by Lender) and Section 11.10 (Enforcement Costs), and (d) the monitoring, administration, processing, servicing of any or all of the Obligations and/or the Collateral.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

     “Equipment” shall mean all equipment, machinery, furniture and fixtures and supplies of every nature pertaining to the Facility, presently existing or hereafter acquired or created and wherever located, together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary for the operation and use of such personal property, whether or not the same shall be deemed to be affixed to real property, and all rights under or arising out of present or future contracts relating to the foregoing and all proceeds (cash and non-cash) of the foregoing.

     “Event(s) of Default” shall mean the occurrence of any one or more of the events specified in ARTICLE IX (Events of Default) or in the Deed of Trust and the continuance of such event beyond the applicable grace and/or cure periods therefor, if any, set forth in ARTICLE IX.

     “Facility” has the meaning described in the Recitals of this Agreement.

     “Federal Funds Rate” means for any day of determination, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day) by the Federal Reserve Bank for the next preceding Business Day) by the Federal Reserve Bank of Richmond or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by Lender from three (3) federal funds brokers of recognized standing selected by Lender.

     “Financing Documents” means at any time collectively this Agreement, the Note, the Deed of Trust, the Security Documents, and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by Borrower and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with any of the Obligations and/or in connection with this Agreement, the Note and/or any of the Security Documents, as the same may from time to time be amended, restated, supplemented or otherwise modified.

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     “GAAP” shall mean generally accepted accounting principles in effect in the United States of America in effect from time to time.

     “General Intangibles” shall mean any and all general intangibles of every nature, whether presently existing or hereafter acquired or created arising out of or relating to the Facility, including without limitation all books, correspondence, credit files, records, computer programs, computer tapes, cards and other papers and documents in the possession or control of Borrower, claims (including without limitation all claims for income tax and other refunds), choses in action, judgments, patents, patent licenses, trademarks (excluding the “Sunrise” trademark or tradename), trademark licenses, licensing agreements, rights in intellectual property, goodwill, as that term is defined in accordance with GAAP (including all goodwill of Borrower’s businesses symbolized by, and associated with, any and all trademarks, trademark licenses, copyrights and/or service marks), royalty payments, contractual rights, rights as lessee under any lease of real or personal property, literary rights, copyrights, service names, service marks, logos, trade secrets, all amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures or general or limited partnerships, all Licenses, construction permits, Operating Agreements and Management Contracts, Participation Agreements and Resident Agreements, and all proceeds (cash and non-cash) of the foregoing.

     “Governmental Authority or Authorities” shall mean any nation or government, the District of Columbia, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

     “Guarantor” means SSLI, and its successors and assigns.

     “Guaranty” means the Guaranty of Payment dated of even date herewith executed by SSLI in favor of Lender, as amended, modified, substituted, extended, and renewed from time to time.

     “Hazardous Materials” means any flammable explosives, radioactive materials, hazardous waste, toxic substances or related materials, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde, radon, and any substance defined as or included in the definition of (a) any “hazardous waste” as defined by the Resource Conservation Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder; (b) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; (c) any “toxic substance” as defined by the Toxic Substances Control Act, as amended from time to time, and regulations promulgated thereunder; (d) any hazardous or infectious medical waste including, but not limited to, cultures and stocks of infectious agents and associated biologicals, pathological wastes, human and animal blood specimens and blood products, anatomical materials, blood, blood-soiled articles, contaminated materials, microbiological laboratory wastes, sharps, chemical wastes, infectious wastes, chemotherapeutic wastes, and radioactive wastes; (e) any substance, the presence of which on any property now or hereafter owned, operated or acquired by any Borrower is prohibited or regulated under any applicable Federal or state laws or regulations; and (f) any other substance, pollutant, contaminant, chemical, or industrial toxic hazardous substance or waste, including without

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limitation hazardous materials, which by law is prohibited or is otherwise regulated as a hazardous material.

     “Hazardous Materials Contamination” means the contamination (whether presently existing or occurring after the date of the Deed of Trust) of the Improvements, facilities, soil, ground water, air or other elements on, in or constituting a part of, the Property by Hazardous Materials, or the contamination of the buildings, facilities, soil, ground water, air or other elements on, in or constituting a part of, any other property as a result of Hazardous Materials at any time (whether before or after the date of the Deed of Trust) emanating from the Property.

     “Improvements” shall have the meaning given to that term in the Deed of Trust.

     “Instruments” means any and all notes, notes receivable, drafts, acceptances, and similar instruments or documents, both now owned or hereafter created or acquired arising out of or relating to the Facility (or any part thereof).

     “Inventory” means any and all inventory of Borrower and all right, title and interest of Borrower in, and to, all of its now owned and hereafter acquired goods, merchandise and other personal property furnished under any contract of service or intended for sale or lease arising out of or relating to the Facility, including, without limitation, all supplies of any kind, nature or description which are used or consumed in Borrower’s business and all documents of title or documents representing the same and all proceeds (cash and non-cash) and products of the foregoing.

     “Investment Property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract or commodity account and all Proceeds of, and Supporting Obligations with respect to, the foregoing.

     “Laws” means all ordinances, statutes, rules, regulations, orders, injunctions, writs or decrees of any Governmental Authority or any court or similar entity established by any thereof.

     “Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.

     “Licenses” means any and all licenses, certificates of need, operating permits, franchises, and other licenses, authorizations, certifications, permits, or approvals, other than construction permits, issued by, or on behalf of, any Governmental Authority now existing or at any time hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing, ownership management and/or operation of the Facility, accreditation of the Facility, and/or the participation or eligibility for participation in any third party payment or reimbursement programs (but specifically excluding any and all third-party payor participation or reimbursement agreements now or at any time hereafter existing for the benefit of Borrower to the extent required by Law), any and all operating licenses issued by any state Governmental Authority, any and all pharmaceutical licenses and other licenses related to the purchase, dispensing, storage, prescription or use of drugs, medications, and other “controlled substances,” any and all licenses relating to the operation of food or beverage facilities or amenities, if any, and any and all certifications and eligibility for participation in Medicare, Medicaid, Blue Cross

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and/or Blue Shield, or any of the Managed Care Plans, private insurer, employee assistance programs or other third party payment or reimbursement programs as the same may from time to time be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified.

     “Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, lien or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, consensual or non-consensual, including, without limitation, any conditional sale or other title retention agreement, filed or unfiled tax liens, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction.

     “Loan A” means a term loan in the principal amount of $30,000,000 made pursuant to a Loan and Security Agreement (Loan A) by and among Borrower, Chevy Chase Bank, F.S.B. as agent and the lenders party thereto and evidenced by a series of Deed of Trust Notes — Loan A of even date executed by Borrower in favor of such lenders and secured as provided such Loan and Security Agreement (Loan A).

     “Managed Care Plans” shall mean any health maintenance organization, preferred provider organization, individual practice association, competitive medical plan, or similar arrangement, entity, organization, or Person.

     “Management Agreement” shall mean the Management Agreement dated April 1, 2002, by and between Borrower and the Management Company relating to the management of the Facility, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “Management Company” means SSLMI, its successors and assigns and any other Person which may become the manager of the Facility.

     “Material Adverse Change” means a significant adverse change in a Person’s financial position or capacity including but not limited to significant adverse changes in (a) liquidity (b) gross revenues (c) total expenses (d) such Person’s net worth or (e) ability to meet payment obligations under such Person’s existing funded debt, existing Indebtedness, the Obligations and/or existing contingent liabilities.

     “Multi-employer Plan” shall mean a Plan which is a multi-employer plan as defined in Section 4001(a)(3) of ERISA.

     “Net Operating Income” means for any period of determination thereof an amount equal to the total of the sum of operating revenues less operating expenses plus depreciation and amortization and a reserve of $300 per unit per annum.

     “Note” shall have the meaning set forth in Section 2.2 (The Loan).

     “Notice” means a written communication delivered by hand, or sent by overnight courier, or by certified or registered mail, postage prepaid, return receipt requested, to the Person to whom such communication is to be given, at the addresses set forth in Section 11.1 (Notices).

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     “Obligations” means all present and future debts, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of Borrower to Lender under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, the Notes, each Security Document, and any of the other Financing Documents, any Swap Contract or the Loan, including, without limitation, the principal of, and interest on, the Note, late charges, Enforcement Costs, and other prepayment penalties (if any), letter of credit fees or fees charged with respect to any guaranty of any letter of credit, any and all recording, transfer or other taxes and costs of any kind required or incurred in connection with the recordation of a ground lease of the Property (as defined in the Deed of Trust) and also means all other present and future indebtedness, liabilities and obligations, whether now existing or contemplated or hereafter arising, of Borrower to Lender of any nature whatsoever regardless of whether such debts, obligations and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or contingent, and any and all renewals, extensions and rearrangements of any such debts, obligations and liabilities.

     “Operating Agreements and Management Contracts” means any and all contracts and agreements previously, now or at any time hereafter entered into by Borrower and/or the Management Company other than Resident Agreements with respect to the acquisition, construction, renovation, expansion, ownership, operation, maintenance, use or management of the Property or otherwise concerning the operations and business of the Property, any and all service and maintenance contracts, any employment contracts, any and all management agreements, any and all consulting agreements, laboratory servicing agreements, pharmaceutical contracts, physician, other clinician or other professional services provider contracts, patient admission agreements, Resident Agreements, food and beverage service contracts, and other contracts for the operation and maintenance of, or provision of services to, the Property, as the same may from time to time be amended, restated or substituted from time to time.

     “Participation Agreements” means any and all third party payor participation or reimbursement agreements now or at any time hereafter existing for the benefit of Borrower relating to rights to payment or reimbursement from, and claims against, private insurers, Managed Care Plans, material employee assistance programs, Blue Cross and/or Blue Shield, federal, state and local Governmental Authorities, including without limitation, Medicare and Medicaid, and other third party payors, as the same may from time to time be amended, restated, extended, supplemented or modified.

     “Permitted Liens” means: (a) Liens for Taxes which are not delinquent or which Lender has determined in the good faith exercise of its sole and absolute discretion (i) are being diligently contested in good faith and by appropriate proceedings, (ii) Borrower have the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting Borrower, and (iii) are not, and will not be with appropriate filing, the giving of notice and/or the passage of time, entitled to priority over any Lien of Lender; (b) deposits or pledges to secure obligations under workers’ compensation, social security or similar laws, or under unemployment insurance in the ordinary course of business; (c) Liens in favor of Lender; (d) judgment Liens to the extent the entry of such judgment does not constitute an Event of Default under the terms of this Agreement or result in the sale of, or levy of execution on, any of the Collateral; and (e) Liens approved by Lender which have been created to secure permitted

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subordinated debt on a junior lien basis; and (f) such other Liens, if any, as are identified as Permitted Encumbrances as defined in the Deed of Trust.

     “Person” shall mean and include an individual, a corporation, a partnership, a limited liability company, a joint venture, a trust, an unincorporated association, any Governmental Authority or any other entity.

     “Pledge Assignment and Security Agreement” means the Pledge, Assignment and Security Agreement of even date herewith executed by SSLII in favor of Lender, pursuant to which SSLII has pledged and assigned all of its interests in Borrower to Lender as additional security for the Loan.

     “Post Default Rate” means the interest rate on the Note plus three percent (3%) per annum.

     “Property” shall have the meaning given to that term in the Deed of Trust.

     “Receivables” means all of Borrower’s now or hereafter owned, acquired or created Accounts, Chattel Paper, Contract Rights, General Intangibles and Instruments, and all cash and non-cash proceeds and products thereof.

     “Reportable Event” shall mean any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder.

     “Resident Agreements” means any and all contracts, authorizations, agreements and/or consents executed by or on behalf of any resident or other person seeking services from the Management Company or Borrower pursuant to which the Management Company or the Borrower provides or furnishes health or assisted living care and related services at the Property, including the consent to treatment, assignment of payment of benefits by third party, as amended, restated or substituted from time to time.

     “SSLI” means Sunrise Senior Living, Inc., a Delaware corporation.

     “SSLII” means Sunrise Senior Living Investments, Inc., a Delaware corporation.

     “SSLMI” means Sunrise Senior Living Management, Inc., a Virginia corporation.

     “Security Documents” shall mean, collectively, any assignment, including, without limitation, the Pledge, Assignment and Security Agreement, the Guaranty and any assignment, pledge agreement, security agreement, mortgage, deed of trust, leasehold mortgage, leasehold deed of trust, deed to secure debt, financing statement and any similar instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, Lender on any collateral to secure the Obligations, as the same may from time to time be amended, restated, supplemented or otherwise modified.

     “State” means the Commonwealth of Virginia.

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     “Sunrise Bank Group” means the lenders from time to time under the Sunrise Senior Financing Agreement.

     “Sunrise Senior Financing Agreement” means the Credit Agreement dated as of December 2, 2005 by and among Guarantor, certain subsidiaries of Guarantor, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the lenders named therein in any senior credit facility substituted therefore from time to time.

     “Sunrise Financing Agreement” means the Credit Agreement dated as of December 2, 2005 by and among Guarantor, Subsidiaries of Guarantor, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and others, as amended, extended, restated, supplemented or otherwise modified from time to time.

     “Supporting Obligation” means a Letter-of-credit right, secondary obligation or obligation of a secondary obligor or that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument or investment property.

     “Swap Contract” means any document, instrument or agreement between Borrower and Lender or any affiliate of Lender, now existing or entered into in the future, relating to an interest rate swap transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar transaction, any option to enter into any of the foregoing, and any combination of the foregoing, which agreement may be oral or in writing, including, without limitation, any master agreement relating to or governing any or all of the foregoing and any related schedule or confirmation, each as amended from time to time.

     “Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority on Borrower or any of their properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

     “Term Loan” has the meaning described in 0 (The Term Loan).

     “Term Loan Commitment” has the meaning described in 0 (The Term Loan).

     “Term Loan Committed Amount” has the meaning described in 0 (The Term Loan).

     “Term Loan Facility” means the facility established by Lender pursuant to Section 2.1 (The Term Loan).

     “Uniform Commercial Code” means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other jurisdiction, as applicable.

     Section 1.2 Accounting Terms and Other Definitional Provisions.

     Unless otherwise defined in this Agreement, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not

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otherwise defined in this Agreement, and accounting terms only partly defined in this Agreement, to the extent not defined, shall have the respective meanings given to them under GAAP. Unless otherwise defined in this Agreement, all terms used in this Agreement which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement. The words “hereof, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, section, subsection, schedule and exhibit references are references to sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used in this Agreement, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neutered gender shall include all genders, as the context may require. Reference to any one or more of the Financing Documents and any of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified.

ARTICLE II
BORROWING

     Section 2.1 The Term Loan.

     Subject to and upon the provisions of this Agreement, Lender agrees to make a loan (the “Term Loan”) to Borrower on the Closing Date in the principal amount of Ten Million Dollars ($10,000,000) (the “Term Loan Committed Amount”). The obligation of Lender to make the Term Loan is herein called its “Term Loan Commitment”.

     Section 2.2 Note.

     The obligation of Borrower to pay the Term Loan with interest shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the “Note”) substantially in the form of EXHIBIT A attached hereto and made a part hereof with appropriate insertions. The Note shall be dated as of the Closing Date, shall be payable to the order of Lender at the times provided in the Note, and shall be in the principal amount of Lender’s Term Loan Committed Amount.

     Section 2.3 Use of Proceeds.

     The proceeds of the Term Loan shall be used by Borrower for the following purpose and, unless prior written consent of Lender is obtained, for no other purpose: to refinance an existing mortgage loan from PNC Bank, to finance the purchase of membership interests in Borrower from investors and the associated closing costs, including, without limitation, the cost of recording the Deed of Trust.

     Section 2.4 Prepayment.

     Borrower may voluntarily prepay the principal sum outstanding only in accordance with the terms of the Note. Sums borrowed and repaid may not be readvanced.

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ARTICLE III
GENERAL FINANCING PROVISIONS

     Section 3.1 Computation of Interest and Fees.

     All applicable fees and interest shall be calculated on the basis of a year of 365 days for the actual number of days elapsed pursuant to the terms of the Note and Borrower’s election of interest rate options thereunder and interest shall be payable in arrears.

     Section 3.2 Payment and Performance of Obligations.

     All payments of the Obligations shall be paid by Borrower without setoff or counterclaim to Lender (except as otherwise provided herein) at Lender’s office specified in Section 11.1 (Notices) in immediately available funds not later than 2:00 p.m. (Eastern Time) on the due date of such payment. All payments received by Lender after such time shall be deemed to have been received by Lender for purposes of computing interest and fees and otherwise as of the next Business Day. Payments shall not be considered received by Lender until such payments are paid to Lender in immediately available funds.

     Section 3.3 Liens; Setoff.

     Borrower hereby grants to Lender a continuing Lien for all of the Obligations upon any and all monies, Investment Property, and other property of Borrower and the proceeds thereof, now or hereafter held or received by or in transit to, Lender, and/or any Affiliate of Lender, from or for the account of Borrower, and also upon any and all deposit accounts (general or special) and credits of Borrower, if any, with Lender or any Affiliate of Lender, at any time existing, excluding any deposit accounts held by Borrower in its capacity as trustee for Persons who are not Affiliates of Borrower. Without implying any limitation on any other rights Lender may have under the Financing Documents or applicable Laws, during the continuance of an Event of Default, Lender is hereby authorized by Borrower at any time and from time to time, without notice to Borrower, to set off, appropriate and apply any or all items hereinabove referred to against all Obligations then outstanding (whether or not then due), all in such order and manner as shall be determined by Lender in its sole and absolute discretion.

     Section 3.4 Requirements of Law.

     In the event that Lender shall have determined in good faith that (i) the adoption of any Capital Adequacy Regulation, or (ii) any change in any Capital Adequacy Regulation or in the interpretation or application thereof or (iii) compliance by Lender or any corporation controlling Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on the capital of Lender or any corporation controlling Lender, as a consequence of the obligations of Lender hereunder to a level below that which Lender or any corporation controlling Lender would have achieved but for such adoption, change or compliance (taking into consideration the policies of Lender and the corporation controlling Lender, with respect to capital adequacy) by an amount deemed by Lender to be material, then from time to time, after submission by Lender to Borrower of a written request therefor and a statement of the basis for such determination, Borrower shall pay to Lender such additional amount or amounts in order to compensate Lender or its controlling corporation for such

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reduction. If rates have been increased pursuant to the foregoing, and thereafter there is a change which has the effect of increasing the rate of return to a Lender, then any additional amount that the effect had on the rate of return to a Lender, then any additional amount that had been charged will be appropriately reduced.

ARTICLE IV
COLLATERAL

     Section 4.1 Collateral.

     As security for the payment of all of the Obligations and for Borrower’s performance of, and compliance with, all of the terms, covenants, conditions, stipulations and agreements contained in the Financing Documents, Borrower hereby assigns, grants and conveys to Lender, and agrees that Lender, shall have, to the extent permitted by law a perfected, continuing security interest in, all of the Collateral. Borrower further agrees that Lender shall have in respect of the Collateral all of the rights and remedies of a secured party under the Uniform Commercial Code and under other applicable Laws as well as those provided in this Agreement. Borrower covenants and agrees to execute and deliver such financing statements and other instruments and filings as are necessary in the opinion of Lender to perfect such security interest. Notwithstanding the fact that the proceeds of the Collateral constitute a part of the Collateral, Borrower may not dispose of the Collateral, or any part thereof, other than in the ordinary course of its business or as otherwise may be permitted by this Agreement.

     Section 4.2 Assignment of Ownership Interests.

     The Obligations are further secured by the Pledge, Assignment and Security Agreement pursuant to which SSLII has assigned to Lender, one hundred percent (100%) of its ownership interests in Borrower.

     Section 4.3 Costs.

     Borrower agrees to pay on demand, to the fullest extent permitted by applicable laws, all reasonable fees, commissions, costs, charges, and other expenses incurred by Lender in connection with the taking, perfection, preservation, protection and/or release of any security interest or lien on any of the Collateral.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Lender as follows:

     Section 5.1 Good Standing.

     Borrower (a) is a limited liability company duly organized, existing and in good standing under the laws of the Commonwealth of Virginia, (b) has the power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary.

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     Section 5.2 Power and Authority.

     Borrower has full power and authority to execute and deliver this Agreement and each of the other Financing Documents executed and delivered by it and to incur the Obligations, all of which have been duly authorized by all proper and necessary action. No consent or approval of owners of, or lenders to, Borrower, and no consent or approval of any Governmental Authority or any third party payor on the part of Borrower, is required as a condition to the validity or enforceability of this Agreement or any of the other Financing Documents executed and delivered by Borrower or to the payment or performance by Borrower of the Obligations.

     Section 5.3 Binding Agreements.

     This Agreement and each of the other Financing Documents executed and delivered by Borrower have been properly executed by Borrower, constitute valid and legally binding obligations of Borrower, and are fully enforceable against Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general applications affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law.

     Section 5.4 Litigation.

     There are no proceedings pending before any court or arbitrator or before or by any Governmental Authority which, in any one case or in the aggregate, will materially adversely affect the financial condition or operations of Borrower or the authority of Borrower to enter into this Agreement or any of the other Financing Documents executed and delivered by Borrower. There is no pending revocation, suspension, termination, probation, restriction, limitation or non-renewal of any License, Participation Agreement or any similar accreditation or approval from any organization or Governmental Authority regulating healthcare providers, including, without limitation, the issuance of any provisional License or other License with a term of less than twelve (12) months, as a consequence of any sanctions imposed by any Governmental Authority, nor is there any pending assessment of any civil or criminal penalties by any Governmental Authority, the outcome of which, if determined adversely to Borrower, could materially impair Borrower’s ability to pay the Obligations. Borrower has no appeals regarding rates or reimbursements currently pending or contemplated before any Governmental Authority or any administrator of any third party payor or preferred provider program or referral source, the outcome of which, if determined adversely to Borrower, could materially impair Borrower’s ability to pay the Obligations. There are no Medicare or Medicaid recoupments or recoupments of any other third party payor being sought, requested or claimed, against Borrower, the outcome of which, if determined adversely to Borrower could materially impair Borrower’s ability to pay the Obligations, except as otherwise disclosed in writing to, and approved by, Lender.

     Section 5.5 No Conflicting Agreements.

     There is (a) no provision of the operating agreement of Borrower and no provision of any existing mortgage, indenture, contract or agreement binding on Borrower or affecting its property, and (b) to the knowledge of Borrower no provision of law or order of court binding upon Borrower, which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Agreement or of any of the other Financing Documents

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executed and delivered by Borrower, or which would be violated as a result of such execution, delivery or performance, or, if so, all necessary consents have been obtained.

     Section 5.6 Financial Information.

     All financial statements or information hereto furnished to Lender with respect to Borrower and the Facility is complete and correct in all material respects and fairly presents the financial position of Borrower and the financial condition of the Facility. There are no liabilities, direct or indirect, fixed or contingent, of Borrower which are not reflected in Borrower’s financial statements or in the notes thereto. There has been no Material Adverse Change in the financial condition or operations of Borrower or the Facility since the date of such financial statements and information (and to Borrower’s knowledge, no such adverse change is pending), and Borrower has not guaranteed the obligations of, or made any investments in or advances to, any company, individual or other entity, except as disclosed in such information.

     Section 5.7 No Default.

     Borrower is not in default under or with respect to any obligation under any agreement to which Borrower is a party in any respect which could materially adversely affect the ability of Borrower to perform the Obligations. There is no Event of Default hereunder.

     Section 5.8 Taxes.

     Borrower has filed or has caused to have been filed all federal, state and local tax or informational returns which are required by law to be filed, and have paid or caused to have been paid all Taxes as shown on such returns or on any assessment received by Borrower, to the extent that such Taxes have become due, or which are required by law to be paid, unless and to the extent only that such Taxes, assessments and governmental charges are currently contested in good faith and by appropriate proceedings by Borrower and adequate reserves therefor have been established as required under GAAP.

     Section 5.9 Place(s) of Business and Location of Collateral.

     Borrower warrants that the address of its chief executive office is as specified in EXHIBIT B attached hereto and made a part hereof and that the address of each of its other places of business, if any, is as disclosed to Lender in EXHIBIT B. The Collateral and all books and records pertaining to the Collateral are and will be located at the addresses indicated on EXHIBIT B. Borrower will immediately advise Lender in writing of the opening of any new place of business or the closing of any existing place of business, and of any change in the location of the places where the Collateral, or any part thereof, or the books and records concerning the Collateral, or any part thereof, are kept.

     Section 5.10 Title to Properties.

     Borrower has good and marketable title to all of its properties, including, without limitation, the Collateral owned by it, and the Collateral is free and clear of mortgages, pledges, liens, charges and other encumbrances other than the Permitted Liens.

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     Section 5.11 Margin Stock.

     None of the Loan proceeds will be used, directly or indirectly, by Borrower for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry, any “margin security” within the meaning of Regulation G (12 CFR Part 207), or “margin stock” within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System (herein called “margin security” and “margin stock”) or for any other purpose which might make the transactions contemplated herein a “purpose credit” within the meaning of said Regulation G or Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any rules or regulations promulgated under any of such statutes.

     Section 5.12 ERISA.

     With respect to any “pension plan”, as defined in Section 3(2) of ERISA, which plan is now or previously has been maintained or contributed to by Borrower and/or by any Commonly Controlled Entity: (a) no “accumulated funding deficiency” as defined in Code §412 or ERISA §302 has occurred, whether or not that accumulated funding deficiency has been waived, that would materially adversely affect the ability of Borrower to pay the Obligations; (b) no “reportable event” as defined in ERISA §4043 has occurred with respect to which notice has not been waived under 29 C.F.R. § 4043; (c) no termination of any plan subject to Title IV of ERISA has occurred that would materially adversely affect the ability of Borrower to pay the Obligations; (d) neither Borrower nor any Commonly Controlled Entity has incurred a “complete withdrawal” within the meaning of ERISA §4203 from any multi-employer plan; (e) neither Borrower nor any Commonly Controlled Entity has incurred a “partial withdrawal” within the meaning of ERISA §4205 with respect to any multi-employer plan; (f) no multi-employer plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute is in “reorganization” within the meaning of ERISA §4241 nor has notice been received by Borrower or any Commonly Controlled Entity that such a multi-employer plan will be placed in “reorganization”.

     Section 5.13 Governmental Consent.

     Neither the nature of Borrower or of its business or properties, nor any relationship between Borrower and any other Person, nor any circumstance in connection with the making of the Loan, or the offer, issue, sale or delivery of the Note is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority, on the part of Borrower, as a condition to the execution and delivery of this Agreement or any of the other Financing Documents, the borrowing of the principal amount of the Loan or the offer, issue, sale or delivery of the Note.

     Section 5.14 Full Disclosure.

     The financial statements referred to in this ARTICLE V do not, nor does this Agreement, nor do any written statements furnished by Borrower to Lender in connection with the making of the Loan, contain any untrue statement of fact or knowingly omit a material fact necessary to make the statements contained therein or herein not materially misleading. Borrower has not, to

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the best of its knowledge, failed to disclose any fact to Lender in writing which materially adversely affects or, will or could prove to materially adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of Borrower or the ability of Borrower to perform this Agreement.

     Section 5.15 Business Names and Addresses.

     Borrower has not conducted business under any name other than its current name, and has not conducted its business in any jurisdiction other than the District of Columbia. Borrower intends to operate the Facility under the name “Sunrise of Connecticut Avenue.” Borrower shall promptly notify Lender of any change in the name of the Facility.

     Section 5.16 Licenses.

     Borrower further represents and warrants to Lender that, with respect to any License: (a) no Default or Event of Default has occurred or is continuing under the terms of any of the Licenses, or any condition to the issuance, maintenance, renewal and/or continuance of any License, (b) Borrower has paid all fees, charges and other expenses to the extent due and payable with respect to, and has provided all information and otherwise complied with all material conditions precedent to, the issuance, maintenance, renewal, and continuance of all Licenses, (c) Borrower has not received any notice from any Governmental Authority relating to any actual or pending suspension, revocation, restriction, or imposition of any probationary use, of any License, nor has any License been materially amended, supplemented, rescinded, terminated, or otherwise modified except as otherwise disclosed in writing to, and approved by, Lender, (d) Borrower has not made any previous assignment of any of the Licenses to any Person, and (e) no financing statement covering any of the Licenses is on file in any public office except financing statements in favor of Lender. The foregoing notwithstanding, Borrower and Lender acknowledge and agree that the District of Columbia does not currently require a license for the operation of an assisted living facility. At such time as the District of Columbia implements laws or establishes regulations governing the operation of the Facility which require licensure, Borrower shall provide Lender with a copy of the License issued by the District of Columbia and comply with this Section 5.16 in all respects.

     Section 5.17 Operating Agreements and Management Contracts.

     Borrower has furnished or caused SSLMI to furnish to Lender photocopies of all material Operating Agreements and Management Contracts entered into with respect to the Facility, and all amendments, supplements and modifications thereto including, without limitation, the Management Agreement. Borrower further represents and warrants to Lender that (a) all of the material Operating Agreements and Management Contracts are or will be at the time of execution and delivery thereof valid and binding on the parties thereto and in full force and effect, (b) no Default or Event of Default has occurred or is continuing under the terms of any of the material Operating Agreements and Management Contracts, and no party thereto has attempted or threatened to terminate any Operating Agreement and Management Contract, (c) Borrower has not made any previous assignment of the Operating Agreements and Management Contracts to any Person, and (d) no financing statement covering any of the Operating Agreements and Management Contracts is on file in any public office except financing statements in favor of Lender.

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     Section 5.18 Participation Agreements and Resident Agreements.

     Borrower has furnished or caused SSLMI to furnish to Lender, on or before the Closing Date, the form of Resident Agreement used with respect to the Facility and, if requested by Lender, copies of all current, executed Resident Agreements.

     Borrower further covenants to Lender that:

          (a) With respect to the Participation Agreements, if any, (i) to the best of its knowledge, all Participation Agreements will be at the time of execution and delivery thereof valid and binding on the parties thereto and in full force and effect, and (ii) all Participation Agreements will provide for payment to or for the benefit of Borrower or the Management Company for services rendered to residents of the Facility. Borrower represents and warrants that as of the date hereof it has not entered any Participation Agreement for the Facility.

          (b) To the extent Borrower participates or will participate in Medicare or Medicaid payment and reimbursement programs, Borrower has complied and will comply with all notice and other requirements under Title XVIII and Title XIX of the Social Security Act to enable Borrower to participate in the Medicare and Medicaid payment and reimbursement programs.

     Section 5.19 Compliance with Laws.

     Borrower is not in violation of any applicable laws of any Governmental Authority pertaining to employment practices, health standards or controls, environmental and occupational standards or controls or order of any court or arbitrator, the violation of which, considered in the aggregate, would materially adversely affect the ability of Borrower to pay the Obligations. Borrower is in compliance with all accreditation standards and requirements to which it is subject. Borrower has obtained all Licenses necessary to the ownership of its property or to the conduct of its activities which, if not obtained, would materially adversely affect the ability of Borrower to conduct its activities of operating the Facility as an assisted living facility, including, without limitation if and as required by any Governmental Authorities for the dispensing, storage, prescription, disposal, and use of drugs, medications and other “controlled substances” and for the maintenance of cafeteria and other food and beverage facilities or services or the condition (financial or otherwise) of Borrower. The foregoing notwithstanding, Borrower and Lender acknowledge and agree that the District of Columbia does not currently require a license for the operation of an assisted living facility. At such time as the District of Columbia implements laws or establishes regulations governing the operation of the Facility which require licensure, Borrower shall provide Lender with a copy of the License issued by the District of Columbia and comply with this Section 5.19 in all respects.

     Section 5.20 Presence of Hazardous Materials or Hazardous Materials Contamination.

     Borrower has not placed Hazardous Materials on the Property. To the best of Borrower’s knowledge, no Hazardous Materials are located on the Property, except for reasonable quantities of necessary supplies for use by SSLMI in the ordinary course of its current line of business and stored, used and disposed of in accordance with applicable Laws, and, to the best of Borrower’s knowledge, the Property has never been used as a manufacturing, storage, or dump site for

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Hazardous Materials nor is the Property affected in any materially adverse way by Hazardous Materials Contamination.

     Section 5.21 Nature of Loan; Usury; Disclosures.

     Borrower is a business or commercial organization, and the Loan is being made solely for the purpose of carrying on or acquiring a business or commercial enterprise. The rates of interest charged on the Loan do not, and will not, violate any usury Law or interest rate limitation. The Loan is not subject to the federal Consumer Credit Protection Act (15 U.S.C. §1601 et. seq.) nor any other federal or state disclosure or consumer protection laws. The Loan is being transacted solely for business or commercial purposes and not for personal, family or household purposes.

     Section 5.22 Accounts.

     With respect to all of Borrower’s Accounts and to the best of Borrower’s knowledge (a) they are genuine, and in all respects what they purport to be, and are not evidenced by a judgment, an instrument, or chattel paper (unless such judgment has been assigned and such instrument or chattel paper has been endorsed and delivered to Lender); (b) they represent undisputed, bona fide transactions completed in accordance with the terms and provisions contained in the invoices relating thereto; (c) the services rendered which resulted in the creation of the Accounts have been delivered or rendered to and accepted by the Account Debtor; (d) the amounts shown on Borrower’s books and records, with respect thereto are actually and absolutely owing to Borrower and are not contingent for any reason; (e) there are no set-offs, counterclaims or disputes known by Borrower or asserted with respect thereto, and Borrower has made no agreement with any Account Debtor thereof for any deduction or discount of the sum payable thereunder except regular discounts allowed by Borrower in the ordinary course of its business for prompt payment; (f) there are no facts, events or occurrences known to Borrower which in any way impair the validity or enforcement thereof or tend to reduce the amount payable thereunder; (g) all Account Debtors thereof, to the best of Borrower’s knowledge, have the capacity to contract; (h) the services furnished giving rise thereto are not subject to any Liens other than Permitted Liens; (i) Borrower has no knowledge of any fact or circumstance which would impair the validity or collectibility thereof; and (j) there are no proceedings or actions known to Borrower which are pending against any Account Debtor which might result in any material adverse change in its financial condition.

     Section 5.23 Survival; Updates of Representations and Warranties.

     All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the date of this Agreement and the Loan made hereunder. Lender acknowledges and agrees that any and all representations and warranties contained in, or made under, or in connection with, this Agreement may be amended, changed or otherwise modified by Borrower at any time and from time to time after the date of this Agreement so as to accurately reflect the matters represented and warranted therein; provided, that such amendments, changes and/or modifications are disclosed in writing to Lender. Lender shall have no obligation to waive any Event of Default due to any present or future inaccuracy of such representation or warranty or to agree to any amendment, change or modification of any such representation or warranty.

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     Section 5.24 Compliance with Health Care Laws.

          (a) Without limiting the generality of any other provision of this Agreement, including, without limitation, any other representation or warranty made herein, Borrower, SSLMI and the Property and, to Borrower’s knowledge, each of Borrower’s or SSLMI’s licensed employees and contractors (other than contracted agencies) in the exercise of their respective duties on behalf of Borrower or SSLMI (with respect to its operation of the Property) or any portion of the Property, is in material compliance with all applicable statutes, laws, ordinances, rules and regulations of any federal, state or local governmental authority with respect to regulatory matters primarily relating to patient healthcare and/or patient healthcare information, including without limitation, if applicable, the Health Insurance Portability and Accountability Act of 1996, as amended, and the rules and regulations promulgated thereunder (“HIPAA”) (collectively, “Healthcare Laws”)). Borrower and/or SSLMI, as applicable, has maintained in all material respects all records required to be maintained by any governmental agency or authority or otherwise under the Healthcare Laws and, to the knowledge of Borrower, there are no presently existing circumstances which would result or likely would result in material violations of the Healthcare Laws. Borrower and/or SSLMI, as applicable, and its or their respective Affiliates have such permits, licenses, franchises, certificates and other approvals or authorizations of governmental or regulatory authorities as are necessary under applicable law to own or lease, their respective Projects and to conduct their respective business in connection with the Projects (including without limitation such permits as are required under such the Healthcare Laws).

          (b) To the extent that and for so long as (i) Borrower or SSLMI is a “covered entity” within the meaning of HIPAA or (ii) Borrower or SSLMI (with respect to its operation of the Property) and/or their respective business and operations (with respect to the Property) are subject to or covered by the so-called “Administrative Simplification” provisions of HIPAA, such entity (A) has undertaken or will undertake in a timely manner all necessary surveys, audits, inventories, reviews, analyses and/or assessments (including any necessary risk assessments) or all areas of its business and operations required by HIPAA and/or that could adversely affected by the failure of such entity to be HIPAA Compliant (as defined below); (B) has developed or will develop in a timely manner a detailed plan and time line for becoming HIPAA Compliant (a “HIPAA Compliance Plan”); and (C) has implemented or will implement those provisions of such HIPAA Compliance Plan in all material respects necessary to ensure that such entity is or becomes HIPAA Compliant. For purposes hereof, “HIPAA Compliant” shall mean that Borrower or SSLMI, as applicable (1) is or will be in compliance with each of the applicable requirements of the so-called “Administrative Simplification” provisions of HIPAA on and as of each date that any part thereof, or any final rule or regulation thereunder, becomes effective in accordance with its or their terms, as the case may be (each such date, a “HIPAA Compliance Date”) and (2) is not and could not reasonably be expected to become, as of any date following any such HIPAA Compliance Date, the subject of any civil or criminal penalty, process, claim, action or proceeding, or any administrative or other regulatory review, survey, process or proceeding, (other than routine surveys or reviews conducted by any governmental health plan or other accreditation entity) that could result in any of the foregoing or that could reasonably be expected to adversely affect Borrower’s or SSLMI’s business, operations, assets, properties or condition (financial or otherwise), in connection with any actual or potential violation by any such entity of the then effective provisions of HIPAA.

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ARTICLE VI
CONDITIONS OF LENDING

     The making of the Loan is subject to the following conditions precedent:

     Section 6.1 Opinion of Counsel for Borrower.

     On the date hereof, Lender shall receive one or more written opinions of counsel for Borrower and SSLI satisfactory in all respects to Lender. Counsel to Borrower will also provide adequate assurance that the Facility holds any necessary Licenses for its operation.

     Section 6.2 Approval of Counsel for Lender.

     All legal matters incident to the Loan and all documents necessary in the opinion of Lender to make the Loan shall be satisfactory in all material respects to counsel for Lender.

     Section 6.3 Supporting Documents.

     Lender shall receive on the date hereof: (a) a certificate of the managing member of Borrower in a form acceptable to Lender in all respects, dated as of the date hereof and certifying (i) that attached thereto is a true, complete and correct copy of resolutions duly adopted by the members of Borrower authorizing the execution and delivery of the Financing Documents to which it is a party, the borrowing thereunder, and the performance of the Obligations, and (ii) as to the incumbency and specimen signature of the authorized officer of the managing member of Borrower or SSLI executing the Financing Documents to which it is a party; (b) a copy of the resolutions, dated November 15, 2002, duly adopted by the board of directors of SSLI generally authorizing the execution and delivery of the Financing Documents to which it is a party and the guarantee of the Loan; (c) such other documents as Lender may reasonably require Borrower, SSLI, the managing member of Borrower or the board of directors of SSLI to execute, in form and substance acceptable to Lender; and (d) such additional information, instruments, opinions, documents, certificates and reports as Lender may reasonably deem necessary.

     Section 6.4 Financing Documents.

     All of the Financing Documents required by Lender shall be executed and delivered to Lender. The Deed of Trust and financing statements shall be recorded at the sole expense of Borrower.

     Section 6.5 Insurance.

     Lender shall have received all policies of insurance required by the terms hereof and by the other Financing Documents to be in effect from a company or companies and in form and amount reasonably satisfactory to Lender, including without limitation, flood insurance (in the amount of the Loan or the maximum limit of coverage available on the Property, whichever is less or evidence that flood insurance is not available or otherwise required with respect to the Property), together with written evidence, in form and substance satisfactory to Lender, that all fees and premiums due on account thereof have been paid in full.

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     Section 6.6 Security Documents.

     In order to perfect the lien and security interest created by this Agreement, Borrower shall have executed and delivered to Lender all Security Documents (in form and substance acceptable to Lender in its sole discretion) deemed necessary by Lender, in a sufficient number of counterparts for recordation, and, at Borrower’s sole expense, shall record all such financing statements and Security Documents, or cause them to be recorded, in all public offices deemed necessary by Lender.

     Section 6.7 Commitment Fee.

     In consideration for the making of the Loan, Borrower shall pay to Lender on or prior to the Closing Date, a commitment fee in the amount of $62,500.00.

     Section 6.8 Management Agreement.

     Borrower shall have delivered to Lender an executed management agreement for the Facility by and between Borrower and SSLMI, in all respects satisfactory to Lender and its counsel.

     Section 6.9 Title and Survey Matters.

     Lender shall have received a paid policy of title insurance (American Land Title Association Standard Form “B” Loan Policy — Current Edition) or a valid and enforceable commitment to issue the same from a company satisfactory to Lender in the amount of the Loan and which may be endorsed or assigned to the successors and assigns of Lender without additional cost, insuring the lien of the Deed of Trust to be a valid second lien on the Property, free and clear of all defects, exceptions and encumbrances except Permitted Liens. Lender shall also have received and approved a copy of a current as-built survey of the Property certified to Lender and to the title insurance company and any recorded subdivision plat of the Property.

     Section 6.10 Appraisal.

     Lender shall have received and approved an appraisal of the Property in all respects satisfactory to Lender.

     Section 6.11 Environmental Reports.

     Lender shall have received evidence satisfactory to it regarding the current and past pollution control practices at the Property in connection with the discharge, emission, handling, disposal or existence of materials and substances controlled by federal, state or local laws and regulations.

ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER

     So long as any of the Obligations shall be outstanding hereunder, Borrower agrees with Lender as follows:

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     Section 7.1 Financial Statements.

     Borrower shall furnish or cause to be furnished to Lender:

          (a) As soon as available, but in no event more than twenty-five (25) days after the close of each month, Borrower’s monthly operating and census reports, certified by Borrower.

          (b) As soon as available but in no event more than thirty (30) days after the date of filing, the federal and state income tax returns for Borrower for the year in question as well as any requests for extensions filed in connection therewith.

          (c) As soon as available but in no event later than the dates indicated, consolidated, draft, internally-prepared financial statements of Guarantor for the fiscal quarter ending June 30, 2007, no later than September 30, 2007 and for the fiscal quarter ending September 30, 2007, no later than December 31, 2007 for each fiscal quarter thereafter, within ninety (90) days thereafter and income and expense statements of Guarantor for such periods certified as to accuracy to the best of his or her knowledge by the chief financial officer of Guarantor, subject to additional adjustments that may arise as a result of final quarterly closing procedures and adjustments as a result of the pending Ernst & Young audit. Adjustments arising from final quarterly closing procedures will be reported to Lender within ninety (90) days of the date on which such statements were delivered.

          (d) As soon as available, but not later than June 30, 2008, restated audited statements for any periods through fiscal year 2007.

          (e) Such additional information, reports or statements as Lender may from time to time reasonably request.

     Section 7.2 Taxes and Claims.

     Borrower shall pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or any of its income or properties prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a lien or charge upon any of its properties; provided, however, Borrower shall not be required to pay any such tax, assessment, charge, levy or claim, the payment of which is being contested in good faith and by proper proceedings.

     Section 7.3 Legal Existence.

     Borrower shall maintain its existence as a limited liability company in good standing in the Commonwealth of Virginia and in each jurisdiction where it is required to register or qualify to do business.

     Section 7.4 Conduct of Business and Compliance with Laws. Borrower shall:

          (a) do or cause to be done all things necessary to obtain, enter into, preserve and to keep in full force and effect its material rights and any trade names, patents, trademarks

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and Licenses, Participation Agreements, and Operating Agreements and Management Contracts which are necessary for the operation of the Facility as an adult assisted living facility as contemplated by Borrower and (b) comply with all applicable Laws, including, without limitation, regulations issued under the Omnibus Budget Reconciliation Act of 1987 (OBRA’87) (Pub.L.No. 100-203), as amended, and observe the valid requirements of Governmental Authorities, and perform the terms of all Participation Agreements to which it is a party, the non-compliance with or the non-observance of which might materially interfere with the performance of its Obligations or the proper or prudent conduct of its business or the Property.

          (b) at such time as required by the District of Columbia obtain and maintain in full force and effect all Licenses necessary to the acquisition and/or ownership and/or operation of the Facility including, without limitation, Licenses and other approvals related to the storage, dispensation, use, prescription and disposal of drugs, medications and other “controlled substances” and, to the extent offered by Borrower, the maintenance of cafeteria and other food and beverage facilities or services;

          (c) administer, maintain and operate (or will cause to be administered, maintained and operated) the Facility as a revenue-producing assisted living facility;

          (d) to the extent Borrower participates in any such programs, maintain and operate the Facility to meet the standards and requirements and to provide healthcare of such quality and in such manner as would enable Borrower to participate in, and provide services in connection with, recognized medical and healthcare insurance programs;

          (e) at such time as required by the District of Columbia, obtain, maintain and comply with all conditions for the continuance of, all Licenses, including without limitation, Licenses which may at any time be required by the District of Columbia or other appropriate governmental entity, necessary or desirable for the operation of the Facility as an adult assisted living facility; and

          (f) to the extent Borrower presently participates or in the future will participate in such programs, obtain, maintain and comply with all conditions for the continuance of certification from each applicable Governmental Authority that Borrower meet all conditions for participation in the Medicare and Medicaid programs.

     Section 7.5 Use of Proceeds.

     Borrower shall use the proceeds of the Loan for the purpose or purposes set forth in Recital A above and 0 (The Term Loan) and, without the prior written consent of Lender, for no other purpose or purposes.

     Section 7.6 Insurance.

     Borrower shall maintain in full force and effect at all times during the term of the Loan, such policies of insurance as may be required by the terms of the Financing Documents from a company or companies, and in form and amounts satisfactory to Lender including, by way of example and not by way of limitation, at least the following:

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          (a) During any period of construction in or on the Property, “builder’s risk” insurance, including vandalism and malicious mischief and collapse endorsements in amounts not less than the replacement cost of the Improvements being constructed or of the Property and naming Lender as a loss payee in the mortgagee clause thereof;

          (b) Casualty or physical damage insurance coverage for the Property affording protection against loss or damage by fire or other hazards covered by the standard all-risk fire and hazard insurance policy with “lender’s loss payable” endorsement and such other risks as shall be customarily covered with respect to projects similar in construction, location and use as the Property, or as Lender may from time to time otherwise require in amounts not less than the greater of the full insurable value of the Improvements (as defined in the Deed of Trust) or the aggregate principal amount of the Obligations; no policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise; the term “full insurable value” means the actual replacement cost of the Property (as defined in the Deed of Trust) (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items);

          (c) General public liability insurance in amounts usually carried by similar operations against claims for bodily injury or death and property damage insurance for claims for damage to property (including loss of use) occurring upon, in or about the Property, with such insurance to afford protection to the limit of not less than $5,000,000 for the aggregate of all occurrences during any given annual policy period;

          (d) Workers’ compensation insurance in accordance with the requirements of applicable law or regulation;

          (e) Business interruption insurance with respect to the Facility in an amount equal to at least twelve (12) months’ debt service on the Loan; and

          (f) To the extent that healthcare professionals are employed by Borrower, medical liability, malpractice and other healthcare professional liability insurance protecting Borrower and their employees against claims arising from the professional services performed by Borrower and their employees with limits of (i) not less than One Million Dollars ($1,000,000.00) with respect to injury or death for each person or occurrence, and (ii) not less than Three Million Dollars ($3,000,000.00) in the aggregate for claims made for injury or death in any one year, and an umbrella policy insuring against such liability in an aggregate amount of Five Million Dollars ($5,000,000). In addition, Borrower shall ensure that all healthcare providers with whom Borrower contract to provide services at the Facility are insured against claims arising from such services with limits as set forth in clauses (i) and (ii) above.

     Borrower shall cause SSLMI to file with Lender, upon its request, a detailed list of the insurance then in effect and stating the names of the insurance companies, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. Each policy of insurance shall (A) be issued by one or more recognized, financially sound and responsible insurance companies approved by Lender and which are qualified or authorized by the laws of the District of Columbia to assume the risk covered by such policy, (B) with respect to the insurance described under the preceding subsections (a), (b) and (e) have attached thereto

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standard noncontributing, non-reporting mortgagee clauses in favor of and entitling Lender without contribution to collect any and all proceeds payable under such insurance, (C) provide that such policy shall not be canceled or modified without at least thirty (30) days prior written notice to the named insured, who will in turn within five (5) days notify Lender, and (D) provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Borrower which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Unless an escrow account has been established for insurance premiums pursuant to the provisions of the Deed of Trust, Borrower shall promptly pay all premiums when due on such insurance and, not less than ten (10) days prior to the expiration date of each such policy, Borrower will deliver to Lender evidence of payment satisfactory to Lender. Borrower will immediately give Lender notice of any cancellation of, or change in, any insurance policy. Lender shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (i) the existence, nonexistence, form or legal sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of losses.

     Section 7.7 Flood Insurance.

     If required by applicable law or regulation, Borrower shall maintain and provide evidence to Lender of a separate policy of flood insurance in the aggregate amount of the Loan or the maximum limit of coverage available with respect to the Property, whichever is the lesser, from a company or companies satisfactory to Lender and written in strict conformity with the Flood Disaster Protection Act of 1973, as amended, and all applicable regulations adopted pursuant thereto. In the event that flood insurance is not required by applicable law or regulation to be provided in connection with the Loan or is not otherwise available with respect to the Property, Borrower shall supply Lender with written evidence, in form and substance satisfactory to Lender, to that effect. Lender acknowledges receipt of such written evidence by Borrower. Any such policy shall provide that the policy may not be surrendered, canceled or substantially modified (including, without limitation, cancellation for nonpayment of premiums) without at least thirty (30) days’ prior written notice to the named insured, who will in turn within five (5) days notify Lender.

     Section 7.8 Maintenance of Properties.

     Borrower shall keep its properties, whether owned in fee or otherwise, or leased, including, without limitation, the Property, in good operating condition; make all proper repairs, renewals, replacements, additions and improvements thereto needed to maintain such properties in good operating condition; comply with the provisions of all leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder; and comply with all laws, rules, regulations and orders applicable to its properties or business or any part thereof.

     Section 7.9 Maintenance of the Collateral.

     Borrower shall not permit anything to be done to the Collateral which may impair the value thereof. Upon notice thereof, Lender or an agent designated by Lender, shall be permitted to enter the premises of Borrower and examine, audit and inspect the Collateral at any reasonable time and from time to time. Lender shall not have any duty to, and Borrower hereby releases Lender from, all claims of loss or damage caused by the delay or failure to collect or enforce any

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of the Accounts or Receivables or to preserve any rights against any other party with an interest in the Collateral.

     Section 7.10 Other Liens, Security Interests, etc.

     Borrower shall keep the Collateral and the Property free from all liens, security interests and claims of every kind and nature, other than Permitted Liens.

     Section 7.11 Defense of Title and Further Assurances.

     Borrower shall, at its expense, defend the title to the Collateral (or any part thereof), and promptly upon request execute, acknowledge and deliver any financing statement, renewal, affidavit, deed, assignment, continuation statement, security agreement, certificate or other document Lender may reasonably require in order to perfect, preserve, maintain, protect, continue and/or extend the lien or security interest granted to Lender under this Agreement and its priority. Borrower shall pay to Lender, on demand all taxes, costs and expenses incurred by Lender, in connection with the preparation, execution, recording and filing of any such document or instrument.

     Section 7.12 Subsequent Opinion of Counsel as to Recording Requirements.

     Borrower shall provide to Lender a subsequent opinion of counsel as to the filing, recording and other requirements with which Borrower has complied to maintain the lien and security interest in favor of Lender in the Collateral in the event that Borrower shall transfer its principal place of business or the office where it keeps its records pertaining to the Accounts and Receivables.

     Section 7.13 Books and Records.

     Borrower shall (a) keep and maintain accurate books and records, (b) make entries on such books and records in form reasonably satisfactory to Lender disclosing Lender’s assignment of, and security interest in and lien on, the Collateral and all collections received by Borrower on its Accounts, (c) furnish to Lender promptly upon request such information, reports, contracts, invoices, lists of purchases of Inventory (showing names, addresses and amount owing) and other data concerning Account Debtors and Borrower’s Accounts and Inventory and all contracts and collection(s) relating thereto as Lender may from time to time specify, (d) unless Lender shall otherwise consent in writing, keep and maintain all such books and records mentioned in (a) above only at the addresses listed in EXHIBIT B, and (e) upon notice thereof, permit any person designated by Lender to enter the premises of Borrower and examine, audit and inspect the books and records at any reasonable time and from time to time.

     Section 7.14 Collections.

     Until such time as Lender shall notify Borrower of the revocation of such privilege following an Event of Default, Borrower shall (a) at its own expense have the privilege for the account of and in trust for Lender of collecting its Accounts and receiving in respect thereto all items of payment and shall otherwise completely service all of the Accounts including (i) the billing, posting and maintaining of complete records applicable thereto, and (ii) the taking of such action with respect to such Accounts as Lender may reasonably request or in the absence of such request, as Borrower may deem advisable; and (b) in its discretion, grant, in the ordinary

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course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to an Account. Lender may, at its option but solely in accordance with applicable law, at any time or from time to time after the occurrence of an Event of Default hereunder, revoke the collection privilege given to Borrower herein by either giving notice of its assignment of, and lien on the Collateral, subject to the provisions of Section 4.1 (Collateral), to the Account Debtors or giving notice of such revocation to Borrower.

     Section 7.15 Notice to Account Debtors and Escrow Account.

     In the event that (a) a Default or an Event of Default exists, or (b) demand has been made for any or all of the Obligations, Borrower shall promptly upon the request of Lender in such form and at such times as reasonably specified by Lender, give notice of Lender’s lien on the Accounts to the Account Debtors requiring those Account Debtors which are permitted by applicable law to make payments thereon directly to Lender.

     Section 7.16 Business Names.

     Borrower shall immediately notify Lender of any change in the name under which they conduct their business.

     Section 7.17 ERISA.

     With respect to any pension plan which Borrower and/or any Commonly Controlled Entity maintains or contributes to, either now or in the future, Borrower covenants that: (a) such bonding as is required under ERISA §412 will be maintained; (b) as soon as practicable and in any event within fifteen (15) days after Borrower or any Commonly Controlled Entity knows or has reason to know that a “reportable event,” with respect to which notice has not been waived under 29 C.F.R. § 4043, has occurred or is likely to occur, Borrower will deliver to Lender a certificate signed by its chief financial officer setting forth the details of such “reportable event”; (c) neither Borrower nor any Commonly Controlled Entity will: (i) knowingly engage in or permit any “prohibited transaction” (as defined in ERISA §406 or Code §4975) to occur; (ii) cause any “accumulated funding deficiency” as defined in ERISA §302 and/or Code §412 if such deficiency would materially adversely affect the ability of Borrower to pay the Obligations; (iii) terminate any pension plan in a manner which could result in the imposition of a lien on the property of Borrower pursuant to ERISA §4068 if such termination would materially adversely affect the ability of Borrower to pay the Obligations; (iv) terminate or consent to the termination of any multi-employer plan; (v) incur a complete or partial withdrawal with respect to any multi-employer plan within the meaning of ERISA §§4203 and 4205; and (d) within fifteen (15) days after notice is received by Borrower or any Commonly Controlled Entity that any multi-employer plan has been or will be placed in “reorganization” within the meaning of ERISA §4241, Borrower will notify Lender to that effect. Upon Lender’s request, Borrower will deliver to Lender a copy of the most recent actuarial report, financial statements and annual report completed with respect to any “defined benefit plan”, as defined in ERISA §3(35).

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     Section 7.18 Change in Management.

     Borrower shall not change the Management Company for the Facility without the prior written consent of Lender.

     Section 7.19 Management.

     Subject to the terms of that certain Management Fee Subordination Agreement by and among Borrower, SSLMI and Lender of even date herewith, Borrower shall subordinate payment of any management fees under, or in connection with, the Management Agreement (the “Management Fees”) to payment of the Obligations, in accordance with the terms and conditions of one or more subordination agreements in form and content acceptable to Lender in its reasonable discretion, and (a) not amend, restate, supplement, terminate, cancel or otherwise modify any of the terms or conditions of such Management Agreement, in any material respect, without the prior written consent of Lender, and (b) following Borrower’s failure to make any payment due under the Loan Documents, which failure continues for more than sixty (60) days or the occurrence of any event which causes the District of Columbia to require the Facility to close or to cease operations as an assisted living facility, terminate the Management Agreement upon receipt of notice from Lender directing Borrower to terminate the Management Agreement after the occurrence of an Event of Default, and, if requested to do so by Lender, enter into a management agreement for the management of the Facility with an independent manager.

     Section 7.20 Fees and Expenses; Indemnity.

     Borrower shall pay all reasonable fees, charges, costs and expenses required to satisfy the conditions of the Financing Documents. Borrower shall hold Lender harmless and indemnify Lender against all claims of brokers and “finders” arising by reason of the execution and delivery of the Financing Documents or the consummation of the transaction contemplated hereby.

     Section 7.21 Surveys.

     Borrower shall furnish or cause SSLMI to furnish to Lender, within thirty (30) days of receipt thereof, copies of any and all annual surveys or inspections performed by any Governmental Authority or accreditation or certification organization with respect to the Facility.

     Section 7.22 Cost Reports.

     Borrower shall prepare and file or cause SSLMI to prepare and file all applicable cost reports to all third-party payors, if any, to the extent required by any such third-party payor and, within thirty (30) days thereafter, notify Lender of any settlement of any cost report disclosed to Lender as being open or unsettled as of the Closing Date to the extent any such cost report would have a materially adverse effect on Borrower. Copies of any such cost reports shall be furnished to Lender.

Section 7.23 Notification of Certain Events, Events of Default and Adverse Developments.

     Borrower shall promptly notify Lender upon obtaining knowledge of the occurrence of any of the following:

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          (a) any Event of Default under the Financing Documents;

          (b) any event, development or circumstance whereby the financial statements furnished under the Financing Documents fail in any material respect to present fairly the financial condition and operational results of Borrower;

          (c) any judicial, administrative or arbitral proceeding commenced or pending against Borrower which, if adversely decided, could cause a Material Adverse Change in Borrower;

          (d) (i) the revocation, suspension, probation, restriction, limitation or refusal to renew, or the pending, revocation, suspension, probation, restriction, limitation, or refusal to renew, of any License, or (ii) the decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew, or the pending, decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew any participation or eligibility in any third party payor program in which Borrower elects to participate, including, without limitation, Medicare, Medicaid or any accreditation of Borrower, or (iii) the issuance or pending issuance of any License for a period of less than twelve (12) months, as a consequence of sanctions imposed by any Governmental Authority, or (iv) the assessment or pending assessment, of any civil or criminal penalties by any Government Authority, any third party payor or any accreditation organization or Person, which could materially adversely affect the financial condition or operations of Borrower or an Affiliate (present or prospective) as determined by Lender, in its sole but reasonable discretion;

          (e) any other development in the business or affairs of Borrower results in a Material Adverse Change; and

          (f) any action, including, but not limited to, the filing of any certificate of need application if required by law, the amendment of any facility license or certification, or the issuance of any new license or certification for the Facility, under which Borrower proposes (i) to develop a new facility or service and/or (ii) eliminate, materially expand or materially reduce any service;

in each case listed in clauses (a) through (f), inclusive, of this Section 7.23 describing in detail satisfactory to Lender the nature thereof and, in the case, if any, of notification under clause (a), the action Borrower proposes to take with respect thereto or a statement that Borrower intends to take no action and an explanation of the reasons for such inaction. In addition, Borrower will furnish to Lender immediately after receipt thereof copies of all administrative notices material to Borrower’s business and operation of the Facility and all responses by or on behalf of Borrower with respect to such administrative notices.

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     Section 7.24 Compliance with Environmental Laws.

     If any Hazardous Materials are used, present or generated on the Property, Borrower shall use, process, distribute, handle, maintain, treat, store, dispose of and transport such substance in compliance with all applicable laws, including, but not limited to, those regulating PCBs, underground storage tanks, radon and medical waste tracking, as well as any laws that are enacted after the date of this Agreement.

     Section 7.25 Hazardous Materials; Contamination.

     Borrower shall (a) give notice to Lender within five (5) business days of Borrower acquiring actual knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous Materials Contamination with a full description thereof, except for reasonable quantities of necessary supplies for use by Borrower in the ordinary course of its current line of business and stored, used and disposed of in accordance with applicable Laws; (b) promptly comply with any laws requiring special handling, maintenance, servicing, removal, treatment or disposal of Hazardous Materials or Hazardous Materials Contamination and provide Lender upon request with satisfactory evidence of such compliance; (c) provide Lender, within thirty (30) days after a demand by Lender, with a bond, letter of credit or similar financial assurance evidencing to Lender’s satisfaction that funds are available to pay the cost of removing, treating, and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any lien which may be established as a result thereof on any property owned, operated or controlled by Borrower or for which Borrower is responsible; and (d) defend, indemnify and hold harmless Lender and each of its agents, employees, trustees, successors and assigns from any and all claims which may now or in the future (whether before or after the termination of this Agreement) be asserted as a result of the presence of any Hazardous Materials on the Property.

     Section 7.26 Participation in Reimbursement Programs.

     In the event Borrower elects to participate in any or all plans and/or programs for third party payment and/or reimbursement, and the revenues derived from a single plan or program exceed ten percent (10%) of the gross revenues of the Facility, Borrower shall continue its participation in any and all such plans and/or programs for third party payment and/or reimbursement from, and claims against, private insurers or programs for payment and/or reimbursement from federal, state and local governmental agencies and/or private or quasi-public insurers, including, without limitation, Managed Care Plans, Medicaid and Medicare and the Veterans Administration (as determined by Borrower in the good faith exercise of its prudent and commercially reasonable business judgment). While participating in such plans, Borrower shall comply with any and all rules, regulations, standards, procedures and decrees necessary to maintain Borrower’s participation in any such third party payment or reimbursement program or plan.

     Section 7.27 Inspection and Other Reports and Notices.

     Borrower will or will promptly cause SSLMI to furnish to Lender copies of any and all annual inspections performed by any Governmental Authority or accreditation or certification organization with respect to the Facility. Borrower will also furnish to Lender copies of all reports or notices from any Governmental Authority or other organization pertaining to the

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licensure of or Participation Agreements or Operating Agreements for the Facility which (a) cite any deficiency, (b) indicate that a penalty will be imposed unless a corrective action is taken, (c) impose a penalty (including, but not limited to, a monetary penalty, a ban on admissions or a suspension of a license) or (d) would be otherwise materially adverse to the business or operations of the Facility, together with Borrower’s written response to any such report or notice.

     Section 7.28 Subordination of Distributions and Management Fees.

      Borrower shall subordinate, and cause the members of Borrower to subordinate:

          (a) any distributions of Borrower to principal and interest payments on the Loan; and

          (b) the payment of management fees with respect to the Facility pursuant to the terms of that certain Management Fee Subordination Agreement of even date herewith (as the same may be modified from time to time) by and among Borrower, Lender and the Management Company.

     Section 7.29 Debt Service Ratio.

     Commencing with the quarter ending December 31, 2007, Borrower shall maintain, tested as of the end of each fiscal quarter during the term of the Loan, a Debt Service Ratio for the Facility of not less than 1.20 to 1.0.

     Section 7.30 Occupancy Covenant.

     Borrower shall maintain at all times, tested as of the end of each fiscal quarter during the term of the Loan, a minimum average daily occupancy of eighty-five percent (85%), measured on a unit basis.

ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER

     Until payment in full and the performance of all of the Obligations, without the prior written consent of Lender, Borrower will not directly or indirectly:

     Section 8.1 Borrowings.

     Other than Loan A, create, incur, assume or suffer to exist any liability for borrowed money other than unsecured loans from Affiliates bearing interest at a rate no higher than that then applicable to the Loan which are fully subordinated to the Loan under the terms of subordination agreements acceptable to Lender. The proceeds of any loans obtained by Borrower from Affiliates shall be used only to cover operating deficits, capital improvement or working capital for the Facility and may be repaid only if no Event of Default exists or would result from such payment.

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     Section 8.2 Merger or Acquisition.

     Enter into any merger or consolidation or amalgamation, windup or dissolve themselves (or suffer any liquidation or dissolution) or acquire all or substantially all the assets of any Person.

     Section 8.3 Deeds of Trust and Pledges.

     Other than as security for Loan A, create, incur, assume or suffer to exist any deed of trust, mortgage, pledge, lien or other encumbrance of any kind upon, or any security interest in, any of its property or assets, whether now owned or hereafter acquired. Lender agrees to review requests for such encumbrances but shall not be bound to formally consider them.

     Section 8.4 Sale or Transfer of Assets.

     Other than cash distributions to its members, enter into any arrangement whereby Borrower shall sell, lease, transfer, or otherwise dispose of more than $25,000 worth of its assets in any one year or $100,000 in the aggregate during the term of the Loan, unless replaced with assets of equivalent or greater value.

     Section 8.5 Advances and Loans.

     Make loans or advances to any Person, including, without limitation, partners and employees of Borrower. Borrower shall disclose in writing to Lender any advances of loans described in this section which are outstanding as of the date hereof.

     Section 8.6 Contingent Liabilities.

     Assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any Person, except by the endorsement of negotiable instruments for deposit and collection or similar transactions in the ordinary course of business and contingent obligations in the aggregate not exceeding $25,000 at any time.

     Section 8.7 Licenses.

     Allow any Licenses, permit, right, franchise or privilege necessary for the ownership or operation of the Facility for the purposes for which the Facility is intended to be used to lapse, be suspended, be revoked, be denied renewal, be forfeited or be placed on probation.

     Section 8.8 ERISA Compliance.

     (a) Restate or amend any pension plan established and maintained by Borrower or any Commonly Controlled Entity and subject to the requirements of ERISA, in a manner designed to disqualify such plan and its related trusts under the applicable requirements of the Code; (b) permit any officers of Borrower or any Commonly Controlled Entity to materially adversely affect the qualified tax-exempt status of any pension plan or related trusts of Borrower or any Commonly Controlled Entity under the Code; (c) knowingly engage in or permit any Commonly Controlled Entity to engage in any “prohibited transaction” (as defined in ERISA §406 or Code §4975) with respect to any pension plan established and maintained by Borrower or any Commonly Controlled Entity; (d) incur or permit any Commonly Controlled Entity to incur any “accumulated funding deficiency” (as defined in ERISA §302 or Code §412), whether or not

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waived, in connection with any pension plan, if such deficiency would materially adversely affect the ability of Borrower to pay the Obligations; (e) take or permit any Commonly Controlled Entity to take any action or fail to take any action which causes a termination of any Plan in a manner which could result in the imposition of a lien on the property of Borrower or any Commonly Controlled Entity pursuant to Section 4068 of ERISA if such termination would materially adversely affect the ability of Borrower to pay the Obligations; (f) fail to notify Lender that notice has been received of a “termination” (as defined in ERISA) of any Multi-employer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute; (g) incur or permit any Commonly Controlled Entity to incur a “complete withdrawal” or “partial withdrawal” (as defined in ERISA) from any Multi-employer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute; or (h) fail to notify Lender that notice has been received from the administrator of any Multi-employer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute that any such Plan will be placed in “reorganization” (as defined in ERISA).

     Section 8.9 Transfer of Collateral.

     Transfer, or permit the transfer, to another location of any of the Collateral or the books and records related to any of the Collateral; provided, however, that Borrower may transfer the Collateral or the books and records related thereto to another location if Borrower shall have provided to Lender prior to such transfer an opinion of counsel addressed to Lender to the effect that Lender’s perfected security interest shall not be affected by such move or if it shall be affected, setting forth the steps necessary to continue Lender’s perfected security interest together with the commencement of such steps by Borrower at its expense.

     Section 8.10 Sale of Accounts or Receivables.

     Sell, discount, transfer, assign or otherwise dispose of any of their Accounts or Receivables, such as accounts receivable, notes receivable, installment or conditional sales agreements or any other rights to receive income, revenues or moneys, however evidenced.

     Section 8.11 Amendments; Terminations.

     Amend or terminate or agree to amend or terminate any License, the Management Agreement or, except in the ordinary course of business or as otherwise agreed to herein, any participation agreement, or any other Management Contracts and Operating Agreements, or consent to or waive any material provisions thereof.

     Section 8.12 Prohibition on Hazardous Materials.

     Place, manufacture or store or permit to be placed, manufactured or stored, any Hazardous Materials on the Property, except for reasonable quantities of necessary supplies for use by Borrower in the ordinary course of its current line of business and stored, used and disposed of in accordance with applicable Laws.

     Section 8.13 Subsidiaries.

     Create or otherwise acquire any subsidiaries if such creation or acquisition would result in a Material Adverse Change.

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     Section 8.14 Single Purpose Entity.

     Engage in any activity which would cause Borrower to be other than a single purpose entity for the purpose of the Loan.

     Section 8.15 Distributions.

     Pay distributions to members of Borrower.

ARTICLE IX
EVENTS OF DEFAULT

     The occurrence of one or more of the following events shall be “Events of Default” under this Agreement, and the terms “Event of Default” shall mean, whenever they are used in this Agreement, any one or more of the following events:

     Section 9.1 Failure to Pay and/or Perform the Obligations.

     Borrower shall fail to pay any of the Obligations including but not limited to the Expense Payments and Liquidation Costs when due and payable. Lender shall endeavor to give notice of such failure to Borrower; however, failure to give such notice shall not impair the rights of Lenders hereunder.

     Section 9.2 Breach of Representations and Warranties.

     Any material representation or warranty made in this Agreement or in any report, certificate, opinion, financial statement or other instrument furnished in connection with the Obligations or with the execution and delivery of any of the Financing Documents, shall prove to have been false or misleading when made in any material respect.

     Section 9.3 Failure to Comply with Certain Covenants.

     Borrower shall fail to perform, observe or comply with any covenant, condition or agreement contained in Sections 7.1, 7.6, 7.7, 7.10, 7.15, 7.18, 7.19, 7.21, 7.22, 7.23, 7.25, 7.26, 7.27, 7.28, 7.29, 7.30 and all Article VIII of this Agreement.

     Section 9.4 Failure to Comply with Other Covenants.

     Borrower shall fail to perform, observe or comply with any other covenant, condition or agreement contained in this Agreement, except those expressly described in other sections of this Article IX, which failure continues for thirty (30) days after written notice thereof.

     Section 9.5 Default Under Other Financing Documents.

     A Default shall occur under any of the other Financing Documents, and such Default is not cured within any applicable grace period provided therein.

     Section 9.6 Receiver; Bankruptcy.

     An Act of Bankruptcy occurs with respect to Borrower or Borrower becomes generally unable to pay its debts as they become due; provided, however, if a proceeding with respect to an Act of Bankruptcy is filed or commenced against Borrower, the same shall not constitute an

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Event of Default if such proceeding is dismissed within ninety (90) days from the date of such Act of Bankruptcy.

     Section 9.7 Judgment.

     Any judgment against Borrower of $25,000 or more or any attachment or other levy against the property of Borrower remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty (30) days.

     Section 9.8 Execution; Attachment.

     Any execution or attachment shall be levied against the Collateral, or any part thereof, and such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days after the same shall have been levied.

     Section 9.9 Default Under Other Borrowings.

     Default shall be made by Borrower with respect to any evidence of indebtedness or liability for borrowed money (other than the Loan) if the effect of such default is to accelerate the maturity of such evidence of indebtedness or liability or to permit the holder or obligee thereof to cause any indebtedness to become due prior to its stated maturity.

     Section 9.10 Material Adverse Change.

     If Lender in its reasonable discretion determines that a Material Adverse Change has occurred in the financial condition of Borrower.

     Section 9.11 Impairment of Position.

     If Lender in its reasonable discretion determines that an event has occurred which impairs the prospect of payment of the Obligations and/or the value of the Collateral.

     Section 9.12 Change in Status or Ownership.

     Borrower is dissolved, merged, consolidated or reorganized, or any change occurs in the ownership or control of Borrower, without the prior written consent of Lender.

     Section 9.13 Zoning.

     Any change in any zoning ordinance or any other public restriction is enacted, limiting or defining the uses which may be made of the Property or a part thereof, such that the current use of the Property, as specified herein, would be in violation of such restriction or zoning change, and not permitted as a prior non-conforming use..

     Section 9.14 Change in Management.

     The Management Agreement is terminated without the prior written consent of Lender.

     Section 9.15 Licenses.

     The involuntary, imposed or required revocation, suspension, probation, restriction, limitation or refusal to renew, or the pending revocation, suspension, probation, restriction, limitation, of, or refusal to renew, of any License; other than in the ordinary course of business or

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to the extent that Borrower deems such action to be, in the exercise of prudent business judgment, in the best interest of Borrower; the decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew, or the pending, decertification, revocation, suspension, probation, restriction, limitation, or refusal to renew any participation or eligibility in any third party payor program in which Borrower elects to participate, including, without limitation, the Medicaid or Medicare programs; or the issuance or pending issuance of any License for a period of less than twelve (12) months as a consequence of any sanctions imposed by any Governmental Authority; or the assessment or pending assessment, of any civil or criminal penalties against Borrower by any Governmental Authority, any third party payor or any accreditation organization or person.

     Section 9.16 Compliance with Law.

     Borrower fails to comply with any material requirement of any Governmental Authority having jurisdiction within the time required by such Governmental Authority; or any proceeding is commenced or action taken against Borrower to enforce any remedy for a material violation of any requirement of a Governmental Authority or any restrictive covenant affecting the Property or any part thereof, an adverse decision as to which would have a material adverse effect on Borrower.”

     Section 9.17 Change of Control in Guarantor.

     If a Change of Control occurs in Guarantor.

ARTICLE X
RIGHTS AND REMEDIES UPON DEFAULT

     Upon the occurrence of any Event of Default, Lender shall, at the direction of the Requisite Lenders, at any time thereafter exercise any one or more of the following rights, powers or remedies.

     Section 10.1 Acceleration.

     Lender may declare any or all of the Obligations to be immediately due and payable, notwithstanding anything contained in this Agreement or in any of the other Financing Documents to the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other notice of any kind, all of which Borrower hereby waives.

     Section 10.2 Uniform Commercial Code.

     Lender shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code and other applicable Laws. Upon demand by Lender, Borrower shall assemble the Collateral and make it available to Lender, at a place designated by Lender. Lender or its agents may without notice from time to time enter upon Borrower’s premises to take possession of the Collateral, to remove it, to render it unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it.

     Any written notice of the sale, disposition or other intended action by Lender with respect to the Collateral which is sent by regular mail, postage prepaid, to Borrower at the address set

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forth in Section 11.1 (Notices), or such other address of Borrower which may from time to time be shown on Lender’s records, at least ten (10) days prior to such sale, disposition or other action, shall constitute commercially reasonable notice to Borrower. Lender may alternatively or additionally give such notice in any other commercially reasonable manner. Nothing in this Agreement shall require Lender to give any notice not required by applicable Laws.

     If any consent, approval, or authorization of any state, municipal or other Governmental Authority or of any other Person or of any Person having any interest therein, should be necessary to effectuate any sale or other disposition of the Collateral, Borrower agrees to execute all such applications and other instruments, and to take all other action, as may be required in connection with securing any such consent, approval or authorization.

     Borrower recognizes that Lender may be unable to effect a public sale of all or a part of the Collateral consisting of Investment Property by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and other applicable Federal and state Laws. Lender may, therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws and may, for example, at any sale of the Collateral consisting of securities restrict the prospective bidders or purchasers as to their number, nature of business and investment intention, including, without limitation, a requirement that the Persons making such purchases represent and agree to the satisfaction of Lender that they are purchasing such securities for their account, for investment, and not with a view to the distribution or resale of any thereof. Borrower covenants and agrees to do or cause to be done promptly all such acts and things as Lender may request from time to time and as may be necessary to offer and/or sell the securities or any part thereof in a manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale or disposition, Lender shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral consisting of securities so sold.

     Section 10.3 Specific Rights With Regard to Collateral.

     In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, Lender may (but shall be under no obligation to), without notice to Borrower, and Borrower hereby irrevocably appoints Lender as its attorney-in-fact, with power of substitution, in the name of Lender and/or in the name of Borrower or otherwise, for the use and benefit of Lender, but at the cost and expense of Borrower and without notice to Borrower:

          (a) assign any and all Operating Agreements and Management Contracts to any Person designated by Lender, and/or exercise all rights and privileges of Borrower under such contracts and agreements for the purpose of realizing on the Collateral and to the extent and for the time required to realize the value of the Collateral;

          (b) to the extent permitted by applicable law, assume such management, operation and control of the Property to the extent and for the time necessary to realize the value of the Collateral;

          (c) cause Borrower to engage, contract with, and/or hire qualified service, billing, collection and other such agents, organizations and

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          companies acceptable to Lender to collect and/or realize upon any or all of the Collateral and to remit the proceeds to Lender;

          (d) subject to applicable state and federal laws pertaining to resident confidentiality, request any Account Debtor obligated on any of the Accounts to make payments thereon directly to Lender to the extent permitted by applicable law, with Lender taking control of the cash and non-cash proceeds thereof and/or direct Borrower to (and Borrower shall) turn over to Lender immediately following receipt all payments with respect to the Collateral in the form received (with the addition of all necessary endorsements) and not to deposit, negotiate or otherwise deal with those payments;

          (e) compromise, extend or renew any of the Collateral or deal with the same as it may deem advisable;

          (f) make exchanges, substitutions or surrenders of all or any part of the Collateral;

          (g) remove from Borrower’s places of business all books, records, ledger sheets, correspondence, invoices and documents, relating to or evidencing any of the Collateral or without cost or expense to Lender, make such use of Borrower’s place of business as may be reasonably necessary to administer, control and collect the Collateral;

          (h) demand, collect, receipt for and give renewals, extensions, discharges and releases of any of the Collateral;

          (i) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral;

          (j) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any of the Collateral or any legal proceedings brought in respect thereof;

          (k) endorse the name of Borrower upon any items of payment relating to the Collateral or on any Proof of Claim in Bankruptcy against an Account Debtor; and

          (l) notify the Post Office authorities to change the address for the delivery of mail to Borrower to such address or Post Office Box as Lender may designate and receive and open all mail addressed to Borrower.

     In addition, Borrower shall, following an Event of Default which remains uncured beyond any applicable grace period, promptly, upon request, execute and deliver to Lender written assignments, to the extent permitted by applicable law, in form and content acceptable to Lender, of specific Accounts or groups of Accounts; provided, however, that the lien and/or security interest granted to Lender under this Agreement shall not be limited in any way to or by the inclusion or exclusion of Accounts within such assignments. Such Accounts shall secure

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payment of the Obligations and are not sold to Lender whether or not any assignment thereof, which is separate from this Agreement, is in form absolute.

     Without limiting Lender’s other rights and remedies under the Loan Documents, following Borrower’s failure to make any payment due under the Loan Documents, which failure continues for more than sixty (60) days or the occurrence of any event which causes the District of Columbia to require the Facility to close or to cease operations as an assisted living facility, Lender may also direct Borrower to appoint a manager for the Facility and enter into a management agreement with a management company approved by Lender, the terms of which agreement shall be approved by Lender.

     Section 10.4 Application of Proceeds.

     Any proceeds of sale or other disposition of the Collateral will be applied by Lender to the payment first of any and all Enforcement Costs, and any balance of such proceeds will be applied in such order and manner as Lender shall determine. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, Borrower shall remain liable to Lender for any deficiency.

     Section 10.5 Performance by Lender.

     Lender without notice to or demand upon Borrower and without waiving or releasing any of the Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of Borrower, and may enter upon the premises of Borrower for that purpose and take all such action thereon as Lender may consider necessary or appropriate for such purpose and Borrower hereby irrevocably appoints Lender as its attorney-in-fact to do so, with power of substitution, in the name of Lender, or in the name of Borrower or otherwise, for the use and benefit of Lender, but at the cost and expense of Borrower and without notice to Borrower. All sums so paid or advanced by Lender together with interest thereon from the date of payment, advance or incurring until paid in full at the Post-Default Rate and all costs and expenses, shall be deemed part of the Enforcement Costs, shall be paid by Borrower to Lender on demand, and shall constitute and become a part of the Obligations.

     Section 10.6 Other Remedies.

     Lender may from time to time proceed to protect or enforce the rights of Lender by an action or actions at law or in equity or by any other appropriate proceeding, whether for the specific performance of any of the covenants contained in this Agreement or in any of the other Financing Documents, or for an injunction against the violation of any of the terms of this Agreement or any of the other Financing Documents, or in aid of the exercise or execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws. Lender is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of Borrower now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with Lender or any Affiliate of Lender.

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     Section 10.7 Receiver or Other Court Order.

     Following an uncured Event of Default, as a matter of right, following ten (10) days notice and without regard to the adequacy of the security, and upon application to a court of competent jurisdiction, Lender shall be entitled to the immediate appointment of a receiver for all or any part of the Collateral, and of the payments and proceeds thereof and therefrom, whether such receivership be incidental to a proposed sale of the Collateral or otherwise, and Borrower hereby consents to the appointment of such a receiver and to an order of court directing that payments, including Medicare and Medicaid payments, be made directly to the receiver. Borrower will pay to Lender, upon demand, all expenses, including reasonable receiver’s fees, reasonable attorney’s fees, costs and agents compensation, advanced by Borrower and incurred pursuant to the provisions contained in this Section.

ARTICLE XI
MISCELLANEOUS

     Section 11.1 Notices.

     All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows:

Lender:	Chevy Chase Bank, F.S.B., 7926 Jones Branch Drive Suite 230 McLean, VA 22102 Attn: Richard L. Amador           Group Vice President
With a courtesy copy to:	Margaret Ann Brown, Esquire Troutman Sanders Mays & Valentine LLP 1660 International Drive, Suite 600 McLean, Virginia 22102
Borrower:	Sunrise Connecticut Avenue Assisted Living, L.L.C. c/o Sunrise Senior Living, Inc. 7902 Westpark Drive McLean, Virginia 22102 Attn: James S. Pope
And	Sunrise Senior Living, Inc. 7902 Westpark Drive McLean, Virginia 22102 Attn: General Counsel

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     With a Courtesy Copy to: Wayne G. Tatusko, Esquire
Wayne G. Tatusko, PC
3016 Williams Drive
Suite 200
Fairfax, VA 22031

     Section 11.2 Amendments; Waivers.

     This Agreement and the other Financing Documents may not be amended, modified, or changed in any respect except by an agreement in writing signed by Lender and Borrower. No waiver of any provision of this Agreement or of any of the other Financing Documents, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing signed by Lender. No course of dealing between Borrower and Lender and no act or failure to act from time to time on the part of Lender shall constitute a waiver, amendment or modification of any provision of this Agreement or any of the other Financing Documents or any right or remedy under this Agreement, under any of the other Financing Documents or under applicable Laws. Without implying any limitation on the foregoing:

          (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as Lender may specify in any such instrument.

          (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto.

          (c) No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstance.

          (d) No failure or delay by Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude Lender from exercising any such right, power or remedy at any time or times.

          (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount.

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     Section 11.3 Cumulative Remedies.

     The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as Lender shall determine, subject to the provisions of this Agreement, and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle Lender to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing and subject to the terms of this Agreement, Lender may:

          (a) proceed against Borrower with or without proceeding against any other Person (including, without limitation, any one or more of the Guarantors) who may be liable (by endorsement, guaranty, indemnity or otherwise) for all or any part of the Obligations;

          (b) proceed against Borrower with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations;

          (c) without reducing or impairing the obligation of Borrower and without notice, release or compromise with any guarantor or other Person liable for all or any part of the Obligations under the Financing Documents or otherwise;

          (a) without reducing or impairing the obligations of Borrower and without notice thereof:

          (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral;

          (ii) approve the making of advances under the Revolving Loan under this Agreement;

          (iii) waive any provision of this Agreement or the other Financing Documents;

          (iv) exercise or fail to exercise rights of set-off or other rights; or

          (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations.

     Section 11.4 Severability.

     In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action:

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          (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby;

          (b) the obligation to be fulfilled shall be reduced to the limit of such validity;

          (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of Lender, all of the Obligations of Borrower to Lender shall become immediately due and payable; and

          (d) if the affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect.

     Section 11.5 Assignments by Lender.

     Lender may, without notice to or consent of Borrower, assign to any Person (each an “Assignee” and collectively, the “Assignees”) all or a portion of Lender’s Commitment; provided that, unless Lender has assigned all of its Commitment, after giving effect to such assignment, Lender must continue to hold a Pro Rata Share of the Commitment at least equal to Five Million Dollars ($5,000,000). Lender and its Assignee shall notify Borrower in writing of the date on which the assignment is to be effective (the “Adjustment Date”). On or before the Adjustment Date, Lender, Borrower and the respective Assignee shall execute and deliver a written assignment agreement in a form acceptable to Lender, which shall constitute an amendment to this Agreement to the extent necessary to reflect such assignment. Upon the request of Lender following an assignment made in accordance with this Section 11.5, Borrower shall issue new Notes to Lender and its Assignee reflecting such assignment, in exchange for the existing Note held by Lender.

     In addition, notwithstanding the foregoing, Lender may at any time pledge all or any portion of Lender’s rights under this Agreement, the Commitment or any of the Obligations to a Federal Reserve Bank.

     Section 11.6 Participations by Lender.

     Lender may at any time sell to one or more financial institutions participating interests in any of Lender’s Obligations or Commitment; provided, however, that (a) no such participation shall relieve Lender from its obligations under this Agreement or under any of the other Financing Documents to which it is a party, (b) Lender shall remain solely responsible for the performance of its obligations under this Agreement and under all of the other Financing Documents to which it is a party, and (c) Borrower shall continue to deal solely and directly with Lender in connection with Lender’s rights and obligations under this Agreement and the other Financing Documents.

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     Section 11.7 Disclosure of Information by Lender.

     In connection with any sale, transfer, assignment or participation by Lender in accordance with Section 11.5 (Assignments by Lender) or Section 11.6 (Participations by Lender), Lender shall have the right to disclose to any actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and/or any of the other Financing Documents or otherwise.

     Section 11.8 Successors and Assigns.

     This Agreement and all other Financing Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, personal representatives, successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Lender.

     Section 11.9 Continuing Agreements.

     All covenants, agreements, representations and warranties made by Borrower in this Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant hereto or thereto shall survive the making by Lender of the Loan and the execution and delivery of the Notes, shall be binding upon Borrower regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon Lender’s request, and as a condition of the release of any one or more of the Security Documents, Borrower and other Persons obligated with respect to the Obligations shall provide Lender with such acknowledgments and agreements as Lender may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against Lender, and/or any of its agents and others, or to the extent there are, the same are waived and released.

     Section 11.10 Enforcement Costs.

     Borrower agrees to pay to Lender on demand all Enforcement Costs, together with interest thereon from the date incurred or advanced until paid in full at a per annum rate of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be immediately due and payable at the time Borrower received notice that Enforcement Costs have been advanced or incurred, whichever is earlier. Without implying any limitation on the foregoing, Borrower agrees, as part of the Enforcement Costs, to pay upon demand any and all stamp and other Taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other Financing Documents and to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions of this Section shall survive the execution and delivery of this Agreement, the repayment of the other Obligations and shall survive the termination of this Agreement.

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     Section 11.11 Applicable Law; Jurisdiction.

               11.11.1 Applicable Law.

               Borrower acknowledges and agrees that the Financing Documents, including, this Agreement, shall be governed by the Laws of the State, as if each of the Financing Documents and this Agreement had each been executed, delivered, administered and performed solely within the State even though for the convenience and at the request of Borrower, one or more of the Financing Documents may be executed elsewhere. Lender acknowledges, however, that remedies under certain of the Financing Documents that relate to property outside the State may be subject to the laws of the state in which the property is located.

               11.11.2 Submission to Jurisdiction.

               Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. Borrower irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon Borrower and may be enforced in any court in which Borrower is subject to jurisdiction, by a suit upon such judgment, provided that service of process is effected upon Borrower in one of the manners specified in this Section or as otherwise permitted by applicable Laws.

               11.11.3 Appointment of Agent for Service of Process.

               Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as Borrower’s authorized agent to receive on Borrower’s behalf service of any and all process that may be served in any suit, action or proceeding of the nature referred to in this Section in any state or federal court sitting in the State. If such agent shall cease so to act, Borrower shall irrevocably designate and appoint without delay another such agent in the State satisfactory to Lender and shall promptly deliver to Lender evidence in writing of such other agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

               11.11.4 Service of Process.

               Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by (a) the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to Borrower at Borrower’s address designated in or pursuant to Section 11.1 (Notices), and (b) serving a copy thereof upon Lender, if any, designated and appointed by Borrower as Borrower’s agent for service of process by or pursuant to this Section. Borrower irrevocably agrees that such service (y) shall be deemed in every respect effective service of process upon Borrower in any such suit, action or proceeding, and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon Borrower. Nothing in this Section shall affect the right of Lender to serve process in any manner otherwise permitted by law or limit the right of Lender otherwise to bring proceedings against Borrower in the courts of any jurisdiction or jurisdictions.

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     Section 11.12 Duplicate Originals and Counterparts.

     This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument.

     Section 11.13 Headings.

     The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof.

     Section 11.14 No Agency.

     Nothing herein contained shall be construed to constitute Borrower as agent of Lender for any purpose whatsoever or to permit Borrower to pledge any of the credit of Lender. Lender shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. Lenders shall not, by anything herein or in any of the Financing Documents or otherwise, assume any of Borrower’s obligations under any contract or agreement assigned to Lender, and Lender shall not be responsible in any way for the performance by Borrower of any of the terms and conditions thereof.

     Section 11.15 Date of Payment.

     Should the principal of or interest on the Notes become due and payable on other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in the case of principal, interest shall be payable thereon at the rate per annum specified in the Notes during such extension.

     Section 11.16 Entire Agreement.

     This Agreement is intended by Lender and Borrower to be a complete, exclusive and final expression of the agreements contained herein. Neither Lender nor Borrower shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement.

     Section 11.17 Waiver of Trial by Jury.

     BORROWER AND LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.

     This waiver is knowingly, willingly and voluntarily made by Borrower and Lender, and Borrower and Lender hereby represent that no representations of fact or opinion have been made

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by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Borrower and Lender further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel.

     Section 11.18 Liability of Lender.

     Borrower hereby agrees that Lender shall not be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by Lender in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations.

     By inspecting the Collateral or any other properties of Borrower or by accepting or approving anything required to be observed, performed or fulfilled by Borrower or to be given to Lender pursuant to this Agreement or any of the other Financing Documents, Lender shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Lender.

     Section 11.19 Indemnification.

     Borrower agrees to indemnify and hold harmless, Lender, the parent and Affiliates of Lender and the respective parent’s and Affiliates’ officers, directors, shareholders, employees and agents (each an “Indemnified Party,” and collectively, the “Indemnified Parties”), from and against any and all claims, liabilities, losses, damages, costs and expenses (whether or not such Indemnified Party is a party to any litigation), including without limitation, reasonable attorney’s fees and costs and costs of investigation, document production, attendance at depositions or other discovery, incurred by any Indemnified Party with respect to, arising out of or as a consequence of (a) this Agreement or any of the other Financing Documents, including without limitation, any failure of Borrower to pay when due (at maturity, by acceleration or otherwise) any principal, interest, fee or any other amount due under this Agreement or the other Financing Documents, or any other Event of Default; (b) the use by Borrower of any proceeds advanced hereunder; (c) the transactions contemplated hereunder; or (d) any claim, demand, action or cause of action being asserted against (i) Borrower or any of its Affiliates by any other Person, or (ii) any Indemnified Party by Borrower in connection with the transactions contemplated hereunder. Notwithstanding anything herein or elsewhere to the contrary, Borrower shall not be obligated to indemnify or hold harmless any Indemnified Party from any liability, loss or damage resulting from the gross negligence, willful misconduct or unlawful actions of such Indemnified Party. Any amount payable to Lender under this Section will bear interest at the Post- Default Rate from the due date until paid.

     Section 11.20 Electronic Transmission of Data.

     Lender and Borrower agree that certain data related to the Loans (including confidential information, documents, applications and reports) may be transmitted electronically, including transmission over the Internet. This data may be transmitted to, received from or circulated among agents and representatives of Borrower and/or Lender and their affiliates and other Persons involved with the subject matter of this Agreement. Borrower acknowledges and agrees

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that (a) there are risks associated with the use of electronic transmission and that Lender does not control the method of transmittal or service providers, (b) Lender has no obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt or third party interception of any such transmission, and (c) Borrower will release, hold harmless and indemnify Lender from any claim, damage or loss, including that arising in whole or part from Lender’s strict liability or sole, comparative or contributory negligence, which is related to the electronic transmission of data.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the parties hereto have signed and sealed this Agreement on the day and year first above written.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its Managing Member
/s/ Kelly L. Hayden		By:	/s/ James Pope	(SEAL)
			Name: James Pope
			Title: Vice President
WITNESS:	LENDER:
	CHEVY CHASE BANK, F.S.B.
/s/ Kelly L. Hayden	By:		/s/ Richard L. Amador	(SEAL)
			Richard L. Amador
			Group Vice President

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LIST OF EXHIBITS

A            Form of Note

B            Places of Business

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EXHIBIT A

FORM OF NOTE

DEED OF TRUST NOTE B

$	McLean, Virginia
	,

     FOR VALUE RECEIVED, SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (the “Borrower”), promises to pay to the order of C                    , a                    , its successors and assigns (the “Lender”), the principal sum of                      ($                     ) (the “Principal Sum”), together with interest thereon at the rate hereinafter provided, in accordance with the Loan Agreement (as hereinafter defined) and the following:

     1. Interest.

     Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 225 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.

     2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate provided above, shall be payable as follows:

          (a) Interest only commencing on                      ,                      and continuing on the same day of each and every month thereafter, to and including                     ,                     ;

          (b) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on August 29, 2009.

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     3. Default Interest.

     Upon the occurrence of an Event of Default (as hereinafter defined) the unpaid Principal Sum shall bear interest thereafter until such Event of Default is cured at the Post Default Rate (as defined in the Loan Agreement).

     4. Late Charges.

     In the event that any payment due under the terms of this Note is not received by the Lender within fifteen (15) days of the date such payment is due (inclusive of the date when due), the Borrower shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment.

     5. Application and Place of Payments.

     All payments made on account of this Note, including prepayments, shall be applied first to the payment of any prepayment fee due hereunder, second to any late charge then due hereunder, third to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid Principal Sum, with application first made to all principal installments then due hereunder, next to the outstanding principal balance due at maturity and thereafter to the unpaid principal installments in the inverse order of maturity. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Chevy Chase, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower.

     6. Prepayment.

          (a) The Borrower may prepay the Principal Sum in whole or in part, at any time or from time to time, upon ten (10) days prior written notice to the Lender, without premium or penalty.

          (b) Payment of the indebtedness evidenced by this Note in whole or in part subsequent to the occurrence of an Event of Default shall be deemed to be a prepayment of the Principal Sum subject to any prepayment fee due hereunder.

     7. Other Financing Documents.

     The term “Financing Documents” as used in this Note shall mean collectively this Note, the Deed of Trust (as hereinafter defined) and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with this Note or the Principal Sum evidenced hereby.

     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) of even date herewith from the Borrower to Alexandra

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Johns and Ellen-Elizabeth Lee, trustees (the “Deed of Trust”), covering the Borrower’s fee simple interest in certain real property located in the District of Columbia, described in Exhibit A attached hereto and made a part hereof and all other property, real and personal, more particularly described in the Deed of Trust (the “Property”).

     9. Events of Default.

     The occurrence of any one or more of the following events shall constitute an event of default (individually, an “Event of Default” and collectively, the “Events of Default”) under the terms of this Note:

          (a) The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note; or

          (b) The occurrence of a default or an event of default under the terms and conditions of any of the other Financing Documents, which default or event of default remains uncured beyond any applicable grace and/or cure period provided therefor.

     10. Remedies.

     Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender without notice to the Borrower or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrower and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrower, guarantors and endorsers.

     11. Consent to Jurisdiction.

     The Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a suit upon such judgment provided that service of process is effected upon the Borrower as provided in this Note or as otherwise permitted by applicable law.

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     12. Service of Process.

          (a) The Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as the Borrower’s authorized agent to accept and acknowledge on the Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Virginia satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          (b) The Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (i) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Borrower and (ii) serving a copy thereof upon the agent, if any, hereinabove designated and appointed by the Borrower as the Borrower’s agent for service of process. The Borrower irrevocably agrees that such service shall be deemed to be service of process upon the Borrower in any such suit, action, or proceeding. Nothing in this Note shall affect the right of the Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of the Lender otherwise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions.

     13. Expenses.

     The Borrower promises to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, all reasonable attorneys’ fees and expenses and all court costs.

     14. Notices.

     Any notice, request, or demand to or upon the Borrower or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 9.3 of the Deed of Trust.

     15. Miscellaneous.

     Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due

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date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note.

     16. Partial Invalidity.

     In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable.

     17. Captions.

     The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note.

     18. Governing Law.

     The provisions of this Note shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     19. Waiver of Trial by Jury.

     The Borrower and the Lender hereby waive trial by jury in any action or proceeding to which the Borrower and the Lender may be parties, arising out of or in any way pertaining to (a) this Note, (b) the other Financing Documents or (c) the Property. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Note. This waiver is knowingly, willingly and voluntarily made by the Borrower, and the Borrower hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower further represents that it has been represented in the signing of this Note and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under seal by its duly authorized member as of the date first written above.

WITNESS OR ATTEST	SUNRISE CONNECTICUT AVENUE ASSISTED     LIVING, L.L.C.
		By: Sunrise Senior Living Investments, Inc., sole Member
		By:		(SEAL)
			Name:
			Title:

     THIS IS TO CERTIFY that this is the Deed of Trust Note B described in the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee, trustees, securing the Lender and bearing even date herewith, said Deed of Trust Note B and Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) having been executed in my presence.

Notary Public

My Commission expires:

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

EXHIBIT B

PLACES OF BUSINESS

Borrower’s Chief Executive Office is:

7902 Westpark Drive
McLean, Virginia 22102

Location of Borrower’s Collateral:

511 Connecticut Avenue, N.W.
Washington, D.C.

EX-10.10

Exhibit 10.10

GUARANTY OF PAYMENT

(Loan B)

          THIS GUARANTY OF PAYMENT (this “Agreement”) is made as of August 28, 2007, by SUNRISE SENIOR LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) in favor of CHEVY CHASE BANK, F.S.B., a federal savings bank, its successors and assigns, “Lender”).

          IN ORDER to induce Lender to make a loan in the principal amount of $10,000,000 (the “Loan”) to Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (“Borrower”) and in connection therewith to accept a Deed of Trust Note (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Note”) and a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Deed of Trust”), of even date herewith, made by Borrower in the principal sum of $10,000,000, which Loan is to be advanced pursuant to the terms of a Loan and Security Agreement (Loan B) of even date herewith by and between Borrower and Lender (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), Guarantor hereby covenants and agrees with Lender as follows:

          1. Guaranty.

          Guarantor hereby unconditionally and irrevocably guarantees to Lender: (a) the due and punctual payment in full (and not merely the collectibility) of the principal of the Note and the interest thereon, in each case when due and payable, whether on any installment payment date or at the stated or accelerated maturity, all according to the terms of the Note and the Deed of Trust; and (b) the due and punctual payment in full (and not merely the collectibility) of all other sums and charges which may at any time be due and payable in accordance with, or secured by, the Note, the Deed of Trust or any other document evidencing or securing the Loan (together with the Note and the Deed of Trust, the “Financing Documents”); and (c) the due and punctual performance of all of the other terms, covenants and conditions contained in the Note and the other Financing Documents, on the part of Borrower or any subsequent owner of the property more particularly described in the Deed of Trust (the “Property”) to be performed.

          2. Guaranty Unconditional.

          Guarantor expressly agrees that Lender may, in its sole and absolute discretion, without notice to or further assent of Guarantor, except as specifically set forth herein, and without in any way releasing, affecting or impairing the obligations and liabilities of Guarantor hereunder: (a) waive compliance with, or any defaults under, or grant any other indulgences with respect to, the Financing Documents; (b) with Guarantor’s prior written consent, modify, amend, change or terminate any provisions of the Financing Documents; (c) with Guarantor’s prior written consent, grant extensions or renewals of or with respect to the Note or the other Financing Documents; (d) with Guarantor’s prior written consent, effect any release, subordination, compromise or settlement in connection with the Note and the other Financing Documents; (e) with Guarantor’s prior written consent, agree to the substitution, exchange, release or other

disposition of all or any part of the Property, or any other collateral for the Loan; (f) make advances for the purpose of performing any term or covenant contained in any of the Financing Documents with respect to which Borrower or the then owner of the Property shall be in default; (g) with Guarantor’s prior written consent, assign or otherwise transfer the Financing Documents or this Agreement or any interest therein or herein; and (h) deal in all respects with Borrower or the then owner of the Property as if this Agreement were not in effect. The obligations of Guarantor under this Agreement shall be unconditional, irrespective of the genuineness, validity, regularity or enforceability of the Note or the Deed of Trust, or any security given therefor or in connection therewith, or any other circumstances which might otherwise constitute a legal or equitable discharge of a surety or guarantor.

          3. Guaranty Primary.

          The obligations and liability of Guarantor under this Agreement shall be primary, direct and immediate; shall not be conditional or contingent upon pursuit by Lender of any remedies it may have against Borrower with respect to the Financing Documents, whether pursuant to the terms thereof or by law; and shall not be subject to any counterclaim, recoupment, set-off, reduction or defense based upon any claim that Guarantor may have against Borrower or Lender. Without limiting the generality of the foregoing, Lender shall not be required to make any demand on Borrower and/or the then owner of the Property, or to sell at foreclosure or otherwise pursue or exhaust its remedies against the Property or any part thereof and/or against Borrower or the then owner of the Property, before, simultaneously with or after enforcing its rights and remedies hereunder against Guarantor. Any one or more successive and/or concurrent actions may be brought hereon against Guarantor either in the same action, if any, brought against Borrower and/or the then owner of the Property or in separate actions, as often as Lender may deem advisable.

          4. Waivers by Guarantor.

          Guarantor hereby unconditionally and irrevocably waives: (a) presentment and demand for payment of the principal of or interest on the Note and protest of non-payment; (b) notice of acceptance of this Agreement and of presentment, demand and protest; (c) except as set forth below, notice of any default under this Agreement or any of the Financing Documents and notice of all indulgences; (d) except as set forth below, demand for observance, performance, or enforcement of any terms or provisions of this Agreement or any of the Financing Documents; (e) any right or claim of right to cause a marshalling of the assets of Borrower; and (f) all other notices and demands otherwise required by law which Guarantor may lawfully waive.

          5. Reimbursement for Expenses.

          If Lender shall commence any action or proceeding for the enforcement of this Agreement, Guarantor shall reimburse Lender promptly upon demand, for all expenses incurred in connection therewith, including, without limitation, reasonable attorneys’ fees.

          6. Acceleration.

          Anything in this Agreement or in any of the Financing Documents to the contrary notwithstanding, Lender, at its option, may, as to Guarantor, accelerate the indebtedness evidenced and secured by the Financing Documents in the event of: (a) the making by Guarantor

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of an assignment for the benefit of creditors; (b) the appointment of a custodian for Guarantor, or for any property of Guarantor; (c) the commencement of any proceeding by Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment, receivership or like law or statute; or (d) the commencement of any proceeding against Guarantor under any bankruptcy, reorganization, arrangement, insolvency, readjustment, receivership or like law or statute which is not discharged or dismissed within ninety (90) days after institution thereof; or (e) a Change of Control (as defined in the current Sunrise Senior Financing Agreement of Guarantor); or (f) the termination, dissolution or, liquidation of Guarantor, without the prior written consent of Lender.

          7. Subordination; Subrogation.

          If Guarantor shall advance any sums to Borrower or if Borrower shall hereafter become indebted to Guarantor, such sums and indebtedness shall be subordinate in all respects to the amounts then or thereafter due and owing to Lender under the Financing Documents. Nothing herein contained shall be construed to give Guarantor any right of subrogation in and to the Note or the Deed of Trust or all or any part of Lender’ interest therein, until all amounts owing to Lender shall have been paid in full. Notwithstanding any provision of this Paragraph to the contrary, if Guarantor is or becomes an “insider” (as defined from time to time in Section 101 of the Federal Bankruptcy Code) with respect to Borrower, then Guarantor irrevocably and absolutely waives any and all rights of subrogation, contribution, indemnification, reimbursement or any similar rights against Borrower with respect to this Agreement, whether such rights arise under an express or implied contract or by operation of law. It is the intention of the parties hereto that Guarantor shall not be deemed to be a “creditor” (as defined in Section 101 of the Federal Bankruptcy Code) of Borrower by reason of the existence of this Agreement in the event that Borrower becomes a debtor in any proceeding under the Federal Bankruptcy Code.

          8. Representations and Warranties.

          Guarantor represents and warrants to Lender as follows:

               (a) Good Standing. Guarantor (a) is a corporation duly organized, existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary.

               (b) Power and Authority. Guarantor has full corporate power and authority to execute and deliver this Agreement and the other Financing Documents to which it is a party and to incur and perform the Obligations (as defined in the Deed of Trust) whether under this Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by all proper and necessary corporate action. No consent or approval of shareholders or any creditors of Guarantor, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of Guarantor, is required as a condition to the execution, delivery, validity or enforceability of this Agreement or the other Financing Documents or the performance by Guarantor of the Obligations.

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               (c) Binding Agreements. This Agreement and the other Financing Documents executed and delivered by Guarantor have been properly executed and delivered and constitute the valid and legally binding obligations of Guarantor and are fully enforceable against Guarantor in accordance with their respective terms.

               (d) No Conflicts. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by Guarantor nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (i) the charter or bylaws of Guarantor, (ii) any existing mortgage, indenture, contract or agreement binding on Guarantor or affecting its property, or (iii) any Laws.

               (e) Compliance with Laws. Guarantor is not in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator or any Governmental Authority affecting Guarantor or its properties, the violation of which, considered in the aggregate, are reasonably likely to materially adversely affect the business, operations or properties of Guarantor.

               (f) Litigation. Except shown on the Form 8K provided to Lender, there are no proceedings, actions or investigations pending or, so far as Guarantor knows, threatened before or by any court, arbitrator or any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of Guarantor, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations, present or prospective, of Guarantor.

               (g) Financial Condition. On the date delivered, the draft financial statements of Guarantor dated June 30, 2006 were complete and correct and fairly presented the financial position of Guarantor and the results of its operations and transactions in its surplus accounts as of the date and for the period referred to and were prepared in accordance with GAAP applied on a consistent basis throughout the period involved. Subsequently the Guarantor provided additional information including cash and debt levels as of June 30, 2007 and there has been no material adverse change in the cash or debt levels of Guarantor since such reports. The representations and warranties contained in this Section shall also cover financial statements furnished from time to time to Lender pursuant to the Loan Agreement. Notwithstanding the foregoing, except as provided in Section 7.1 of the Loan Agreement, Guarantor will not be required to deliver financial statements or operating statement until ten (10) days after such statements have been made publicly available by the Securities and Exchange Commission.

               (h) Full Disclosure. The financial statements referred to in Section 8(g), and the statements, reports or certificates furnished by Guarantor in connection with this Agreement (i) do not contain any untrue statement of a material fact and (ii) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to Guarantor which Guarantor has not disclosed to Lender in writing prior to the date of this Agreement which materially and adversely affects or in the future could, in the reasonable opinion of Guarantor materially adversely affect the condition, financial or otherwise, results of operations, business, or assets of Guarantor.

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               (i) Financial Interest. Financial Interest. Guarantor will derive a benefit from the credit facilities extended to and the Obligations incurred by Borrower, and hereby waives any claim that Lender violated the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) in connection with the Loan, any of the Financing Documents or any of the other Obligations or security for any obligation which is the subject thereto.

          9. Covenants.

               (a) Guarantor covenants and agrees that until the Obligations are repaid in full Guarantor shall at all times directly or indirectly own one hundred percent (100%) or more of the membership interests of Borrower.

               (b) Guarantor covenants and agrees that until the Obligations are repaid in full Guarantor or an entity controlled by Guarantor shall operate and manage the Property.

               (c) Guarantor hereby covenants and agrees that it will comply with (i) the following financial covenants contained in the Sunrise Senior Financing Agreement (as defined in the Loan Agreement) provided that Lender hereby agrees that it will consent to any waiver or modification of such covenants to which the Sunrise Bank Group (as defined in the Loan Agreement) consents so long as Lender is a member of the Sunrise Bank Group and Guarantor, Borrower and Lender shall negotiate replacement covenants acceptable to Lender if Lender ceases to be a member of the Sunrise Bank Group:

          (i) Consolidated Net Worth. Guarantor will at all times maintain, tested as of the end of each of the Borrower’s fiscal quarters beginning with the quarter ending December 31, 2007, a Consolidated Net Worth of not less than the sum of $450,000,000 (which is eighty percent (80%) of consolidated GAAP Shareholder Equity as of the date hereof) plus seventy-five percent (75%) of the net proceeds to Guarantor of any equity capital transaction received during any subsequent quarter (except for all exercises of employee stock options, issuance or sale of restricted stock and operation of the employee stock purchase program), less $110,000,000 associated with stock repurchases.

          (ii) Leverage Ratio. Guarantor will maintain, tested as of the end of each of Guarantor’s fiscal quarters beginning with the quarter ending December 31, 2007, a ratio of Total Funded Indebtedness to Consolidated EBITDA so that it is not more than 4.25 to 1.0.

          (iii) Fixed Charge Coverage Ratio. Guarantor will maintain, tested as of the end of each of the Guarantor’s fiscal quarters beginning with the quarter ending December 31, 2007, a ratio of Consolidated EBITDAR to Consolidated Fixed Charges of not less than 1.75 to 1.0.

The following definitions shall apply to this Section 9(c):

     “Capitalized Cash Interest Expense” means capitalized interest on construction or development loans, to the extent not funded from an interest reserve as part of third party construction financing.

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     “Consolidated EBITDA” means the sum of: (a) (i) net income; (ii) Consolidated Interest Expense; (iii) income taxes; (iv) depreciation and amortization; (v) the non-cash component of any unusual or non-recurring item of loss or expense which was deducted in determining net income (in accordance with GAAP), and (vi) income (or loss) in respect of minority interest (assuming it was deducted in the calculation of net income); minus (b) “other income — operating properties” as shown on Guarantor’s financial statements in accordance with GAAP as of the date hereof (or as such category may be categorized in future financial statements) in each case for Guarantor and its Subsidiaries on a consolidated basis. For purposes of calculating the leverage ratio only, Consolidated EBITDA will be adjusted to reflect actual transition costs (post-closing) or pre-closing on a pro forma basis to reflect (i) material acquisitions and dispositions of property and (ii) material acquisitions and dispositions of management contracts, provided that documentation of such acquisitions and dispositions satisfactory to the Lender in its sole discretion is delivered to the Lender. Transition costs shall be subject to the approval of the Lender.

     “Consolidated EBITDAR” means the sum of: (a) Consolidated EBITDA plus (b) rent paid or payable under all operating leases as determined in accordance with GAAP.

     “Consolidated Fixed Charges” means the sum of: (a) Consolidated Interest Expense, (b) Capitalized Cash Interest Expense (c) scheduled payments of principal on Total Funded Indebtedness (excluding balloon payments), (d) rent payable under all operating leases (other than capital leases) as determined in accordance with GAAP, and (e) dividends payable on stock.

     “Consolidated Interest Expense” means total interest expense (whether paid or accrued), including the amortization of debt discounts and premiums as well as the interest component under capital leases, on a consolidated basis in accordance with GAAP.

     “Consolidated Net Worth” means Shareholders’ Equity of Guarantor and its Subsidiaries on a consolidated basis in accordance with GAAP.

     “Continuing Care Retirement Community” means a senior living facility which provides or arranges housing and health-related services that are effective for the life of the resident or for an extended, specified period in excess of one year, including mutually terminable contracts, in consideration for the payment of an entrance fee, which services are provided on a comprehensive continuum of care basis which includes a skilled nursing facility.

     “Development Joint Venture” means an entity which owns a Development Joint Venture Investment.

     “Development Joint Venture Investments” means (a) Investments which are (i) less than fifty percent (50%) owned and unconsolidated by any of the Loan Parties and (ii) have a ratio of EBITDAR (as defined by GAAP) to Fixed Obligations (as defined by GAAP) of less than 1.20 to 1.0 for any fiscal quarter plus (b) any amounts funded by any of the Loan Parties under operating deficit guaranties or construction completion guaranties.

     “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

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     “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the carrying value of such Investment determined in accordance with GAAP.

     “Lifecare Bond” means a surety bond, irrevocable letter of credit or other financial assurance required by a Governmental Authority as evidence of the financial responsibility of the owner or operator of a Continuing Care Retirement Community.

     “Loan Parties” means, collectively, Guarantor, each Subsidiary Guarantor (as defined in the Sunrise Financing Agreement), and each Designated Borrower.

     “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     “Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Company and its Subsidiaries as of that date determined in accordance with GAAP.

     “Total Funded Indebtedness” means all indebtedness and guarantees including recourse and non-recourse mortgage debt, capitalized leases, letters of credit, unsecured debt, guarantees (including all debt guarantees, but excluding all development completion guarantees and operating deficit guarantees which will be captured in the limitation on Development Joint Ventures), purchase obligations treated as liabilities per GAAP, subordinated debt, unfunded obligations (including total Lifecare Bond obligations at GAAP book value, subject to certain exclusions as discussed below), all as defined in accordance with GAAP. Total Funded Indebtedness shall not include security deposits, accounts payable, accrued liabilities, any prepaid rent and any outstanding balance under the Convertible Debt only to the extent that the Company’s common stock market price remains at least $2.50 per share above the Convertible Debt conversion price. Furthermore, certain Lifecare Bond obligations may be excluded from Total Funded Indebtedness to the extent the Borrower is not obligated to refund these obligations prior to receiving proceeds of new Lifecare Bonds. Total Funded Indebtedness will be reduced by unrestricted cash balances, cash equivalents and short-term marketable securities in excess of $50,000,000.

          10. Financial Statements.

          Guarantor shall provide to Lender, the financial statements of Guarantor more fully described in Section 7.1 of the Loan Agreement.

          Guarantor also agrees to provide Lender with such other financial information at such other times as may be reasonably requested by Lender.

          11. Governing Law.

          The provisions of this Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

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          12. Consent to Jurisdiction.

          Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Agreement. Guarantor irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon Guarantor and may be enforced in any court to whose jurisdiction Guarantor is subject, by a suit upon such judgment provided that service of process is effected upon Guarantor in a manner specified in this Agreement or as otherwise permitted by applicable law.

          13. Service of Process.

          Guarantor hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as its authorized agent to accept and acknowledge on its behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Agreement in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, Guarantor shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Virginia satisfactory to Lender and shall promptly deliver to Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          Guarantor hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Agreement by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to it at its address designated herein and (b) serving a copy thereof upon Lender, hereinabove designated and appointed by Guarantor as Guarantor’s agent for service of process. Guarantor irrevocably agrees that such service shall be deemed in every respect to be effective service of process in any such suit, action, or proceeding. Nothing in this Agreement shall affect the right of Lender to serve process in any manner otherwise permitted by law and nothing in this Agreement will limit the right of Lender otherwise to bring proceedings against Guarantor, in the courts of any other appropriate jurisdiction or jurisdictions.

          14. Waiver of Jury Trial.

          Guarantor and Lender hereby, jointly and severally, waive trial by jury in any action or proceeding to which Guarantor and Lender may be parties, arising out of or in any way pertaining to (a) this Agreement, (b) the Loan or (c) the other Financing Documents. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Agreement. This waiver is knowingly, willingly and voluntarily made by Guarantor, and Guarantor hereby represents and warrants that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Guarantor further represents and warrants that it has been represented in the signing of this Agreement and in the

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making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

          15. Voidable Preference; Fraudulent Conveyance.

          If at any time any payment, or portion thereof, made by, or for the account of, Guarantor on account of any of the obligations and liabilities hereunder is set aside by any court or trustee having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored or returned by Lender under any insolvency, bankruptcy or other federal and/or state laws or as a result of any dissolution, liquidation or reorganization of Borrower or upon, or as a result of, the appointment of any receiver, intervenor or conservator of, or trustee or similar officer for, Borrower or any substantial part of its properties or assets, Guarantor hereby agrees that this Agreement shall continue and remain in full force and effect or be reinstated, as the case may be, all as though such payment(s) had not been made.

          16. Notices.

          Notice, demand, request or other communication which either party may desire to give to the other with respect to this Agreement, shall be deemed to have been properly given if in writing and delivered by hand, sent by overnight courier or mailed by certified mail, postage prepaid, addressed as follows:

Lender:	Chevy Chase Bank, F.S.B.
	7926 Jones Branch Drive
	McLean, VA 22102
	Attention:   Richard L. Amador
	Group Vice President
If to Guarantor, at:	Sunrise Senior Living, Inc.
	c/o Sunrise Senior Living Investments, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attention:    James S. Pope
and:	Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attn: General Counsel
With a Courtesy Copy to:	Wayne G. Tatusko, Esquire
	Wayne G. Tatusko, PC
	3016 Williams Drive
	Suite 200
	Fairfax, VA 22031

          Any of the parties hereto may designate a change of address by notice in writing to the other parties. Whenever in this Agreement the giving of notice by mail or otherwise is required,

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the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

          17. Remedies Cumulative.

          All rights and remedies afforded to Lender by reason of this Agreement, the Financing Documents, or by law are separate and cumulative and the exercise of one shall not in any way limit or prejudice the exercise of any other such rights or remedies. Every right, power and remedy given by this Agreement to Lender shall be concurrent and may be pursued separately, successively or together against Guarantor; and each such right, power and remedy may be exercised from time to time as often as Lender may deem expedient. No delay or omission by Lender in exercising any such right or remedy shall operate as a waiver thereof. No waiver of any rights and remedies hereunder, and no modification or amendment hereof, shall be deemed made by Lender unless in writing and duly signed by Lender. Any such written waiver shall apply only to the particular instance specified therein and shall not impair the further exercise of such right or remedy or of any other right or remedy of Lender and no single or partial exercise of any right or remedy hereunder shall preclude any other or further exercise thereof or any other right or remedy.

          18. Severability.

          If any provision (or any part of any provision) contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had never been contained herein but only to the extent it is invalid, illegal or unenforceable.

          19. Successors and Assigns.

          This Agreement shall inure to the benefit of, and be enforceable by, Lender and its successors and assigns as holder of the Note, and shall be binding upon, and enforceable against, Guarantor and its successors and assigns.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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          WITNESS the signature and seal of Guarantor as of the day and year first above written.

WITNESS OR ATTEST:	SUNRISE SENIOR LIVING, INC.
/s/ Kelly L. Hayden	By:	/s/ Carl Adams Name: Carl Adams	(SEAL)
		Title: Treasurer

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

          I HEREBY CERTIFY, that on this 28^th day of August, 2007, before me, the undersigned Notary Public of said Commonwealth, personally appeared Carl Adams, who acknowledged himself to be the Treasurer of Sunrise Senior Living, Inc., a corporation, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained as the duly authorized Treasurer of said corporation by signing the name of the corporation by himself as Treasurer.

          WITNESS my hand and Notarial Seal.

	/s/ Marguerite W. Capen
	Notary Public

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EX-10.11

Exhibit 10.11

DEED OF TRUST NOTE B

$10,000,000	McLean, Virginia
	August 28, 2007

     FOR VALUE RECEIVED, SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (the “Borrower”), promises to pay to the order of CHEVY CHASE BANK, F.S.B., a federally chartered savings bank its successors and assigns (the “Lender”), the principal sum of TEN MILLION DOLLARS ($10,000,000) (the “Principal Sum”), together with interest thereon at the rate hereinafter provided, in accordance with the Loan Agreement (as hereinafter defined) and the following:

     1. Interest.

     Commencing as of the date hereof and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 225 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.

     2 . Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate provided above, shall be payable as follows:

          (a) Interest only commencing on October 1, 2007 and continuing on the same day of each and every month thereafter, to and including August 1, 2009;

          (b) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on August 28, 2009.

     3. Default Interest.

     Upon the occurrence of an Event of Default (as hereinafter defined) the unpaid Principal Sum shall bear interest thereafter until such Event of Default is cured at the Post Default Rate (as defined in the Loan Agreement).

     4. Late Charges.

     In the event that any payment due under the terms of this Note is not received by the Lender within fifteen (15) days of the date such payment is due (inclusive of the date when due), the Borrower shall pay to the Lender on demand a late charge equal to five percent (5%) of such payment.

     5. Application and Place of Payments.

     All payments made on account of this Note, including prepayments, shall be applied first to the payment of any prepayment fee due hereunder, second to any late charge then due hereunder, third to the payment of accrued and unpaid interest then due hereunder, and the remainder, if any, shall be applied to the unpaid Principal Sum, with application first made to all principal installments then due hereunder, next to the outstanding principal balance due at maturity and thereafter to the unpaid principal installments in the inverse order of maturity. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Chevy Chase, Maryland or at such other times and places as the Lender may at any time and from time to time designate in writing to the Borrower.

     6. Prepayment.

          (a) The Borrower may prepay the Principal Sum in whole or in part, at any time or from time to time, upon ten (10) days prior written notice to the Lender, without premium or penalty.

          (b) Payment of the indebtedness evidenced by this Note in whole or in part subsequent to the occurrence of an Event of Default shall be deemed to be a prepayment of the Principal Sum subject to any prepayment fee due hereunder.

     7. Other Financing Documents.

     The term “Financing Documents” as used in this Note shall mean collectively this Note, the Deed of Trust (as hereinafter defined) and any other instrument, agreement, or document previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with this Note or the Principal Sum evidenced hereby.

     8. Security.

     This Note is secured by, among other things, a Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) of even date herewith from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee, trustees (the “Deed of Trust”), covering the Borrower’s fee simple interest in certain real property located in the District of Columbia, described in Exhibit A attached hereto and made a part hereof and all other property, real and personal, more particularly described in the Deed of Trust (the “Property”).

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     9. Events of Default.

     The occurrence of any one or more of the following events shall constitute an event of default (individually, an “Event of Default” and collectively, the “Events of Default”) under the terms of this Note:

          (a) The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note; or

          (b) The occurrence of a default or an event of default under the terms and conditions of any of the other Financing Documents, which default or event of default remains uncured beyond any applicable grace and/or cure period provided therefor.

     10. Remedies.

     Upon the occurrence of an Event of Default, at the option of the Lender, all amounts payable by the Borrower to the Lender under the terms of this Note shall immediately become due and payable by the Borrower to the Lender without notice to the Borrower or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Financing Documents and all applicable laws. The Borrower and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note and expressly agree that this Note or any payment hereunder may be extended from time to time without in any way affecting the liability of the Borrower, guarantors and endorsers.

     11. Consent to Jurisdiction.

     The Borrower irrevocably submits the to jurisdiction of any state or federal court sitting in the Commonwealth of Virginia over any suit, action, or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a suit upon such judgment provided that service of process is effected upon the Borrower as provided in this Note or as otherwise permitted by applicable law.

     12. Service of Process.

          (a) The Borrower hereby irrevocably designates and appoints CT Corporation, 4701 Cox Road, Suite 301, Glen Allen, Virginia 23060, as the Borrower’s authorized agent to accept and acknowledge on the Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the Commonwealth of Virginia. If such agent shall cease so to act, the Borrower shall irrevocably designate and appoint without delay another such

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agent in the Commonwealth of Virginia satisfactory to the Lender and shall promptly deliver to the Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

          (b) The Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (i) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Borrower and (ii) serving a copy thereof upon the agent, if any, hereinabove designated and appointed by the Borrower as the Borrower’s agent for service of process. The Borrower irrevocably agrees that such service shall be deemed to be service of process upon the Borrower in any such suit, action, or proceeding. Nothing in this Note shall affect the right of the Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of the Lender otherwise to bring proceedings against the Borrower in the courts of any jurisdiction or jurisdictions.

     13. Expenses.

     The Borrower promises to pay to the Lender on demand by the Lender all costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, all reasonable attorneys’ fees and expenses and all court costs.

     14. Notices.

     Any notice, request, or demand to or upon the Borrower or the Lender shall be deemed to have been properly given or made when delivered in accordance with Section 9.3 of the Deed of Trust.

     15. Miscellaneous.

     Each right, power, and remedy of the Lender as provided for in this Note or any of the other Financing Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Financing Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Financing Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note.

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     16. Partial Invalidity.

     In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable.

     17. Captions.

     The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope or intent of this Note.

     18. Governing Law.

     The provisions of this Note shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia as the same may be in effect from time to time.

     19. Waiver of Trial by Jury.

     The Borrower and the Lender hereby waive trial by jury in any action or proceeding to which the Borrower and the Lender may be parties, arising out of or in any way pertaining to (a) this Note, (b) the other Financing Documents or (c) the Property. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such actions or proceedings, including claims against parties who are not parties to this Note. This waiver is knowingly, willingly and voluntarily made by the Borrower, and the Borrower hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Borrower further represents that it has been represented in the signing of this Note and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed under seal by its duly authorized member as of the date first written above.

WITNESS OR ATTEST	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:  Sunrise Senior Living Investments, Inc., sole Member

/s/ Kelly L. Hayden	By :	/s/ James Pope	(SEAL)
		Name: James Pope
		Title: Vice President

     THIS IS TO CERTIFY that this is the Deed of Trust Note B described in the Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) from the Borrower to Alexandra Johns and Ellen-Elizabeth Lee trustees, securing the Lender and bearing even date herewith, said Deed of Trust Note B and Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) having been executed in my presence.

/s/Notary Public

My Commission expires:

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

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EX-10.12

Exhibit 10.12

DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING

(Loan B)

This document serves as a Fixture Filing under the District of Columbia Uniform Commercial Code.

Grantor’s Organizational Identification Number is S037833.

     THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FIXTURE FILING is made as of August 28, 2007, by SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (“Grantor”), to ALEXANDRA JOHNS and ELLEN-ELIZABETH LEE, as Trustees either of whom may act (the “Individual Trustees”), and CHEVY CHASE BANK, F.S.B., a federally chartered savings bank (“Beneficiary”).

RECITALS

     A. Grantor and Beneficiary are parties to a Loan and Security Agreement (Loan B) dated of even date herewith (as amended, extended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”). Pursuant to the Loan Agreement the Beneficiary has agreed to make a loan (herein referred to as the “Loan”) to Grantor in the principal amount of $10,000,000. The Loan will be evidenced by Grantor’s Deed of Trust Note (Loan B) of even date herewith (as amended, extended, restated, supplemented or otherwise modified from time to time, herein referred to as the “Note”).

     B. As a condition precedent to making the Loan to Grantor, Beneficiary required that Grantor secure the payment and performance of all obligations of Grantor arising out of, or in connection with, the Loan by the execution of this Deed of Trust.

     NOW, THEREFORE, in order to induce Beneficiary to make the Loan to Grantor, Grantor agrees as follows:

ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION

     Section 1.1 Definitions.

     As used in this Deed of Trust, Assignment, Security Agreement and Fixture Filing, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the meanings indicated:

     “Accounts” means all presently existing or hereafter acquired or created accounts, accounts receivable, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in or a lease of goods, all rights to receive the payment of money or other consideration under present or future contracts (including, without limitation, all rights to receive the payment of money or other consideration

from, or on behalf of, Medicare or Medicaid, except to the extent prohibited by law, any private pay patient, and all rights to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of services rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts or agreements which gave rise to any or all of the foregoing, including all claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including real property mortgages) given by any person with respect to any of the foregoing, all rights to receive payment under all admission agreements and all third-party payor contracts (including Medicare and Medicaid except to the extent prohibited by law), and any and all depository accounts, except resident trust accounts, into which the proceeds of all or any portion of such accounts may be now or hereafter deposited, and all proceeds (cash and non-cash) of the foregoing.

     “Additions” means any and all alterations, additions, accessions and improvements to property, substitutions therefor, and renewals and replacements thereof.

     “Casualty” means any act or occurrence of any kind or nature that results in damage, loss or destruction to the Property.

     “Claim” means any liability, suit, action, claim, demand, loss, expense (including, without limitation, attorney’s fees) or cost of any kind or nature whatsoever.

     “Condemnation” means any taking of title, of use, or of any other property interest under the exercise of the power of eminent domain, whether temporarily or permanently, by any Governmental Authority or by any Person acting under Governmental Authority.

     “Condemnation Awards” means any and all judgments, awards of damages (including, but not limited to, severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.

     “Contracts of Sale” means any contracts for the sale of all or any part of the Property or any interest therein, whether now or hereafter executed, including, without limitation, all of the Proceeds thereof, any funds deposited thereunder to secure performance by the purchasers of their obligations and the right, after the occurrence of an Event of Default, to receive and collect all payments due under any contracts of sale.

     “Deed of Trust” means this Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan B) executed by Grantor for the benefit of Beneficiary, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

     “Default” means an event which, with the giving of Notice or lapse of time, or both, could or would constitute an Event of Default under the provisions of this Deed of Trust.

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     “Encumbrance” means any Lien, easement, right of way, roadway (public or private), common area, condominium regime, cooperative housing regime, restrictive covenant, Lease or other matter of any nature that would affect title to the Property.

     “Environmental Assessment” means a report of an environmental assessment of the Property of such scope (including but not limited to the taking of soil borings and air and groundwater samples and other above and below ground testing) as Beneficiary may request, prepared by a recognized environmental consulting firm acceptable to Beneficiary in all respects and sufficient in detail to comply with Beneficiary’s established guidelines and the guidelines of any appropriate Governmental Authority.

     “Environmental Requirement” means any Law or other agreement or restriction, whether public or private (including but not limited to any condition or requirement imposed by any insurer or surety company), now existing or hereafter created, issued or enacted and all amendments thereto, modifications thereof and substitutions therefor, which in any way pertains to human health, safety or welfare, Hazardous Materials, Hazardous Materials Contamination or the environment (including but not limited to ground, air, water or noise pollution or contamination, and underground or above ground tanks) and shall include without limitation, the Resource Conservation and Recovery Act (the Solid Waste Disposal Act), 42 U.S.C. § 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq. (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”); the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.

     “Equipment” means all building materials, fixtures, equipment and other tangible personal property of every kind and nature whatsoever (other than consumable goods, and trade fixtures or other personal property owned by tenants occupying the Improvements), now or hereafter located or contained in or upon, or attached to, the Real Property, whether now owned or hereafter acquired by Grantor, together with all Additions to the Equipment and Proceeds thereof.

     “Event of Default” means the occurrence of any one or more of the events specified in ARTICLE VI (Events of Default) and the continuance of such event beyond the applicable cure periods, if any, set forth in ARTICLE VI.

     “Expenses” means all costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Beneficiary or the Trustees in exercising or enforcing any rights, powers and remedies provided in this Deed of Trust or any of the other Financing Documents, including, without limitation, reasonable attorney’s fees, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.

     “Facility” means an assisted living facility located on the Property and known as “Sunrise of Connecticut Avenue”.

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     “Financing Documents” means this Deed of Trust, the Note, the Loan Agreement, the Guaranty and any and all other documents which Grantor, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee all or any portion of the Obligations, as the same may from time to time be extended, amended, restated or substituted from time to time.

     “Governmental Authority” means any governmental or quasi-governmental entity, including, without limitation, any department, commission, board, bureau, agency, administration, service or other instrumentality of any governmental entity.

     “Guarantor” means Sunrise Senior Living, Inc. and its successors and assigns.

     “Guaranty” means the Guaranty of Payment (Loan B) of even date hereof executed by Guarantor for the benefit of the Beneficiary, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

     “Hazardous Materials” means any and all hazardous or toxic substances, wastes or materials which, because of their quantity, concentration, or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard or nuisance to human health, safety or welfare or to the environment when used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled, including without limitation, any substance, waste or material which is or contains asbestos, radon, polychlorinated biphenyls, urea formaldehyde, explosives, radioactive materials or petroleum products.

     “Hazardous Materials Contamination” means the contamination (whether presently existing or occurring after the date of this Deed of Trust) of the Improvements, facilities, soil, ground water, air or other elements on, in or constituting a part of, the Property by Hazardous Materials, or the contamination of the buildings, facilities, soil, ground water, air or other elements on, in or constituting a part of, any other property as a result of Hazardous Materials at any time (whether before or after the date of this Deed of Trust) emanating from the Property.

     “Improvements” means the Facility and all other buildings, structures and other improvements now or hereafter existing, erected or placed on the Land, or in any way used in connection with the use, enjoyment, occupancy or operation of the Land.

     “Land” means the land described in Exhibit A attached hereto, together with (a) all estates, title interests, title reversion rights, increases, issues, profits, rights of way or uses, additions, accretions, servitudes, gaps, gores, liberties, privileges, water rights, water courses, alleys, streets, passages, ways, vaults, licenses, tenements, franchises, hereditaments, appurtenances, easements and other rights, now or hereafter owned by Grantor, as lessee, and belonging or appertaining to the Land, (b) all Claims whatsoever of Grantor with respect to the Land, either in law or in equity, in possession or in expectancy, and (c) all estate, right, title and interest of Grantor in and to all streets, roads and public places, opened or proposed, now or hereafter adjoining or appertaining to, the Land.

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     “Laws” means federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

     “Leases” means all leases, excluding Resident Agreements, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property, together with all options therefor, amendments thereto and renewals, modifications and guarantees thereof, including, without limitation, any cash or securities deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or securities are to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due.

     “Licenses” means any and all licenses, certificates of need, operating permits, franchises, and other licenses, authorizations, certifications, permits, or approvals, other than construction permits, issued by, or on behalf of, any Governmental Authority now existing or at any time hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing, ownership and/or operation of the Property, accreditation of the Property, and/or the participation or eligibility for participation in any third party payment or reimbursement programs (but specifically excluding any and all third-party payor participation or reimbursement agreements now or at any time hereafter existing for the benefit of the Borrower), any and all operating licenses issued by any state Governmental Authority, any and all pharmaceutical licenses and other licenses related to the purchase, dispensing, storage, prescription or use of drugs, medications, and other “controlled substances,” any and all licenses relating to the operation of food or beverage facilities or amenities, if any, as the same may from time to time be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified.

     “Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, lien or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.

     “Loan Agreement” means the Loan and Security Agreement (Loan B) of even date herewith between Grantor and Beneficiary which sets forth, among other things, the terms and conditions upon which the Loan proceeds will be disbursed, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

     “Manager” means Sunrise Senior Living Management, Inc., a Virginia corporation, and its successors and assigns, in its capacity as Manager and operator of the Facility.

     “Material Lease” means a Lease that generates $30,000 per year or more in revenue.

     “Net Proceeds”, when used with respect to any Condemnation Awards or insurance proceeds allocable to the Property, means the gross proceeds from any Casualty or Condemnation remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such gross proceeds.

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     “Note” has the meaning set forth in the Recitals hereto.

     “Notice” means a written communication delivered by hand, or sent by overnight courier, or by certified or registered mail, postage prepaid, return receipt requested, to the Person to whom such communication is to be given, at the addresses as follows:

Beneficiary:	Chevy Chase Bank, F.S.B.,
	7926 Jones Branch Drive
	McLean, VA 22102
	Attn: Richard L. Amador
	Group Vice President
Grantor:	Sunrise Connecticut Avenue Assisted Living, L.L.C.
	c/o Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attn: James S. Pope
Guarantor:	Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
	Attention: General Counsel
With a Courtesy Copy to:	Wayne G. Tatusko, Esquire
	Wayne G. Tatusko, PC
	3016 Williams Drive
	Suite 200
	Fairfax, VA 22031
Trustees:	c/o Chevy Chase Bank, F.S.B.,
	7501 Wisconsin Avenue
	Bethesda, MD 20814

or at such other address as any party shall have notified the others of in the manner set forth in this definition.

     “Obligations” means all present and future debts, obligations and liabilities of Grantor to Beneficiary and/or the Trustees arising pursuant to, and/or on account of, the provisions of this Deed of Trust, the Note, the Guaranty, any Swap Contract and any of the other Financing Documents, including, without limitation, the obligations to (a) pay all principal (including, again without limitation, any principal advanced after the date of this Deed of Trust and any principal that is repaid and readvanced), interest, late charges and prepayment premiums (if any) due at any time under the Note, and (b) pay all Expenses, indemnification payments and other sums due at any time under this Deed of Trust together with interest thereon as provided in Section 4.19 (Reimbursement; Interest), and (c) perform, observe and comply with all of the terms, covenants and conditions, expressed or implied, with which Grantor and/or Guarantor is required by this Deed of Trust and any of the other Financing Documents, to perform, observe or comply.

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     “Operating Agreements and Management Contracts” means any and all contracts and agreements previously, now or at any time hereafter entered into by Grantor and/or Manager other than Resident Agreements with respect to the acquisition, construction, renovation, expansion, ownership, operation, maintenance, use or management of the Property or otherwise concerning the operations and business of the Property, any and all service and maintenance contracts, any employment contracts, any and all management agreements, any and all consulting agreements, laboratory servicing agreements, pharmaceutical contracts, physician, other clinician or other professional services provider contracts, patient admission agreements, Resident Agreements, food and beverage service contracts, and other contracts for the operation and maintenance of, or provision of services to, the Property, as the same may from time to time be amended, restated or substituted from time to time.

     “Permitted Encumbrances” means (a) the Encumbrances set forth in the Commitment for Title Insurance No. NCS-311032-DC72 issued by First American Title Insurance Company and furnished to Beneficiary in connection with this Deed of Trust, as updated to the date of this Deed of Trust, (b) this Deed of Trust, (c) any Leases so long as such Leases are subject and subordinate to this Deed of Trust, (d) liens for Property Assessments which are either (i) not delinquent, or (ii) being contested in accordance with the provisions of Section 4.20 (Permitted Contests) and (e) a first lien Deed of Trust, Assignment, Security Agreement and Fixture Filing (Loan A) of even date herewith granted by Grantor to Trustees to secure Loan A (as defined in the Loan Agreement).

     “Person” means an individual, a corporation, a partnership, a limited liability company, a joint venture, a trust, an unincorporated association, any Governmental Authority or any other entity.

     “Personalty” means all of Grantor’s interest in personal property of any kind or nature whatsoever, whether tangible or intangible and whether now owned or hereafter acquired, which is used in the construction of, or is placed upon, or is derived from or used in connection with the maintenance, use, occupancy or enjoyment of, the Property, including, without limitation, (a) the Equipment, (b) the Accounts, (c) all Licenses and all Operating Agreements and Management Contracts (provided all of such agreements with non-affiliated parties that are for more than one (1) year in duration shall be subordinate to this Deed of Trust, and Beneficiary shall have no responsibility for the performance of Grantor’s obligations thereunder), and (d) all plans and specifications, contracts and subcontracts for the construction or repair of the Improvements, sewer and water taps, allocations and agreements for utilities, bonds, permits, licenses, guarantees, warranties, causes of action, judgments, Claims, profits, security deposits, utility deposits, refunds of fees or deposits paid to any Governmental Authority, letters of credit and policies of insurance, together with all Additions to the Personalty and Proceeds thereof.

     “Proceeds”, when used with respect to any of the collateral described in this Deed of Trust, means all proceeds within the meaning of the Uniform Commercial Code of the State and shall also include the proceeds of any and all insurance policies.

     “Property” means the Land, the Improvements and the Personalty, and all Additions to, and Proceeds of, all of the foregoing.

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     “Property Assessments” means all taxes, payments in lieu of taxes, water rents, sewer rents, ground rents, assessments, condominium charges, maintenance charges and other governmental or municipal or public or private dues, charges and levies and any Liens (including federal tax liens) which are or may be levied, imposed or assessed upon the Property or any part thereof, or upon any Leases or any Rents, whether levied directly or indirectly or as excise taxes, as income taxes, or otherwise.

     “Real Property” means the Land and the Improvements, and all Additions to, and Proceeds of, each of the foregoing.

     “Reimbursement Rate” means the Post Default Rate as defined in the Loan Agreement.

     “Rents” means Grantor’s right to any of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property, or arising from the use or enjoyment of the Property, or from any Lease or other use, or occupancy pertaining to the Property.

     “Resident Agreements” means any and all contracts, authorizations, agreements and/or consents executed by or on behalf of any resident or other person seeking services from Grantor or Manager pursuant to which Grantor and/or Manager provides or furnishes health or assisted living care and related services at the Property, including the consent to treatment, assignment of payment of benefits by third party, as amended, restated or substituted from time to time.

     “State” means the District of Columbia.

     “Swap Contract” means any document, instrument or agreement between Grantor and Beneficiary or any affiliate of Beneficiary, now existing or entered into in the future, relating to an interest rate swap transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar transaction, any option to enter into any of the foregoing, and any combination of the foregoing, which agreement may be oral or in writing, including, without limitation, any master agreement relating to or governing any or all of the foregoing and any related schedule or confirmation, each as amended from time to time.

     “Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed on Grantor or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

     “Transfer” means any direct or indirect sale, assignment, conveyance or transfer, including, without limitation, any contract or agreement to sell, assign, convey or transfer, whether made with or without consideration.

     “Uniform Commercial Code” means the Uniform Commercial Code as adopted by the State, as amended.

     “Trustees” means the Individual Trustees or their successors in trust who may be acting under and pursuant to this Deed of Trust from time to time.

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     Section 1.2 Rules of Construction.

     The words “hereof”, “herein”, “hereunder”, “hereto”, and other words of similar import refer to this Deed of Trust in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants”. The headings of this Deed of Trust are for convenience only and shall not define or limit the provisions hereof. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Land, Improvements, Personalty, Real Property or Property shall mean all or any portion of each of the foregoing, respectively, and (d) to Section numbers are to the respective Sections contained in this Deed of Trust unless expressly indicated otherwise. Any term used or defined in the Uniform Commercial Code of the State, as in effect from time to time, which is not defined in this Deed of Trust has the meaning given to that term in the Uniform Commercial Code of the State, as in effect from time to time, when used in this Deed of Trust. However, if a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term has the meaning specified in Article 9.

ARTICLE II
GRANTING CLAUSES; CONDITION OF GRANT

     In order to secure the prompt payment and performance of the Obligations, Grantor (a) grants, bargains, sells and conveys the Real Property unto the Trustees in trust for the benefit of Beneficiary, to have and to hold the Real Property unto the Trustees in fee simple forever; provided that, Grantor may retain possession of the Real Property until the occurrence of an Event of Default; and (b) grants Beneficiary a lien on, and security interest in, the Personalty; and (c) unconditionally and absolutely assigns the Leases and Rents to Beneficiary (but subject to the license for collection of Rents described in Section 4.14(b) (Leases)); and (d) assigns to, and grants Beneficiary a security interest in, any Contracts of Sale; and (e) assigns to Beneficiary all Condemnation Awards and any insurance proceeds payable with respect to any Casualty. If and when Grantor has paid and performed all of the Obligations, the Trustees, upon request by Beneficiary, will provide a release of this Deed of Trust to Grantor. Grantor shall be responsible for the recordation of such release and payment of any recording costs.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

     Grantor makes the following representations and warranties to Beneficiary:

     Section 3.1 Organization, Power and Authority of Grantor; Financing Documents.

     Grantor (a) is a limited liability company duly organized, and existing and in good standing under the laws of the jurisdiction in which it is organized, and is duly qualified to do business and in good standing in the State and in any other state in which Grantor conducts business, and (b) has the power, authority and legal right to own its property and carry on the business now being conducted by it and to engage in the transactions contemplated by the Financing Documents. The execution and delivery of, and the carrying out of the transactions contemplated by, the Financing

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Documents executed by Grantor, and the performance and observance of the terms and conditions of such Financing Documents, have been duly authorized by all necessary action of Grantor. The Financing Documents to which Grantor is a party constitute the valid and legally binding obligations of Grantor and are fully enforceable against Grantor in accordance with their respective terms.

     Section 3.2 Other Documents; Laws.

     The execution and performance of the Financing Documents executed by Grantor and the consummation of the transactions contemplated thereby will not conflict with, result in any breach of, or constitute a default under the operating agreement of Grantor, or any contract, agreement, document or other instrument to which Grantor is a party or by which Grantor may be bound or affected, and do not and will not violate or contravene any Law to which Grantor is subject.

     Section 3.3 Taxes.

     Grantor has filed all federal, state, county and municipal Tax returns required to have been filed by Grantor and has paid all Taxes which have become due pursuant to such returns or pursuant to any Tax assessments received by Grantor.

     Section 3.4 Legal Actions.

     There are no (a) Claims pending or, to the best of Grantor’s knowledge and belief, threatened, against or affecting Grantor, Grantor’s business or the Property, or (b) investigations at law or in equity, before or by any court or Governmental Authority, pending or, to the best of Grantor’s knowledge and belief, threatened, against or affecting Grantor, Grantor’s business or the Property. Grantor is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority affecting Grantor or the Property.

     Section 3.5 Nature of Loan; Usury; Disclosures.

     Grantor is a business or commercial organization, and the Loan is being made solely for business or investment purposes. The rate of interest charged on the Loan does not, and will not, violate any usury Law or interest rate limitation. The Loan is not subject to the federal Consumer Credit Protection Act (15 U.S.C. §1601 et. seq.) nor any other federal or state disclosure or consumer protection laws.

     Section 3.6 Trade Names.

     Grantor conducts its business solely under the name set forth in the Preamble to this Deed of Trust and makes use of no trade names in connection therewith, unless such trade names have been previously disclosed to Beneficiary in writing.

     Section 3.7 Warranty of Title.

     Grantor is (a) the owner of the fee simple legal title to the Real Property, (b) except for the Permitted Encumbrances, the owner of all of the beneficial and/or equitable interest in and to the Real Property and (c) lawfully seized and possessed of the Real Property. Grantor has the right and authority to convey the Real Property and does hereby warrant specially, and agrees to

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defend, the Real Property and the title thereto, whether now owned or hereafter acquired, against all Claims by any Person claiming by, through, or under Grantor. The Real Property is subject to no Encumbrances other than the Permitted Encumbrances.

     Section 3.8 Property Assessments.

     The Real Property is assessed for purposes of Property Assessments as a separate and distinct parcel from any other property, such that the Real Property shall never become subject to the Lien of any Property Assessments levied or assessed against any property other than the Real Property.

     Section 3.9 Independence of the Real Property.

     No building or other improvements on property not covered by this Deed of Trust rely on the Real Property or any interest therein to fulfill any requirement of any Governmental Authority for the existence of such property, building or improvements; and none of the Real Property relies, or will rely, on any property not covered by this Deed of Trust or any interest therein to fulfill any requirement of any Governmental Authority. The Real Property has been properly subdivided from all other property in accordance with the requirements of any applicable Governmental Authorities.

     Section 3.10 Existing Improvements.

     The existing Improvements, if any, were constructed, and are being maintained, in accordance with all applicable Laws, including, without limitation, zoning Laws.

     Section 3.11 Personalty.

     Grantor has good title to the Equipment, and the Personalty is not subject to any Encumbrance other than the Permitted Encumbrances.

     Section 3.12 Leases, Rents, Contracts of Sale.

     The Leases, Rents and Contracts of Sale are not subject to any Encumbrance other than the Permitted Encumbrances.

     Section 3.13 Presence of Hazardous Materials or Hazardous Materials Contamination; Compliance with Environmental Requirements.

     To the best of Grantor’s knowledge and belief, (a) no Hazardous Materials are currently located on the Property, nor is the Property affected by any Hazardous Materials Contamination, (b) the Property has never been used as a manufacturing, storage, treatment, processing, recycling or disposal site for Hazardous Materials, and (c) no property in the vicinity of the Real Property has ever been used as a manufacturing, storage, treatment, processing, recycling or disposal site for Hazardous Materials, nor is any such property affected by Hazardous Materials Contamination. The present condition and uses of, and activities on, the Property do not violate any Environmental Requirement and the uses of the Property which Grantor and each tenant and subtenant, if any, intend in the future to make of the Property comply and will comply with all applicable Environmental Requirements. Neither Grantor, nor to Grantor’s knowledge, any tenant or subtenant, has obtained or is required to obtain any permit or other authorization to

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construct, occupy, operate, use or conduct any activity on, the Property by reason of any Environmental Requirement. Grantor has received no notice, and is not aware, of any Claim involving a violation of any Environmental Requirement with respect to the Property or any parcel in the vicinity of the Real Property or any operation conducted on the Property or on any parcel in the vicinity of the Real Property. There is no Environmental Requirement which requires any work, repair, construction, capital expenditure, or other remedial work of any nature whatsoever to be undertaken with respect to the Property.

     Section 3.14 Financial Statements.

     The financial statements heretofore delivered by Grantor and any other party or parties to Beneficiary are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof. No material adverse change has occurred in the financial conditions reflected therein since the respective dates thereof and no material additional liabilities have been incurred by Grantor or any such other party or parties since the date thereof other than the borrowings contemplated herein or as approved in writing by Beneficiary.

ARTICLE IV
AFFIRMATIVE COVENANTS

     Section 4.1 Obligations.

     Grantor agrees to promptly pay and/or perform all of the Obligations, time being of the essence in each case.

     Section 4.2 Insurance.

     Grantor shall maintain the following insurance at its sole cost and expense:

               (a) Insurance against Casualty to the Property under a policy or policies covering such risks as are ordinarily insured against by similar businesses, but in any event including fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Unless otherwise agreed in writing by Beneficiary, such insurance shall be for the full replacement cost of the Property. The deductible amount under such policy or policies shall not exceed $25,000. No policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise. The term “full replacement cost” means the actual replacement cost of the Property (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items). The “full replacement cost” shall be determined from time to time at the request of Beneficiary (but not more frequently than once every three (3) years) by a third party appraiser or appraisal company or one of the insurers, who shall be selected and paid for by Grantor but subject to Beneficiary’s approval. A combination of primary and umbrella policies can be used to satisfy the limit requirements.

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               (b) Comprehensive general public liability insurance for bodily injuries to Persons and damage to property, in limits of not less than $2,000,000 for any one occurrence and $5,000,000 for the aggregate of all occurrences during any given annual policy period. Such insurance shall name Beneficiary as an additional insured.

               (c) Workers’ compensation insurance for all employees of Grantor in such amount as is required by Law.

               (d) During any period of construction upon the Property, Grantor shall maintain, or cause others to maintain, builder’s risk insurance (non-reporting form) of the type customarily carried in the case of similar construction for the full replacement cost of work in place and materials stored at or upon the Property.

               (e) If at any time the Property is in an area that has been identified as having special flood and mudslide hazards, and flood insurance is available in such area, Grantor shall purchase and maintain a flood insurance policy in form and amount acceptable to Beneficiary. In the event that the Property is not in an area having special flood and mudslide hazards, Grantor shall deliver to Beneficiary upon request evidence satisfactory to Beneficiary stating that the Property is not in such a flood or mudslide hazard area.

               (f) Business interruption insurance in an amount acceptable to Beneficiary.

               (g) Grantor will obtain and keep in force such other and further insurance as may be required from time to time by Beneficiary in order to comply with regular requirements and practices of Beneficiary in similar transactions.

               (h) To the extent that health care professionals are employed by Manager, medical liability, malpractice and other health care professional liability insurance protecting Manager, as the case may be, against claims arising from the professional services performed by Manager, as the case may be, with limits of (A) not less than One Million Dollars ($1,000,000) with respect to bodily injury or death for each person or occurrence, and (B) not less than Three Million Dollars ($3,000,000) in the aggregate for claims made for injury or death in any one year, and an umbrella policy insuring against such liability in an aggregate amount of Five Million Dollars ($5,000,000).

               (i) Each policy of insurance shall (i) be issued by one or more recognized, financially sound and responsible insurance companies, (ii) with respect to the insurance described under the preceding subsections (a), (d), (e) and (f), have attached thereto standard non-contributing, non-reporting mortgagee clauses in favor of and entitling Beneficiary without contribution to collect any and all proceeds payable under such insurance, (iii) provide that such policy shall not be canceled or modified without at least thirty (30) days prior written notice to Beneficiary, and (iv) provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Grantor which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Unless an escrow account has been established for insurance premiums pursuant to Section 4.5 (Property Assessments; Escrow), Grantor shall promptly pay all premiums when due on such insurance and, not less than thirty (30)

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days prior to the expiration dates of each such policy, Grantor will deliver to Beneficiary evidence of payment satisfactory to Beneficiary. Grantor will within five (5) days give Beneficiary Notice of any cancellation of, or change in, any insurance policy. Beneficiary shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (i) the existence, nonexistence, form or legal sufficiency thereof, (ii) the solvency of any insurer, or (iii) the payment of losses.

     Section 4.3 Adjustment of Condemnation and Insurance Claims.

     Grantor shall give prompt Notice to Beneficiary of any Casualty or any Condemnation or threatened written Condemnation. Beneficiary is authorized, at its sole option, to commence, appear in and prosecute, in its own or Grantor’s name, any action or proceeding relating to any Condemnation or Casualty, and to settle or compromise any Claim in connection therewith. In such case, Beneficiary may also deduct from any payment all of its Expenses. Beneficiary agrees, however, that, so long as no Event of Default has occurred and is continuing, it will not settle or compromise any such Claim without the prior written consent of Grantor, which consent shall not be unreasonably withheld or delayed. If Beneficiary elects not to adjust a Claim, Grantor agrees to promptly pursue the settlement and compromise of the Claim subject to Beneficiary’s approval that will not be unreasonably withheld or delayed. If, prior to the receipt by Beneficiary of any Condemnation Award or insurance proceeds, the Property shall have been sold pursuant to the provisions of Section 7.2 (Foreclosure), Beneficiary shall have the right to receive such funds to the extent of (a) any deficiency found to be due upon such sale with interest thereon (whether or not a deficiency judgment on this Deed of Trust shall have been sought or recovered or denied), and (b) necessary to reimburse Beneficiary for its Expenses. Grantor agrees to execute and deliver from time to time, upon the request of Beneficiary, such further instruments or documents as may be requested by Beneficiary to confirm the grant and assignment to Beneficiary of any Condemnation Awards or insurance proceeds.

     Section 4.4 Application of Net Proceeds.

     Net Proceeds must be applied to either (a) the payment of the Obligations, or (b) the restoration of the Property. If either an Event of Default has occurred or the cost to repair or restore the Property exceeds $3,000,000, Beneficiary shall determine, in its sole discretion, the manner in which Net Proceeds are to be applied. If no Event of Default has occurred and the cost to repair or restore the Property is $3,000,000 or less, Grantor shall determine the manner in which Net Proceeds are to be applied. In the event that, and to the extent that, Net Proceeds are to be applied to the restoration of the Property, each of the following conditions must also be met and complied with if and to the extent required by Beneficiary:

               (a) An escrow account shall have been established with Beneficiary composed of Net Proceeds, and, if necessary, additional deposits made by Grantor, which, in the sole judgment of Beneficiary, is sufficient to restore the Property to its use, value and condition immediately prior to the Casualty or Condemnation. Beneficiary shall be entitled, at the expense of Grantor, to consult such professionals as Beneficiary may deem necessary, in its sole discretion, to determine the total costs of restoring the Property. Interest will be paid on funds in the escrow account. Grantor hereby assigns to, and grants Beneficiary a security interest in, such escrow account and the funds therein to secure the payment and performance of the Obligations.

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               (b) Either:

               (i) All Material Leases must continue in full force and effect (subject to rent abatement during restoration as may be provided in the Material Leases) or, if terminated, the terminated Material Leases must have been replaced with Material Leases of equal quality in the reasonable judgment of Beneficiary. Any tenant having the right to terminate its Material Lease due to the Casualty or Condemnation, and which has not exercised that right, shall have confirmed in writing to Beneficiary its irrevocable waiver of such termination right, or

               (ii) Proceeds from business interruption insurance must be available to Grantor in such amounts as Beneficiary, in its reasonable judgment, considers sufficient to pay the amortization under the Loan, and all Property Assessments, insurance premiums and other sums becoming due from Grantor pursuant to this Deed of Trust during the time required for restoration.

               (c) All restoration will be conducted under the supervision of an architect or engineer, or both, selected and paid for by Grantor and approved in advance by Beneficiary, and by a general contractor who shall be approved by Beneficiary and shall have executed a fixed price contract.

               (d) The restoration will be performed pursuant to the original plans and specifications approved by Beneficiary.

               (e) If required by Beneficiary at its sole option, the contractor or contractors responsible for the restoration shall have obtained payment and performance bonds from a corporate surety acceptable to Beneficiary and naming Beneficiary as dual obligee.

               (f) Grantor shall have provided Beneficiary with reasonably satisfactory evidence that there has been no adverse change in the economic viability of the Property since the date of this Deed of Trust, such evidence to include, among other things, an appraisal and market study prepared by a firm or firms acceptable to Beneficiary, but at Grantor’s expense.

If any of the foregoing conditions are not satisfied, Beneficiary may, in its sole discretion, apply Net Proceeds to the payment of the Obligations.

     If applied to restoration, Net Proceeds (and any other funds required to be deposited with Beneficiary) shall be disbursed from time to time in accordance with the terms and conditions of the construction loan agreement most commonly used by Beneficiary or other regionally recognized construction lenders, at the time of the Casualty or Condemnation for major commercial construction loans, and subject also to the following conditions (which shall control in the event of any conflict with the provisions of such construction loan agreement):

               (a) Restoration shall commence within sixty (60) days following receipt of the Net Proceeds by Beneficiary or such additional time as may be required by Grantor

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in obtaining the necessary licenses, permits or approvals from the applicable Governmental Authorities provided Grantor has and continues to diligently pursue obtaining the necessary licenses, permits and approvals, and shall be completed within such time as may be determined by Beneficiary in view of the extent of the Casualty or Condemnation but, in any event, shall be completed within a reasonable period after the date the Net Proceeds are received.

               (b) At the time of each disbursement,

               (i) (1) no Leases (if any) shall have been terminated which either singularly or in the aggregate affect more than ten percent (10%) of the leasable area of the Property unless the same have been replaced with Leases of equal quality, in the reasonable judgment of Beneficiary, and (2) no Default shall have occurred, or

               (ii) Proceeds from business interruption insurance or other moneys of Grantor must be available to Grantor in such amounts as Beneficiary, in its reasonable judgment, considers sufficient to pay the amortization under the Loan and all Property Assessments, insurance premiums and other sums becoming due from Grantor pursuant to this Deed of Trust during the time required for restoration.

               (c) Restoration shall be performed in accordance with the requirements of Section 5.4 (Additional Improvements).

               (d) With respect to each disbursement and accompanying each request therefor, there shall be delivered to Beneficiary (i) a certificate addressed to Beneficiary from the architect or engineer supervising the restoration stating that such disbursement is to pay the cost of restoration not paid previously by any prior disbursement, that all restoration completed to the date of such certificate has been completed in accordance with applicable Laws and the approved plans and specifications, and that the amount of such disbursement, together with all other disbursements, does not exceed ninety percent (90%) of the requisition for direct construction costs until such time as fifty percent (50%) of the restoration has been completed, then such disbursements shall not exceed ninety-five percent (95%) of the requisition for direct construction costs, and (ii) evidence satisfactory to Beneficiary that all Claims then existing for labor, services and materials have been paid in full or will be paid in full from the proceeds of the disbursement requested.

               (e) The final holdback shall be disbursed only upon delivery to Beneficiary, in addition to the items required in paragraph (d) above, of the following:

                    (i) Final waivers of Liens from all contractors and subcontractors.

               (ii) A certificate of the architect or engineer stating that the restoration has been completed in a good and workmanlike manner, in accordance with the plans and specification approved by Beneficiary and in accordance with all applicable Laws.

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               (iii) An estoppel affidavit from each tenant occupying or leasing space under a Material Lease in the Property stating that its Lease is in full force and effect.

               (f) Immediately upon the occurrence of any Event of Default, Beneficiary may apply Net Proceeds and any other sums deposited with Beneficiary to the repayment of the Obligations.

     Section 4.5 Property Assessments; Escrow.

               (a) Unless an escrow account for payment of Property Assessments is created pursuant to subsection (c) below, Grantor will (i) promptly pay in full and discharge all Property Assessments, and (ii) exhibit to Beneficiary, upon demand, the receipted bills for such Property Assessments prior to the day upon which the same shall become delinquent. Property Assessments shall be considered delinquent as of the first day any interest or penalties commence to accrue thereon.

               (b) In the event of the passage of any Law subsequent to the date of this Deed of Trust in any manner changing or modifying the Laws now in force governing the taxation of deeds of trust or debts secured by deeds of trust or the manner of collecting any such taxes so as to adversely affect Beneficiary (including, without limitation, a requirement that internal revenue stamps be affixed to this Deed of Trust or any of the other Financing Documents), Grantor will promptly pay any such tax. If Grantor fails to make such prompt payment, or if any Law prohibits Grantor from making such payment or would penalize Beneficiary if Grantor makes such payment, then the entire unpaid balance of the Obligations shall, without Notice, immediately become due and payable at the sole option of Beneficiary. In no event, however, shall any income taxes of Beneficiary or franchise taxes of Beneficiary measured by income, or taxes in lieu of such income taxes or franchise taxes, be required to be paid by Grantor.

               (c) At any time following the occurrence and during the continuance of an Event of Default, Beneficiary reserves the right to require Grantor to pay to Beneficiary monthly, on any date selected by Beneficiary, such amount as Beneficiary from time to time estimates will generate sufficient funds to pay all Property Assessments and premiums for the insurance required by Section 4.2 (Insurance) prior to the date such Property Assessments or insurance premiums next become due. Beneficiary’s estimates shall be based on the amounts actually payable or, if unknown, on the amounts actually paid for the year preceding that for which such payments are being made. Any deficiencies shall be promptly paid by Grantor to Beneficiary on demand. Grantor shall transmit or cause to be transmitted bills for the Property Assessments and insurance premiums to Beneficiary as soon as received by Grantor. When Beneficiary has received from Grantor, or on its account, funds sufficient to pay the same, Beneficiary shall, except as provided below following an Event of Default, pay such bills. Payments for such purposes may be made by Beneficiary at its discretion even though subsequent owners of the Property may benefit thereby. Upon foreclosure or release of this Deed of Trust or, to the extent permitted by Law, upon the occurrence of an Event of Default, Beneficiary may apply any sums so deposited to the payment of the Obligations. If from time to time funds are accumulated under the terms of this Section in excess of the amount needed to pay the Property

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Assessments and such insurance premiums, Grantor at least annually shall be given the option of (i) receiving a refund of the excess funds, (ii) applying the excess funds to the payment of the Obligations (provided prepayment is then permitted without penalty pursuant to the Note), or (iii) permitting the excess funds to remain in the escrow account established pursuant to this Section. If Grantor fails to give Notice to Beneficiary of its intent with respect to the application of the excess funds as provided in this Section within sixty (60) days from the date Beneficiary mailed notice of the accumulation of the excess funds, Beneficiary shall promptly return the excess funds to Grantor. Within sixty (60) days after receipt from Grantor of a Notice requesting a refund, Beneficiary shall also return excess funds to Grantor.

     Section 4.6 Compliance with Laws.

     Grantor will comply with and not violate, and cause to be complied with and not violated, all present and future Laws applicable to the Property and its use and operation.

     Section 4.7 Maintenance and Repair of the Property.

     Grantor, at Grantor’s sole expense, will (a) keep and maintain the Improvements and the Equipment in good condition, working order and repair, and (b) make all necessary or appropriate repairs and Additions to the Improvements and Equipment, so that each part of the Improvements and all of the Equipment shall at all times be in good condition and fit and proper for the respective purposes for which they were originally intended, erected, or installed.

     Section 4.8 Additions to Security.

     All right, title and interest of Grantor in and to all Improvements and Additions hereafter constructed or placed on the Property and in and to any Equipment hereafter acquired shall, without any further deed of trust, conveyance, assignment or other act by Grantor, become subject to the Lien of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Grantor and specifically described in the granting clauses hereof. Grantor agrees, however, to execute and deliver to the Trustees and/or Beneficiary such further documents as may be required pursuant to Section 9.2 (Further Assurances).

     Section 4.9 Inspection.

     Upon reasonable advance notice thereof by Beneficiary, Grantor will permit Beneficiary, or any Person authorized by Beneficiary, to enter and make inspections of the Property at all reasonable times and as often as may be requested by Beneficiary.

     Section 4.10 Management.

     Grantor shall at all times provide for the competent and responsible management and operation of the Property. Each management contract affecting the Property must be approved in writing by Beneficiary prior to the execution of the same.

     Section 4.11 Books and Records.

     Grantor will keep and maintain full and accurate records and books administered in accordance with generally accepted accounting principles, consistently applied, showing in detail the earnings and expenses of the Property and the operation thereof. Grantor shall permit

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Beneficiary, or any Person authorized by Beneficiary, to inspect and examine such records and books (regardless of where maintained) and all supporting vouchers and data and to make copies and extracts therefrom at all reasonable times and as often as may be requested by Beneficiary. In addition, Grantor will furnish or cause to be furnished to Beneficiary the financial information required under the Loan Agreement:

     Section 4.12 Estoppel Certificates.

     Within ten (10) days after any request by Beneficiary or a proposed assignee or purchaser of the Loan, Grantor shall certify in writing to Beneficiary, or to such proposed assignee or purchaser, the then unpaid balance of the Loan and whether Grantor has any right of defense or setoff to the payment or performance of any of the Obligations.

     Section 4.13 Subrogation.

     To the extent permitted by Law, Beneficiary shall be subrogated, notwithstanding its release of record, to any Lien now or hereafter existing on the Property to the extent that such Lien is paid or discharged by Beneficiary whether or not from the proceeds of the Loan. This Section shall not be deemed or construed, however, to obligate Beneficiary to pay or discharge any Lien.

     Section 4.14 Leases.

               (a) Beneficiary shall approve any Material Lease executed after the date of this Deed of Trust as to form, content and financial strength of the tenant. At any time, within thirty (30) days after Notice from Beneficiary, Grantor will deliver to Beneficiary a written description in such reasonable detail as Beneficiary may request of all of the Leases, including, without limitation, the names of all tenants, the terms of all Leases and the Rents payable under all Leases. If any Material Lease provides for the giving by the tenant of certificates with respect to the status of such Lease, Grantor shall exercise its right to require such certificate within ten (10) days after any request by Beneficiary. Following the occurrence of an Event of Default and notice from Beneficiary, Grantor will notify all tenants under existing Leases, and agrees to notify all tenants under future Leases, that (i) Grantor collects and receives all Rents pursuant to the license granted to it hereunder, and (ii) upon Notice from Beneficiary that such license has been revoked, the tenants shall pay all unpaid Rent directly to Beneficiary.

               (b) So long as no Event of Default has occurred, Grantor shall have a license (which license shall terminate automatically and without Notice upon the occurrence of an Event of Default) to collect upon, but not prior to accrual, the Rents under the Leases and, where applicable, subleases, such Rents to be held in trust for Beneficiary. Each month, provided no Event of Default has occurred, Grantor may retain such Rents and proceeds from Resident Agreements as were collected that month and held in trust for Beneficiary. Upon revocation of such license and following notification to the tenants under the Leases by Beneficiary or the Trustees that Rents are to be paid to Beneficiary, all Rents shall be paid directly to Beneficiary and not through Grantor. A demand by Beneficiary on any tenant for the payment of Rent shall be sufficient to warrant such tenant to make future payments of Rent to Beneficiary without the necessity of further consent by Grantor.

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               (c) Grantor, at its sole cost and expense, will use its best efforts to enforce or secure, or cause to be enforced or secured, the performance of each and every obligation and undertaking of the respective tenants under any Leases and will appear in and defend, at its sole cost and expense, any action or proceeding arising under, or in any manner connected with, such Leases.

               (d) Grantor will not assign the whole or any part of the Leases or Rents without the prior written consent of Beneficiary, and any assignment without such consent shall be null and void.

               (e) Grantor will promptly perform all of its obligations under any Leases. Grantor will not, without the prior written consent of Beneficiary, (i) cancel, terminate, accept a surrender of, reduce the payment of rent under any Material Leases, or accept any prepayment of rent for more than one (1) month in advance under, any Lease or Resident Agreements, (ii) modify, amend or substitute any Material Leases, or (iii) permit a Lien on the Property superior to any Lease, other than this Deed of Trust. Beneficiary acknowledges that the community fee paid in connection with a Resident Agreement is not a prepayment of rent.

               (f) If any Leases are subordinate (either by their date, their express terms, or by subsequent agreement of the tenant) to this Deed of Trust, such Leases shall be subject to the condition (and this Deed of Trust so authorizes) that, in the event of any sale of the Property pursuant to the provisions of Section 7.2 (Foreclosure), the Leases shall, at the sole option of Beneficiary or any purchaser at such sale, either (i) continue in full force and effect as set forth in the required advertisement of sale, and the tenant or tenants thereunder will, upon request, attorn to and acknowledge in writing the purchaser or purchasers at such sale or sales as landlord thereunder, or (ii) upon notice to such effect from Beneficiary, the Trustees or any purchaser or purchasers, terminate within ninety (90) days from the date of sale. As to any Lease, neither Beneficiary nor any purchaser or purchasers at foreclosure shall be bound by any payment of rent for more than one (1) month in advance or by any amendment or modification of the Lease made without the prior written consent of Beneficiary or, subsequent to a foreclosure sale, such purchaser or purchasers.

               (g) Neither the Trustees nor Beneficiary shall be obligated to perform or discharge any obligation of Grantor under any Lease. This assignment of the Leases in no manner places on Beneficiary or the Trustees any responsibility for (i) the control, care, management or repair of the Property, (ii) the carrying out of any of the terms and conditions of the Leases, (iii) any waste committed on the Property, or (iv) any dangerous or defective condition on the Property (whether known or unknown). Grantor agrees to indemnify the Trustees and Beneficiary for, and forever hold them harmless from, any and all Claims arising out of, or in connection with, any Leases or any assignment thereof.

               (h) Unless otherwise agreed to by Beneficiary, each Lease shall (i) be at market rents, (ii) be subordinate to the lien of this Deed of Trust, (iii) contain attornment language requiring each tenant to attorn to any subsequent purchaser of the Property, (iv) not contain non-disturbance language entitling such tenant to remain at the Property after any sale of the Property except as specifically agreed to by Beneficiary in connection with specified Leases,

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and shall be in all respects acceptable to Beneficiary and its counsel. Approved Material Leases may not be amended, modified or terminated without the prior written consent of Beneficiary.

     Section 4.15 Contracts of Sale.

     Following the occurrence and during the continuance of an Event of Default, Grantor irrevocably authorizes Beneficiary, at its sole option, to collect, in the name of Grantor or in its own name as assignee, all payments due or to become due under any Contract of Sale. Grantor agrees that it will facilitate in every reasonable way the collection by Beneficiary of such payments, and will, upon written request by Beneficiary, execute a written notice and deliver the same to each purchaser directing the purchaser to make such payments to Beneficiary. In no event shall Beneficiary be accountable for more moneys than it actually receives pursuant to a Contract of Sale, nor shall Beneficiary be liable for any failure to collect payments under any Contract of Sale. The right to determine the method of collection and the extent to which the enforcement of collection shall be prosecuted is reserved to the sole discretion of Beneficiary. Grantor, without the prior written consent of Beneficiary, will not execute any assignment of any Contract of Sale or the payments due thereunder. Grantor shall furnish to Beneficiary, within ten (10) days after a written request from Beneficiary, a written certification containing the names of all contract purchasers of the Property and shall attach to such certification a copy of any Contract of Sale. Nothing contained in this Section shall (a) be construed as a consent by Beneficiary to any Transfer of the Property, or (b) constitute a delegation to Beneficiary of any of Grantor’s duties or obligations under any Contract of Sale. Grantor agrees to indemnify Beneficiary and the Trustees for, and forever hold them harmless from, any Claim arising out of, or in connection with, any Contract of Sale.

     Section 4.16 Taxes.

     Grantor shall pay and discharge all Taxes prior to the date on which penalties are attached thereto unless and to the extent only that such Taxes are contested in accordance with Section 4.20 (Permitted Contests).

     Section 4.17 Hazardous Materials; Contamination.

          (a) The Grantor agrees to (i) give Notice to the Beneficiary immediately upon the Grantor’s acquiring knowledge of the presence of any Hazardous Materials on the Property or of any Hazardous Materials Contamination or of any Claim made or threatened against the Grantor or the Property with respect to any Environmental Requirement with a full description thereof; (ii) at the Grantor’s sole cost and expense, promptly comply with any and all Environmental Requirements relating to the Property or such Hazardous Materials or Hazardous Materials Contamination and provide the Beneficiary with satisfactory evidence of such compliance; (iii) provide the Beneficiary, within thirty (30) days after a demand by the Beneficiary, with a bond, letter of credit or similar financial assurance evidencing to the Beneficiary’s satisfaction that the necessary funds are available to pay the cost of complying with such Environmental Requirements and removing, treating and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any Lien which may be established on the Property as a result thereof; and (iv) take whatever other action as the Beneficiary may deem necessary or appropriate to restore to the Grantor the full use and benefit of the Property as contemplated by the Financing Documents.

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          (b) The Grantor shall immediately upon the receipt of Notice from the Beneficiary, which may be given at any time and from time to time by the Beneficiary in its sole discretion (but not more frequently than once during any twelve (12) month period), cause an Environmental Assessment to be undertaken with respect to the Property and furnish the same to the Beneficiary within thirty (30) days after the date of the Beneficiary’s request. The cost of any such Environmental Assessment shall be borne exclusively by the Grantor. The Grantor shall cooperate with each environmental consulting firm engaged to make any such Environmental Assessment and shall supply to each such environmental consulting firm, from time to time and promptly on request, all information available to the Grantor to facilitate the completion of the Environmental Assessment. Notwithstanding the foregoing, the Beneficiary shall be under no duty to require the preparation of any Environmental Assessment of the Property, and in no event shall any such Environmental Assessment by the Beneficiary be or give rise to any representation or warranty by the Beneficiary that Hazardous Materials are or are not present on the Property, or that there has been compliance by the Grantor or any other Person with any Environmental Requirement.

          (c) The Grantor shall protect, indemnify, defend and hold the Beneficiary, the Trustees, any Persons owned or controlled by, owning or controlling, or under the common control of or affiliated with, the Beneficiary and/or the Trustees, any participants in the Loan, the directors, officers, employees and agents of the Beneficiary, and/or such other Persons, and the heirs, personal representatives, successors and assigns of each of the foregoing, harmless from and against any and all Claims of any kind or nature whatsoever arising out of or in any way connected with any investigative, enforcement, cleanup, removal, containment, remedial or other private, governmental or regulatory action at any time threatened, instituted or completed pursuant to any applicable Environmental Requirement against the Grantor or the Beneficiary or against or with respect to the Property or any condition, use or activity on the Property or at any time threatened or made by any Person against the Grantor or the Beneficiary or against or with respect to the Property or any condition, use or activity on the Property relating to any damage, contribution, cost recovery, compensation, loss or injury resulting from or in any way arising in connection with any Hazardous Materials or Hazardous Materials Contamination. Upon demand by the Beneficiary, the Grantor shall diligently defend any such Claim which affects the Property or is made or commenced against the Beneficiary, whether alone or together with the Grantor or any other Person, all at the Grantor’s sole cost and expense and by counsel to be approved by the Beneficiary in the exercise of its reasonable judgment. In the alternative, the Beneficiary may at any time elect to conduct its own defense through counsel selected by the Beneficiary and at the cost and expense of the Grantor.

     Section 4.18 Right to Perform.

     If the Grantor fails to promptly pay or perform any of the Obligations, the Beneficiary, without Notice to or demand upon the Grantor, and without waiving or releasing any Obligation or Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Grantor. The Beneficiary may enter upon the Property for that purpose and take all action thereon as the Beneficiary considers necessary or appropriate. All Expenses incurred by the Beneficiary pursuant to this Section, together with interest thereon at the Reimbursement Rate, shall be paid by the Grantor to the Beneficiary as provided in Section 4.19 (Reimbursement; Interest).

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     Section 4.19 Reimbursement; Interest.

     If Beneficiary or the Trustees shall incur any Expenses or pay any Claims to which Beneficiary or the Trustees become a party by reason of this Deed of Trust or the rights and remedies provided hereunder (regardless of whether this Deed of Trust expressly provides for an indemnification against such Claims by Grantor), such Expenses and Claims shall be (a) paid by Grantor to Beneficiary on demand, together with interest thereon from the date incurred until paid in full by Grantor at the Reimbursement Rate and (b) a part of the Obligations. Notwithstanding the foregoing, however, in any action or proceeding to foreclose this Deed of Trust or to recover or collect the Obligations, the provisions of Law governing the recovery of costs, disbursements and allowances shall prevail unaffected by this Section. Whenever this Deed of Trust provides for interest to be paid by Grantor at the Reimbursement Rate, the Reimbursement Rate shall be calculated on the basis of a 365-day year factor applied to actual days elapsed.

     Section 4.20 Permitted Contests.

     Grantor shall not be required to pay any of the Property Assessments, or to comply with any Law, so long as Grantor shall in good faith, and at its cost and expense, contest the amount or validity thereof, or take other appropriate action with respect thereto, in good faith and in an appropriate manner or by appropriate proceedings; provided that (a) such proceedings operate to prevent the collection of, or other realization upon, such Property Assessments or enforcement of the Law so contested, (b) there will be no sale, forfeiture or loss of the Property during the contest, (c) neither Beneficiary nor the Trustees are subjected to any Claim, and (d) Grantor provides assurances satisfactory to Beneficiary (including, without limitation, the establishment of an appropriate reserve account with Beneficiary) of its ability to pay such Property Assessments or comply with such Law in the event Grantor is unsuccessful in its contest. Each such contest shall be promptly prosecuted to final conclusion or settlement, and Grantor shall indemnify and save Beneficiary and Trustees harmless against all Claims in connection therewith. Promptly after the settlement or conclusion of such contest or action, Grantor shall comply with such Law and/or pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable, together with all penalties, fines, interests, costs and expenses in connection therewith.

     Section 4.21 Security Agreement.

     This Deed of Trust creates a security interest in the Personalty, and, to the extent the Personalty is not real property, this Deed of Trust constitutes a security agreement from the Grantor to the Beneficiary under the Uniform Commercial Code of the State. This Deed of Trust constitutes a fixture filing under the Uniform Commercial Code of the State, as amended or recodified from time to time, and covers property which includes goods that are or are to become fixtures on the Property. “Fixtures” shall include all articles of personal property now or hereafter attached to, placed upon for an indefinite term or used in connection with said real property, appurtenances and improvements, together with all goods and other property which are or at any time become so related to the Property that an interest in them arises under real estate law. The respective mailing addresses of Grantor and Beneficiary are set forth in the definition of “Notices” in Section 1.1 (Definitions).

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     The Grantor hereby authorizes Beneficiary at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements as authorized by applicable law, required by Beneficiary to establish or maintain the validity, perfection and priority of the security interest granted in this Deed of Trust. For purposes of such filings, Grantor agrees to furnish any information requested by Beneficiary promptly upon request by Beneficiary. Grantor also ratifies its authorization for Beneficiary to have filed any like initial financing statements, amendment thereto or continuation statements if filed prior to the date of this Deed of Trust.

     Grantor shall pay all fees and costs that Beneficiary may incur in filing this or any other documents in public offices and in obtaining such record searches as Beneficiary may reasonably require. If any financing statement or other document is filed in the records normally pertaining to personal property, that filing shall never be construed as in any way derogating from or impairing this Deed of Trust or the rights or obligations of the parties under it. The Grantor hereby agrees to execute and deliver on demand, and hereby irrevocably constitutes and appoints the Beneficiary the attorney-in-fact of the Grantor, to execute, deliver and, if appropriate, to file with the appropriate filing office or offices, such financing statements or other instruments as the Beneficiary may request or require in order to perfect the security interest granted hereby or to continue the effectiveness of the same.

     Section 4.22 Access Law.

               (a) Grantor agrees to use its best efforts to ensure that the Property shall at all times comply with and remain in compliance with the requirements of the Americans with Disabilities Act of 1990, all state and local Laws and ordinances related to handicapped access and all rules, regulations, and orders issued pursuant to any of the foregoing, including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities, all to the extent applicable to the Property (collectively, “Access Laws”).

               (b) Notwithstanding any provisions set forth herein or in any other document regarding Beneficiary’s approval of alterations of the Property, Grantor shall not alter the Property in any manner which would increase Grantor’s responsibilities for compliance with the applicable Access Laws without the prior written approval of Beneficiary. The foregoing shall apply to tenant improvements constructed by Grantor or by any of its tenants. Beneficiary may condition any such approval upon receipt of a certificate of Access Law compliance from an architect, engineer, or other person acceptable to Beneficiary.

               (c) Grantor agrees to give prompt notice to Beneficiary of the receipt by Grantor of any complaints related to violations of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with applicable Access Laws.

     Section 4.23 Appraisals.

     Beneficiary shall have the right, upon an Event of Default, but not the obligation to require annual updated appraisals of the Property, which appraisals shall be prepared by an appraiser or appraisers designated by Beneficiary and shall be in all respects acceptable to Beneficiary. The

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basis of the appraisal calculations shown on such appraisal reports and all other aspects of the appraisal reports must be satisfactory to Beneficiary in all respects. A copy of such appraisal reports shall be released to Grantor. Grantor shall reimburse Beneficiary upon demand for all costs and expenses incurred by Beneficiary with respect to the preparation and review of all future appraisals required pursuant to the terms hereof; provided, however, Grantor shall not be obligated to reimburse Beneficiary for more than one (1) appraisal during the term of the Loan.

ARTICLE V
NEGATIVE COVENANTS

     Section 5.1 Encumbrances.

     Without the prior written consent of Beneficiary, Grantor will not permit the Real Property or the Personalty, or the Leases, Rents and Contracts of Sale, to become subject to any Encumbrances other than the Permitted Encumbrances. Grantor shall give Beneficiary Notice of any default under any Lien and Notice of any foreclosure or threat of foreclosure.

     Section 5.2 Transfer of the Property.

     Grantor will not Transfer, or contract to Transfer, all or any part of the Property or any legal or beneficial interest therein (except for Transfers of the Equipment permitted by Section 5.3 (Removal, etc. of Equipment).

     Section 5.3 Removal, etc. of Equipment.

     Except to the extent permitted by the following sentence, none of the Improvements or Equipment shall be removed, demolished or materially altered, without the prior written consent of the Beneficiary. Grantor may remove and dispose of, free from the Lien of this Deed of Trust, such Equipment as from time to time becomes worn out or obsolete, provided that, either (a) at the time of, or prior to, such removal, any such Equipment is replaced with other Equipment which is free from Liens other than Permitted Encumbrances and has a value at least equal to that of the replaced Equipment (and by such removal and replacement Grantor shall be deemed to have subjected such Equipment to the Lien of this Deed of Trust), or (b) so long as a prepayment may be made without penalty pursuant to the Note, such Equipment is sold at fair market value for cash and the net cash proceeds received from such disposition are paid over promptly to Beneficiary to be applied to the prepayment of the principal of the Loan.

     Section 5.4 Additional Improvements.

     Grantor will not construct or permit to be constructed any Improvements for which costs exceed $1,000,000 in the aggregate other than those presently on the Land without the prior written consent of Beneficiary, which consent shall not be unreasonably withheld. Grantor will complete and pay for, within a reasonable time, any Improvements which Grantor is permitted to construct on the Land. Grantor will construct and erect any permitted Improvements (a) strictly in accordance with all applicable Laws and any private restrictive covenants, (b) entirely on lots or parcels of the Land, (c) so as not to encroach upon any easement or right of way or upon the land of others, and (d) wholly within any building restriction lines applicable to the Land.

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     Section 5.5 Restrictive Covenants, Zoning, etc.

     Without the prior written consent of Beneficiary, which consent shall not be unreasonably withheld, Grantor will not initiate, join in, or consent to any change in, any restrictive covenant, easement, zoning ordinance, or other public or private restrictions, limiting or defining the uses which may be made of the Property. Grantor will (a) promptly perform and observe, and cause to be performed and observed, all of the terms and conditions of all material agreements affecting the Property, and (b) do or cause to be done all things necessary to preserve intact and unimpaired any and all easements, appurtenances and other interests and rights in favor of, or constituting any portion of, the Property.

     Section 5.6 Prohibition on Hazardous Materials.

     The Grantor will not cause, commit, permit or allow to continue any violation of any Environmental Requirement by any Person on or with respect to the Property. The Grantor will not place, install, store, spill, leak, dispose of or release, or cause, commit, permit, or allow the placement, installation, storage, spilling, leaking, disposal or release of, any Hazardous Materials on the Property and will keep the Property free of all Hazardous Materials Contamination.

ARTICLE VI
EVENTS OF DEFAULT

     The occurrence of any one or more of the following shall constitute an “Event of Default” under this Deed of Trust:

     Section 6.1 Representations and Warranties.

     Any representation or warranty contained in this Deed of Trust, or in any other document, certificate or opinion delivered to Beneficiary in connection with the Loan, proves at any time to be incorrect or misleading in any material respect.

     Section 6.2 Payment Obligations.

     Grantor fails to promptly pay any of the Obligations when and as provided in the Financing Documents, subject to the notice and cure provisions contained in the Financing Documents.

     Section 6.3 Transfer of the Property; Encumbrances.

     Grantor fails to comply with Section 5.1 (Encumbrances) or Section 5.2 (Transfer of the Property).

     Section 6.4 Insurance Obligations.

     Grantor fails to promptly perform or comply with any of Grantor’s obligations in Section 4.2 (Insurance).

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     Section 6.5 Hazardous Materials.

     Grantor fails to promptly perform or comply with any of the terms and conditions set forth in Section 4.17 (Hazardous Materials; Contamination) or Section 5.6 (Prohibition on Hazardous Materials).

     Section 6.6 Other Obligations.

     Grantor fails to promptly perform or comply with any of the Obligations (other than those expressly described in other Sections of this ARTICLE VI), and such failure continues uncured for a period of thirty (30) days after Notice from Beneficiary to Grantor, unless the nature of the failure is such that (a) it cannot be cured within the thirty (30) day period, (b) Grantor institutes corrective action within the thirty (30) day period and (c) Grantor diligently pursues such action and completes the cure within ninety (90) days or as promptly as reasonably possible under the circumstances.

     Section 6.7 Event of Default Under Other Financing Documents.

     An Event of Default (as defined therein) occurs under any of the Financing Documents other than this Deed of Trust.

     Section 6.8 Change in Zoning or Public Restriction.

     Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented, that limits or defines the uses which may be made of the Property such that the present or intended use of the Property as a Facility, would be in violation of such zoning ordinance or regulation or public restriction, as changed, and not permitted as a pre-existing, non-conforming use.

     Section 6.9 Default Under Other Lien Documents.

     A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion of the Property, including, without limitation, any Permitted Encumbrances.

     Section 6.10 Voluntary Bankruptcy, etc.

     Grantor or Guarantor (a) applies for, or consents in writing to, the appointment of a receiver, trustee or liquidator of Grantor or Guarantor or the Property or of all or substantially all of Grantor’s or Guarantor’s other assets, or (b) files a voluntary petition in bankruptcy or admits in writing its inability to pay its debts as they become due, or (c) makes a general assignment for the benefit of creditors, or (d) files a petition or an answer seeking a reorganization (other than a reorganization not involving the liabilities of Grantor or Guarantor) or an arrangement with creditors or takes advantage of any bankruptcy or insolvency law, or (e) files an answer admitting the material allegations of a petition filed against Grantor or Guarantor in any bankruptcy, reorganization or insolvency proceeding.

     Section 6.11 Involuntary Bankruptcy, etc.

     An order, judgment or decree is entered by any court of competent jurisdiction on the application of a creditor adjudicating Grantor or Guarantor as bankrupt or insolvent, or appointing a receiver, trustee or liquidator of Grantor, Guarantor or of the Property, or of all or

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substantially all of Grantor’s or Guarantor’s other assets, and such order, judgment or decree continues unstayed and in effect for a period of ninety (90) days from the date entered.

     Section 6.12 Execution; Attachment.

     Any execution or attachment is levied against the Property, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied.

     Section 6.13 Judgment.

     Unless adequately covered by insurance in the opinion of Beneficiary, the entry of a final, non-appealable judgment for the payment of money involving more than $100,000 against Grantor or Guarantor and the failure by Grantor or Guarantor, respectively, to discharge the same, or cause it to be discharged, or bonded off to Beneficiary’s satisfaction, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered.

     Section 6.14 Change in Business Status.

     Unless the written consent of Beneficiary is previously obtained, the sale of all or substantially all of the business assets of Grantor, or the commencement of any proceeding to dissolve or liquidate Grantor, or the occurrence of any change in the form of business entity through which Grantor presently conducts its business, or the occurrence of any merger or consolidation involving Grantor.

     Section 6.15 Default Under Other Indebtedness.

     Grantor fails to pay any indebtedness of Grantor (other than the Loan) owed to Beneficiary when and as due and payable (whether by acceleration or otherwise).

     Section 6.16 Swap Default.

     An event occurs which gives the Beneficiary the right or option to terminate any Swap Contract which is secured by this Deed of Trust.

     Section 6.17 Dissolution of Grantor, etc.

     Without Beneficiary’s prior express written consent thereto, (a) Grantor is dissolved either pursuant to the provisions of its operating agreement, by operation of law, or in any other manner, voluntarily or otherwise; (b) the operating agreement of Grantor is terminated pursuant to any of its provisions or by operation of law, or amended or modified in any material respect; (c) if any member of Grantor either directly or indirectly sells, assigns, mortgages, pledges, hypothecates, transfers or otherwise encumbers or permits to be encumbered any or all of his, her or its interest in Grantor (other than for the benefit of Beneficiary) or withdraws voluntarily or involuntarily (by operation of law or otherwise) from Grantor; or (d) any new member is admitted to Grantor.

     Section 6.18 Management of the Facility.

     Sunrise Senior Living Management, Inc. or an entity controlled by Sunrise Senior Living, Inc. ceases to operate and manage the Facility.

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     Section 6.19 Appraisals.

     Grantor fails to promptly perform or comply with any of the terms and conditions set forth in Section 4.23 (Appraisals).

ARTICLE VII
RIGHTS AND REMEDIES

     Upon the occurrence of any Event of Default, Beneficiary, or the Trustees at the direction of Beneficiary, may at any time thereafter exercise any of the following rights, powers or remedies:

     Section 7.1 Acceleration.

     Beneficiary may declare (without Notice to Grantor and without presentment, demand, protest or notice of protest or of dishonor, all of which Grantor hereby waives) the Obligations to be immediately due and payable.

     Section 7.2 Foreclosure.

     The Trustees, personally or by their agent or attorneys, may sell the Property, or any part or parts thereof, and all estate, right, title, interest, claim and demand therein, at public auction at such time and place and upon such terms and conditions as the Trustees may deem appropriate or as may be required or permitted by applicable law, after having first advertised the time, place and terms of sale in accordance with applicable law. In the event of any such sale, the Beneficiary may bid for and purchase the Property (or such portion thereof as may be offered for sale) and shall be entitled to apply all or any part of the amount secured by this Deed of Trust as a credit to the purchase price. At any foreclosure sale, such portion of the Property as is offered for sale may, at the Beneficiary’s option, be offered for sale for one total price, and the proceeds of such sale accounted for in one account without distinction between the items of security or without assigning to them any proportion of such proceeds, the Grantor hereby waiving the application of any doctrine of marshalling. If less than all of the Property is sold at foreclosure and any of the Obligations remain outstanding after the sale proceeds are applied thereto, this Deed of Trust shall continue as a lien on the Property remaining unsold, and the Beneficiary may at any time thereafter direct the Trustees to sell the same as provided above.

     Section 7.3 Application of Proceeds.

     In the event of a foreclosure sale of the Property, either judicially or by private power of sale, the proceeds of said sale shall be applied, unless applicable statutes shall specify otherwise, first, to the expenses of such sale and of all proceedings in connection therewith, including attorneys’; and trustee’s fees, then to insurance premiums, liens, assessments, taxes and charges including utility charges advanced by the Beneficiary together with interest at the interest rate provide in the Note, this Deed of Trust or the Financing Documents, and finally the remainder, if any, shall be paid to the Grantor or as otherwise may be required by the provisions of applicable law.

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     Section 7.4 No Reinstatement.

     Except as otherwise provided by applicable law, if a Default shall have occurred and the Beneficiary or the Trustees shall have commenced to exercise any of the remedies permitted hereunder, then a tender of payment by the Grantor or by anyone on behalf of the Grantor of the amount necessary to satisfy all sums due hereunder, or the acceptance by the Beneficiary of any such payment so tendered, shall not, without the prior consent of the Beneficiary, constitute a reinstatement of the Note or this Deed of Trust.

     Section 7.5 Taking Possession or Control of the Property.

     As a matter of right without regard to the adequacy of the security, and to the extent permitted by law without Notice to Grantor, Beneficiary shall be entitled, upon application to a court of competent jurisdiction, to the immediate appointment of a receiver for all or any part of the Property and the Rents, whether such receivership be incidental to a proposed sale of the Property or otherwise, and Grantor hereby consents to the appointment of such a receiver. In addition, to the extent permitted by Law, and with or without the appointment of a receiver, or an application therefor, Beneficiary may (a) enter upon, and take possession of (and Grantor shall surrender actual possession of), the Property or any part thereof, without Notice to Grantor and without bringing any legal action or proceeding, or, if necessary by force, legal proceedings, ejectment or otherwise, and (b) remove and exclude Grantor and its agents and employees therefrom.

     Section 7.6 Management of the Property.

     Upon obtaining possession of the Property or upon the appointment of a receiver as described in Section 7.5 (Taking Possession or Control), Beneficiary, the Trustees or the receiver, as the case may be, may, at their sole option, (a) make all necessary or proper repairs and Additions to or upon the Property, (b) operate, maintain, control, make secure and preserve the Property, (c) receive all Rents, and (d) complete the construction of any unfinished Improvements on the Property and, in connection therewith, continue any and all outstanding contracts for the erection and completion of such Improvements and make and enter into any further contracts which may be necessary, either in their or its own name (the cost of completing the Improvements shall be Expenses secured by this Deed of Trust and accrue interest as set forth in Section 4.19 (Reimbursement; Interest)). In so doing, Beneficiary, the Trustees or such receiver shall have the right to manage the Property and to carry on the business of Grantor and may exercise all of the rights and powers of Grantor, including, but without limiting the generality of the foregoing, the right to lease the Property, to cancel, modify, renew or extend any Lease or sub-lease of the Property and to carry on any contracts entered into by Grantor with respect to the Property. Beneficiary, the Trustees or such receiver shall be under no liability for, or by reason of, any such taking of possession, entry, holding, removal, maintaining, operation or management, except for willful misconduct. Any Rents received shall be applied (a) first, to pay all Expenses, and (b) the balance, if any, to payment of the other Obligations. Grantor shall pay on demand to Beneficiary, the receiver or the Trustees (as the case may be) the amount of any deficiency between (a) the Rents received by Beneficiary, the receiver or the Trustees, and (b) all Expenses incurred together with interest thereon at the Reimbursement Rate as provided in Section 4.19 (Reimbursement; Interest). The exercise of the remedies provided in this Section shall not cure or waive any Event of Default, and the enforcement of such remedies, once commenced, shall continue for so long as

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Beneficiary shall elect, notwithstanding the fact that the exercise of such remedies may have, for a time, cured the original Event of Default.

     Section 7.7 Uniform Commercial Code.

     Beneficiary may proceed under the Uniform Commercial Code as to all or any part of the Personalty, and in conjunction therewith may exercise all of the rights, remedies and powers of a secured creditor under the Uniform Commercial Code. Upon the occurrence of any Event of Default, Grantor shall assemble all of the Equipment and make the same available within the Improvements. Any notification required by the Uniform Commercial Code with respect to a sale or other disposition of Personalty shall be deemed reasonably and properly given if sent in accordance with the Notice provision of this Deed of Trust at least ten (10) days before any such sale or disposition. Disposition of the Personalty shall be deemed commercially reasonable if made pursuant to a public sale advertised at least twice in a newspaper of general circulation in the community where the Property is located. Proceeds from any such sale shall be applied as follows: (a) first, to pay all Expenses incurred in connection with the sale, and (b) the balance, if any, to payment of the other Obligations.

     Section 7.8 Other Remedies.

     Beneficiary shall have the right from time to time to enforce any legal or equitable remedy against Grantor and to sue Grantor for any sums (whether interest, damages for failure to pay principal or any installments thereof, taxes, or any other sums required to be paid under the terms of this Deed of Trust, as the same become due), without regard to whether or not any other of the Obligations shall be due, and without prejudice to the right of Beneficiary thereafter to enforce any appropriate remedy against Grantor, including, without limitation, an action of foreclosure or an action for specific performance for a Default by Grantor existing at the time such earlier action was commenced.

     Section 7.9 Remedies, etc. Cumulative.

     Each right, power and remedy of Beneficiary or the Trustees as provided for in this Deed of Trust, or in any of the other Financing Documents or now or hereafter existing by Law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Deed of Trust, or in any of the other Financing Documents or now or hereafter existing by Law, and the exercise or beginning of the exercise by Beneficiary or the Trustees of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by Beneficiary or the Trustees of any or all such other rights, powers or remedies.

     Section 7.10 No Waiver by Beneficiary etc.

     No course of dealing or conduct between Beneficiary, the Trustees and Grantor shall be effective to amend, modify or change any provisions of this Deed of Trust or the other Financing Documents. No failure or delay by Beneficiary or the Trustees to insist upon the strict performance of any term, covenant or agreement of this Deed of Trust or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, covenant or agreement or of any such breach, or preclude Beneficiary or the Trustees from exercising any such right, power or remedy at any

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later time or times. By accepting payment after the due date of any of the Obligations, Beneficiary or the Trustees shall not be deemed to waive the right either to require prompt payment when due of all other Obligations, or to declare an Event of Default for failure to make prompt payment of any such other Obligations. Neither Grantor nor any other Person now or hereafter obligated for the payment of the whole or any part of the Obligations shall be relieved of such liability by reason of (a) the failure of Beneficiary to comply with any request of Grantor or of any other Person to take action to foreclose this Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust, or (b) any agreement or stipulation between any subsequent owner or owners of the Property and Beneficiary, or (c) Beneficiary extending the time of payment or modifying the terms of this Deed of Trust or any of the other Financing Documents without first having obtained the consent of Grantor or such other Person. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate Lien on the Property, Beneficiary may release any Person at any time liable for any of the Obligations or any part of the security for the Obligations, and may extend the time of payment or otherwise modify the terms of this Deed of Trust or any of the other Financing Documents without in any way impairing or affecting the Lien of this Deed of Trust or the priority of this Deed of Trust over any subordinate Lien. The holder of any subordinate Lien shall have no right to terminate any Lease regardless of whether or not such Lease is subordinate to this Deed of Trust. Beneficiary may resort to the security or collateral described in this Deed of Trust or any of the other Financing Documents in such order and manner as Beneficiary may elect in its sole discretion.

     Section 7.11 Waivers and Agreements Regarding Remedies.

     To the full extent Grantor may do so, Grantor hereby:

               (a) agrees that it will not at any time plead, claim or take advantage of any Laws now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and waives and releases all rights of redemption, valuation, appraisement, stay of execution, extension and notice of election to accelerate the Obligations;

               (b) waives all rights to a marshalling of the assets of Grantor, including without limitation, the Property, or to a sale in the inverse order of alienation in the event of a foreclosure of the Property, and agrees not to assert any right under any Law pertaining to the marshalling of assets, the sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatsoever to defeat, reduce or affect the right of Beneficiary under the terms of this Deed of Trust to a sale of the Property without any prior or different resort for collection, or the right of Beneficiary to the payment of the Obligations out of the proceeds of sale of the Property in preference to every other claimant whatsoever;

               (c) waives any right to bring or utilize any defense, counterclaim or setoff, other than one which denies the existence or sufficiency of the facts upon which any foreclosure action is grounded. If any defense, counterclaim or setoff, other than one permitted by the preceding clause, is timely raised in a foreclosure action, such defense, counterclaim or setoff shall be dismissed. If such defense, counterclaim or setoff is based on a Claim which could be tried in an action for money damages, such Claim may be brought in a

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separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action;

               (d) waives and relinquishes any and all rights and remedies which Grantor may have or be able to assert by reason of the provisions of any Laws pertaining to the rights and remedies of sureties; and

               (e) any requirement that the Beneficiary or the Trustees present evidence or otherwise proceed before any court, clerk or other judicial or quasi-judicial body before exercising the power of sale contained in this Deed of Trust.

     Section 7.12 Setoff.

     Beneficiary may set off against and apply any funds of Grantor on deposit with, or under the control of, Beneficiary to the payment of the Obligations, without Notice and without resort to any judicial proceeding.

ARTICLE VIII
THE TRUSTEES

     Section 8.1 Liability of the Trustees.

     The Trustees shall have no liability or responsibility for, and make no warranties in connection with, the validity or enforceability of any of the Financing Documents or the description, value or status of title to the Property. The Trustees shall be protected in acting upon any notice, request, consent, demand, statement, note or other paper or document believed by them to be genuine and to have been signed by the party or parties purporting to sign the same. The Trustees shall not be liable for any error of judgment, nor for any act done or step taken or omitted, nor for any mistakes of law or fact, nor for anything which the Trustees may do or refrain from doing in good faith, nor generally shall either of the Trustees have any accountability hereunder except for willful misconduct and/or gross negligence. The powers and duties of the Trustees hereunder may be exercised through such attorneys, agents or servants as they may appoint, and the Trustees shall have no liability or responsibility for any act, failure to act, negligence or willful conduct of such attorney, agent or servant, so long as they were selected with reasonable care. In addition, the Trustees may consult with legal counsel selected by them and the Trustees shall have no liability or responsibility by reason of any act or failure to act in accordance with the opinions of such counsel. The Trustees may act hereunder and may sell or otherwise dispose of the Property or any part thereof as herein provided, although the Trustees have been, may now be or may hereafter be, attorneys, officers, agents or employees of Beneficiary, in respect of any matter of business whatsoever. The Trustees, however, shall have no obligation to sell all or any part of the Property following an Event of Default or to take any other action authorized to be taken by them hereunder except upon the demand of Beneficiary.

     Section 8.2 Substitution of Trustees, etc.

     Beneficiary shall have, and is hereby granted with warranty of further assurances, the irrevocable power to appoint a new or replacement or substitute Trustee or Trustees. Such

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power may be exercised at any time without notice, without cause and without specifying any reason therefor, by filing for record in the office where this Deed of Trust is recorded a Deed of Appointment. The power of appointment of a successor Trustee or Trustees may be exercised as often as and whenever Beneficiary may choose, and the exercise of the power of appointment, no matter how often, shall not be an exhaustion thereof. Upon the recordation of such Deed or Deeds of Appointment, the Trustee or Trustees so appointed shall thereupon, without any further act or deed of conveyance, become fully vested with identically the same title and estate in and to the Property and with all the rights, powers, trusts and duties of their, his or its predecessor in the trust hereunder with like effect as if originally named as Trustees or as one of the Trustees hereunder. Whenever in this Deed of Trust reference is made to the Trustees, it shall be construed to mean the Trustee or Trustees for the time being, whether original or successors or successor in trust. All title, estate, rights, powers, trusts and duties hereunder given or appertaining to or devolving upon the Trustees shall be in each of the Trustees so that any action hereunder or purporting to be hereunder of any one of the original or any successor Trustees shall for all purposes be considered to be, and as effective as, the action of all the Trustees.

ARTICLE IX
MISCELLANEOUS

     Section 9.1 Application of Moneys.

     Whenever it is provided in this Deed of Trust for any moneys to be applied to payment of the Obligations, and no express order of payment is set forth, such moneys shall be applied to the Obligations in such order and manner as Beneficiary may determine in its sole discretion.

     Section 9.2 Further Assurances.

     At any time, and from time to time, upon request by Beneficiary, Grantor will, at Grantor’s expense, (a) correct any defect, error or omission which may be discovered in the form or content of any of the Financing Documents, and (b) make, execute, deliver and record, or cause to be made, executed, delivered and recorded, any and all further instruments, certificates, and other documents as may, in the opinion of Beneficiary, be necessary or desirable in order to complete, perfect or continue and preserve the Lien of this Deed of Trust. Upon any failure by Grantor to do so, Beneficiary may make, execute and record any and all such instruments, certificates and documents for and in the name of Grantor, all at the sole expense of Grantor, and Grantor hereby irrevocably appoints Beneficiary the agent and attorney-in-fact of Grantor to do so, this appointment being coupled with an interest. With respect to any financing statement, Grantor agrees that a carbon, photographic or other reproduction of a security agreement or a financing statement is sufficient as a financing statement for purposes of Section 28.9-402 of the Uniform Commercial Code of the State.

     Section 9.3 Notices.

     All Notices shall be deemed to have been received when delivered by hand, when delivered to an overnight courier, or three (3) days following deposit of such Notice in the mail in the manner provided for in the definition of Notices in ARTICLE I (Definitions; Rules of Construction).

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     Section 9.4 Successors and Assigns.

     All of the grants, covenants, terms, provisions and conditions of this Deed of Trust shall run with the Land and shall apply to and bind the successors and assigns of Grantor (including any permitted subsequent owner of the Property), and inure to the benefit of Beneficiary, its successors and assigns and to the successors in trust of the Trustees.

     Section 9.5 No Warranty by Beneficiary or Trustees.

     By inspecting the Property or by accepting or approving anything required to be observed, performed or fulfilled by Grantor or to be given to Beneficiary or the Trustees pursuant to this Deed of Trust or any of the other Financing Documents, Beneficiary and the Trustees shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Beneficiary or the Trustees.

     Section 9.6 Amendments.

     This Deed of Trust may not be modified or amended except by an agreement in writing, signed by the party against whom enforcement of the change is sought.

     Section 9.7 Illegality.

     If fulfillment of any provision of this Deed of Trust or any transaction related hereto shall at any time involve transcending the limit of validity prescribed by Law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein contained, other than the provisions requiring Grantor to pay the Obligations, operates or would prospectively operate to invalidate this Deed of Trust in whole or in part, then such clause or provision only shall be void, as though not herein contained, and the remainder of this Deed of Trust shall remain operative and in full force and effect; and if such clause or provision requires Grantor to pay any of the Obligations, then at the sole option of Beneficiary, all of the Obligations shall become due and payable.

     Section 9.8 Assignments by Beneficiary.

     Beneficiary may, without notice to, or consent of, Grantor, sell, assign or transfer to or participate with any Person or Persons all or any part of the Obligations, and each such Person or Persons shall have the right to enforce the provisions of this Deed of Trust and any of the other Financing Documents as fully as Beneficiary, provided that Beneficiary shall continue to have the unimpaired right to enforce the provisions of this Deed of Trust and any of the other Financing Documents as to so much of the Obligations that Beneficiary has not sold, assigned or transferred. In connection with the foregoing, Beneficiary shall have the right to disclose to any such actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and any of the other Financing Documents or otherwise. Notwithstanding the foregoing provisions of this Section 9.8, Beneficiary shall give notice to Grantor of any sale, assignment, transfer or participation to a Person who is an affiliate or successor of Beneficiary either before or after the transaction has occurred as Beneficiary shall determine; however, Beneficiary shall give notice to Grantor in advance of any such transaction with a non-affiliate.

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     Section 9.9 Governing Law.

     This Deed of Trust shall be construed, governed and enforced in accordance with the Laws in effect from time to time in the State.

     Section 9.10 Counterparts.

     This Deed of Trust may be executed in any number of duplicate originals, each of which shall be an original but all of which together shall constitute one and the same instrument.

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     IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be executed under seal as of the day and year first written above.

WITNESS OR ATTEST:	GRANTOR:
	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member

/s/	By:	/s/	(SEAL)
		Name:
		Title:

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August ___, 2007, before me,                                                              , a Notary Public in and for the Commonwealth shown above, appeared                                         , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as                     of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/

Notary Public

My Commission Expires:                                         

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EXHIBIT A

PROPERTY DESCRIPTION

Lot 162 in Square 1989 in a subdivision made by Sunrise Connecticut Avenue Assisted Living, LLC, and others, as per plat recorded in Liber No. 194 at folio 37 among the Records of the Office of the Surveyor of the District of Columbia.

Names and Addresses of All Parties
to Deed of Trust:

Grantor:	Sunrise Connecticut Avenue Assisted Living L.L.C.
	c/o Sunrise Senior Living, Inc.
	7902 Westpark Drive
	McLean, Virginia 22102
Trustee(s):	Alexandra Johns and Ellen-Elizabeth Lee
	7926 Jones Branch Drive
	McLean, VA 22102
Grantee:	Chevy Chase Bank, F.S.B.
	7926 Jones Branch Drive
	McLean, VA 22102

EX-10.13

Exhibit 10.13

FIRST AMENDMENT TO LOAN AGREEMENT

(Loan A)

     THIS FIRST AMENDMENT TO LOAN AGREEMENT (this “Agreement”) is made as of April 15, 2008, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and CHEVY CHASE BANK, F.S.B, a federally chartered savings bank (“Agent” or in its individual capacity, “Chevy Chase”), as Agent for the lenders party hereto (individually a “Lender” and collectively, “Lenders”).

RECITALS

     A. Borrower obtained a loan from the Lenders in the maximum principal amount of Thirty Million and No/Dollars ($30,000,000,00) (“Loan A”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower and the Lenders (the same, as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan A is evidenced by, and repaid with interest in accordance with the provisions of (i) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to Chevy Chase in the principal amount of Twenty Million and No/Dollars ($20,000,000.00) (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Chevy Chase Note”) and (ii) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to M.B. Financial, N.A., a national banking association in the principal amount of Ten Million and No/Dollars ($10,000,000.00) (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “MB Financial Note” and, collectively with Chevy Chase Note, the “Notes”).

     C. Loan B is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007 (the “Guaranty”).

     D. The Borrower has requested and the Agent has agreed to (i) waive the delivery of financial statements for the fiscal quarter ending September 30, 2007, (ii) extend the delivery deadline for financial statements for the fiscal quarter ending March 31, 2008 and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Agent agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. Borrower hereby acknowledges and agrees that pursuant to the terms of Section 7.1 (Financial Statements) of the Loan Agreement, Borrower is required to deliver to Agent and Lenders, draft, internally-prepared quarterly financial statements of Guarantor within ninety (90) days of the close of each fiscal quarter. Borrower and Agent hereby agree (i) the requirement to deliver the quarterly financial statement of Guarantor for the fiscal quarter ending September 30, 2007 is waived and (ii) the quarterly financial statement of Guarantor for the fiscal quarter ending March 31, 2008 shall be due no later than August 20, 2008 rather than by June 30, 2008.

     3. Subsection (d) of Section 7.1 (Financial Statements) of the Loan Agreement is hereby amended and restated in its entirety as follows:

     “(d) The annual financial statement for the Guarantor for the fiscal year ending December 31, 2006, as such financial statement was submitted to the Securities and Exchange Commission, no later than April 15, 2008 and as soon as available, but not later than July 31, 2008, restated audited statements for any periods through fiscal year 2007.”

     4. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Loan Agreement, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Borrower under the Loan Agreement. Except as expressly modified herein, the terms, provisions and covenants of the Loan Agreement are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Agent may rely on a telecopy of any signature of Borrower. Agent agrees that Borrower may rely on a telecopy of this Agreement executed by Agent.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, Borrower and Agent have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member
		By:	/s/ James S. Pope	(SEAL)
			Name: James S. Pope
			Title: Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On April 15, 2008, before me, Alma M. Tomlin, a Notary Public in and for the Commonwealth shown above, appeared James S. Pope, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Alma M. Tomlin  

Notary Public 

My Commission Expires:
My Notarial Registration Number is:

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	AGENT:
WITNESS:	CHEVY CHASE BANK, F.S.B., as Agent and Lender
/s/	By:	/s/	(SEAL)
		Name:
		Title:

COMMONWEALTH/STATE OF                     , COUNTY/CITY OF                     , TO WIT:

     On April       , 2008, before me,                                         , a Notary Public in and for the Commonwealth shown above, appeared                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he/she executed the same in his authorized capacity as                      of Chevy Chase Bank, F.S.B, and that by his/her signature on the instrument the entity upon behalf of which he/she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/  

Notary Public 

My Commission Expires:                                         
My Notarial Registration Number is:                                         

4

EX-10.14

Exhibit 10.14

FIRST AMENDMENT TO GUARANTY OF PAYMENT

(Loan A)

     THIS FIRST AMENDMENT TO GUARANTY OF PAYMENT (Loan A) (this “Agreement”) is made as of September 2008, by and between SUNRISE SENIOR LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) and CHEVY CHASE BANK, F.S.B., a federal savings bank, its successors and assigns, as Agent (“Agent”) for Lenders (individually a “Lender” and collectively, “Lenders”) party to the Loan Agreement (as hereinafter defined).

RECITALS

     A. Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (“Borrower”), obtained a loan from Lenders in the aggregate principal amount of Thirty Million and No/Dollars ($30,000,000.00) (the “Loan A”), which is one of two simultaneous loans made by Chevy Chase Bank, F.S.B. to Borrower.

     B. Loan A was made pursuant to the provisions of a certain Loan and Security Agreement (Loan A) dated August 28, 2007, by and among Borrower, Agent and Lenders, as amended by that certain First Amendment to Loan Agreement (Loan A) dated April 15, 2008 (as further amended, modified, restated, substituted, extended and renewed at any time and from time to time, collectively, the “Loan Agreement”).

     C. Loan A is evidenced by, and repaid with interest in accordance with the provisions of one or more Deed of Trust Note As dated August 28, 2007, from Borrower payable to Lenders in the aggregate principal amount of Thirty Million and No/Dollars ($30,000,000.00) (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, collectively, the “Note”).

     D. Guarantor executed a Guaranty of Payment (Loan A) dated August 28, 2007 (the “Guaranty”) pursuant to which Guarantor guaranteed Borrower’s obligations under the Loan Agreement and the Note.

     E. Borrower and Guarantor have requested and Lenders have agreed to (i) waive any defaults which have occurred under those certain financial covenants described in Section 9(c) of the Guaranty for the fiscal year ending December 31, 2007 and the fiscal quarters ending March 31, 2008 and June 30, 2008 and any defaults which may occur during the fiscal quarter ending September 30, 2008; and (ii) make such other changes to the Guaranty as are more particularly set forth herein.

     F. As a condition precedent to the agreements referenced above, Agent has required that this Agreement be executed and delivered to Agent on behalf of Lenders.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Guarantor, Agent and Lenders agree as follows:

     1. Guarantor, Agent and Lenders agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. The Guaranty is hereby amended as follows:

          (a) The following defined terms are hereby added to the end of Section 9(c) (Covenants):

     “Cash Equivalents” means any investment security issued by the United States Government and backed by the full faith and credit of the United States Government.

     “Required Liquidity” has the meaning set forth in Section 9(c)(iv).

          (b) A new subsection (iv) is hereby added to Section 9(c) (Covenants) as follows:

     (d) Required Liquidity. Guarantor will maintain at all times, tested as of the end of each calendar month until Guarantor has complied with the Updated Reporting Requirements (as defined in the Sunrise Senior Financing Agreement) and Guarantor is not otherwise in default under the Sunrise Senior Financing Agreement, liquidity of not less than $50,000,000 composed of availability under the Sunrise Senior Financing Agreement plus up to not more than $50,000,000 in unrestricted cash and unrestricted Cash Equivalents (the “Required Liquidity”). Guarantor shall provide a certificate of compliance with the Required Liquidity on or before fifteen (15) days after the end of each such calendar month. The face amounts of letters of credit outstanding under the Sunrise Senior Financing Agreement and the outstanding amounts of the loans made under the Sunrise Senior Financing Agreement will be deducted from the maximum availability under the Sunrise Senior Financing Agreement for purposes of determining compliance with “Required Liquidity.” During such time as Guarantor is required to comply with the Required Liquidity covenant, Guarantor must also provide evidence of compliance with the Required Liquidity covenant contemporaneously when provided to the Sunrise Bank Group pursuant to the Sunrise Senior Financing Agreement.

     3. Guarantor hereby acknowledges and agrees that, pursuant to the terms of Section 9(c) of the Guaranty, Guarantor is required to comply with certain financial covenants more particularly described therein (the “Financial Covenants”). Guarantor, Agent and Lenders

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hereby agree to waive compliance with the Financial Covenants for the fiscal year ending December 31, 2007 and the fiscal quarters ending March 31, 2008 and June 30, 2008. Additionally, Guarantor hereby acknowledges and agrees that Guarantor is not expected to be in compliance with the leverage ratio and the fixed charge coverage ratio for the fiscal quarter ending September 30, 2008. Guarantor, Agent and Lenders hereby agree to waive compliance with subsections 9(c)(ii) (Leverage Ratio) and 9(c)(iii) (Fixed Charge Coverage Ratio) for the fiscal quarter ending September 30, 2008.

     4. Guarantor hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Guaranty, as amended hereby. Guarantor agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Guarantor under the Guaranty. Except as expressly modified herein, the terms, provisions and covenants of the Guaranty are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. Guarantor shall pay to Agent at the time this Agreement is executed and delivered (i) a waiver fee in the amount of $3,000.00 for the pro rata benefit of Lenders, and (ii) all fees, costs, charges, taxes and other expenses incurred by Agent and its counsel in connection with this Agreement.

     6. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Guarantor agrees that Agent and Lenders may rely on a telecopy of any signature of Guarantor. Agent and Lenders agree that Guarantor may rely on a telecopy of this Agreement executed by Agent and Lenders.

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     IN WITNESS WHEREOF, Guarantor and Agent have executed this Agreement under seal as of the date and year first written above.

	GUARANTOR:
WITNESS OR ATTEST:	SUNRISE SENIOR LIVING, INC.
	By:	Sunrise Senior Living, Inc.,
/s/		By:	/s/ Richard J. Nadeau	(SEAL
			Name: Richard J. Nadeau
			Title:   Chief Financial Officer
	AGENT:
WITNESS:	CHEVY CHASE BANK, F.S.B., as Agent
/s/	By:	/s/		(SEAL)
		Name:
		Title:

AGREEMENT OF LENDERS

     The undersigned are each a “Lender” under the Loan Agreement and pursuant to Section 9(c) of the Guaranty each hereby consent to the waivers of the financial covenants as set forth in the Agreement.

     WITNESS signature and seal of the undersigned as of the date of the Agreement.

	LENDERS:
WITNESS:	CHEVY CHASE BANK, F.S.B., as Lender
/s/	By:	/s/ Name:	(SEAL)
		Title:
WITNESS:	MB FINANCIAL BANK, N.A., as Lender
/s/	By:	/s/ Jack H. Sharp Name: Jack H. Sharp	(SEAL)
		Title: Senior Vice President

EX-10.15

Exhibit 10.15

FIRST AMENDMENT TO LOAN AGREEMENT

(Loan B)

     THIS FIRST AMENDMENT TO LOAN AGREEMENT (this “Agreement”) is made as of April 15, 2008, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and CHEVY CHASE BANK, F.S.B. a federally chartered savings bank (“Lender”).

RECITALS

     A. Borrower obtained a loan from the Lender in the maximum principal amount of Ten Million and No/Dollars ($10,000,000.00) (“Loan B”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower and the Lender (the same, as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan B is evidenced by, and repaid with interest in accordance with the provisions of a Deed of Trust Note B dated August 28, 2007 from the Borrower payable to Lender in the principal amount of Ten Million and No/Dollars ($10,000,000.00) (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Note”).

     C. Loan B is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007 (the “Guaranty”).

     D. The Borrower has requested and the Lender has agreed to (i) waive the delivery of financial statements for the fiscal quarter ending September 30, 2007, (ii) extend the delivery deadline for financial statements for the fiscal quarter ending March 31, 2008 and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. Borrower hereby acknowledges and agrees that pursuant to the terms of Section 7.1 (Financial Statements) of the Loan Agreement, Borrower is required to deliver to Lender, draft, internally-prepared quarterly financial statements of Guarantor within ninety (90) days of

the close of each fiscal quarter. Borrower and Lender hereby agree (i) the requirement to deliver the quarterly financial statement of Guarantor for the fiscal quarter ending September 30, 2007 is waived and (ii) the quarterly financial statement of Guarantor for the fiscal quarter ending March 31, 2008 shall be due no later than August 20, 2008 rather than by June 30, 2008.

     3. Subsection (d) of Section 7.1 (Financial Statements) of the Loan Agreement is hereby amended and restated in its entirety as follows:

     “(d) The annual financial statement for the Guarantor for the fiscal year ending December 31, 2006, as such financial statement was submitted to the Securities and Exchange Commission, no later than April 15, 2008 and as soon as available, but not later than July 31, 2008, restated audited statements for any periods through fiscal year 2007.”

     4. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Loan Agreement, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Borrower under the Loan Agreement. Except as expressly modified herein, the terms, provisions and covenants of the Loan Agreement are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Lender may rely on a telecopy of any signature of Borrower. Lender agrees that Borrower may rely on a telecopy of this Agreement executed by Lender.

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     IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member
		By:	/s/ James S. Pope Name: James S. Pope	(SEAL)
			Title: Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On April 15, 2008, before me, Alma M. Tomlin, a Notary Public in and for the Commonwealth shown above, appeared James S. Pope, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Alma M. Tomlin Notary Public

My Commission Expires:                     
My Notarial Registration Number is:                     

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	LENDER:
WITNESS:	CHEVY CHASE BANK, F.S.B., as Agent and Lender
	By:	/s/	(SEAL)
		Name:
		Title:

COMMONWEALTH/STATE OF       , COUNTY/CITY OF       , TO WIT:

     On April    , 2008, before me,                     , a Notary Public in and for the Commonwealth shown above, appeared                     , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he/she executed the same in his authorized capacity as               of Chevy Chase Bank, F.S.B, and that by his/her signature on the instrument the entity upon behalf of which he/she acted, executed the instrument.

     WITNESS my hand and official seal.

Notary Public

My Commission Expires:                     
My Notarial Registration Number is:                     

4

EX-10.16

Exhibit 10.16

FIRST AMENDMENT TO GUARANTY OF PAYMENT

(Loan B)

     THIS FIRST AMENDMENT TO GUARANTY OF PAYMENT (Loan B) (this “Agreement”) is made as of September 2008, by and between SUNRISE SENIOR LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) and CHEVY CHASE BANK, F.S.B., a federal savings bank, its successors and assigns (“Lender”).

RECITALS

     A. Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (“Borrower”), obtained a loan from Lender in the principal amount of Ten Million and No/Dollars ($10,000,000.00) (the “Loan B”), which is one of two simultaneous loans made by Lender to Borrower.

     B. Loan B was made pursuant to the provisions of a certain Loan and Security Agreement (Loan B) dated August 28, 2007, by and between Borrower and Lender, as amended by that certain First Amendment to Loan Agreement (Loan B) dated April 15, 2008 (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, collectively, the “Loan Agreement”).

     C. Loan B is evidenced by, and repaid with interest in accordance with the provisions of a certain Deed of Trust Note B dated August 28, 2007, from Borrower payable to Lender in the original principal amount of Ten Million and No/Dollars ($10,000,000.00) (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Note”).

     D. Guarantor executed a Guaranty of Payment (Loan B) dated August 28, 2007 (the “Guaranty”) pursuant to which Guarantor guaranteed Borrower’s obligations under the Loan Agreement and the Note.

     E. Borrower and Guarantor have requested and Lender has agreed to (i) waive any defaults which have occurred under those certain financial covenants described in Section 9(c) of the Guaranty for the fiscal year ending December 31, 2007 and the fiscal quarters ending March 31, 2008 and June 30, 2008 and any defaults which may occur during the fiscal quarter ending September 30, 2008; and (ii) make such other changes to the Guaranty as are more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Guarantor and Lender agree as follows:

     1. Guarantor and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. The Guaranty is hereby amended as follows:

          (a) The following defined terms are hereby added to the end of Section 9(c) (Covenants):

     “Cash Equivalents” means any investment security issued by the United States Government and backed by the full faith and credit of the United States Government.

     “Required Liquidity” has the meaning set forth in Section 9(c)(iv).

          (b) A new subsection (iv) is hereby added to Section 9(c) (Covenants) as follows:

     (d) Required Liquidity. Guarantor will maintain at all times, tested as of the end of each calendar month until Guarantor has complied with the Updated Reporting Requirements (as defined in the Sunrise Senior Financing Agreement) and Guarantor is not otherwise in default under the Sunrise Senior Financing Agreement, liquidity of not less than $50,000,000 composed of availability under the Sunrise Senior Financing Agreement plus up to not more than $50,000,000 in unrestricted cash and unrestricted Cash Equivalents (the “Required Liquidity”). Guarantor shall provide a certificate of compliance with the Required Liquidity on or before fifteen (15) days after the end of each such calendar month. The face amounts of letters of credit outstanding under the Sunrise Senior Financing Agreement and the outstanding amounts of the loans made under the Sunrise Senior Financing Agreement will be deducted from the maximum availability under the Sunrise Senior Financing Agreement for purposes of determining compliance with “Required Liquidity.” During such time as Guarantor is required to comply with the Required Liquidity covenant, Guarantor must also provide evidence of compliance with the Required Liquidity covenant contemporaneously when provided to the Sunrise Bank Group pursuant to the Sunrise Senior Financing Agreement.

     3. Guarantor hereby acknowledges and agrees that, pursuant to the terms of Section 9(c) of the Guaranty, Guarantor is required to comply with certain financial covenants more particularly described therein (the “Financial Covenants”). Guarantor and Lender hereby agree to waive compliance with the Financial Covenants for the fiscal year ending December 31, 2007 and the fiscal quarters ending March 31, 2008 and June 30, 2008. Additionally, Guarantor hereby acknowledges and agrees that Guarantor is not expected to be in compliance with the leverage ratio and the fixed charge coverage ratio for the fiscal quarter ending September 30, 2008. Guarantor and Lender hereby agree to waive compliance with subsections 9(c)(ii)

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(Leverage Ratio) and 9(c)(iii) (Fixed Charge Coverage Ratio) for the fiscal quarter ending September 30, 2008.

     4. Guarantor hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Guaranty, as amended hereby. Guarantor agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Guarantor under the Guaranty. Except as expressly modified herein, the terms, provisions and covenants of the Guaranty are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. Guarantor shall pay to Lender at the time this Agreement is executed and delivered (i) a waiver fee in the amount of $1,000.00, and (ii) all fees, costs, charges, taxes and other expenses incurred by Lender and its counsel in connection with this Agreement.

     6. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Guarantor agrees that Lender may rely on a telecopy of any signature of Guarantor. Lender agrees that Guarantor may rely on a telecopy of this Agreement executed by Lender.

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     IN WITNESS WHEREOF, Guarantor and Lender have executed this Agreement under seal as of the date and year first written above.

WITNESS OR ATTEST:	GUARANTOR:
	SUNRISE SENIOR LIVING INC.
	By:	Sunrise Senior Living Inc.
/s/		By:	/s/ Richard J. Nadeau Name: Richard J. Nadeau	(SEAL)
			Title: Chief Financial Officer
	LENDER:
WITNESS:	CHEVY CHASE BANK, F.S.B.
/s/	By:	/s/		(SEAL)
		Name:
		Title:

EX-10.17

Exhibit 10.17

SECOND AMENDMENT TO LOAN AGREEMENT

(Loan A)

     THIS SECOND AMENDMENT TO LOAN AGREEMENT (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and CHEVY CHASE BANK, a division of Capital One, N.A. (“Agent” or in its individual capacity, “Chevy Chase”), as Agent for the lenders party hereto (individually a “Lender” and collectively, “Lenders”).

RECITALS

     A. Borrower obtained a loan from the Lenders in the maximum principal amount of Thirty Million and No/Dollars ($30,000,000.00) (“Loan A”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower and the Lenders, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 (the same, as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan A is evidenced by, and repaid with interest in accordance with the provisions of (i) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to Chevy Chase in the principal amount of Twenty Million and No/Dollars ($20,000,000.00), as amended by that certain First Amendment to Deed of Trust Note A dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Chevy Chase Note”) and (ii) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to M.B. Financial Bank, N.A., a national banking association in the principal amount of Ten Million and No/Dollars ($10,000,000.00), as amended by that certain First Amendment to Deed of Trust Note A dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “MB Financial Note” and, collectively with Chevy Chase Note, the “Notes”).

     C. Loan A is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment dated September 8, 2008 (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Guaranty”).

     D. The Borrower has requested and the Agent has agreed to (i) waive the Event of Default caused by the Borrower’s failure to comply with the occupancy requirement for the fiscal quarters ending March 31, 2009 and June 30, 2009, (ii) revise the financial reporting requirements and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Agent agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. The parties hereto acknowledge and agree (a) that the outstanding principal balance of Loan A as of the date hereof is $29,637,000 (b) that interest on the unpaid principal balance of Loan A has been paid through August 1, 2009 and (c) that the unpaid principal balance of Loan A, together with accrued and unpaid interest thereon, is due and owing subject to the terms of repayment hereinafter set forth, without defense or offset.

     3. Borrower hereby acknowledges and agrees that pursuant to the terms of Section 7.29 (Debt Service Ratio) of the Loan Agreement, Borrower is required to maintain, tested as of the end of each fiscal quarter during the term of the Loan, a Debt Service Ratio for the Facility of not less than 1.20 to 1.0 (the “Debt Service Covenant”). Borrower and Agent hereby acknowledge and agree that for the period commencing July 1, 2009 and ending December 2, 2009 the Debt Service Covenant will not be measured.

     4. Borrower hereby acknowledges and agrees that pursuant to the terms of Section 7.30 (Occupancy Covenant) of the Loan Agreement, Borrower is required to maintain at all times, tested as of the end of each fiscal quarter during the term of each Loan, a minimum average daily occupancy of eighty-five percent (85%), measured on a unit basis (the “Occupancy Covenant”). Pursuant to Section 9.3 of the Loan Agreement, the failure to comply with the Occupancy Covenant constitutes an Event of Default under each Loan Agreement. Agent hereby agrees to waive the Event of Default caused by the Borrower’s failure to comply with the Occupancy Covenant for the fiscal quarters ending March 31, 2009 and June 30, 2009.

     5. Subsection (c) of 7.1 (Financial Statements) of the Loan Agreement is hereby amended and restated in its entirety as follows:

     “(c) As soon as available but in no event later than the dates indicated, consolidated financial statements of Guarantor for the fiscal quarter ending September 30, 2009, no later than November 15, 2009, and for each fiscal quarter thereafter, within forty-five (45) days thereafter; such statements shall include a consolidated balance sheet and related consolidated statements of income and operations, shareholder’s equity and cash flows for such fiscal quarter.”

     6. Section 7.1 (Financial Statements) of the Loan Agreement is hereby amended by adding the following subsections (f) – (j) in their entirety as follows:

     “(f) As soon as available but in no event later than the 15^th day of each calendar month, commencing on September 15, 2009, certification by Guarantor

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of the amount of its Cash Balance (as defined in the Guaranty) as of the last day of the immediately preceding month.

     (g) As soon as available but in no event later than the 15^th day of each calendar month, commencing on September 15, 2009, a detailed report as to the occupancy levels within the facilities owned by Guarantor or its Affiliates as of the last day of the immediately preceding month.

     (h) As soon as available but in no event later than the 15^th day of each calendar month, commencing on September 15, 2009, a thirteen (13) week cash flow projection for Guarantor and its Affiliates dating from the fifteenth (15^th) of such calendar month.

     (i) Immediately after their preparation, written copies of any updates or additional information related to that certain long-term cash flow projection and analysis of expected liquidity previously delivered to Agent.

     (j) Concurrently with delivery to such lender of Guarantor, Borrower will make reasonable efforts to provide any additional written information or written reports provided by an authorized officer of Guarantor related to any cash flow projection or analysis of expected liquidity of Guarantor provided to any other lender of Guarantor.”

     7. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Loan Agreement, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Borrower under the Loan Agreement. Except as expressly modified herein, the terms, provisions and covenants of the Loan Agreement are in all other respects hereby ratified and confirmed and remain in full force and effect.

     8. The Borrower shall pay at the time this Agreement is executed and delivered all fees, commissions, costs, charges, taxes and other expenses incurred by the Agent and its counsel in connection with this Agreement, including, but not limited to, a commitment fee in the aggregate amount of Fifty Thousand and No/100 Dollars ($50,000.00) for Loan A and Loan B payable to the Lenders on a pro rata basis and the reasonable fees and expenses of the Agent’s counsel and all recording fees, taxes and charges.

     9. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Agent may rely on a telecopy of any signature of Borrower. Agent agrees that Borrower may rely on a telecopy of this Agreement executed by Agent.

     10. Pursuant to Section 8.15 of the Loan Agreement, Borrower has been prohibited from making cash distributions to its Sole Member. As a result, Borrower has cash on hand as a result of its Net Operating Income being greater than Debt Service. Lender hereby consents to

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the withdrawal of a portion of Borrower’s cash on hand in order to pay the commitment fee described in Section 8 of this Agreement. Borrower’s projection of Net Operating Income from the date hereof through the maturity date of the Loan, as provided by Borrower to Lender, indicates that Borrower will generate sufficient funds to pay Debt Service at the interest rate set forth in the Note as amended through the date hereof. Lender consents to Borrower’s use of Borrower’s funds to pay Debt Service.

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     IN WITNESS WHEREOF, Borrower and Agent have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member

/s/ Uma Singh	By:	/s/ Julie Pangelinan (SEAL)
		Julie Pangelinan
		Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August 29, 2009, before me, Helen A. Wilson, a Notary Public in and for the Commonwealth shown above, appeared Julie Pangelinan personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that she executed the same in her authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by her signature on the instrument the entity upon behalf of which she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Helen A. Wilson  

Notary Public 

My Commission Expires: 11/30/2010
My Notarial Registration Number is: 313047

	AGENT:
WITNESS:	CHEVY CHASE BANK F.S.B., as Agent and Lender
/s/		By:	/s/ Claude R. Sanders (SEAL)
			Claude R. Sanders
			Senior Vice President

COMMONWEALTH/STATE OF MARYLAND, COUNTY/CITY OF MONTGOMERY, TO WIT:

     On August 28^th, 2009, before me, Pauline Ralph, a Notary Public in and for the Commonwealth shown above, appeared Claude R. Sanders, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as Senior Vice President of Chevy Chase Bank F.S.B., a division of Capital One, N.A., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Pauline C. Ralph  

Notary Public 

My Commission Expires: 6/1/2010
My Notarial Registration Number is:                                         

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EX-10.18

Exhibit 10.18

SECOND AMENDMENT TO GUARANTY OF PAYMENT

(Loan A)

     THIS SECOND AMENDMENT TO GUARANTY OF PAYMENT (Loan A) (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE SENIOR LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) and CHEVY CHASE BANK, a division of Capital One, N.A., its successors and assigns, as Agent (“Agent”) for Lenders (individually a “Lender” and collectively, “Lenders”) party to the Loan Agreement (as hereinafter defined).

RECITALS

     A. Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (“Borrower”), obtained a loan from Lenders in the aggregate principal amount of Thirty Million and No/Dollars ($30,000,000.00) (the “Loan A”), which is one of two simultaneous loans made by Chevy Chase Bank, F.S.B. to Borrower.

     B. Loan A was made pursuant to the provisions of a certain Loan and Security Agreement dated August 28, 2007, by and among Borrower, Agent and Lenders, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 and that Second Amendment to Loan Agreement dated of even date herewith (as further amended, modified, restated, substituted, extended and renewed at any time and from time to time, collectively, the “Loan Agreement”).

     C. Loan A is evidenced by, and repaid with interest in accordance with the provisions of one or more Deed of Trust Note As dated August 28, 2007, from Borrower payable to Lenders in the aggregate principal amount of Thirty Million and No/Dollars ($30,000,000.00) as amended by those certain First Amendments to Deed of Trust Note A dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, collectively, the “Note”).

     D. Guarantor executed a Guaranty of Payment (Loan A) dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment (Loan A) dated September, 2008 (as amended by this Agreement and as further amended, modified, restated, substituted, extended and renewed at any time and from time to time, collectively, the “Guaranty”) pursuant to which Guarantor guaranteed Borrower’s obligations under the Loan Agreement and the Note.

     E. Borrower and Guarantor have requested and Lenders have agreed to (i) waive any defaults which have occurred under those certain financial covenants described in Section 9(c) of the Guaranty for the fiscal year ending December 31, 2008 and the fiscal quarters ending March 31, 2009 and June 30, 2009; (ii) revise the financial covenants described in Section 9(c)

of the Guaranty and (iii) make such other changes to the Guaranty as are more particularly set forth herein.

     F. As a condition precedent to the agreements referenced above, Agent has required this Agreement be executed and delivered to Agent on behalf of Lenders.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Guarantor, Agent and Lenders agree as follows:

     1. Guarantor, Agent and Lenders agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. The Guaranty is hereby amended as follows:

          (a) Section 9(c) (Covenants) of the Guaranty is hereby amended and restated in its entirety as follows:

     “(c) Guarantor hereby covenants and agrees that it will comply with (i) the following financial covenants contained in the Sunrise Senior Financing Agreement (as defined in the Loan Agreement) provided that Lender hereby agrees that it will consent to any waiver or modification of such covenants to which the Sunrise Bank Group (as defined in the Loan Agreement) consents so long as Lender is a member of the Sunrise Bank Group and Guarantor, Borrower and Lender shall negotiate replacement covenants acceptable to Lender if Lender ceases to be a member of the Sunrise Bank Group:

     (i) Cash Balance. Guarantor and SSLMI (as defined in the Loan Agreement) shall maintain, tested as of the last day of each calendar month, a Cash Balance of not less than Five Million and No/100 Dollars ($5,000,000.00).

     The following definitions shall apply to this Section 9(c):

     “Cash Balance” means the aggregate amount of unrestricted cash of Guarantor and SSLMI on deposit with Bank of America, N.A., a national banking association.”

     3. Guarantor hereby acknowledges and agrees that, pursuant to the terms of Section 9(c) of the Guaranty, prior to the date of this Agreement, Guarantor was required to comply with certain financial covenants more particularly described therein (the “Financial Covenants”). Guarantor, Agent and Lenders hereby agree to waive compliance with the

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Financial Covenants for the fiscal year ending December 31, 2008 and the fiscal quarter ending March 31, 2009.

     4. Guarantor hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Guaranty, as amended hereby. Guarantor agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Guarantor under the Guaranty. Except as expressly modified herein, the terms, provisions and covenants of the Guaranty are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. Guarantor shall pay to Agent at the time this Agreement is executed and delivered all fees, costs, charges, taxes and other expenses incurred by Agent and its counsel in connection with this Agreement.

     6. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Guarantor agrees that Agent and Lenders may rely on a telecopy of any signature of Guarantor. Agent and Lenders agree that Guarantor may rely on a telecopy of this Agreement executed by Agent and Lenders.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, Guarantor and Agent have executed this Agreement under seal as of the date and year first written above.

	GUARANTOR:
WITNESS OR ATTEST:	SUNRISE SENIOR LIVING, INC.
/s/	By:	/s/ Julie Pangelinan (SEAL)
		Julie Pangelinan
		Chief Financial Officer
	AGENT:
WITNESS:	CHEVY CHASE BANK, as Agent
/s/ Pauline Ralph	By:	/s/ Claude R. Sanders (SEAL)
		Claude R. Sanders
		Senior Vice President

AGREEMENT OF LENDERS

     The undersigned are each a “Lender” under the Loan Agreement and pursuant to Section 9(c) of the Guaranty each hereby consent to the waivers of the financial covenants as set forth in the Agreement.

     WITNESS signature and seal of the undersigned as of the date of the Agreement.

	LENDERS:
WITNESS:	CHEVY CHASE BANK, as Lender
	By:	/s/ Claude R. Sanders (SEAL)
		Claude R. Sanders
		Senior Vice President
WITNESS:	MB FINANCIAL BANK, N.A., as Lender
	By:	/s/ Jack H. Sharp (SEAL)
		Name: Jack H. Sharp
		Title: Senior Vice President

EX-10.19

Exhibit 10.19

FIRST AMENDMENT TO DEED OF TRUST NOTE A

(Loan A)

     THIS FIRST AMENDMENT TO DEED OF TRUST NOTE A (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and MB FINANCIAL BANK, N.A. a national banking association, its successors and assigns (the “Lender”).

RECITALS

     A. Borrower obtained a loan from the Lender and Chevy Chase Bank, a division of Capital One, N.A. (“Chevy Chase”) in the maximum principal amount of Thirty Million and No/Dollars ($30,000,000.00) (“Loan A”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower, Chevy Chase and the Lender, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 and that certain Second Amendment to Loan Agreement dated of even date herewith (the same, as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan A is evidenced by, and repaid with interest in accordance with the provisions of (i) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to Chevy Chase in the principal amount of Twenty Million and No/Dollars ($20,000,000.00), as amended by that certain First Amendment to Deed of Trust Note A dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Chevy Chase Note”) and (ii) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to the Lender in the principal amount of Ten Million and No/Dollars ($10,000,000.00) (as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “MB Financial Note” and, collectively with Chevy Chase Note, the “Notes”).

     C. Loan A is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment dated September 8, 2008 and that certain Second Amendment to Guaranty of Payment dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Guaranty”).

     D. The Borrower has requested and the Lender has agreed to (i) extend the Maturity Date of the MB Financial Note, (ii) increase the interest rate applicable under the terms of the MB Financial Note and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the MB Financial Note shall have the same meaning under this Agreement.

     2. Section 1 (Interest) of the MB Financial Note is hereby amended and restated in its entirety as follows:

     “1. Interest.

     Commencing as of August 29, 2009 and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 500 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.”

     3. Section 2 (Payments and Maturity) of the MB Financial Note is hereby amended and restated in its entirety as follows:

     “2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows:

     (a) Commencing on October 1, 2007 and continuing on the same day of each and every month thereafter, to and including September 1, 2008, interest only;

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     (b) Commencing on October 1, 2008 and continuing on the same day of each and every month thereafter, to and including December 1, 2009, principal shall be due and payable in equal monthly payments of $11,000.00, plus all accrued and unpaid interest on the outstanding principal balance; and

     (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on December 2, 2009.”

     4. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the MB Financial Note, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to Loan A any or all of the obligations of Borrower under the Financing Documents. Except as expressly modified herein, the terms, provisions and covenants of the MB Financial Note are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. The Borrower acknowledges and warrants that the Lender has acted in good faith and has conducted in a commercially reasonable manner its relationships with the Borrower in connection with this Agreement and generally in connection with the Financing Documents and the obligations evidenced by the MB Financial Note, the Borrower hereby waiving and releasing any claims to the contrary.

     6. The Borrower shall pay at the time this Agreement is executed and delivered all fees, commissions, costs, charges, taxes and other expenses incurred by the Lender and its counsel in connection with this Agreement, including reasonable fees and expenses of the Lender’s counsel and all recording fees, taxes and charges.

     7. This Agreement shall be governed in all respects by the laws of the Commonwealth of Virginia and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

     8. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Lender may rely on a telecopy of any signature of Borrower. Lender agrees that Borrower may rely on a telecopy of this Agreement executed by Lender.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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     IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member

/s/ Uma Singh	By:	/s/ Julie Pangelinan (SEAL)
		Julie Pangelinan
		Vice President

     COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August 29, 2009, before me, Helen A. Wilson, a Notary Public in and for the Commonwealth shown above, appeared Julie Pangelinan personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he/she executed the same in her authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by her signature on the instrument the entity upon behalf of which she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Helen A. Wilson

Notary Public 

My Commission Expires: 11/30/2010
My Notarial Registration Number is: 313047

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	LENDER:
WITNESS:	MB FINANCIAL BANK, N.A.
/s/	By:	/s/ Jack H. Sharp
		Name: Jack H. Sharp
		Title: Senior Vice President

COMMONWEALTH/STATE OF ILLINOIS, COUNTY/CITY OF ROSEMONT, TO WIT:

     On August 27, 2009, before me, Mirsada Durakovic, a Notary Public in and for the State shown above, appeared Jack H. Sharp personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he/she executed the same in his authorized capacity as S.V.P. of MB Financial Bank, N.A., and that by his/her signature on the instrument the entity upon behalf of which he/she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Mirsada Durakovic

Notary Public 

My Commission Expires: 7/2/2012
My Notarial Registration Number is: 606393

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EX-10.20

Exhibit 10.20

FIRST AMENDMENT TO DEED OF TRUST NOTE A

(Loan A)

     THIS FIRST AMENDMENT TO DEED OF TRUST NOTE A (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and CHEVY CHASE BANK, a division of Capital One, N.A. (the “Lender”).

RECITALS

     A. Borrower obtained a loan from the Lender and M.B. Financial Bank, N.A., a national banking association (“MB Financial”) in the maximum principal amount of Thirty Million and No/Dollars ($30,000,000.00) (“Loan A”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower, MB Financial and the Lender, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 and that certain Second Amendment to Loan Agreement dated of even date herewith (the same, as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan A is evidenced by, and repaid with interest in accordance with the provisions of (i) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to the Lender in the principal amount of Twenty Million and No/Dollars ($20,000,000.00) (as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Chevy Chase Note”) and (ii) a Deed of Trust Note A dated August 28, 2007 from the Borrower payable to MB Financial in the principal amount of Ten Million and No/Dollars ($10,000,000.00), as amended by that certain First Amendment to Deed of Trust Note A dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “MB Financial Note” and, collectively with Chevy Chase Note, the “Notes”).

     C. Loan A is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment dated September 8, 2008 and that certain Second Amendment to Guaranty of Payment dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Guaranty”).

     D. The Borrower has requested and the Lender has agreed to (i) extend the Maturity Date of the Chevy Chase Note, (ii) increase the interest rate applicable under the terms of the Chevy Chase Note and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Chevy Chase Note shall have the same meaning under this Agreement.

     2. Section 1 (Interest) of the Chevy Chase Note is hereby amended and restated in its entirety as follows:

     “1. Interest.

     Commencing as of August 29, 2009 and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 500 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.”

     3. Section 2 (Payments and Maturity) of the Chevy Chase Note is hereby amended and restated in its entirety as follows:

     “2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate or rates provided above, shall be payable as follows:

     (a) Commencing on October 1, 2007 and continuing on the same day of each and every month thereafter, to and including September 1, 2008, interest only;

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     (b) Commencing on October 1, 2008 and continuing on the same day of each and every month thereafter, to and including December 1, 2009, principal shall be due and payable in equal monthly payments of $22,000.00, plus all accrued and unpaid interest on the outstanding principal balance; and

     (c) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on December 2, 2009.”

     4. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Chevy Chase Note, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to Loan A any or all of the obligations of Borrower under the Financing Documents. Except as expressly modified herein, the terms, provisions and covenants of the Chevy Chase Note are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. The Borrower acknowledges and warrants that the Lender has acted in good faith and has conducted in a commercially reasonable manner its relationships with the Borrower in connection with this Agreement and generally in connection with the Financing Documents and the obligations evidenced by the Chevy Chase Note, the Borrower hereby waiving and releasing any claims to the contrary.

     6. The Borrower shall pay at the time this Agreement is executed and delivered all fees, commissions, costs, charges, taxes and other expenses incurred by the Lender and its counsel in connection with this Agreement, including reasonable fees and expenses of the Lender’s counsel and all recording fees, taxes and charges.

     7. This Agreement shall be governed in all respects by the laws of the Commonwealth of Virginia and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

     8. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Lender may rely on a telecopy of any signature of Borrower. Lender agrees that Borrower may rely on a telecopy of this Agreement executed by Lender.

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     IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member

/s/ Uma Singh	By:	/s/ Julie Pangelinan (SEAL)
		Julie Pangelinan
		Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August 29, 2009, before me, Helen A. Wilson, a Notary Public in and for the Commonwealth shown above, appeared Julie Pangelinan, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that she executed the same in her authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by her signature on the instrument the entity upon behalf of which she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Helen A. Wilson

Notary Public 

My Commission Expires: 11/30/2010
My Notarial Registration Number is: 313047

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	LENDER:
WITNESS:	CHEVY CHASE BANK
	By:	/s/ Claude R. Sanders (SEAL)
		Claude R. Sanders
		Senior Vice President

COMMONWEALTH/STATE OF MARYLAND, COUNTY/CITY OF MONTGOMERY, TO WIT:

     On August 28, 2009, before me, Pauline C. Ralph, a Notary Public in and for the Commonwealth shown above, appeared Claude R. Sanders, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as Senior Vice President of Chevy Chase Bank, a division of Capital One, N.A., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Pauline C. Ralph

Notary Public 

My Commission Expires: 6/1/2020
My Notarial Registration Number is:                                         

5

EX-10.21

Exhibit 10.21

SECOND AMENDMENT TO LOAN AGREEMENT

(Loan B)

     THIS SECOND AMENDMENT TO LOAN AGREEMENT (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and CHEVY CHASE BANK, a division of Capital One, N.A. (“Lender”).

RECITALS

     A. Borrower obtained a loan from the Lender in the maximum principal amount of Ten Million and No/Dollars ($10,000,000.00) (“Loan B”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower and the Lender, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 (the same, as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan B is evidenced by, and repaid with interest in accordance with the provisions of a Deed of Trust Note B dated August 28, 2007 from the Borrower payable to Lender in the principal amount of Ten Million and No/Dollars ($10,000,000.00) as amended by that certain First Amendment to Deed of Trust Note B dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Note”).

     C. Loan B is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment dated September 8, 2008 (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Guaranty”).

     D. The Borrower has requested and the Lender has agreed to (i) waive the Event of Default caused by the Borrower’s failure to comply with the occupancy requirement for the fiscal quarters ending March 31, 2009 and June 30, 2009, (ii) revise the financial reporting requirements and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. The parties hereto acknowledge and agree (a) that the outstanding principal balance of Loan B as of the date hereof is $10,000,000(b) that interest on the unpaid principal balance of Loan B has been paid through August 1, 2009, and (c) that the unpaid principal balance of Loan B, together with accrued and unpaid interest thereon, is due and owing subject to the terms of repayment hereinafter set forth, without defense or offset.

     3. Borrower hereby acknowledges and agrees that pursuant to the terms of Section 7.29 (Debt Service Ratio) of the Loan Agreement, Borrower is required to maintain, tested as of the end of each fiscal quarter during the term of the Loan, a Debt Service Ratio for the Facility of not less than 1.20 to 1.0 (the “Debt Service Covenant”). Borrower and Lender hereby acknowledge and agree that for the period commencing July 1, 2009 and ending December 2, 2009 the Debt Service Covenant will not be measured.

     4. Borrower hereby acknowledges and agrees that pursuant to the terms of Section 7.30 (Occupancy Covenant) of the Loan Agreement, Borrower is required to maintain at all times, tested as of the end of each fiscal quarter during the term of each Loan, a minimum average daily occupancy of eighty-five percent (85%), measured on a unit basis (the “Occupancy Covenant”). Pursuant to Section 9.3 of the Loan Agreement, the failure to comply with the Occupancy Covenant constitutes an Event of Default under each Loan Agreement. Borrower and Lender hereby agree to waive the Event of Default caused by the Borrower’s failure to comply with the Occupancy Covenant for the fiscal quarters ending March 31, 2009 and June 30, 2009.

     5. Subsection (c) of 7.1 (Financial Statements) of the Loan Agreement is hereby amended and restated in its entirety as follows:

     “(c) As soon as available but in no event later than the dates indicated, consolidated financial statements of Guarantor for the fiscal quarter ending September 30, 2009, no later than November 15, 2009, and for each fiscal quarter thereafter, within forty-five (45) days thereafter; such statements shall include a consolidated balance sheet and related consolidated statements of income and operations, shareholder’s equity and cash flows for such fiscal quarter.”

     6. Section 7.1 (Financial Statements) of the Loan Agreement is hereby amended by adding the following subsections (f) — (j) in their entirety as follows:

     “(f) As soon as available but in no event later than the 15^th day of each calendar month, commencing on September 15, 2009, certification by Guarantor of the amount of its Cash Balance (as defined in the Guaranty) as of the last day of the immediately preceding month.

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     (g) As soon as available but in no event later than the 15^th day of each calendar month, commencing on September 15, 2009, a detailed report as to the occupancy levels within the facilities owned by Guarantor or its Affiliates as of the last day of the immediately preceding month.

     (h) As soon as available but in no event later than the 15^th day of each calendar month, commencing on September 15, 2009, a thirteen (13) week cash flow projection for Guarantor and its Affiliates dating from the fifteenth (15^th) of such calendar month.

     (i) Immediately after their preparation, copies of any written updates or additional information related to that certain long-term cash flow projection and analysis of expected liquidity previously delivered to Agent.

     (j) Concurrently with delivery to such lender of Guarantor, Borrower will make reasonable efforts to provide any additional written information or written reports provided by an authorized officer of Guarantor related to any cash flow projection or analysis of expected liquidity of Guarantor provided to any other lender of Guarantor.”

     7. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Loan Agreement, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Borrower under the Loan Agreement. Except as expressly modified herein, the terms, provisions and covenants of the Loan Agreement are in all other respects hereby ratified and confirmed and remain in full force and effect.

     8. The Borrower shall pay at the time this Agreement is executed and delivered all fees, commissions, costs, charges, taxes and other expenses incurred by the Lender and its counsel in connection with this Agreement, including, but not limited to, a commitment fee in the aggregate amount of Fifty Thousand and No/100 Dollars ($50,000.00) for Loan A and Loan B payable to the Lenders on a pro rata basis and the reasonable fees and expenses of the Lender’s counsel and all recording fees, taxes and charges.

     9. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Lender may rely on a telecopy of any signature of Borrower. Lender agrees that Borrower may rely on a telecopy of this Agreement executed by Lender.

     10. Pursuant to Section 8.15 of the Loan Agreement, Borrower has been prohibited from making cash distributions to its Sole Member. As a result, Borrower has cash on hand as a result of its Net Operating Income being greater than Debt Service. Lender hereby consents to the withdrawal of a portion of Borrower’s cash on hand in order to pay the commitment fee described in Section 8 of this Agreement. Borrower’s projection of Net Operating Income from the date hereof through the maturity date of the Loan, as provided by Borrower to Lender,

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indicates that Borrower will generate sufficient funds to pay Debt Service at the interest rate set forth in the Note as amended through the date hereof. Lender consents to Borrower’s use of Borrower’s funds to pay Debt Service.

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     IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member
/s/ Uma Singh		By:	/s/ Julie Pangelinan (SEAL)
			Julie Pangelinan
			Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August 29, 2009, before me, Helen A. Wilson, a Notary Public in and for the Commonwealth shown above, appeared Julie Pangelinan personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that she executed the same in her authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by her signature on the instrument the entity upon behalf of which she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Helen A. Wilson

Notary Public 

My Commission Expires: 11/30/2010
My Notarial Registration Number is: 313047

	LENDER:
WITNESS:	CHEVY CHASE BANK, as Agent and Lender
/s/	By:	/s/ Claude R. Sanders (SEAL)
		Claude R. Sanders
		Senior Vice President

COMMONWEALTH/STATE OF MARYLAND, COUNTY/CITY OF MONTGOMERY, TO WIT:

     On August 28, 2009, before me, Pauline C. Ralph, a Notary Public in and for the Commonwealth shown above, appeared Claude R. Sanders, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as Senior Vice President of Chevy Chase Bank F.S.B., a division of Capital One, N.A., and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Pauline C. Ralph

Notary Public 

My Commission Expires: 6/1/2010
My Notarial Registration Number is:                     

EX-10.22

Exhibit 10.22

SECOND AMENDMENT TO GUARANTY OF PAYMENT

(Loan B)

     THIS SECOND AMENDMENT TO GUARANTY OF PAYMENT (Loan B) (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE SENIOR LIVING, INC., a corporation organized under the laws of the State of Delaware (“Guarantor”) and CHEVY CHASE BANK, a division of Capital One, N.A., its successors and assigns ( “Lender”).

RECITALS

     A. Sunrise Connecticut Avenue Assisted Living, L.L.C., a limited liability company organized under the laws of the Commonwealth of Virginia (“Borrower”), obtained a loan from Lender in the principal amount of Ten Million and No/Dollars ($10,000,000.00) (the “Loan B”), which is one of two simultaneous loans made by Lender to Borrower.

     B. Loan B was made pursuant to the provisions of a certain Loan and Security Agreement dated August 28, 2007, by and between Borrower and Lender, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 and that certain Second Amendment to Loan Agreement dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, collectively, the “Loan Agreement”).

     C. Loan B is evidenced by, and repaid with interest in accordance with the provisions of a certain Deed of Trust Note B dated August 28, 2007, from Borrower payable to Lender in the original principal amount of Ten Million and No/Dollars ($10,000,000.00), as amended by that certain First Amendment to Deed of Trust Note B dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Note”).

     D. Guarantor executed a Guaranty of Payment (Loan B) dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment (Loan B) dated September 8, 2008 (as amended by this Agreement and as further amended, modified, restated, substituted, extended and renewed at any time and from time to time, collectively, the “Guaranty”) pursuant to which Guarantor guaranteed Borrower’s obligations under the Loan Agreement and the Note.

     E. Borrower and Guarantor have requested and Lender has agreed to (i) waive any defaults which have occurred under those certain financial covenants described in Section 9(c) of the Guaranty for the fiscal year ending December 31, 2008 and the fiscal quarters ending March 31, 2009 and June 30, 2009; (ii) revise the financial covenants described in Section 9(c) of the Guaranty and (iii) make such other changes to the Guaranty as are more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Guarantor and Lender agree as follows:

     1. Guarantor and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Loan Agreement shall have the same meaning under this Agreement.

     2. The Guaranty is hereby amended as follows:

          (a) Section 9(c) (Covenants) of the Guaranty is hereby amended and restated in its entirety as follows:

     “(c) Guarantor hereby covenants and agrees that it will comply with (i) the following financial covenants contained in the Sunrise Senior Financing Agreement (as defined in the Loan Agreement) provided that Lender hereby agrees that it will consent to any waiver or modification of such covenants to which the Sunrise Bank Group (as defined in the Loan Agreement) consents so long as Lender is a member of the Sunrise Bank Group and Guarantor, Borrower and Lender shall negotiate replacement covenants acceptable to Lender if Lender ceases to be a member of the Sunrise Bank Group:

          (i) Cash Balance. Guarantor and SSLMI (as defined in the Loan Agreement) shall maintain, tested as of the last day of each calendar month, a Cash Balance of not less than Five Million and No/100 Dollars ($5,000,000.00).

     The following definitions shall apply to this Section 9(c):

     “Cash Balance” means the aggregate amount of unrestricted cash of Guarantor and SSLMI on deposit with Bank of America, N.A., a national banking association.”

     3. Guarantor hereby acknowledges and agrees that, pursuant to the terms of Section 9(c) of the Guaranty, prior to the date of this Agreement, Guarantor was required to comply with certain financial covenants more particularly described therein (the “Financial Covenants”). Guarantor and Lender hereby agree to waive compliance with the Financial Covenants for the fiscal year ending December 31, 2008 and the fiscal quarter ending March 31, 2009.

     4. Guarantor hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Guaranty, as amended hereby. Guarantor agrees that this Agreement is not intended to and shall not cause a novation with respect to any or all of the obligations of Guarantor under the Guaranty. Except as expressly modified herein, the terms, provisions and covenants of the Guaranty are in all other respects hereby ratified and confirmed and remain in full force and effect.

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     5. Guarantor shall pay to Lender at the time this Agreement is executed and delivered all fees, costs, charges, taxes and other expenses incurred by Lender and its counsel in connection with this Agreement.

     6. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Guarantor agrees that Lender may rely on a telecopy of any signature of Guarantor. Lender agrees that Guarantor may rely on a telecopy of this Agreement executed by Lender.

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     IN WITNESS WHEREOF, Guarantor and Lender have executed this Agreement under seal as of the date and year first written above.

	GUARANTOR:
WITNESS OR ATTEST:	SUNRISE SENIOR LIVING, INC.
/s/ Uma Singh	By:	/s/ Julie Pangelinan (SEAL)
		Julie Pangelinan
		Chief Financial Officer
	LENDER:
WITNESS:	CHEVY CHASE BANK
/s/	By:	/s/ Claude R. Sanders (SEAL)
		Claude R. Sanders
		Senior Vice President

EX-10.23

Exhibit 10.23

FIRST AMENDMENT TO DEED OF TRUST NOTE B

(Loan B)

     THIS FIRST AMENDMENT TO DEED OF TRUST NOTE B (this “Agreement”) is made as of August 28, 2009, by and between SUNRISE CONNECTICUT AVENUE ASSISTED LIVING L.L.C., a limited liability company organized and existing under the laws of the Commonwealth of Virginia (the “Borrower”) and CHEVY CHASE BANK, a division of Capital One, N.A. (the “Lender”).

RECITALS

     A. Borrower obtained a loan from the Lender in the maximum principal amount of Ten Million and No/Dollars ($10,000,000.00) (“Loan B”) which was advanced pursuant to the provisions of a certain Loan Agreement dated August 28, 2007 by and between the Borrower and the Lender, as amended by that certain First Amendment to Loan Agreement dated April 15, 2008 and that certain Second Amendment to Loan Agreement dated of even date herewith (the same, as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the “Loan Agreement”).

     B. Loan B is evidenced by, and repaid with interest in accordance with the provisions of a Deed of Trust Note B dated August 28, 2007 from the Borrower payable to Lender in the principal amount of Ten Million and No/Dollars ($10,000,000.00) (as amended by this Agreement and as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Note”).

     C. Loan B is guaranteed by Sunrise Senior Living, Inc. a Delaware corporation (“Guarantor”), pursuant to the terms of that certain Guaranty of Payment dated August 28, 2007, as amended by that certain First Amendment to Guaranty of Payment dated September 8, 2008 and that certain Second Amendment to Guaranty of Payment dated of even date herewith (as amended, modified, restated, substituted, extended and renewed at anytime and from time to time, the “Guaranty”).

     D. The Borrower has requested and the Lender has agreed to (i) extend the Maturity Date of the Note, (ii) increase the interest rate applicable under the terms of the Note and (iii) make such other changes as more particularly set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:

     1. Borrower and Lender agree that the Recitals above are a part of this Agreement. Unless otherwise expressly defined in this Agreement, terms defined in the Note shall have the same meaning under this Agreement.

     2. Section 1 (Interest) of the Note is hereby amended and restated in its entirety as follows:

          “1. Interest.

     Commencing as of August 29, 2009 and continuing until repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear interest at the fluctuating rate based on an independent index which is the average of interbank offered rates for one-month dollar deposits in the London Market as reported in The Wall Street Journal (the “Index”) plus 550 basis points per annum (the “LIBOR Rate”) which rate shall be adjusted for any reserve requirements imposed upon the Lender from time to time. The LIBOR Rate does not necessarily represent the lowest rate of interest charged by the Lender to borrowers. If the Index becomes unavailable during the term of this Note, the Lender may designate a substitute index after giving notice to the Borrower. The LIBOR Rate will be adjusted on the first day of each month, based on the value of the Index as published in The Wall Street Journal as of the first business day of each month. All interest payable under the terms of this Note shall be calculated on the basis of a 365-day year. The LIBOR Rate shall be in effect for a period of the number of days indicated (each a “LIBOR Period”), in any case extended to the next succeeding Business Day (as defined in the Loan and Security Agreement of even date herewith) when necessary, beginning on the date hereof or the expiration date of the then-current LIBOR Period.”

     3. Section 2 (Payments and Maturity) of the Note is hereby amended and restated in its entirety as follows:

          “2. Payments and Maturity.

     The unpaid Principal Sum, together with interest thereon at the rate provided above, shall be payable as follows:

     (a) Interest only commencing on October 1, 2007 and continuing on the same day of each and every month thereafter, to and including December 1, 2009;

     (b) Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on December 2, 2009.”

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     4. Borrower hereby issues, ratifies and confirms the representations, warranties and covenants contained in the Note, as amended hereby. Borrower agrees that this Agreement is not intended to and shall not cause a novation with respect to Loan B any or all of the obligations of Borrower under the Financing Documents. Except as expressly modified herein, the terms, provisions and covenants of the Note are in all other respects hereby ratified and confirmed and remain in full force and effect.

     5. The Borrower acknowledges and warrants that the Lender has acted in good faith and has conducted in a commercially reasonable manner its relationships with the Borrower in connection with this Agreement and generally in connection with the Financing Documents and the obligations evidenced by the Note, the Borrower hereby waiving and releasing any claims to the contrary.

     6. The Borrower shall pay at the time this Agreement is executed and delivered all fees, commissions, costs, charges, taxes and other expenses incurred by the Lender and its counsel in connection with this Agreement, including reasonable fees and expenses of the Lender’s counsel and all recording fees, taxes and charges.

     7. This Agreement shall be governed in all respects by the laws of the Commonwealth of Virginia and shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

     8. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Borrower agrees that Lender may rely on a telecopy of any signature of Borrower. Lender agrees that Borrower may rely on a telecopy of this Agreement executed by Lender.

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     IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement under seal as of the date and year first written above.

	BORROWER:
WITNESS OR ATTEST:	SUNRISE CONNECTICUT AVENUE ASSISTED LIVING, L.L.C.
	By:	Sunrise Senior Living Investments, Inc., its sole Member
/s/ Uma Singh		By:	/s/ Julie Pangelinan (SEAL)
			Julie Pangelinan
			Vice President

COMMONWEALTH OF VIRGINIA, COUNTY OF FAIRFAX, TO WIT:

     On August 29, 2009, before me, Helen A. Wilson, a Notary Public in and for the Commonwealth shown above, appeared Julie Pangelinan personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that she executed the same in her authorized capacity as Vice President of Sunrise Senior Living Investments, Inc., sole Member of Sunrise Connecticut Avenue Assisted Living, L.L.C., and that by her signature on the instrument the entity upon behalf of which he/she acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Helen A. Wilson

Notary Public 

My Commission Expires: 11/30/2010
My Notarial Registration Number is: 313047

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	LENDER:
WITNESS:	CHEVY CHASE BANK F.S.B.
/s/	By:	/s/ Claude R. Sanders (SEAL)
		Claude R. Sanders
		Senior Vice President

COMMONWEALTH/STATE OF MARYLAND, COUNTY/CITY OF MONTGOMERY, TO WIT:

     On August 28^th, 2009, before me, Pauline Ralph, a Notary Public in and for the Commonwealth shown above, appeared Claude R. Sanders, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose signature is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity as Senior Vice President of Chevy Chase Bank, F.S.B, a division of Capital One, N.A. and that by his signature on the instrument the entity upon behalf of which he acted, executed the instrument.

     WITNESS my hand and official seal.

/s/ Pauline C. Ralph

Notary Public 

My Commission Expires: 6/1/2010
My Notarial Registration Number is:                     

CC/Connecticut Ave Loan B (First Amendment to Note–Chevy Chase)

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EX-10.28

Exhibit 10.28

2009 Annual Bonus Performance Metrics Applicable to Executive Officers

     As previously disclosed, on August 25, 2009, the Compensation Committee of the Board of Directors of Sunrise Senior Living, Inc. (the “Company”) approved the 2009 annual bonus performance metrics applicable to the Company’s current executive officers. For additional information regarding these performance metrics, please refer to pages 24 and 25 of the Company’s definitive proxy statement for its 2009 annual meeting of stockholders filed with the Securities and Exchange Commission on October 19, 2009.

EX-10.29

Exhibit 10.29

Consulting Arrangement with Paul J. Klaassen

     As previously disclosed, in November 2008, Sunrise Senior Living, Inc. (the “Company”) entered into an oral consulting arrangement with Paul J. Klaassen, the Company’s non-executive Chair of the Board of Directors. Under the consulting arrangement, the Company agreed to pay Mr. Klaassen a fee of $25,000 per month for consulting with the Company and Mark S. Ordan, the Company’s new chief executive officer, on senior living matters. This was in addition to any benefits Mr. Klaassen was entitled to under his prior employment agreement. Fees totaling $87,500 were paid to Mr. Klaassen for three and a half months commencing in November 2008.

EX-10.30

Exhibit 10.30

2009 Special Bonus Payments to Executive Officers

     As previously disclosed, in May and August 2009, the Compensation Committee of the Board of Directors of Sunrise Senior Living, Inc. (the “Company”) approved the payment of 2009 special bonuses to each of the Company’s current executive officers. For additional information regarding these special bonus payments, please refer to pages 24-26 of the Company’s definitive proxy statement for its 2009 annual meeting of stockholders filed with the Securities and Exchange Commission on October 19, 2009.

EX-10.31

Exhibit 10.31

2009 Partial Bonus Payments to Executive Officers

     As previously disclosed, on August 28, 2009, the Compensation Committee of the Board of Directors of Sunrise Senior Living, Inc. (the “Company”) approved partial payments to each of the Company’s current executive officers of 33% of their respective target 2009 annual bonus amounts. For additional information regarding these partial bonus payments, please refer to page 25 of the Company’s definitive proxy statement for its 2009 annual meeting of stockholders filed with the Securities and Exchange Commission on October 19, 2009.

EX-10.32

Exhibit 10.32

2009 Director Fees

     Independent director Board fees for 2009 are as follows:

Annual Retainer	$	150,000
Committee Chair Annual Retainer:
Audit Committee	$	25,000
Compensation Committee	$	15,000
Fee for serving on Audit Committee (other than the Committee Chair)	$	10,000

     Beginning in May 2009, the annual Board fees are payable quarterly in advance.

     In addition to the Board fees described above, in July 2009, the Governance and Compliance Committee of the Board of Directors approved 2009 compensation for Lynn Krominga serving as lead director commencing in May 2009 of $50,000. The lead director fee was ratified by the Board of Directors in August 2009. Ms. Krominga had previously received an additional fee of $100,000 for serving as non-executive chair of the Board from March 2008 to November 2008, which was recommended by the Compensation Committee and approved by the Board in May 2008. Ms. Krominga abstained from voting on these additional fee arrangements.

EX-31.1

Exhibit 31.1

I, Mark S. Ordan, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Sunrise Senior Living, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2009	/s/Mark S. Ordan
	Mark S. Ordan
	Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Julie A. Pangelinan, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Sunrise Senior Living, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2009	/s/Julie A. Pangelinan
	Julie A. Pangelinan
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

     The undersigned, the Chief Executive Officer of Sunrise Senior Living, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

     (a) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2009 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark S. Ordan

Mark S. Ordan

Chief Executive Officer

Date: November 9, 2009

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer
Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

     The undersigned, the Chief Financial Officer of Sunrise Senior Living, Inc. (the “Company”), hereby certifies that, to his knowledge on the date hereof:

     (a) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2009 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julie A. Pangelinan

Julie A. Pangelinan

Chief Financial Officer

Date: November 9, 2009