Exhibit 10.8

ARC OFFICER’S INCENTIVE COMPENSATION PLAN

Compensation Philosophy

American Retirement Corporation (ARC) strives to provide the Officers of the
Company with base salaries and incentive compensation that are competitive,
comparable to similar positions in the retirement housing industry and
commensurate with positions in companies of a similar size and scope of
responsibility.

ARC believes that Officers make a major difference in the Company’s performance
and level of profitability, and therefore, strives to tie compensation to the
goals of the Company, and in so doing, achieve the Company’s goals while
providing appropriate rewards.

For Officers, ARC will strive to provide a total compensation package at or
above the 75th percentile of the industry. ARC defines total compensation as
being base salary, incentive or bonus compensation, stock options and all other
forms of continuing compensation.

ARC, on a regular basis, will participate in appropriate salary surveys and may
sponsor a survey or participate as a co-sponsor. The Company believes it is
important to maintain accurate information on pay trends in the industry as well
as geographic differentials. As such, ARC will routinely compare the Company’s
standing to survey results as part of verifying the Company’s relative position
to the stated compensation philosophy.

SECTION 1 - DEFINITIONS

For this Plan, the following words and phrases shall have the meaning indicated
unless otherwise defined or required by the context:

Administrator or Plan Administrator shall mean, with respect to the Plan,
American Retirement Corporation (the “Employer”), actions of which will be
undertaken by the Chairman and the Compensation Committee of the Employer’s
Board of Directors.

Beneficiary shall mean the designated recipient or recipients who shall receive
any benefits payable under the Plan upon the death of a Participant. If a
beneficiary has not been designated, the Administrator shall, upon the death of
the Participant, pay any benefit payable under the Plan to the Participant’s
estate.

Break in Employment shall mean an interruption in continuous employment which
shall exceed ninety (90) days of employment in a given Plan Year.

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Base Compensation shall mean the salary from the Employer, exclusive of any
other form of compensation and salary deferral (but unreduced by any Employee
contribution to any pension plan sponsored by the Employer), of the Participant
which is attributable to the period of his/her participation in the Plan for
each Plan Year.

Effective Date shall mean the effective date of the Plan which shall be January
1, 2003.

Employer shall mean American Retirement Corporation, a Tennessee corporation
with its principal place of business in Brentwood, Tennessee, its successors and
assigns, and any subsidiary authorized by the Board of Directors of American
Retirement Corporation to participate in this Plan with respect to its
employees.

Employment shall mean the employment relationship as an Employee of the
Employer.

Officer shall mean an individual employed by the Employer and elected to an
Officer position by the Board of Directors.

Participant shall mean any Officer who becomes a Participant hereunder as
provided in Section 2.

Plan shall mean the American Retirement Corporation Officer’s Incentive
Compensation Plan.

Plan Year shall mean the twelve month period ending on December 31st; the
initial Plan Year shall commence on January 1, 2003. The Employer may change the
consecutive twelve month period which comprises the Plan Year at its discretion
prior to the beginning of any Plan Year.

SECTION 2 – ELIGIBILITY AND PARTICIPATION

Section 2.01 - Eligibility.  Officers eligible to participate in the Plan shall
include the following officers of the Employer: (i) Chairman and Chief Executive
Officer, (ii) President and Chief Operating Officer, (iii) any Executive Vice
President, (iv) any Senior Vice President and, (v) any Vice President provided
that any Employee otherwise eligible must also be approved to participate by the
Plan Administrator (the “Eligible Employees”).

Section 2.02 - Participation.   To receive Incentive Compensation under the
provisions of the Plan, an employee must be a Plan Participant. To be a
Participant in the Plan, an employee must (i) hold a position which is eligible
for participation, and (ii) have satisfied his or her 90 day introductory period
of employment with ARC. An eligible employee satisfying these conditions shall
be a Plan Participant (a “Plan Participant” or “Participant”).

Section 2.03 - Not a Contract.   The Plan shall not be deemed to constitute a
contract between the Employer and an Employee; neither shall it be a
consideration nor an inducement for the Employment of any Employee. No
provisions of the Plan shall be deemed to abridge or limit any managerial right
of the employer, give any Employee the right to be retained in Employment, or

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to interfere with the right of the Employer to discharge any Employee at any
time regardless of the effect which such discharge may have upon him/her as a
Participant. By his/her act of participation in the Plan, each Participant on
behalf of him/herself, his/her heirs assigns and Beneficiary shall be deemed
conclusively to have agreed to and accepted the terms and conditions of the
Plan.

Section 2.04 - Termination.   A Participant shall cease to be a Participant in
the Plan as of the effective date of the Participant’s termination of
Employment. In the event that a Participant’s date of termination is after the
last day of a Plan Year and before the date of the Incentive Compensation
Payment, the Participant shall not be eligible for an Incentive Compensation
Payment for the Plan Year preceding his/her date of termination.

Section 2.05 - Employer’s Right to Terminate Plan.   Notwithstanding anything
contained herein to the contrary, the Employer retains the right to terminate or
suspend the Plan at any time, in accordance with the direction of the Employer’s
Board of Directors, at which time the Employer shall have no liability to
Participants for payment of Incentive Compensation Payments which would have
otherwise accrued during a Plan Year during which the Plan was terminated or
suspended by the Employer.

Section 2.06 - ARC Compensation Committee.   The ARC Compensation Committee is
comprised of Board members approved by the Board of Directors. The Chairman and
CEO, as well as the Senior Vice President of Human Resources will serve as
non-voting members of the Committee representing Management.

Each year the Compensation Committee shall approve the Plan, its Participants
and their level of participation.

SECTION 3 - DETERMINATION OF BONUS PAYMENTS

Section 3.01 - Incentive Compensation Payment.    Incentive Compensation
Payments, if any, shall be determined for each Participant for each Plan Year.
The Plan shall be divided into three (3) parts, Part A, Part B and Part C. Part
A, Part B and Part C Incentive Compensation shall add to a Total Maximum
Potential of Base Salary. The Officers shall have a maximum of eighty percent
(80%) of Base Salary per the table below: 

 

    Maximum Potential Bonus as a %
Of Base Compensation            Part A: Individual Quarterly Performance Awards
  20%      Part B: Quarterly Company Incentive Awards   40%      Part C: The
Annual Incentive Award   20%    

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    80%

 

Section 3.02 – Bonus Payment Part A.  Bonus Payments for Part A, if any, shall
be determined for each Participant for each Plan Quarter and paid consistent
with Plan guidelines following the

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close of each Plan Year. Plan Participants shall be subject to the maximum
percentage of Base Salary as described in Section 3.01. Participants earn Part A
Bonus in accordance with their individual performance against approved
objectives. This measurement of individual performance is determined and
approved by the Participant’s Supervisor and is not contingent upon the
Company’s overall performance during the quarter.

Section 3.03 – Plan Funding for Part A.  Funding for Part A of the OICP is
through the budgeting process of the Company.

Section 3.04 – Bonus Payment Part B.  Bonus Payments for Part B, if any, shall
be determined for each Participant for each Plan Quarter and paid consistent
with Plan guidelines following the close of each Plan Year. Plan Participants
shall be subject to the maximum percentage of Base Salary as described in
Section 3.01.

Section 3.05 – Plan Funding for Part B.  A target EBITDAR (Earnings Before
Interest, Taxes, Depreciation Amortization and Rent) will be approved for each
Plan Quarter. Target EBITDAR will determine funding for the Plan. When actual
EBITDAR exceeds the target for the Plan quarter, 100% of the excess shall be
applied to fund Part B of both the Officer’s and the Manager’s Incentive
Compensation Plans. For quarters where the Manager’s and the Officer’s Plans are
partially funded, funding for both Plans will occur on a pro rata basis.

EBITDAR Target

The EBITDAR target will consist of the Company’s Business Plan EBITDAR less
Corporate G&A. The Compensation Committee may adjust the targets, at its
discretion, to take into account special events such as delayed openings or
acquisitions.

Each Participant’s realization of Part B Bonus Compensation shall be determined
by measurement of individual performance against approved objectives. This
measurement of individual performance achievement will be applied to the amount
of funded bonus potential to determine the amount accrued for each Participant.
This will be done quarterly for those quarters where Bonus Pool funding is
achieved.

Section 3.06 – Part C Bonus Payment.   Part C Bonus Payments, if any, shall be
determined for each Participant and paid consistent with Plan guidelines. Plan
Participants shall be subject to the maximum percentage of Base Salary as
described in Section 3.01.

Section 3.07 – Part C Funding.   An annual target EBITDAR (Earnings Before
Interest, Taxes, Depreciation Amortization and Rent), or a similar target will
be approved by the Compensation Committee. Exceeding Target EBITDAR will
determine funding for Part C of the Plan. When actual EBITDAR exceeds the target
100% of the excess shall be applied to fund Part C of the Officers Bonus
Potential.

Each Participant’s realization of Part C Bonus Compensation shall not be
modified by measurement of individual objectives, but awarded solely on the
basis of achieving the Objective set by the Compensation Committee for Part C of
this Plan.

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SECTION 4 – PAYMENT OF BONUS COMPENSATION

Section 4.01 – Cash Distribution.   Participant’s total realized incentive
compensation under this Plan (Part A, B, & C) shall be disbursed within ten (10)
days after the audited financial statements for the full year have been reviewed
and approved by the Audit Committee of the Board of Directors and performance
measurements and bonus calculations have been reviewed and approved by the
Compensation Committee of the Board of Directors.

SECTION 5 – GENERAL PLAN PROCEDURES

Section 5.01 - Participation.    Individuals must be in an eligible position for
a minimum of three months of the current performance period to participate and
receive an award for that period. Awards for participating employees will be
prorated, equal to the months of participation in the Plan retroactive to the
initial eligibility date.

Eligibility beginning prior to the fifteenth of a month will constitute a full
month. Participation for employees becoming eligible after the fifteenth of a
month will roll to the first of the following month.

Section 5.02 - Base Salary.   Base salary under the Plan is the annualized base
salary in effect at the end of the performance period.

Section 5.03 – Forfeiture.   Awards under the Plan are subject to forfeiture in
the event of termination (voluntary or otherwise) of active ARC employment at
any time prior to the date awards are paid (unless specifically approved by the
CEO and the Compensation Committee of the Board of Directors) except from
termination resulting from death, permanent and total disability, or retirement
in which case prorated awards would be paid at the conclusion of the performance
cycle.

Section 5.04 – Performance Expectations.   One time, extraordinary events that
have a significant impact (positive or negative) on objectives, may be reviewed
by the CEO on an individual basis and potentially offset when calculating final
awards.

Section 5.05 – Employer Rights.   ARC’s Board of Directors retains the right to
amend, suspend, or terminate the OICP in whole or in part, at any time and for
any reason, without the consent of any Participant, provided that such action
does not adversely affect the right to receive any amounts to which Participants
have become entitled to prior to such action.

Section 5.06 – Taxes.   All incentive awards will be calculated as gross dollar
awards and will be subject to all payroll costs, excluding the employer portion
of payroll taxes.

Section 5.07 – Availability of Funds.   Notwithstanding anything contained
herein to the contrary. The timing of Bonus Payments is subject to the
availability of unrestricted funds.

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