SUNRISE ASSISTED LIVING INC
PURCHASE AND SALE AGREEMENT RE: (3) PROPERTIES
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex10-2.txt
<DESCRIPTION>PURCHASE AND SALE AGREEMENT RE: (3) PROPERTIES
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 10.2

                           PURCHASE AND SALE AGREEMENT

       THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is dated as of the
29th day of June, 2000, by and between (i) Sunrise Fairfield Assisted Living,
L.P., a New Jersey limited partnership ("Sunrise Fairfield"), Sunrise Wayland
Assisted Living Limited Partnership, a Massachusetts limited partnership
("Sunrise Wayland"), and Sunrise Assisted Living Limited Partnership II, a
Virginia limited partnership ("Sunrise Hunter Mill") (Sunrise Fairfield, Sunrise
Wayland and Sunrise Hunter Mill are hereinafter individually and collectively
referred to as "Seller") and (ii) Metropolitan Senior Housing, LLC, a Delaware
limited liability company (hereinafter referred to as "Buyer").

                                    RECITALS:

       1.     Metropolitan/West Essex Senior Housing, LLC, a Delaware limited
liability company ("MSH West Essex") owns the assisted living facility located
in Fairfield, New Jersey, known as Sunrise of West Essex, as more fully
described on Exhibit A attached hereto and made a part hereof (the "Fairfield
Facility").

       2.     Metropolitan/Wayland Senior Housing, LLC, a Delaware limited
liability company ("MSH Wayland") owns the assisted living facility located in
Wayland, Massachusetts known as Sunrise of Wayland, as more fully described on
Exhibit B attached hereto and made a part hereof (the "Wayland Facility").

       3.     Metropolitan/Hunter Mill Senior Housing, LLC, a Delaware limited
liability company ("MSH Hunter Mill") owns the assisted living facility located
in Oakton, Virginia known as Sunrise Assisted Living of Hunter Mill, as more
fully described on Exhibit C attached hereto and made a part hereof (the "Hunter
Mill Facility").

               MSH West Essex, MSH Wayland and MSH Hunter Mill are individually
referred to herein as a "Facility Owner" and collectively referred to herein as
the "Facility Owners." The assisted living facilities described in recital
paragraphs 1 through 3 are individually referred to herein as a "Facility" and
are collectively referred to as the "Facilities."

       4.     Seller owns 100% of the membership interests in the Facility
Owners.

       5.     Seller is willing to contribute 100% of the membership interests
in MSH Wayland (the "Contributed Interest") in exchange for a 25% membership
interest in Buyer (the "LLC Interest"), Seller is willing to convey 100% of the
membership interests in MSH West Essex and MSH Hunter Mill (the "Conveyed
Interests," and together with the Contributed Interest, the "Interests"), and
Buyer desires to acquire and accept such Interests, according to the terms and
conditions set forth below.


<PAGE>   2



       6.     On the Closing Date, the Facility Owners will lease the Facilities
to separate single-purpose entities (individually and/or collectively referred
to herein as "Lessee") of which MSH Operating, LLC, a Delaware limited liability
company, an Affiliate of Buyer, is the sole owner.

       7.     The Facilities will be managed by Sunrise Assisted Living
Management, Inc., a Virginia corporation (the "Operator"), pursuant to separate
Facility Operating Agreements with each Lessee.

        Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows:

                                    ARTICLE I
                                   TERMINOLOGY

        1.1   Defined Terms. As used herein, the following terms shall have the
meanings indicated:

        Affiliate: With respect to any specified person or entity, another
        person or entity which, or a member of an immediate family which,
        directly or indirectly controls, is controlled by, or is under common
        control with, the specified person or entity.

        Code:  The Internal Revenue Code of 1986, as amended.

        Documents: This Agreement and all Exhibits hereto, and each other
        agreement, certificate or instrument delivered pursuant to this
        Agreement.

        Due Diligence Period: The period ending on the earlier of 30 days after
        execution of this Agreement or June 30, 2000, during which Buyer may
        investigate the financial, legal, operational, environmental and all
        other aspects of the Facilities as Buyer may desire in order to
        determine whether to consummate the transactions contemplated by this
        Agreement or terminate this Agreement in accordance with ' 3.2.

        Facility Operating Agreements: The agreements by and between Lessee and
        Operator to be executed and delivered at Closing pertaining to the
        operation, direction, marketing, management and supervision of the
        Facilities, substantially in the form attached hereto as Exhibit E, and
        incorporated herein by reference.

        FF&E: The furniture, fixtures and equipment owned by Seller and located
        at the Facilities, which are used or maintained in connection with
        Seller's operation of the Facilities.

        Health Department: Collectively, all the departments of health and/or
        any other governmental or regulatory authorities of all the states where
        the Facilities are located, which authorities have jurisdiction over the
        licensing, ownership and/or operation of the Facilities as assisted
        living/dementia facilities.



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<PAGE>   3


        Knowledge: As used in this Agreement, the term "knowledge" when used to
        refer to the knowledge of Seller or its Affiliates (a) shall mean and
        apply to the actual knowledge of the responsible officers of Seller or
        its Affiliates who are directly engaged in the management of the
        Facilities and not to any other persons or parties, and (b) shall mean
        the actual knowledge of such responsible officers, it being understood
        and acknowledged that such responsible officers are not charged with
        knowledge of all the acts and/or omissions of their predecessors or with
        acts or omissions of agents or employees of Seller. Neither Seller nor
        the "Responsible Parties" as hereinafter defined, shall be obligated to
        do or perform any independent investigation in connection with the
        making of any representations or warranties as set forth in this
        Agreement; provided, however, that the Responsible Parties shall make a
        good faith inquiry of the executive director of each of the Facilities
        in connection with such representations and warranties. The responsible
        officer of Seller directly engaged in the management and operation of
        the Facilities is: Daniel B. Gorham (whether one or more, the
        "Responsible Parties").

        Lessee: Individually or collectively, those three (3) certain
        single-purpose Delaware limited liability companies which will, at the
        Closing, enter into separate Lease and Security Agreements
        (individually, a "Facility Lease;" collectively, the "Facility Leases")
        whereby Lessee will lease the Facilities from Buyer.

        Licenses. All certificates, licenses, and permits issued by governmental
        authorities held by Seller, the Facility Owners or Seller's Affiliates
        in connection with the ownership, use, occupancy, operation, and
        maintenance of the Facilities. A list of Licenses for each of the
        Facilities is attached hereto and incorporated herein as Exhibit F.

        Lien: Any mortgage, deed of trust, pledge, hypothecation, title defect,
        right of first refusal, security or other adverse interest, encumbrance,
        claim, option, lien, lease or charge of any kind, whether voluntarily
        incurred or arising by operation of law or otherwise, affecting any
        assets or property, including any agreement to give or grant any of the
        foregoing, any conditional sale or other title retention agreement, and
        the filing of or agreement to give any financing statement with respect
        to any assets or property under the Uniform Commercial Code or
        comparable law of any jurisdiction.

        Loss: With respect to any person or entity, any and all costs,
        obligations, liabilities, demands, claims, settlement payments, awards,
        judgments, fines, penalties, damages and reasonable out-of-pocket
        expenses, including court costs and reasonable attorneys' fees, whether
        or not arising out of a third party claim.

        Material Adverse Effect: A material adverse effect on the assets,
        business, operations, financial condition or results of operations of
        the Facilities, or any one of them.



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        Operator: Sunrise Assisted Living Management, Inc., a Virginia
        corporation, its

        successors or assigns, which shall be the operator of the Facilities
        under the Facility Operating Agreements.

        Permitted Lien: Any statutory lien which secures a payment not yet due
        that arises, and is customarily discharged, in the ordinary course of
        Seller's business.

        Resident Deposits: All refundable deposits or advances of any kind or
        nature from any resident of any Facility.

        Taxes: All federal, state, local and foreign taxes including, without
        limitation, income, gains, transfer, unemployment, withholding, payroll,
        social security, real property, personal property, excise, sales, use
        and franchise taxes, levies, assessments, imposts, duties, licenses and
        registration fees and charges of any nature whatsoever, including
        interest, penalties and additions with respect thereto and any interest
        in respect of such additions or penalties.

        Tax Return: Any return, filing, report, declaration, questionnaire or
        other document required to be filed for any period with any taxing
        authority (whether domestic or foreign) in connection with any Taxes
        (whether or not payment is required to be made with respect to such
        document).

        1.2    Additional Defined Terms. As used herein, the following terms
shall have the meanings defined in the recitals or section indicated below:

            Balance Sheet                                Section 4.4
            Buyer                                        Recitals
            Closing                                      Section 9.1
            Closing Date                                 Section 9.1
            Excluded Assets                              Section 2.2
            Facilities                                   Recitals
            Facility Agreements                          Section 2.1(c)
            Facility Lease                               Definitions: "Lessee"
            Fairfield Facility                           Recitals
            Indemnified Party                            Section 10.4(a)
            Indemnifying Party                           Section 10.4(a)
            Intellectual Property                        Section 2.2(j)
            Land                                         Section 2.1(a)
            Owned Assets                                 Section 2.1
            Permitted Exception                          Section 7.3(b)
            Personal Property                            Section 2.1(b)
            Post-Closing Purchase Price Adjustment       Section 2.4(b)
            Proration Date                               Section 2.6(a)



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            Proration Schedule                           Section 2.6(a)
            Purchase Price                               Section 2.4
            Real Property                                Section 2.1(a)
            Receivables                                  Section 2.7
            Resident Agreements                          Section 2.1(c)
            SALI                                         Section 2.2(j)
            Seller                                       Recitals
            Survey                                       Section 7.3(d)
            Title Commitment                             Section 7.3(a)
            Title Defect                                 Section 7.3(b)
            Title Insurer                                Section 7.3(a)
            Title Notice                                 Section 7.3(b)
            Wayland Facility                             Recitals
            West Essex Facility                          Recitals


                                   ARTICLE II
                                PURCHASE AND SALE

       2.1    Owned Assets. Upon and subject to the terms and conditions
provided herein, on the Closing Date, Seller will sell, transfer, assign and
convey (or contribute) to Buyer, and Buyer, which may exercise its rights
hereunder through one or more wholly-owned subsidiaries, will purchase (or
accept in exchange for the LLC Interest) from Seller, all of Seller's right,
title and interest in and to the Interests. As of the Closing Date, all tangible
and intangible assets (except Excluded Assets) used or useful in the operation
of the Facilities as they have been operated by the entities which conveyed the
Facilities to the Facility Owners (the "Predecessor Owners") and are now
operated by the Facility Owners (the "Owned Assets") will be owned by Seller (if
Seller is obligated hereunder to assign, transfer or convey such property to
Lessee pursuant to the terms hereof) or (if Seller is not so obligated) will be
owned by the Facility Owners. The Owned Assets include the following:

               (a)    Real Property.

               (i) That certain real property consisting of land ("Land") and
        all buildings, structures, fixtures and other improvements
        ("Improvements") located as follows:

               Fairfield Facility           47 Greenbrook Road
                                            Fairfield, New Jersey 07470

               Wayland Facility             285 Commonwealth Road
                                            Wayland, Massachusetts 01778



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               Hunter Mill Facility         2863 Hunter Mill Road
                                            Oakton, Virginia

               The Land and related real property (the "Real Property") are
        more fully described on Exhibit A through Exhibit C and shall be deemed
        to include all permits, easements, rights of way and related
        appurtenances.

               (ii) Seller's right, title and interest as landlord (whether
        named as such therein, or by assignment or otherwise) in any leases and
        subleases, if any, regarding the Real Property now existing or at any
        time hereafter made, and all amendments, modifications, supplements,
        renewals and extensions thereof, together with any refundable security
        deposits made by the lessees thereunder.

               (b)    Personal Property.

               (i) Any and all furniture, fixtures, furnishings, machinery and
        equipment used in connection with the Facilities, and all other personal
        property used in connection with the Real Property and now located upon
        the Real property, if any. A list of such tangible personal property is
        attached hereto as Exhibit D. In no event shall the Personal Property
        include any property owned by Operator, notwithstanding Operator's use
        of such property in connection with its management and administration of
        the Facilities.

               (ii) Goodwill, going concern, and all existing warranties and
        guaranties (express or implied) issued to the Facility Owners or to the
        Predecessor Owners in connection with the Improvements or the personal
        property described in paragraph (b)(i) above.

               (iii) The tangible and intangible property described in Sections
        2.1(b)(i) and 2.1(b)(ii) shall be referred to herein as the "Personal
        Property."

               (c) Facility Agreements and Resident Agreements. All rights of
Seller in, to and under all contracts, leases, agreements, commitments and other
arrangements, and any amendments or modifications, used or useful in the
operation of the Facilities as of the date hereof or made or entered into by the
Facility Owners between the date hereof and the Closing Date in compliance with
this Agreement (the "Facility Agreements"), including but not limited to
occupancy, residency, lease, tenancy and similar written agreements entered into
in the ordinary course of business with residents of the Facilities, and all
amendments, modifications, supplements, renewals, and extensions thereof
("Resident Agreements") and all Resident Deposits.

               (d) Records. True and complete copies of all of the books,
records, accounts, files, logs, ledgers and journals pertaining to or used in
the operation of the Facilities, including, but not limited



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<PAGE>   7


to, any electronic data stored on computer disks or tapes, and originals of any
of the foregoing that relate to residents of the Facilities other than Excluded
Assets.

               (e) Miscellaneous Assets. Any other tangible or intangible
assets, properties or rights of any kind or nature not otherwise described above
in this Section 2.1 and now or hereafter owned by the Facility Owners (or the
Predecessor Owners) and used in connection with the operation of the Facilities
(except Excluded Assets).

        2.2     Excluded Assets. Notwithstanding any provision of this Agreement
to the contrary, the Owned Assets shall not include any of the following
(collectively, the "Excluded Assets"):

               (a) Any and all cash, bank deposits and other cash equivalents,
certificates of deposits, marketable securities, cash deposits made by or on
behalf of the Facility Owners (or the Predecessor Owners) to secure contract
obligations (except to the extent Seller receives a credit therefor under
Section 2.6).

               (b) Any and all rights in and to claims or causes of action of
Seller or the Facility Owners or any of their Affiliates against third parties
(including, without limitation, for indemnification) with respect to, or which
are made under or pursuant to the Owned Assets or the Excluded Assets, and which
arose prior to the date of Closing, it being specifically agreed that Seller
shall be responsible for all costs and expenses (including attorneys fees)
incurred in connection with the prosecution of such claims or causes of action.

               (c) All prepaid expenses (and rights arising therefrom or related
thereto) except to the extent taken into account in determining the Adjustment
Amount under Section 2.6.

               (d) All loan agreements and other instruments evidencing
indebtedness for borrowed money.

               (e) All non-transferable contracts of insurance, all coverages
and (subject to Section 13.17 below) proceeds thereunder and all rights in
connection therewith, including, without limitation, rights arising from any
refunds due with respect to insurance premium payments to the extent they relate
to such non-transferable insurance policies.

               (f) All tangible personal property disposed of or consumed at or
in connection with the Facilities between the date hereof and the Closing Date
in accordance with the terms and provisions of this Agreement.

               (g) To the extent now or hereafter held by or issued in the name
of Seller, Operator or their Affiliates (other than the Facility Owners) and not
transferable or assignable under applicable law, all Licenses (and any renewals,
extensions, amendments or modifications thereof), provided, however, that Seller
shall, and shall cause Operator and the Affiliates of Seller and Operator, to
fulfill their obligations as



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<PAGE>   8


set forth in Section 6.12 to have such Licenses transferred or reissued in the
names of the appropriate Lessee, or such other party as Buyer may direct.

               (h) Any and all rights of Sunrise Assisted Living, Inc. ("SALI")
or any of its Affiliates with respect to the use of (i) all trade names,
trademarks, service marks, copyrights, patents, jingles, slogans, symbols,
logos, inventions, computer software or other proprietary material, process,
trade secret or trade right used by SALI or its Affiliates in the operation of
the Facilities, (ii) all registrations, applications and licenses for any of the
foregoing, and (iii) any additional such items acquired or used by SALI or its
Affiliates in connection with the operation of the Facilities between the date
hereof and the Closing Date (collectively, the "Intellectual Property"),
provided, however, that Buyer or its Affiliates shall have the right to use the
Intellectual Property in connection with the operation of the Facilities for so
long as the Facility Operating Agreements with Operator govern operation of the
Facilities.

               (i) All corporate minute books, corporate seals, stock transfer
records and other corporate records (except to the extent such records pertain
primarily to or are used primarily in the operation of the Facilities) and any
records relating to Excluded Assets and to liabilities other than the Assumed
Obligations.

               (j) Personal property of all officers or employees of SALI or its
Affiliates located in their respective personal offices at the Facilities.

               (k) All other assets of Seller or its Affiliates not located on
or used in connection with the operation of the Facilities.

        2.3     Assumption of Liabilities. Buyer acknowledges the existence of,
and will cause Lessee at Closing to assume and agree to pay, discharge and
perform when due, from and after Closing, the following liabilities and
obligations (collectively, the "Owner Obligations"):

                (a)     All liabilities and obligations arising under the
                        Facility Agreements transferred to Lessee in accordance
                        with this Agreement to the extent such liabilities and
                        obligations arise during and relate to any period from
                        and after the Closing Date; and

                (b)     Provided that Seller pays Buyer the amount, if any, owed
                        by Seller at Closing under Section 2.6, the Owner
                        Obligations shall also include such other liabilities of
                        Seller (including but not limited to Resident Deposits
                        or any personal funds belonging to residents of the
                        Facilities held by Seller) to the extent, and only to
                        the extent, the amount thereof is included as a credit
                        to Buyer in calculating the Adjustment Amount as
                        ultimately determined pursuant to Section 2.6.

        2.4     Purchase Price.


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                (a) The purchase price for the Conveyed Interests ("Purchase
Price") shall be Thirty-Three Million and No/100 Dollars ($33,000,000.00). The
Purchase Price, subject to adjustment as provided in Section 2.6 below, shall be
paid by Buyer to Seller on the Closing Date by wire transfer of immediately
available funds to the Title Insurer or at Seller's direction.

                (b) In the event that aggregate Gross Revenues (as defined in
the Facility Operating Agreements) for the Facilities in any of the first three
(3) full fiscal quarters after the Closing is less than the "Threshold Revenue
Amount" for any such fiscal quarter (as shown in Exhibit G), then the Purchase
Price shall be reduced by the amount determined as shown in Exhibit G, but in no
event shall the aggregate amount of reduction exceed the amount shown as the
"Purchase Price Reduction" on Exhibit G (the "Post-Closing Purchase Price
Adjustment") for each such fiscal quarter. Such Post-Closing Purchase Price
Adjustment, if any, shall be allocated among the Owned Assets in the proportion
that the Purchase Price is allocated among the Owned Assets in Section 2.5
below. The determination of the aggregate Gross Revenues for the Facilities and
Seller's payment, if any, of the Post-Closing Purchase Price Adjustment in cash
to Buyer shall be made within sixty (60) days following the end of the third
(3rd) full fiscal quarter after the Closing.

        2.5     Allocation of the Purchase Price. Seller and Buyer have
initially agreed to an allocation of the Purchase Price among the Owned Assets
as follows:

<TABLE>
<CAPTION>

                   FACILITY                                 ALLOCATED PURCHASE PRICE
------------------------------------------------ ----------------------------------------------
<S>                                              <C>
Fairfield                                        $16,825,000.00
------------------------------------------------ ----------------------------------------------
Hunter Mill                                      $16,175,000.00
------------------------------------------------ ----------------------------------------------
</TABLE>


Buyer and Seller further agree that, for purposes of the exchange of the
Contributed Interest for the LLC Interest, the value of the Contributed Interest
shall be Eleven Million and No/100 Dollars ($11,000,000.00). Buyer and Seller
each agree to report such allocations, if agreed upon, to the Internal Revenue
Service in the form required by Treasury Regulation 1.1060-IT and to use such
allocation for all other reporting purposes after Closing in connection with
federal, state and local income and, to the extent permitted under applicable
law, franchise taxes.

        2.6     Adjustment of Purchase Price.

        (a) All income and expenses (including prepaid expenses) of the
Facilities (including the Wayland Facility) shall be prorated on a daily basis
between Seller and Buyer as of 11:59 p.m., June 30, 2000 (the "Proration Date").
Such items to be prorated shall include:

            (i)     Rents under the leases and Resident Agreements and other
        income, if any, including prepaid rents and security deposits;



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        (ii)    Utility charges, if any;

        (iii)   Payments under service agreements assigned to Buyer, if any;

        (iv)    Periodic charges or fees assessed by any governmental authority,
                if any.

        (v)     Food inventory;

        (vi)    Supplies inventory;

        (vii)   Petty cash;

        (viii)  Real estate and personal property taxes; and

        (ix)    Payments under any leases of personal property used in
connection with the operation of the Facilities.

       Buyer and Seller shall prepare a schedule (the "Proration Schedule") at
least three (3) days prior to Closing, including: (i) the items listed above,
(ii) any items which are customarily apportioned between a purchaser and seller
in the localities in which the Facilities are located, and (iii) any other items
the parties determine necessary. Such Proration Schedule shall include all
applicable income and expenses with regard to the Facilities. Notwithstanding
the foregoing, Buyer's due diligence expenses (including the cost of preparing
surveys and title insurance premiums) payable in connection with the
transactions contemplated herein shall be paid by Buyer, provided that transfer
taxes shall be paid in accordance with Section 9.4.

       (b) Any escrow accounts held by any utility companies, and any cash
deposits made by Seller prior to Closing to secure obligations under contracts
which will continue after Closing, shall be either paid to the Seller or, if
assigned to Buyer, Seller shall receive a credit at Closing for any such
deposits.

       (c) The applicable Lessee shall receive all income from the Facilities
attributable to the period from and after the Proration Date and Lessee and
Buyer shall be responsible for all expenses of the Facilities attributable to
the period from and after the Proration Date. In the event Seller receives any
payment from a resident for rent due for any period from and after the Proration
Date, Seller shall forward such payment to the applicable Lessee. In addition,
in the event Seller has received any pre-paid rent or any security deposits from
a resident for any period from and after the Proration Date, Seller shall
forward such pre-paid rent and or security deposits to the applicable Lessee.

       (d) The parties agree that any amounts which may become due under this
Section 2.6 shall be paid at Closing as can best be determined. A post-Closing
reconciliation of such pro-rated items shall be made by the parties sixty (60)
days after Closing and any amounts due at that time shall be promptly forwarded
to the respective party in a lump sum payment. Any additional amounts which may
become



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due after such determination shall be forwarded at the time they are received.
Any amounts due under this Section 2.6 which cannot be determined within sixty
(60) days after Closing (such as, for example, fiscal year-end real estate
taxes) shall be reconciled as soon thereafter as such amounts can be determined.
Seller, on behalf of itself and its Affiliates, agrees that Federal Street
Operating, LLC, a member of Buyer, shall have the right to audit the records of
Seller in connection with any such post-closing reconciliation.

        2.7    Accounts Receivable.  As of the date of this Agreement, the
Facilities have the following outstanding accounts receivable (the
"Receivables"):

               Fairfield                           $  79,525
               Wayland                             $  63,589
               Hunter Mill                         $ 101,019

               Buyer shall make an adjustment payment to Seller in consideration
of Lessee's right to collect the Receivables after Closing. Such adjustment
payment shall be in an amount equal to seventy-five percent (75%) of the
Receivables outstanding as of the Closing Date. Seller agrees that during the
term of this Agreement, it shall continue to use usual and customary procedures
to collect the Receivables.

                                   ARTICLE III
                              DUE DILIGENCE PERIOD

       3.1    Due Diligence Period. During the period beginning on the date of
full execution of this Agreement through the earlier of the date 30 days
thereafter or June 30, 2000 (the "Due Diligence Period"), Buyer shall have the
right to review and evaluate the Owned Assets, the nature and extent of the
Owned Assets and operations and all rights and liabilities related thereto.
Seller shall furnish or make available to Buyer or its representatives within
five (5) days after the date hereof, the following to the extent they are in
Seller's possession or control:

       (a) Any and all title insurance policies, (together with copies of all
exception documents referenced therein), as-built surveys, environmental
reports, property condition reports, site inspection reports, and MAI
Appraisals;

       (b) Any and all contracts, leases, equipment agreements, and information
regarding any claims affecting the Real Property or the Personal Property;

       (c) All licenses and permits currently held by Seller or its Affiliates
in connection with the ownership or operation of the Facilities, and all
existing warranties and guaranties (express or implied) issued in connection
with the Owned Assets; and

       (d) Facility budgets for the year 2000.



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<PAGE>   12


        (e) All other such documents or items as Buyer may reasonably request in
connection with its due diligence investigations of the Facilities.

       3.2    Termination during Due Diligence. At any time during the Due
Diligence Period, Buyer shall have the right, in its sole discretion and for any
reason or no reason, to terminate this Agreement by written notice to Seller.
Upon such notice, this Agreement shall terminate and be of no further force and
effect.

                                   ARTICLE IV
                    REPRESENTATIONS AND WARRANTIES OF SELLER

       Seller represents and warrants to Buyer as follows:

       4.1    Organization, Good Standing and Entity Authority. Sunrise
Fairfield is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of New Jersey, and has all requisite
authority to own and operate its properties and carry on its business. Sunrise
Wayland is a limited partnership duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts, and has all
requisite authority to own and operate its properties and carry on its business.
Sunrise Hunter Mill is a limited partnership duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia, and has all
requisite authority to own and operate its properties and carry on its business.
Each Facility Owner is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware, and has all requisite
authority to own, operate and lease its properties and carry on its business.
Each Facility Owner is duly qualified to do business in the State in which the
Facility owned by it is located.

       4.2    Authorization and Binding Effect of Documents. Seller has all
requisite power and authority to enter into this Agreement and the other
Documents to which it is a party and to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement and each of the
other Documents by Seller and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of Seller and Seller's general partners. This Agreement has
been, and each of the other Documents at or prior to Closing will be, duly
executed and delivered by Seller. This Agreement constitutes (and each of the
other Documents, when executed and delivered, will constitute) the valid and
binding obligation of Seller enforceable against Seller in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights of creditors generally and to the
exercise of judicial discretion in accordance with general principles of equity,
whether applied by a court of law or of equity.

       4.3    Absence of Conflicts. The execution, delivery and performance by
Seller of this Agreement and the other Documents, and consummation by Seller of
the transactions contemplated hereby and thereby, do not and will not, to the
best of Seller's knowledge, (i) conflict with or result in any breach of any of
the terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in a violation of, (iv)



                                       12
<PAGE>   13


give any third party the right to modify, terminate or accelerate any obligation
under, or (v) result in the creation of any Lien upon the Interests or the Owned
Assets under the provisions of the Certificate of Limited Partnership or
Partnership Agreement of Seller, the organizational instruments of any Facility
Owner, any laws or regulations to which Seller or any Facility Owner is subject,
or any indenture, mortgage, lease, loan agreement or other agreement or
instrument to which Seller, any Facility Owner or the Facilities are subject.

       4.4    Financial Statements. Seller has delivered to Buyer prior to the
date of this Agreement the unaudited financial statements for each of the
Facilities as of December 31, 1999, including but not limited to an unaudited
balance sheet as of December 31, 1999 (the "Balance Sheet"). Seller has also
delivered to Buyer prior to the date of this Agreement the unaudited financial
statements for each of the Facilities as of March 31, 2000, certified by the
Chief Financial Officer of SALI (the "Interim Statements"). All such statements
(i) are in accordance in all material respects with the books and records of
Seller and (ii) have been prepared in accordance with GAAP applied on a
consistent basis and fairly present the assets and liabilities of the Facilities
as of the dates stated and accurately reflect the results of operations of the
Facilities for the periods covered by the statements, with the exception that
the Interim Statements are subject to normal year-end adjustments.

       4.5    Absence of Certain Changes or Events. Since the date of the
Balance Sheet (except as disclosed in the Interim Statements):

              (a) There has not been any damage, destruction or other casualty
loss with respect to the Owned Assets (whether or not covered by insurance)
which, individually or in the aggregate has, or could reasonably be expected to
have, a Material Adverse Effect.

              (b) None of the Seller, the Operator, the Facility Owners or the
Facilities has suffered any adverse change or development which, individually or
in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect.

              (c) Neither Seller, the Facility Owners or the Operator has:

                  (i) amended or terminated any Facility Agreement except in the
       ordinary course of business;

                  (ii) mortgaged, pledged, suffered or subjected to any Lien,
       the Interests or any of the Owned Assets, except for Permitted Liens and
       any Lien which will be released at or prior to the Closing Date;

                  (iii) acquired or disposed of any assets or properties
       affecting the Facilities or entered into any agreement or other
       arrangement for such acquisition or disposition, except in the ordinary
       course of business;


                                       13
<PAGE>   14



                  (iv) entered into any agreement, commitment or other
       transaction affecting the Facilities other than in the ordinary course of
       business;

                  (v) operated the Facilities other than in the ordinary course
       of business.

       4.6    Broker's or Finder's Fees. No agent, broker, investment banker or
other person or firm acting on behalf of or under the authority of Seller, the
Facility Owners or any Affiliate of Seller is or will be entitled to any
broker's or finder's fee or any other commission or similar fee, directly or
indirectly, in connection with the transactions contemplated by this Agreement.
Seller agrees to indemnify and hold Buyer harmless from any Loss resulting from
a breach of this representation and warranty. Notwithstanding the provisions of
Article X below, such agreement to indemnify shall survive the Closing without
limitation.

       4.7    Insurance. There is now, and until Closing there will remain, in
full force and effect with reputable insurance companies fire and extended
coverage insurance with respect to all tangible Owned Assets and public
liability insurance, all in commercially reasonable amounts.

       4.8    Litigation. Except as set forth on Exhibit H, there is no pending,
or to the best of Seller's knowledge, threatened litigation, proceeding or
investigation (by any person, governmental or quasi-governmental agency or
authority or otherwise) to which Seller is a party, including without limitation
litigation brought by Seller or the Facility Owners against third parties. The
litigation, proceedings and investigations listed on Exhibit H will not,
individually or in the aggregate, materially adversely affect the ownership,
use, occupancy, operation or title to any of the Facilities.

       4.9    Compliance with Laws. To the best of Sellers' knowledge, the
Improvements have been constructed and the Facilities have been and are
presently used and operated in compliance in all material respects with, and in
no material way violate any applicable statute, law, regulation, rule,
ordinance, order or permit of any kind whatsoever affecting the Facilities or
any part thereof. Neither Seller, the Facility Owners nor any of Seller's
Affiliates has received notice of any such violation.

       4.10   Environmental Matters. To Seller's knowledge, neither Seller, the
Facility Owners, nor any of Seller's Affiliates has generated, stored or
disposed of any hazardous waste at any of the Facilities, and Seller has no
knowledge of any previous or present generation, storage, disposal or existence
of any hazardous waste at any of the Facilities. The term "hazardous waste"
shall mean "hazardous waste," "toxic substances," or other similar or related
terms as defined or used from time to time in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. " 1801,
et seq.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. '
6921, et seq.), similar state laws and regulations adopted thereunder.

       4.11   Assessments. There are no special or other assessments for public
improvements or otherwise now affecting any of the Facilities, nor does Seller
have knowledge of (i) any pending or threatened special assessments affecting
any of the Facilities or (ii) any contemplated improvements affecting any of the
Facilities that may result in special assessments affecting any of the
Facilities.



                                       14
<PAGE>   15


       4.12.  Resident Agreements. Attached hereto as Exhibit I are true and
correct copies of the forms of Resident Agreement used at the Facilities. No
Resident Agreement currently in effect with respect to any of the Facilities
contains any material deviations from the forms attached hereto as Exhibit I.
Seller is not in default under any of its material obligations under any
Resident Agreement or any lease and, except as set forth on the rent roll
attached hereto as Exhibit O (the "Rent Roll"), Seller has no knowledge of any
material default on the part of any other party thereto. All of the Resident
Agreements and lease identified on the Rent Roll are currently in full force and
effect.

       4.13.  Facility Agreements. The Facility Agreements listed on Exhibit J
hereto are all of the Facility Agreements relating to or affecting any of the
Facilities. Seller has heretofore delivered to Buyer true and complete copies of
all such Facility Agreements, including all amendments and modifications
thereto; no Seller is in default of any of its material obligations under any of
such Facility Agreements, and Seller has no knowledge of any material default on
the part of any other party thereto. All of the Facility Agreements listed on
Exhibit J are currently in full force and effect.

       4.14   Permits. Exhibit F attached hereto is a true and complete list of
all Licenses. All the Licenses are valid and no material violations exist. To
Seller's knowledge, the Licenses are the only certificates, licenses, and
permits which are required for the lawful ownership, use, occupancy, operation
and maintenance of the Facilities as assisted living/dementia facilities.

       4.15   Medicare; Medicaid. To Seller's knowledge, no action, proceeding,
or investigation in connection with Medicare, Medicaid or other public or
private third-party payer or other programs is pending or threatened against
Seller, the Facility Owners or any of Seller's Affiliates in connection with the
Facilities. Neither Seller, the Facility Owners nor Seller's Affiliates has
received notice of any threatened or pending investigation in connection with
(i) Medicare, Medicaid, or other public or private third-party payer programs or
(ii) any fraud, false statement or false claim applicable to its business or
(iii) any patient care, patient rights or other law applicable to its business.
Seller, the Facility Owners or Seller's Affiliates have prepared and filed all
cost reports, if any, that were required to be filed for Medicare and Medicaid
purposes and for all other public or private third-party reimbursement programs
through the date of this Agreement. All such cost reports, if any, are correct
and accurate and have been prepared in conformity with Seller's books and
records. Neither Seller, the Facility Owners nor Seller's Affiliates has
received notice that Medicare, Medicaid or any other public or private
third-party payer has any claims for disallowance of costs against it. To
Seller's knowledge, neither Seller, the Facility Owners nor any Affiliate of
Seller has committed any violation of the Medicare and Medicaid fraud and abuse
provisions of the Social Security Act, any similar state law or Title VI of the
Civil Rights Act.

       4.16   Condemnation. Neither Seller, the Facility Owners nor any of
Seller's Affiliates has received any written notice of any pending or
contemplated condemnation, eminent domain or similar proceeding with respect to
all or any portion of the Facilities.



                                       15
<PAGE>   16


       4.17   Condition of Property. To Seller's knowledge, with regard to the
Improvements, (i) there are no material structural defects, (ii) they are free
of insect and rodent infestation, (iii) the roofs are free of leaks, (iv) all
mechanical and utility systems servicing the Improvements are in good condition
and proper working order, free of material defects and, to Seller's knowledge,
in compliance with all applicable laws and codes. To Seller's knowledge, all the
Personal Property is in good condition, working order and repair.

       4.18   Independent Facilities. To Seller's knowledge, each Facility is an
independent unit which as of the date hereof does not rely, and as of the
Closing, will not rely on any facilities (other than the facilities of public
utility, sewer and water companies) located on any property not included in such
Facility (i) to fulfill any zoning, building code, or other municipal or
governmental requirement, or (ii) for structural support or the furnishing of
any essential building systems or utilities, including, but not limited to,
electric, plumbing, mechanical, heating, ventilating and air conditioning
systems. To Seller's knowledge, no building or other improvements not included
in the Facilities relies on any part of the Facilities to fulfill any zoning,
building code or other municipal or governmental requirement or for structural
support or the furnishing of any essential building systems or utilities.

       4.19   Full Disclosure. None of the representations or warranties in this
Agreement by Seller, nor any descriptive information concerning the Owned Assets
set forth in this Agreement, nor, to Seller's knowledge, does any document,
statement, certificate, schedule or other information furnished or to be
furnished to Buyer by Seller in connection with this Agreement, contain, or will
as of the Closing, contain any untrue statement of a material fact or omit, or
will as of the Closing omit, to state a material fact necessary to make the
statements of fact contained therein not misleading.

       4.20   Utilities Access. To Seller's knowledge, each Facility has
adequate water supply, storm and sanitary sewer facilities, adequate access to
telephone, gas and electricity connections, adequate fire protection, drainage,
means of ingress and egress to and from public highways and, without limitation,
other public utilities for operation as an assisted living/dementia facility. To
Seller's knowledge, the parking facilities located on each Facility meet all
applicable requirements imposed by applicable law or requisite exceptions or
variances to such laws. All such public utilities are installed and operating
and all installation and connection charges have been paid in full. All streets
and roads necessary for access to and full utilization of each of the
Facilities, and every part thereof, have been built, completed, dedicated and
accepted for maintenance and public use by the appropriate governmental
authorities or are otherwise owned and maintained by local governments for
public use. Seller has no knowledge of any fact or condition existing that would
result or could result in the termination or reduction of the current access
from the Facilities to the existing roads and highways or to sewer or other
utility services presently serving the Facilities.

       4.21   Zoning. To Seller's knowledge, the use of each of the Facilities
as assisted living/dementia facilities, together with the ancillary uses
thereto, are permitted under the applicable municipal zoning



                                       16
<PAGE>   17


ordinances, or special exceptions, variances, or conditions thereto, and the
Facilities comply, to the extent required (and not waived or grandfathered),
with all conditions, restrictions and requirements of such zoning ordinances and
all amendments thereto.

       4.22   No Employees. None of the employees at the Facilities is employed
by Seller or the Facility Owners. All such employees are employed by Operator or
its Affiliates other than Seller. Neither Seller nor the Facility Owners now
has, and at no time ever had, any employees.

       4.23   FIRPTA. Seller is a Anon-foreign person" within the meaning of
Section 1445 of the Code and the Regulations issued thereunder.

       4.24   Bank Accounts. Exhibit K, attached hereto, sets forth the names
and locations of all banks, trust companies, savings and loan associations, and
other financial institutions or depositories at which Seller or the Facility
Owners maintain any safe deposit boxes or accounts of any nature, the numbers
and types thereof, and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto. After the Closing, Seller shall
cooperate with Buyer to the extent necessary to close any such accounts which
Buyer desires closed, and to change the persons authorized to draw upon such
accounts which Buyer does not desire closed.

       4.25   Taxes. Seller and the Facility Owners have accurately prepared and
duly and timely filed (or has filed as part of a consolidated tax filing) all
tax reports and returns required to be filed by it and, whether or not shown on
such returns or reports to be due, has duly paid or provided for the payment of
all taxes and other charges due or claimed to be due from it by federal, state,
local or foreign taxing authorities (including, without limitation, those due in
respect of the properties, income, franchises, licenses, sales, usages or
payrolls of Seller and the Facility Owners; there are no tax liens upon any
property or assets of any Seller and the Facility Owners except liens for
current taxes not yet due. The federal income tax returns of Seller and the
Facility Owners have not been audited or otherwise examined by the Internal
Revenue Service within the past three years, and no state or local income,
sales, use, or property tax returns of Seller and the Facility Owners have been
audited or otherwise examined within the past three years. Seller has no notice
of the pendency of any such audit or examination. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal or state income tax return for any period and neither Seller nor the
Facility Owners has filed any consent under Section 341(f) of the Code.

       4.26   Owned Assets. The Owned Assets (except Excluded Assets) constitute
all real, tangible and intangible assets and property used or useful in the
operation of the Facilities as they have been operated by the Predecessor Owners
and are now operated by the Facility Owners. Seller is the Landlord under all
leases and Resident Agreements relating to the Facilities. The Facility Owners
do not own or hold an interest in any property, real or personal, tangible or
intangible, except for the Owned Assets.



                                       17
<PAGE>   18


       4.27   Interests. Seller owns 100% of the membership interests in each
Facility Owner, free and clear of all liens, options, claims, encumbrances or
charges of any kind, and there are no outstanding options or other rights to
purchase or otherwise acquire any membership interest in any of the Facility
Owners.

       4.28   Executive Director. The executive director of each Facility is the
person most likely to have knowledge regarding the accuracy or inaccuracy of any
of the representations of Seller set forth herein which are qualified to
Seller's knowledge.

       4.29   Title Encumbrances. Neither Seller nor the Facility Owners are in
default under any of their material obligations under any recorded agreement,
easement or instrument encumbering title to any of the Facilities, and Seller
has no knowledge of any material default on the part of any other party thereto.

       4.30   Affordable Housing Units. Attached hereto as Exhibit P is a true
and complete list of each unit within the Facilities (specifying the number of
bedrooms in each unit) which is leased or reserved for lease as an affordable
housing unit, or for low or moderate income residents. Exhibit P truly and
correctly lists the number of units (and the number of bedrooms in each such
unit) at the Facilities which may be required to be leased as an affordable
housing unit, or for low or moderate income residents, pursuant to a presently
existing agreement or requirement of law.

                                    ARTICLE V
                     REPRESENTATIONS AND WARRANTIES OF BUYER

       Buyer represents and warrants to Seller as follows:

       5.1    Organization and Good Standing. Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. Buyer has all requisite company power to own, operate and
lease its properties and carry on its business as it is now being conducted and
as the same will be conducted following the Closing.

       5.2    Authorization and Binding Effect of Documents. Buyer has all
requisite company power and authority to enter into this Agreement and the other
Documents and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and each of the other Documents by
Buyer and the consummation by Buyer of the transactions contemplated by this
Agreement have been duly authorized by all necessary company action on the part
of Buyer. This Agreement has been, and each of the other Documents at or prior
to Closing will be, duly executed and delivered by Buyer. To the best of Buyer's
knowledge, this Agreement constitutes (and each of the other Documents, when
executed and delivered, will constitute) the valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity, whether applied by a
court of law or of equity.



                                       18
<PAGE>   19


       5.3    Absence of Conflicts. The execution, delivery and performance by
Buyer of this Agreement and the other Documents, and consummation by Buyer of
the transactions contemplated hereby and thereby, do not and will not (i)
conflict with or result in any breach of any of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in a violation of,
(iv) give any third party the right to modify, terminate or accelerate any
obligation under, the provisions of the articles of organization or operating
agreement of Buyer, any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which Buyer is bound or affected, or any law,
statute, rule, judgment, order or decree to which Buyer is subject.

       5.4    Consents. The execution, delivery and performance by Buyer of this
Agreement and the other Documents, and consummation by Buyer of the transactions
contemplated hereby and thereby, do not and will not require the authorization,
consent, approval, exemption, clearance or other action by or notice or
declaration to, or filing with, any court or administrative or other
governmental body, or the consent, waiver or approval of any other person or
entity.

       5.5    Broker's or Finder's Fees. No agent, broker, investment banker, or
other person or firm acting on behalf of Buyer or under its authority is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee, directly or indirectly, from Buyer in connection with the transactions
contemplated by this Agreement. Buyer agrees to indemnify and hold Seller
harmless form any Loss, resulting from a breach of the representations and
warranties set forth in this section. Notwithstanding the provisions of Article
X below, such agreement to indemnify shall survive the Closing without
limitation.

                                   ARTICLE VI
                                 OTHER COVENANTS

       6.1    Conduct of the Facility's Business Prior to the Closing Date.
Seller covenants and agrees with Buyer that from the date hereof through the
Closing Date, unless Buyer otherwise consents in writing (which consent shall
not be unreasonably withheld), Seller, the Facility Owners or Seller's
Affiliates shall:

              (a) Operate the Facilities in the ordinary course of business,
including (i) incurring expenses consistent with the past practices, (ii) making
reasonable capital expenditures prior to the Closing Date in an amount
consistent with past practices and the current Facility budget, and (iii) using
commercially reasonable efforts to preserve the Facilities' present business
operations, organization and goodwill and its relationships with customers,
employees, advertisers, suppliers and other contractors.

              (b) Operate the Facilities and otherwise conduct its business in
all material respects in accordance with the terms or conditions of the
Licenses, all applicable rules and regulations of the relevant State, and to the
best of its knowledge all other rules, regulations, laws and orders of all
governmental authorities having jurisdiction over any aspect of the operation of
such Facilities.



                                       19
<PAGE>   20


              (c) Maintain Seller's books and records in accordance with GAAP on
a basis consistent with prior periods.

              (d) Timely comply in all material respects with any Facility
Agreements.

              (e) Not sell, lease, grant any rights in or to or otherwise
dispose of, or agree to sell, lease or otherwise dispose of, any of the Owned
Assets except for dispositions of assets that (A) are in the ordinary course of
business and (B) if material, are replaced by similar assets of substantially
equal or greater value and utility.

              (f) Maintain the FF&E and Personal Property currently in use in
reasonably good operating condition and repair, except for ordinary wear and
tear, in a manner consistent with past practices.

       6.2    Notification of Certain Matters. Seller shall give prompt notice
to Buyer, and Buyer shall give prompt notice to Seller, of (i) the occurrence,
or failure to occur, of any event that would be likely to cause any of their
respective representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Closing Date, and (ii) any failure on their respective parts to comply with
or satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by any of them under this Agreement.

       6.3    Title; Additional Documents. At the Closing, Seller shall transfer
and convey to Buyer good and marketable title to the Interests free and clear of
any Liens except Permitted Exceptions. At the Closing, all warranties relating
to the Facilities shall be held and owned by the Facility Owners. At the
Closing, Seller shall transfer and convey to Lessee good and marketable title to
all other Owned Assets, free and clear of any Liens except Permitted Exceptions.
Seller shall execute or cause to be executed such documents, in addition to
those delivered at the Closing, as may be necessary to confirm in Buyer such
title to the Interests and the Owned Assets and to carry out the purposes and
intent of this Agreement. Buyer shall execute or cause to be executed such
documents, in addition to those delivered at Closing as may be necessary to
confirm Buyer's assumption of the Owner Obligations.

       6.4    Other Consents. Seller shall use reasonable efforts to obtain the
consents or waivers to the transactions contemplated by this Agreement required
under any Facility Agreements; provided that Seller shall not be required to
make any financial accommodation to a third party in order to obtain any such
consent or waiver (other than payment of any amount otherwise due such third
party).

       6.5    Inspection and Access. Seller shall, commencing on the date of
this Agreement, open the assets, books, accounting records, correspondence and
files of Seller (to the extent related to the operation of the Facilities) for
examination by Buyer, its officers, attorneys, accountants and agents, with the
right to make copies of such books, records and files or extracts therefrom.
Such access will be available to Buyer during normal business hours, upon
reasonable notice and in such manner as will not unreasonably interfere with the
conduct of the business of the Facilities. All requests for access shall be made
by Buyer to Daniel


                                       20
<PAGE>   21



B. Gorham, Susan L. Timoner or Douglas Bath on behalf of Seller. Buyer shall not
contact or otherwise communicate with any of the tenants, occupants, staff
members or other employees or others providing goods or services to the
Facilities without the prior written consent of Seller, which shall not be
unreasonably withheld or delayed, but in no event shall contact be made with any
of the aforementioned before ten (10) days prior to Closing. As and when Seller
prepares the same for its own purposes (which preparation shall be consistent in
terms of timing with Seller's past practices), Seller will furnish to Buyer
unaudited financial statements of Seller for the periods from and after the date
of the Interim Statements prepared in a manner consistent with the Interim
Statements. Seller will make available to Buyer such additional financial and
operating data and other available information regarding the Facilities or the
Owned Assets as Buyer may reasonably request. Those books, records and files
(the possession of which is not being transferred to Buyer pursuant to this
Agreement) which relate to the Owned Assets shall be preserved and maintained by
Seller for four (4) years after the Closing and those books, records and files
relating to the Owned Assets the possession of which is being transferred to
Buyer hereunder shall be maintained and preserved by Buyer for a period of four
(4) years after the Closing. Each such party shall give to the other party and
its authorized representatives, during normal business hours, such access to,
and the opportunity at the other party's expense to copy, such books and records
retained by it as may be reasonably requested by the other party.

       6.6    Confidentiality. AEW Capital Management L.P. and SALI entered into
a confidentiality agreement dated February 8, 2000 (the "Confidentiality
Agreement"), a true and accurate copy of which is attached hereto as Exhibit L,
in connection with the transactions contemplated by this Agreement, which
agreement shall remain in full force and effect, unmodified by the terms of this
Agreement. In furtherance of the intent of the parties as set forth in the
Confidentiality Agreement, Buyer shall take strict care to prevent any
disclosure of Proprietary Information (as defined in the Confidentiality
Agreement) of SALI or its Affiliates to any employee, agent or representative of
Buyer or its Affiliates (or to any other person or entity not affiliated with
SALI or its Affiliates) if such person(s) are directly involved in any business
venture in the assisted living/dementia care industry. Notwithstanding any other
provision in this Agreement, this Section shall survive the Closing
indefinitely.

       6.7    Publicity. The parties agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any party without the prior written consent of the other party, except as
required by law or applicable regulations.

       6.8    Material Adverse Change. Buyer and Seller will promptly notify the
other party of any event of which Buyer or Seller, as the case may be, obtains
knowledge which has had or could reasonably be expected to have a Material
Adverse Effect.

       6.9    Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take all
action and to do all things necessary, proper or advisable to satisfy any
condition hereunder in its power to satisfy and to consummate and make effective
as soon as practicable the transactions contemplated by this Agreement.



                                       21
<PAGE>   22



       6.10   Health Department Reports. Seller shall file, or cause its
Affiliates to file, on a current and timely basis and in all material respects
in a truthful and complete fashion until the Closing Date, all reports and
documents required to be filed with the Health Department with respect to the
Facilities.

       6.11   Tax Returns and Payments. Seller will timely file with the
appropriate governmental agencies all Tax Returns required to be filed by Seller
with respect to the Facilities prior to Closing and timely pay all Taxes
reflected on such Tax Returns as owing by Seller or its Affiliates.

       6.12   Post-Closing Obligation of Seller. Following Closing, Seller shall
use, and shall cause Operator to use diligent efforts to promptly cooperate with
Buyer and its Affiliates to have the Licenses reissued, if reasonably necessary,
in the names of the appropriate Lessee, or such other party as Buyer may direct.
This covenant of Seller shall survive Closing indefinitely. In the event that
the Licenses are not transferred to, or reissued in the name of, Lessee or such
other party as Buyer may direct (such transfer or reissuance being hereafter
referred to as the "License Transfer"), on or prior to September 30, 2000, and
such failure is not due to any act, omission, condition, or characteristic of
Buyer, Lessee, the member of Lessee or any subsidiary or Affiliate (other than
Affiliates of Seller) of Buyer, then such failure shall constitute a material
default of Seller hereunder. Furthermore, it shall be a material default of
Seller hereunder if a Material Adverse Effect is (i) suffered prior to the
License Transfer, (ii) as a result of the failure of the License Transfer to
occur prior to the occurrence of such Material Adverse Effect, and (iii) not due
to any act, omission, condition, or characteristic of Buyer, Lessee, the member
of Lessee or any subsidiary or Affiliate (other than Affiliates of Seller) of
Buyer.

                                   ARTICLE VII
            CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE

        Buyer's obligation to close the acquisition of the Sale Assets pursuant
to the terms of this Agreement is subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, unless waived by Buyer in
writing:

       7.1    Accuracy of Representations and Warranties; Closing Certificate.

              (a) The representations and warranties of Seller contained in this
Agreement or in any other Document shall be true and correct in all material
respects on the date hereof, and at the Closing Date with same effect as though
made at such time except for changes permitted hereunder.

              (b) Seller shall have delivered to Buyer on the Closing Date a
certificate that the conditions specified in Sections 7.1(a) and 7.2 are
satisfied as of the Closing Date.

       7.2    Performance of Agreement. Seller shall have performed in all
material respects all of its covenants, agreements and obligations required by
this Agreement to be performed or complied with by it prior to or upon the
Closing Date.


                                       22
<PAGE>   23



       7.3    Title Insurance and Survey.

              (a) Within five (5) days after the execution of this Agreement,
Buyer, at its expense, shall order commitments for owner's policies of title
insurance (the "Title Commitments") issued by First American Title Insurance
Company - Washington, D.C. National Business Office ("Title Insurer") covering
each parcel of Real Property, in which the Title Insurer shall agree to insure,
in such amount as Buyer deems adequate, merchantable title to the Real Property
in the name of Buyer or its wholly-owned subsidiaries, as the case may be, free
from the Schedule B standard printed exceptions and all other exceptions except
Permitted Exceptions (as defined below). Such Title Commitments shall have
attached thereto complete, legible copies of all instruments noted as exceptions
therein. The Title Commitments shall be updated prior to the Closing to reflect
the state of the title not more than ten (10) days prior to the Closing. Buyer
shall pay any and all costs and expenses related to the title insurance,
including all search fees, closing fees and the premium for the policy issued
pursuant to the Title Commitments.

              (b) If (1) the Title Commitments reflect any exceptions to title
other than Permitted Liens which are not acceptable to Buyer in Buyer's
reasonable discretion, or (2) the Survey delivered to Buyer pursuant to Section
7.3(d) below discloses any state of fact not acceptable to Buyer in Buyer's
reasonable discretion, or (3) at any time prior to the Closing, title to the
Real Property is encumbered by any exception to title other than Permitted Liens
which was not on the initial Title Commitments and is not acceptable to Buyer in
Buyer's sole discretion (any such exception or unacceptable state of fact being
referred to herein as a "Title Defect"), then Buyer shall, within ten (10) days
following receipt of the Title Commitments or discovery of the Title Defect, as
the case may be, give Seller written notice of such Title Defect (the "Title
Notice"). Such Title Notice shall include a copy of the relevant Title
Commitment and copies of the exceptions. Any exception to title to the Real
Property that is (i) disclosed in the Title Commitment, or (ii) identified on a
Survey, which, in either case, is not identified as a Title Defect in the Title
Notice, shall be deemed to be a "Permitted Exception" for purposes of this
Agreement. Seller shall have the right, but not the obligation, within ten (10)
days after receipt of any such Title Notice, to use its reasonable efforts to
remove such Title Defect. If Seller elects to do so, then, on or before the
Closing, Seller shall provide Buyer with reasonable evidence of such removal or
provide reasonable evidence that such Title Defect will be removed.
Notwithstanding anything contained herein to the contrary, Seller shall be
obligated (or shall cause its Affiliates) to expend whatever sums are reasonably
required to cure the following Title Defects prior to, or at, the Closing:


                  (i) All mortgages, security deeds, other security instruments
      or other monetary liens encumbering the Real Property;

                  (ii) All past due ad valorem taxes and assessments of any
      kind, whether or not of record, which constitute, or may constitute, a
      lien against the Real Property; and

                  (iii) Judgments against the Seller (which do not result from
      acts or omissions on the part of Buyer) which have attached to and become
      a lien against the Real Property.



                                       23
<PAGE>   24


              (c) In the event Seller is unable or elects not to cure any Title
Defect within such period, Buyer shall have the option to (i) waive any Title
Defect and proceed to Closing or (ii) terminate this Agreement.

              (d) Within five (5) days after the execution of this Agreement,
Buyer, at Buyer's expense, shall order boundary surveys for each parcel of the
Real Property (the "Survey" or "Surveys") prepared by a registered land surveyor
or surveyors satisfactory to Buyer. The Survey shall (1) be completed in
accordance with Buyer's reasonable survey requirements, and shall be certified
to Seller, Buyer, and the Title Insurer by such surveyor; (2) have one perimeter
description for the Real Property on which each of the Facilities are located;
(3) show all easements, rights-of-way, setback lines, encroachments and other
matters affecting the use or development of the Real Property; and (4) disclose
on the face thereof the gross and net acreage of each parcel of Real Property.
Upon receipt of the Survey by Buyer, Buyer shall promptly furnish a copy of same
to Seller.

              (e) Any failure by Buyer to perform under this Section 7.3 shall
not relieve Buyer of its obligation to proceed to Closing under this Agreement.

       7.4    Other Inspections. During the due diligence period, at reasonable
times and upon reasonable notice, Buyer or Buyer's agent(s) shall have the
right, at Buyer's expense, to employ one or more consultants or other
professionals to perform or complete such inspections and assessments of the
Real Property and Improvements as Buyer deems necessary or desirable, including,
without limitation, environmental and structural aspects, and assessments of the
compliance of the Facilities with all applicable laws and regulations. Buyer
shall cause its inspectors and/or consultants to deliver to Seller a copy of
each such inspection report at the time such report(s) are delivered to Buyer. A
failure by Buyer to perform any inspections or assessments shall not relieve
Buyer of its obligation to proceed to Closing under this Agreement.

       7.5    Delivery of Closing Documents. Seller shall have delivered or
caused to be delivered to Buyer on the Closing Date each of the documents
required to be delivered pursuant to Section 9.2.

       7.6    Facility Leases. The Buyer (or its wholly-owned subsidiaries)
shall have entered into the Facility Leases.

       7.7    Licenses.

              (a) All Licenses shall have been issued as to all Facilities and
shall have, or will upon Closing, become effective under the rules of the
applicable Health Department and applicable law.

              (b) Conditions which the Licenses or any order, ruling or decree
of any judicial or administrative body specifies and requires to be satisfied
prior to issuance of License shall have been satisfied.


                                       24
<PAGE>   25



       7.8    Facility Operating Agreements. Operator shall have entered into
Facility Operating Agreements with Lessee for the operation of the Facilities,
which Facility Operating Agreements shall be in substantially the form as set
forth in Exhibit E.

       7.9    LLC Operating Agreement. Federal Street Operating, LLC and Sunrise
Assisted Living Investments, Inc. ("SALII") (or their respective Affiliates)
shall have entered into a Limited Liability Company Agreement to govern the
operations of Buyer.

                                  ARTICLE VIII
            CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CLOSE

        The obligations of Seller to close the sale of the Sale Assets pursuant
to the terms of this Agreement is subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, unless waived by Seller
in writing:

       8.1    Accuracy of Representations and Warranties.

              (a)    The representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects on the date
hereof and at the Closing Date with the same effect as though made at such time,
except for changes that are not materially adverse to Seller.

              (b) Buyer shall have delivered to Seller on the Closing Date a
certificate that the conditions specified in Sections 8.1(a) and 8.2 are
satisfied as of the Closing Date.

       8.2    Performance of Agreements. Buyer shall have performed in all
material respects all of its covenants, agreements and obligations required by
this Agreement and each of the other Documents to be performed or complied with
by it prior to or upon the Closing Date.

       8.3    Licenses.

              (a) All Licenses shall have been issued as to all Facilities and
shall have, or will upon Closing, become effective under the rules of the
applicable Health Department and applicable law.

              (b) Conditions which the Licenses or any order, ruling or decree
of any judicial or administrative body specifies and requires to be satisfied
prior to issuance of License shall have been satisfied.

       8.4    Facility Operating Agreements. Lessee shall have entered into
Facility Operating Agreements with Operator for the operation of the Facilities,
which Facility Operating Agreements shall be in substantially the form as set
forth in Exhibit E.


                                       25
<PAGE>   26


       8.5    LLC Operating Agreement. Federal Street Operating, LLC and SALII
(or their respective Affiliates) shall have entered into a Limited Liability
Company Agreement to govern the operations of Buyer.

       8.6    Delivery of Closing Documents. Buyer shall have delivered or
caused to be delivered to Seller on the Closing Date each of the Documents
required to be delivered pursuant to Section 9.3.

                                   ARTICLE IX
                                     CLOSING

       9.1    Time and Place. Closing of the purchase and sale of the Sale
Assets pursuant to this Agreement (the "Closing") shall take place through
escrow at the offices of the Title Insurer at 10:00 a.m. on June 30, 2000, or at
such earlier time or date as may be agreed upon by the parties (the "Closing
Date"). In no event shall the Closing be extended beyond June 30, 2000, unless
such delay is caused by Seller. Buyer and Seller shall use commercially
reasonable efforts to ensure that neither party has to attend the Closing in
person. Time is of the essence of the terms of this Section.

       9.2    Documents to be Delivered to Buyer by Seller. At the Closing,
Seller shall deliver or cause to be delivered to Buyer the following, in each
case in form and substance reasonably satisfactory to Buyer:

              (a) Governmental certificates, dated as of a date as near as
practicable to the Closing Date, showing that (i) each entity defined herein as
"Seller," and each general partner of such entities, is in good standing in the
state of organization of such entity, and (ii) each Facility Owner is in good
standing in the State of Delaware and qualified to do business in the state in
where the Facility it owns is located.

              (b) A certificate of the Secretary or Assistant Secretary of
Seller (or the general partner of Seller, as the case may be) attesting as to
the incumbency of each officer of Seller (or the general partner of Seller, as
the case may be) who executes this Agreement and any of the other Documents and
to similar customary matters.

              (c) A bill of sale and other instruments of transfer and
conveyance transferring the Owned Assets held or owned by Seller to Lessee.

              (d) An agreement of assignment and conveyance transferring the
Interests to Buyer.

              (e) A certificate of nonforeign status under Section 1445 of the
Code, complying with the requirements of the Income Tax Regulations promulgated
pursuant to such section.

              (f) The certificate described in Section 7.1(b).

              (g) A true, correct and complete list certified by an officer of
Seller, of each resident of the Facilities as of the Closing Date, which list
shall specify the unit, bed or room number of such


                                       26
<PAGE>   27


resident, and the amount of the monthly fees to be paid by such resident
(including room, meal and other applicable monthly fees).

              (h) Assignment and Assumption of Leases and Deposits for each
Facility from Seller to the corresponding Lessee, duly executed by Seller and
each such Lessee.

              (i) Assignment and Assumption of Contracts and Other Interests for
each Facility from Seller to the corresponding Lessee, duly executed by Seller
and each such Lessee.

              (j) Assignment and Assumption of Other Interests for each Facility
from Seller to the corresponding Facility Owner, duly executed by Seller and
each such Facility Owner.

              (k) A letter agreement from Seller and Operator in favor of Buyer
confirming their obligations under Section 6.12 above.

              (l) Authority opinions from counsel for Seller regarding the due
organization, good standing, power, authority, and due execution of this
Agreement and all other Documents by Seller.

              (m) A rent roll for each of the Facilities, certified on the
Closing Date, in the form attached hereto as Exhibit O.

              (n) Letters from local counsel for each of the Facilities
addressing such matters regarding the Licenses as may be reasonably requested by
Buyer.

              (o) Such additional information and materials as Buyer shall have
reasonably requested to evidence the satisfaction of the conditions to its
obligations hereunder, including without limitation, evidence that all consents
and approvals required as a condition to Buyer's obligation to close hereunder
have been obtained, title affidavits, such affidavits and indemnities as the
Title Insurer may require to issue non-imputation endorsements, and any other
documents expressly required by this Agreement to be delivered by Seller at
Closing, or as may be required by the Title Insurer.

       9.3    Deliveries to Seller by Buyer. At the Closing, Buyer shall deliver
or cause to be delivered to Seller or other appropriate party the following, in
each case in form and substance reasonably satisfactory to Seller or such other
party:

              (a) The Purchase Price in accordance with Section 2.4, and the
adjustments under Section 2.6.

              (b) The certificate described in Section 8.1(b).

              (c) An agreement by Buyer assuming the Owner Obligations.



                                       27
<PAGE>   28


               (d) Governmental Certificates dated as of a date as near as
practicable to the Closing Date showing that Buyer and Lessees are duly
organized and in good standing in the State of Delaware and that Lessees are
duly qualified to transact business in all the states where the Facilities are
located.

              (e) A certificate of the Secretary or Assistant Secretary of Buyer
attesting as to the incumbency of each Officer of Buyer who executes this
Agreement and any of the other Documents and to similar customary matters.

              (f) Such additional information and materials as Seller shall have
reasonably requested to evidence the satisfaction of the conditions to their
obligations hereunder.

       9.4    Closing Costs. Buyer and Seller shall each pay the costs of their
respective attorneys' fees. Buyer shall pay all costs of the title company to
insure title, and the cost of owner's title insurance policies. All items
described in Section 2.6 above shall be prorated between the parties as of the
Closing Date. Buyer shall pay sixty-six and 67/100 (66.67%) of all county or
state transfer or recording taxes, if any, and Seller shall pay thirty-three and
33/100 percent (33.33%) of all such taxes, if any.

                                    ARTICLE X
                                 INDEMNIFICATION

       10.1   Survival. All representations, warranties, covenants and
agreements in this Agreement or any other Document shall survive the Closing for
a period of one (1) year. The rights to indemnification set forth in this
Article X shall be exclusive of all other rights to monetary damages that any
party (or the party's successors or assigns) would otherwise have by statute or
common law in connection with the transactions contemplated by this Agreement or
any other Document. Notwithstanding anything to the contrary herein, if (a)
Buyer is notified of the untruth of any representation or warranty made by
Seller hereunder by (i) written notice from Seller (which notice shall refer to
the representation or warranty which is untrue) or (ii) the professional written
reports and studies prepared by Buyer as part of Buyer's due diligence, and (b)
Buyer nevertheless elects to close under this Agreement, then Buyer shall be
deemed to have waived the breach in question and shall not assert any
post-closing claim against Seller with respect to that breach.

       10.2   Indemnification by Seller and SALII. Seller and SALII shall
indemnify, defend, and hold harmless Buyer and its officers, directors,
employees, Affiliates, successors and assigns from and against, and pay or
reimburse each of them for and with respect to, any Loss relating to, arising
out of or resulting from any of the following:

              (a) Any breach by Seller of any of its representations,
warranties, covenants or agreements in this Agreement or any other Document; or



                                       28
<PAGE>   29


              (b) Any obligation, indebtedness or liability of Seller other than
(i) the Owner Obligations and (ii) obligations, indebtedness or liabilities to
the extent an adjustment is made to the Purchase Price pursuant to Section 2.6.
Subject to the foregoing clauses (i) and (ii), the obligations, indebtedness and
liabilities of Seller hereunder shall include, but not be limited to, (a) claims
by state or federal governmental agencies for repayment of claims for
reimbursement of costs, regardless of whether disclosed to Buyer and regardless
whether constituting a breach by Seller of any representation, warranty,
covenant or agreement hereunder or under any other Document, and (b) all claims
and causes of action held by Seller against third parties, or held by any third
party against Seller, which claims or causes of action accrued prior to the
Closing Date, regardless of whether constituting a breach by Seller of any
representation, warranty, covenant, or agreement hereunder; or

              (c) Noncompliance by Seller with the provisions of the Bulk Sales
Act, if such act applies, in connection with the transactions contemplated by
this Agreement.

       10.3   Indemnification by Buyer. Buyer shall indemnify and hold harmless
Seller and its officers, directors, employees, agents, representatives,
Affiliates, successors and assigns from and against, and pay or reimburse each
of them for and with respect to any Loss relating to, arising out of or
resulting from:

              (a) Any breach by Buyer of any of its representations, warranties,
covenants or agreements in this Agreement or any other Document; or

              (b) All Assumed Obligations; or

              (c) Lessee's operation of the Facilities on or after the Closing
Date.

       10.4   Administration of Indemnification. For purposes of administering
the indemnification provisions set forth in Sections 10.2 and 10.3, the
following procedure shall apply:

              (a) Whenever a claim shall arise for indemnification under this
Article, the party entitled to indemnification (the "Indemnified Party") shall
reasonably promptly give written notice to the party from whom indemnification
is sought (the "Indemnifying Party") setting forth in reasonable detail, to the
extent then available, the facts concerning the nature of such claim and the
basis upon which the Indemnified Party believes that it is entitled to
indemnification hereunder.

              (b) In the event of any claim for indemnification resulting from
or in connection with any claim by a third party, the Indemnifying Party shall
be entitled, at its sole expense, either (i) to participate in defending against
such claim or (ii) to assume the entire defense with counsel which is selected
by it and which is reasonably satisfactory to the Indemnified Party provided
that (A) the Indemnifying Party agrees in writing that it does not and will not
contest its responsibility for indemnifying the Indemnified Party in respect of
such claim or proceeding and (B) no settlement shall be made and no judgment
consented to without the prior written consent of the Indemnified Party which
shall not be unreasonably withheld. If,



                                       29
<PAGE>   30


however, (i) the claim, action, suit or proceeding would, if successful, result
in the imposition of damages for which the Indemnifying Party would not be
solely responsible, or (ii) representation of both parties by the same counsel
would otherwise be inappropriate due to actual or potential differing interests
between them, then the Indemnifying Party shall not be entitled to assume the
entire defense and each party shall be entitled to retain counsel who shall
cooperate with one another in defending against such claim. In the case of
Clause (i) of the preceding sentence, the Indemnifying Party shall be obligated
to bear only that portion of the expense of the Indemnified Party's counsel that
is in proportion to the damages indemnifiable by the Indemnifying Party compared
to the total amount of the third-party claim against the Indemnified Party.

              (c) If the Indemnifying Party does not choose to defend against a
claim by a third party, the Indemnified Party may defend in such manner as it
deems appropriate or settle the claim (after giving notice thereof to the
Indemnifying Party) on such terms as the Indemnified Party may deem appropriate,
and the Indemnified Party shall be entitled to periodic reimbursement of defense
expenses incurred and prompt indemnification from the Indemnifying Party in
accordance with this Article.

              (d) Failure or delay by an Indemnified Party to give a reasonably
prompt notice of any claim (if given prior to expiration of any applicable
Survival Period) shall not release, waive or otherwise affect an Indemnifying
Party's obligations with respect to the claim, except to the extent that the
Indemnifying Party can demonstrate actual loss or prejudice as a result of such
failure or delay.

              (e) The provisions of Sections 10.2, 10.3, and this Section 10.4
shall survive the Closing hereunder indefinitely.

                                   ARTICLE XI
                             DEFAULT AND TERMINATION

       11.1   Right of Termination. This Agreement may be terminated prior to
              Closing:

              (a) By Buyer during the Due Diligence Period or as otherwise
permitted by this Agreement; or

              (b) By written agreement of Seller and Buyer.

       11.2   Remedies upon Default. If Seller materially defaults on any of its
obligations hereunder, and such default continues for ten (10) business days
after written notice thereof specifying such default, Buyer may, as its sole
remedy hereunder, by serving notice in writing to the Seller in the manner
provided in this Agreement, either:

              (a) Terminate this Agreement and declare it null and void (in
                  which event Seller shall pay to Buyer the reasonable,
                  out-of-pocket costs and expenses incurred by Buyer in
                  connection with the transactions contemplated hereby); or



                                       30
<PAGE>   31


              (b)           Waive any such conditions, title objections or
                            defaults and consummate the transaction contemplated
                            by this Agreement in the same manner as if there had
                            been no title objections, conditions or defaults
                            without any reduction in the Purchase Price and
                            without any further claim against the Seller
                            therefor.

       11.3   Specific Performance. The parties acknowledge that the Facilities
are of a special, unique and extraordinary character, and that damages alone are
an inadequate remedy for a breach of this Agreement by either party.
Accordingly, as an alternative to termination of this Agreement under Section
11.2, Buyer shall be entitled, in the event of a breach by Seller, to
enforcement of this Agreement (subject to obtaining any required approval of the
Health Department) by a decree of specific performance or injunctive relief
requiring Seller to fulfill its obligations under this Agreement. Such right of
specific performance or injunctive relief shall be in lieu of Buyer's right to
recover damages and to pursue any other remedies available to Buyer for Seller's
breach. In any action to specifically enforce the Seller's obligation to close
the transactions contemplated by this Agreement, Seller shall waive the defense
that there is an adequate remedy at law or in equity and agrees that the Buyer
shall be entitled to obtain specific performance of the Seller's obligation to
close without being required to prove actual damages. As a condition to seeking
specific performance, Buyer shall tender the Purchase Price.

       11.4   Obligations Upon Termination. Upon termination of this Agreement,
each party shall thereafter remain liable for breach of this Agreement prior to
such termination. If this Agreement is terminated without any breach by either
party hereto, each of the parties shall be liable and responsible for any costs
incurred by such party in connection with the transactions contemplated by this
Agreement.

       11.5   Termination Notice. Each notice given by a party to terminate this
Agreement shall specify the Subsection of Article 11 pursuant to which such
notice is given. If at the time a party gives a termination notice, such party
is entitled to give such notice pursuant to more than one Section of Article 11,
the Subsection pursuant to which such notice is given and termination is
effected shall be deemed to be the section specified in such notice provided
that the party giving such notice is at such time entitled to terminate this
Agreement pursuant to the specified section.

       11.6   Survival. Notwithstanding anything to the contrary contained
herein upon the expiration or any termination of this Agreement the rights and
obligations of the parties under Section 6.6 and Section 6.7 shall survive such
termination or expiration for a period of one (1) year.

                                   ARTICLE XII
                              TRANSITIONAL MATTERS

       12.1   Prior to Closing. Upon a written request from Buyer or Operator,
the parties shall conduct meetings with residents, families of residents and
employees of Operator for the purpose of



                                       31
<PAGE>   32


explaining as the parties hereto deem reasonably necessary any changes in
ownership and operation of the Facilities arising out of the transactions
contemplated hereby.

                                  ARTICLE XIII
                                  MISCELLANEOUS

       13.1   Further Actions. From time to time before, at and after the
Closing, each party, at its expense and without further consideration, will
execute and deliver such documents as reasonably requested by the other party in
order more effectively to consummate the transactions contemplated hereby.

       13.2   Payment of Expenses.

              (a) Except as provided in Section 9.4, all sales, use, transfer
and other similar Taxes or charges payable in connection with consummation of
the transactions contemplated by this Agreement, shall be paid by Buyer. All
other Taxes shall be paid by the party primarily liable under applicable law to
pay such Tax.

              (b) Except as otherwise expressly provided in this Agreement, each
of the parties shall bear its own expenses, including the fees of any attorneys
and accountants engaged by such party, in connection with the transactions
contemplated by this Agreement.

       13.3   Notices. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered by
courier (including overnight delivery service) or sent by registered or
certified mail, first class, postage prepaid, addressed as follows:

               (a)    If to Buyer, to:

                             AEW Capital Management LP
                             225 Franklin Street, 25th Floor
                             Boston MA 02110
                             Attention: Robert J. Plumb, Managing Director

                      with copies to:

                             Joseph J. Christian, Esq.
                             Hale and Dorr LLP
                             60 State Street
                             Boston, MA 02109

                      and:
                             AEW Capital Management LP
                             225 Franklin Street, 25th Floor



                                       32
<PAGE>   33


                             Boston, MA 02110
                             Attention: General Counsel

               (b)    If to Seller, to:

                             Sunrise Assisted Living, Inc.
                             7902 Westpark Drive
                             McLean, Virginia  22102
                             Attention:  Daniel B. Gorham, Senior Vice President

                      with copies to:

                             Sunrise Assisted Living, Inc.
                             7902 Westpark Drive
                             McLean, Virginia  22102
                             Attention:  Susan L. Timoner, Esq.

                             and to:

                             Wayne G. Tatusko, Esq.
                             Watt, Tieder, Hoffar & Fitzgerald, L.L.P.
                             7929 Westpark Drive, Suite 400
                             McLean, Virginia 22102

or such other address as a party may from time to time notify the other party in
writing (as provided above). Any such notice, demand or communication shall be
deemed to have been given (i) if so mailed, as of the close of the third
business day following the date so mailed, and (ii) if delivered by courier, on
the date received.

       13.4   Entire Agreement. This Agreement, Exhibits and the other Documents
constitute the entire agreement and understanding between the parties with
respect to the subject matter hereof and supersede any prior negotiations,
agreements, understandings or arrangements between the parties hereto with
respect to the subject matter hereof.

       13.5   Binding Effect; Benefits. Except as otherwise provided herein,
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors or permitted assigns. Except to the
extent specified herein, nothing in this Agreement, express or implied, shall
confer on any person other than the parties hereto and their respective
successors or permitted assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.

       13.6   Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by either party without the
prior written consent of the other party, provided that Buyer



                                       33
<PAGE>   34


may assign all of its rights under this Agreement to an Affiliate, provided that
(i) the representations and warranties of Buyer hereunder shall be true and
correct in all material respects as applied to the assignee, (ii) both Buyer and
the assignee shall execute and deliver to Seller a written instrument in form
and substance satisfactory to Seller within their reasonable judgment in which
both Buyer and the assignee agree to be jointly and severally liable for
performance of all of Buyer's obligations under this Agreement, and (iii) Buyer
and the assignee shall deliver such other documents and instruments as
reasonably requested by Seller, including appropriate certified resolutions of
the boards of directors of Buyer and the assignee.

       13.7   Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the Commonwealth of Virginia
without regard to its principles of conflicts of laws, provided, however, that,
in the event Seller or Buyer breach this agreement and such breach relates to a
particular Facility, neither Seller nor Buyer shall be precluded from exercising
any rights or remedies which it may have under the laws of the jurisdiction in
which such Facility is located. For purposes of illustration only, if Seller
were to breach its obligation to convey the Fairfield Facility to Buyer, then
Buyer would not be precluded from seeking specific performance under New Jersey
law.

       13.8   Amendments and Waivers. No term or provision of this Agreement may
be amended, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against whom the enforcement of such amendment,
waiver, discharge or termination is sought. Any waiver shall be effective only
in accordance with its express terms and conditions.

       13.9   Severability. Any provision of this Agreement which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such unenforceability without invalidating the remaining
provisions hereof, and any such unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, the parties hereto hereby waive any
provision of law now or hereafter in effect which renders any provision hereof
unenforceable in any respect.

       13.10  Headings. The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

       13.11  Counterparts. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which shall be
an original, and all of which together shall constitute one and the same
instrument.

       13.12  References. All references in this Agreement to Articles and
Sections are to Articles and Sections contained in this Agreement unless a
different document is expressly specified.

       13.13  Exhibits. Unless otherwise specified herein, each Exhibit referred
to in this Agreement is attached hereto, and each such Exhibit is hereby
incorporated by reference and made a part hereof as if fully set forth herein.



                                       34
<PAGE>   35


       13.14  Attorneys' Fees. In the event either party brings an action to
enforce or interpret any of the provisions of this Agreement, the "prevailing
party" in such action shall, in addition to any other recovery, be entitled to
its reasonable attorneys' fees and expenses arising from such action and any
appeal or any bankruptcy action related thereto, whether or not such matter
proceeds to court. For purposes of this Agreement, "prevailing party" shall
mean, in the case of a person asserting a claim, such person is successful in
obtaining substantially all of the relief sought, and in the case of a person
defending against or responding to a claim, such person is successful in denying
substantially all of the relief sought.

       13.15  Section 1031 Exchange. The parties agree and understand that, if
requested by either party, the other party shall cooperate in permitting the
requesting party to accomplish an exchange under Section 1031 of the Code;
provided, however, that such exchange shall not modify any terms of this
Agreement, shall not delay the Closing, shall not relieve Seller of any
liability for Seller's obligations hereunder, shall not cause Buyer to incur any
liability or additional expense therefor or be required to take title to any
other property, and shall not cause Buyer (except for customary consent to
assignment of this Agreement to an exchange intermediary) to incur obligations
to any third parties.

       13.16  Closing Affidavits. Seller shall execute, and shall cause its
Affiliates to execute, at Closing, such affidavits and/or certifications as may
be necessary to consummate the transactions contemplated hereby, including
without limitation, non-imputation affidavits.

       13.17. Joint and Several. Each Seller shall be jointly and severally
liable with the other Sellers for performing all obligations of Seller under
this Agreement.

       13.18  Casualty and Condemnation.

              (a) The risk of any loss or damage to the Facilities by fire or
other casualty before the Closing shall continue to be borne by Seller. Seller
shall promptly give Buyer written notice of any fire or other casualty (in any
event within five (5) days of the occurrence of same, which notice shall include
a description thereof in reasonable detail and an estimate of the cost of time
to repair. In the event that any Facility shall suffer any fire or other
casualty or any injury and Buyer does not elect to cancel this Agreement as
hereinafter provided, Seller shall repair the damage at its sole cost and
expense before the Closing Date or, in the alternative, make an appropriate
reduction in the purchase price herein set forth based on a reasonable
approximation of the cost of such repair as agreed by the parties plus any
deductibles. In the event of any material damage or destruction of any of the
Facilities, Buyer, at any time thereafter, by written notice to Seller, shall
have the option to cancel this Agreement. For the purposes hereof, "material"
damage or destruction shall include any damage or destruction which would
require more than $250,000 per Facility to repair (including in said amount the
amount of any revenues lost as a result of said fire or other casualty). If
Buyer so elects to cancel this Agreement, this Agreement shall terminate and be
of no further force and effect and neither party shall have any liability to the
other hereunder, except as may be otherwise set forth herein with regard to
surviving provisions.



                                       35
<PAGE>   36


              (b) The risk of any loss or damage to the Facilities by
condemnation before the Closing Date shall continue to be borne by Seller. In
the event any condemnation proceeding is commenced or threatened, Seller shall
promptly give Buyer written notice thereof (in any event within five (5) days
after the occurrence of same), together with such reasonable details with
respect thereto as to which Seller may have knowledge. As soon thereafter as the
portion or portions of the Facility to be taken are reasonably determinable,
Seller shall give Buyer written notice thereof ("Seller's Notice") together with
Seller's estimate of the value of the portion or portions of the Facility to be
so taken. In the event of any taking of any Facility, Buyer, by written notice
to Seller at any time thereafter, shall have the option to cancel this
Agreement, in which event this Agreement shall terminate and be of no further
force and effect and neither party shall have any liability to the other
hereunder, except as may be otherwise set forth herein with regard to surviving
provisions. If Buyer shall not so elect to cancel this Agreement, then the sale
of Owned Assets shall be consummated as herein provided at the purchase price
provided for herein (without abatement) and Seller shall pay over to Buyer at
the Closing all amounts theretofore received by Seller in connection with such
condemnation or insurance received therefore. Buyer shall be entitled to
participate in any such condemnation proceeding and Seller shall cooperate with
Buyer in such respect.

              (c) The parties' obligations, if any, under this Section 13.17
shall survive the Closing.

                        [SIGNATURES FOLLOW ON NEXT PAGE]



                                       36
<PAGE>   37


       IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first written above.

                      SELLER:
                      ------

                      SUNRISE FAIRFIELD ASSISTED LIVING, L.P.,
                      a New Jersey limited partnership

                      By: Sunrise Assisted Living Investments, Inc., a
                          Virginia corporation, general partner

                          By: /s/ DANIEL B. GORHAM                    10:30 a.m.
                             -----------------------------------------
                          Name: Daniel B. Gorham
                             -----------------------------------------
                          Title: V.P.
                             -----------------------------------------

                      SUNRISE WAYLAND ASSISTED LIVING LIMITED
                      PARTNERSHIP, a Massachusetts limited partnership

                      By: Sunrise Assisted Living Investments, Inc., a
                          Virginia corporation, general partner

                            By: /s/ DANIEL B. GORHAM                  10:30 a.m.
                              ----------------------------------------
                            Name: Daniel B. Gorham
                              ----------------------------------------
                            Title: V.P.
                              ----------------------------------------

                      SUNRISE ASSISTED LIVING LIMITED
                      PARTNERSHIP II, a Virginia limited partnership

                      By: Sunrise Assisted Living Investments, Inc., a
                          Virginia corporation, general partner

                            By: /s/ DANIEL B. GORHAM                  10:30 a.m.
                              ----------------------------------------
                            Name: Daniel B. Gorham
                              ----------------------------------------
                            Title: V.P.
                              ----------------------------------------



                                       37
<PAGE>   38


                      For purposes of acknowledging its
                      indemnification obligations under Article
                       X:

                      SUNRISE ASSISTED LIVING INVESTMENTS, INC.,
                      a Virginia corporation

                       By: /s/ DANIEL B. GORHAM                       10:30 a.m.
                          --------------------------------------------
                       Name: Daniel B. Gorham
                          --------------------------------------------
                       Title: V.P.
                          --------------------------------------------

                       BUYER:
                       -----

                       METROPOLITAN SENIOR HOUSING, LLC, a Delaware
                       limited liability company

                       By: Sunrise Assisted Living Investments, Inc., a Virginia
                           corporation, Managing Member

                       By: /s/ DANIEL B. GORHAM                       10:30 a.m.
                          --------------------------------------------
                       Name: Daniel B. Gorham
                          --------------------------------------------
                       Title: V.P.
                          --------------------------------------------

                       By: Federal Street Operating, LLC, a Delaware limited
                           liability company, member

                           By: Federal Street Management, LLC, its Managing
                               Member

                               By: Federal Street Management Co., Inc., its
                                   Manager

                                   By:/s/ ROBERT J. PLUMB             10:30 a.m.
                                      --------------------------------
                                   Name: ROBERT J. PLUMB
                                      --------------------------------
                                   Title: Vice President
                                      --------------------------------



                                       38
<PAGE>   39


                                  EXHIBIT LIST

       Exhibit A - Legal Description - Fairfield Facility
       Exhibit B - Legal Description - Wayland Facility
       Exhibit C - Legal Description - Hunter Mill Facility
       Exhibit D - List of Tangible Personal Property
       Exhibit E - Form of Facility Operating Agreement
       Exhibit F - List of Licenses
       Exhibit G - Post-Closing Purchase Price Adjustment Threshold Schedule
       Exhibit H - Schedule of Pending Litigation
       Exhibit I - Forms of Resident Agreement
       Exhibit J - Schedule of Facility Agreements
       Exhibit K - List of Bank Accounts
       Exhibit L - Confidentiality Agreement
       Exhibit M - Intentionally Deleted
       Exhibit N - Intentionally Deleted
       Exhibit O - Rent Rolls
       Exhibit P - List of Affordable Housing Units




                                       39




</TEXT>
</DOCUMENT>
