EXHIBIT 10.104

PROMISSORY NOTE

$ 24,000,000.00
 

 

Costa Mesa, California

 

 

 

July 11, 2002

          FOR VALUE RECEIVED, the undersigned, ARV Hillcreek, LLC, a California
limited liability company having an address at 245 Fischer Avenue, D-1, Costa
Mesa, California 92626 (the “Borrower”), hereby promises to pay to the order of
GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, having an
address at 200 Witmer Road, P.O. Box 1015, Horsham, Pennsylvania 19044-8015 (the
“Lender”), its successors and assigns as holder of this Note or, if this Note
has then been endorsed “to bearer,” to the bearer of this Note (Lender, its said
successors and assigns, and any such bearer, being hereinafter sometimes
referred to collectively as the “Holder”), at Lender’s said address or at such
other place or to such other person as may be designated in writing to Borrower
by Lender, the principal sum of Twenty-Four Million and 00/100 Dollars
($24,000,000.00) (the “Loan”), together with interest on the unpaid balance
thereof at the rate hereinafter set forth.

          ON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:

          Section 1.  Interest Rate and Payment Dates.

          1.1          Initial Rate and Initial Payment.  Interest shall accrue
on the outstanding principal balance hereunder from time to time from and after
the date hereof at the rate of seven percent (7%) per annum until the first Rate
Adjustment Date (as defined below).  On each successive Rate Adjustment Date,
the rate of interest at which interest accrues shall be adjusted to the then
applicable Note Rate (as defined in Section 1.4).  Interest for the period
beginning on the date of this Note and ending on and including the last day of
the month in which this Note is dated shall be payable on the date hereof. 
Interest shall be paid in arrears and shall be computed on the basis of a
360-day year and actual number of days elapsed for any whole or partial month in
which interest on this Note is being calculated and shall be charged on the
principal balance outstanding from time to time.

          1.2          Rate Adjustment Date and Payment Adjustment Dates.  The
rate of interest on the outstanding principal balance hereof from time to time
shall be adjusted on the following dates (each being a “Rate Adjustment Date”): 
the first Rate Adjustment Date shall be August 1, 2002, and subsequent Rate
Adjustment Dates shall fall on the first day of each calendar month thereafter. 
The first payment adjustment date shall be August 1, 2002, and subsequent
payment adjustment dates shall fall on the first day of each calendar month
thereafter during the term of the Loan.

          1.3          Default Interest Rate.  If Borrower fails to make any
payment of principal, interest or fees on the date on which such payment becomes
due and payable (including applicable grace periods) whether at maturity or by
acceleration or on any other date, such payment shall accrue interest from the
date on which such payment was due (and not the date of the payment default)

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until paid at the fluctuating rate (“Default Rate”) which is the lesser of (a)
five percent (5%) per annum above the then applicable Note Rate and (b) the
maximum rate permitted by applicable law.

          1.4          Note Rate.  The “Note Rate” shall mean three and one-half
percent (3.5%) per annum plus the greater of (a) three and one-half percent
(3.5%) per annum or (b) the average of London Interbank Offered Rates (“LIBOR”)
for a term of one month determined solely by Holder as of each Rate Adjustment
Date in the following manner:  on each Rate Adjustment Date, Holder will obtain
the one month LIBOR (in U.S. Dollar deposits) from the appropriate Bloomberg
display page available as of the close of business announced on the last
business day of the month immediately preceding the Rate Adjustment Date; in the
event Bloomberg ceases publication or ceases to publish the one month LIBOR,
Holder shall select a comparable publication to determine the one month LIBOR
and provide notice thereof to Borrower; LIBOR may or may not be the lowest rate
based upon the market for U.S. Dollar deposits in the London Interbank
Eurodollar Market at which Holder prices loans on the date on which the Note
Rate is determined by Holder as set forth above.

          1.5          Note Rate Adjustments.  This Note shall bear interest at
the rate set forth above or at the applicable Note Rate until a new Note Rate is
determined on each Rate Adjustment Date in accordance with the provisions
hereof; provided, however, that, if Holder at any time determines, in the sole
but reasonable exercise of its discretion that it has miscalculated the amount
of the monthly payment of principal and/or interest (whether because of a
miscalculation of the Note Rate or otherwise), Holder shall give notice to
Borrower of the corrected amount of such monthly payment (and the corrected
amount of the Note Rate, if applicable) and (a) if the corrected amount of such
monthly payment represents an increase thereof, Borrower shall, within ten (10)
calendar days after the date of such notice, pay to Holder any sums that
Borrower would have otherwise been obligated under this Note to pay to Holder
had the amount of such monthly payment not been miscalculated or (b) if the
corrected amount of such monthly payment represents a decrease thereof, and
Borrower is not otherwise in breach or default under any of the terms and
provisions of the Note or the Loan Agreement of even date herewith by and
between Borrower and Lender (the “Loan Agreement”), Borrower shall, within ten
(10) calendar days thereafter be paid the sums that Borrower would not have
otherwise been obligated to pay to Holder had the amount of such monthly payment
not been miscalculated.

          1.6          LIBOR Unascertainable.  If (a) on any date on which the
Note Rate would otherwise be set, Holder shall have determined in good faith
(which determination shall be conclusive) that (i) adequate and reasonable means
do not exist for ascertaining the one month LIBOR or (ii) a contingency has
occurred which materially and adversely affects the London Interbank Eurodollar
Market at which Holder prices loans on the date on which the Note Rate is
determined by Holder as set forth above, or (b) at any time Holder shall have
determined in good faith (which determination shall be conclusive) that the
making, maintenance or funding of any part of the Loan has been made
impracticable or unlawful by compliance by Holder in good faith with any law or
guideline or interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof or with any
request or directive of any such governmental authority (whether or not having
the force of law) then, and in any such event, Holder may notify Borrower of
such determination.  Upon such date as shall be specified in such notice (which
shall not be earlier than the date such notice is given), the

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obligation of Holder to charge interest to Borrower at the Note Rate shall be
suspended until Holder shall have later notified Borrower of Holder’s
determination in good faith (which determination shall be conclusive) that the
circumstances giving rise to such previous determination no longer exist.

          1.7          U.S. Treasury Securities.  If Holder notifies Borrower of
a determination under subsection 1.6 hereof for purposes of calculating the Note
Rate, the one month LIBOR shall automatically be converted to the “Index” of the
weekly average yield on United States Treasury Securities adjusted to a constant
maturity of one year, as made available by the Federal Reserve Board forty-five
(45) days prior to the Rate Adjustment Date.

          1.8          Reimbursement for Increased Costs.  If any law or
guideline or interpretation or application thereof by any governmental authority
charged with the interpretation or administration thereof or compliance with any
request or directive of any governmental authority (whether or not having the
force of law) now existing or hereafter adopted (a) subjects Holder to any tax
or changes the basis of taxation with respect to this Note, the Loan or payments
by Borrower of principal, interest or other amounts due from Borrower hereunder
or thereunder (except for taxes on the overall net income or overall gross
receipts of Holder imposed as a result of a present or former connection between
the jurisdiction of the governmental authority imposing such tax on Holder,
provided that this exclusion shall not apply to a connection arising solely from
Holder having executed, delivered, performed its obligations under, or received
a payment under, or enforced, any of the Loan Documents (as defined in Section
8.1.1 below)), or (b) imposes upon Holder any other condition or expense with
respect to this Note, the Loan or its making, maintenance or funding of any part
of the Loan or any security therefor, and the result of any of the foregoing is
to increase the cost to, reduce the income receivable by, or impose any expense
(including, without limitation, loss of margin) upon, Holder with respect to the
Note, or the making, maintenance or funding of any part of the Loan, by an
amount which Holder deems to be material, Holder may from time to time notify
Borrower of the amount determined in good faith (using any averaging and
attribution methods) by Holder (which determination shall be conclusive) to be
necessary to compensate Holder for such increase, reduction or imposition and,
if Borrower is by law prohibited from paying any such amount, Holder may elect
to declare the unpaid principal balance hereof and all interest accrued thereon
immediately due and payable.  Such amount shall be due and payable by Borrower
to Holder seven (7) days after such notice is given. 

          Section 2.  Payments.  Commencing on September 1, 2002, and continuing
on the first day of each calendar month thereafter through and including the
first day of October, 2003 (the “Conversion Date”), payments of interest only
shall be made taking into account the then effective Note Rate.  Commencing on
November 1, 2003, and continuing on the first day of each calendar month
thereafter through and including the Maturity Date (defined below), monthly
payments of principal and interest shall adjust monthly and shall be made on the
first day of each calendar month in such amount, taking into account the then
effective Note Rate, as is sufficient to fully amortize the unpaid principal
balance of the Note on the date that is twenty-five (25) years after the
Conversion Date.

          Section 3.  Application of Payments.  Payments made by Borrower on
account hereof shall be applied, first, toward any Late Fees (hereinafter
defined) or other fees and charges due

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hereunder, second, toward payment of any interest due at the Default Rate,
third, toward payment of any interest due at the then applicable Note Rate set
forth in Section 1.4 above, and fourth, toward payment of principal. 
Notwithstanding the foregoing, if any advances made by Holder under the terms of
any instruments securing this Note have not been repaid, any payments made may,
at the option of Holder, be applied, first, to repay such advances and interest
thereon, with the balance, if any, applied as set forth in the preceding
sentence.

          Section 4.  Maturity Date.  Anything in this Note to the contrary
notwithstanding, the entire unpaid balance of the principal amount hereof and
all interest accrued thereon, to and including the Maturity Date (as defined
below) (including interest accruing at the Default Rate), and all Late Fees (as
defined below) shall, unless sooner paid, and except to the extent that payment
thereof is sooner accelerated, be and become due and payable on August 1, 2004
(the “Maturity Date”).  Notwithstanding any other provision contained herein, if
repayment of the Loan, whether at maturity or upon acceleration or otherwise, is
funded from the proceeds of any refinancing of the Loan, then Borrower shall pay
to Lender a prepayment premium equal to one half of one percent (1/2%) of the
original principal balance of this Note on the date of such prepayment unless
Lender has received a contractually agreed upon sum for the arrangement thereof
or has elected not to provide such refinancing or has arranged for such
refinancing with HUD, FNMA or FHLMC.

 

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Initial

 

          Section 5.  Prepayment.

          Prepayment of the Loan in full shall be permitted at any time during
the term of the Loan without penalty, upon not less than thirty (30) and not
greater than forty (40) days prior written notice to Lender specifying the date
on which prepayment is to be made.  Except as provided in Section 35 of the
Mortgage, partial prepayments of the Loan shall not be permitted.  Any such
prepayment shall be credited, first, toward any Late Fees due hereunder, second,
toward payment of any accrued and unpaid interest due hereunder at the Default
Rate, third, toward payment of any accrued and unpaid interest due hereunder at
the Note Rate, and, fourth, toward payment of principal; provided, however, that
if any advances made by Holder under the terms of any instruments securing this
Note have not been repaid, any payments made may, at the option of Holder, be
applied, first, to repay such advances, and interest thereon, with the balance,
if any, applied as set forth in the preceding sentence.  Notwithstanding any
other provision contained herein, if prepayment of the Loan is funded from
either a payment made pursuant to Section 35 of the Mortgage (as defined below)
or the proceeds of any refinancing of the Loan pursuant to which Lender does not
receive a contractually agreed upon sum for the arrangement thereof, then
prepayment of the Loan in full shall be subject to payment by Borrower to Lender
of a prepayment premium equal to one half of one percent (1/2%) of the original
principal balance of this Note. unless Lender has elected not to refinance the
Loan or such refinancing is provided by HUD, FNMA or FHLMC.

 

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Initial

 

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          Section 6.  Method of Payment.

          Each payment of the Loan Obligations (as defined in the Loan
Agreement) shall be paid directly to Holder in lawful tender of the United
States of America.  Each such payment shall be paid by 1:00 p.m. Horsham,
Pennsylvania, time on the date such payment is due, except if such date is not a
Business Day (as defined in the Loan Agreement) such payment shall then be due
on the first Business Day after such date.  Any payment received after 1:00 p.m.
Horsham, Pennsylvania, time shall be deemed to have been received on the
immediately following Business Day.

          Section 7.  Security.

          The debt evidenced by this Note is to be secured by, among other
things, (a) a Deed of Trust, Fixture Filing and Security Agreement (the
“Mortgage”) of even date herewith by Borrower for the benefit of Lender, and
intended to be recorded in the offices of the Orange County and Ventura County,
California, covering certain real property which is described in Exhibits “A-1”
and “A-2” to the Mortgage, and (b) a Payment and Performance Guaranty of even
date herewith (the “Guaranty Agreement”), executed by ARV Assisted Living, Inc.,
a Delaware corporation (the “Guarantor”), for the benefit of Lender.

          Section 8.  Default.

          8.1          Events of Default.  Anything in this Note to the contrary
notwithstanding, on the occurrence of any of the following events (each of which
is referred to herein, together with each of the Events of Default defined and
described in the Loan Agreement and the Mortgage as an “Event of Default”),
Holder may, in the exercise of its sole and absolute discretion, accelerate the
debt evidenced by this Note, in which event the entire outstanding principal
balance and all interest and fees accrued thereon shall immediately be and
become due and payable without further notice:

                         8.1.1          Failure to Pay or Perform.  If (a)
Borrower fails in making any payment to Holder of any or all sums due hereunder
within ten (10) days after such payment becomes due or on the Maturity Date or
(b) there exists an uncured default under any other document or instrument
evidencing or securing the Loan (collectively, the “Loan Documents”) which has
been executed by Borrower, Guarantor and/or Lessee (as defined in the Loan
Agreement), and such default is not cured within the grace or cure period, if
any, provided in any of such Loan Documents.

                         8.1.2           Bankruptcy.

                                        (a)          If Borrower, Guarantor or
Lessee (i) applies for or consents to the appointment of a receiver, trustee or
liquidator of Borrower or Guarantor or Lessee, as the case may be, or of all or
a substantial part of its assets, (ii) files a voluntary petition in bankruptcy,
or admits in writing its inability to pay its debts as they come due, (iii)
makes an assignment for the benefit of creditors, (iv) files a petition or an
answer seeking a reorganization or an arrangement with creditors or seeking to
take advantage of any insolvency law, (v) performs any other act of bankruptcy,
or (vi) files an answer admitting the material allegations of a petition filed
against Borrower or Guarantor or Lessee in any bankruptcy, reorganization or
insolvency proceeding; or

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                                        (b)          if (i) an order, judgment
or decree is entered by any court of competent jurisdiction adjudicating
Borrower or Guarantor or Lessee bankrupt or an insolvent, or approving a
receiver, trustee or liquidator of Borrower or Guarantor or Lessee or of all or
a substantial part of its assets, or (ii) there otherwise commences with respect
to Borrower or Guarantor or Lessee or any of its assets any proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment, receivership
or like law or statute, and if such order, judgment, decree or proceeding
continues unstayed for any period of sixty (60) consecutive days after the
expiration of any stay thereof.

                         8.1.3           Judgments.  If any judgment for the
payment of money in excess of $25,000.00 hereafter awarded against Borrower or
Guarantor or Lessee by any court of competent jurisdiction remains unsatisfied
or otherwise in force and effect for a period of thirty (30) days after the date
of such award.

          8.2          No Impairment of Rights.  Nothing in this Section shall
be deemed in any way to alter or impair any right which Holder has under this
Note or the Mortgage, or any other document or instrument evidencing or securing
the Loan (collectively, the “Loan Documents”) or at law or in equity, to
accelerate such debt on the occurrence of any other Event of Default provided
herein or therein, whether or not relating to this Note.

          8.3          Late Fees.  Without limiting the generality of the
foregoing provisions of this Section, if any payment of interest or principal
payable under this Note is not made within five (5) calendar days after the date
on which such payment becomes due and payable (including applicable grace
periods), Borrower shall thereupon automatically become obligated immediately to
pay to Holder a late payment charge, for each month during which a payment
delinquency exists, equal to the lesser of five percent (5%) of the amount of
such payment or the maximum amount permitted by applicable law (“Late Fees”) to
defray the expenses incurred by Holder in handling and processing such
delinquent payment and to compensate Holder for the loss of use of such
delinquent payment.

          Section 8.4  [INTENTIONALLY DELETED]

          Section 9.  Costs of Enforcement.

 

          Borrower shall pay to Holder on demand the amount of any and all
expenses incurred by Holder (a) in enforcing its rights hereunder or under the
Mortgage and/or the Loan Documents, (b) as the result of the occurrence of an
Event of Default by Borrower in performing its obligations under this Note,
including but not limited to the expense of collecting any amount owed
hereunder, and of any and all attorneys’ fees incurred by Holder in connection
with such default, whether suit be brought or not, and (c) in protecting the
security for the Loan and Borrower’s obligations under the Loan Documents.  Such
expenses shall be added to the principal amount hereof, shall be secured by the
Mortgage and shall accrue interest at the Default Rate.

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          Section 10.  Borrower’s Waiver of Certain Rights.

          Borrower and any endorser, guarantor or surety hereby waives the
exercise of any and all exemption rights which it holds at law or in equity with
respect to the debt evidenced by this Note, and of any and all rights which it
holds at law or in equity to require any valuation, appraisal or marshalling, or
to have or receive any presentment, protest, demand and notice of dishonor,
protest, demand and nonpayment as a condition to Holder’s exercise of any of its
rights under this Note or the Loan Documents.

          Section 11.  Extensions.

          The Maturity Date and/or any other date by which any payment is
required to be made hereunder may be extended by Holder from time to time in the
exercise of its sole discretion, without in any way altering or impairing
Borrower’s or Guarantor’s liability hereunder.

          Section 12.  General.

          12.1          Applicable Law.  This Note shall be given effect and
construed by application of the laws of the State of California (without regard
to the principles thereof governing conflicts of laws), and any action or
proceeding arising hereunder, and each of Holder and Borrower submits (and
waives all rights to object) to non-exclusive personal jurisdiction in the State
of California, for the enforcement of any and all obligations under the Loan
Documents except that if any such action or proceeding arises under the
Constitution, laws or treaties of the United States of America, or if there is a
diversity of citizenship between the parties thereto, so that it is to be
brought in a United States District Court, it shall be brought in the United
States District Court for the Southern District of California or any successor
federal court having original jurisdiction.

          12.2          Headings.  The headings of the Sections, subsections,
paragraphs and subparagraphs hereof are provided herein for and only for
convenience of reference, and shall not be considered in construing their
contents.

          12.3          Construction.  As used herein, (a) the term “person”
means a natural person, a trustee, a corporation, a limited liability company, a
partnership and any other form of legal entity, and (b) all references made (i)
in the neuter, masculine or feminine gender shall be deemed to have been made in
all such genders, (ii) in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as well, and (iii) to
any Section, subsection, paragraph or subparagraph shall, unless therein
expressly indicated to the contrary, be deemed to have been made to such
Section, subsection, paragraph or subparagraph of this Note.

          12.4          Severability.  No determination by any court,
governmental body or otherwise that any provision of this Note or any amendment
hereof is invalid or unenforceable in any instance shall affect the validity or
enforceability of (a) any other such provision or (b) such provision in any
circumstance not controlled by such determination.  Each such provision shall be
valid and enforceable to the fullest extent allowed by, and shall be construed
wherever possible as being consistent with, applicable law.

          12.5          No Waiver.  Holder shall not be deemed to have waived
the exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing.  No delay or omission by Holder in exercising any such
right (and no allowance by Holder to Borrower of an

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opportunity to cure a default in performing its obligations hereunder) shall be
deemed a waiver of its future exercise.  No such waiver made as to any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance, or any other such right.  Further, acceptance by Holder of
all or any portion of any sum payable under, or partial performance of any
covenant of, this Note, the Mortgage or any of the other Loan Documents, whether
before, on, or after the due date of such payment or performance, shall not be a
waiver of Holder’s right either to require prompt and full payment and
performance when due of all other sums payable or obligations due thereunder or
hereunder or to exercise any of Holder’s rights and remedies hereunder or
thereunder.

          12.6          Waiver of Jury Trial; Service of Process; Court Costs. 
BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH
BORROWER AND HOLDER MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH, OR IN ANY
WAY PERTAINING TO, THIS NOTE AND/OR ANY OF THE OTHER LOAN DOCUMENTS.  IT IS
AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF
ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.  THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY BORROWER, UPON CONSULTATION WITH COUNSEL OF
BORROWER’S CHOICE, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF
FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  BORROWER FURTHER
REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE
AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.

          12.7          Offset.  Upon the occurrence of an Event of Default,
Holder may set-off against any principal and interest owing hereunder, any and
all credits, money, stocks, bonds or other security or property of any nature
whatsoever on deposit with, or held by, or in the possession of, Holder, to the
credit of or for the account of Borrower, without notice to or consent of
Borrower or Guarantor.

          12.8          Non-Exclusivity of Rights and Remedies.  None of the
rights and remedies herein conferred upon or reserved to Holder is intended to
be exclusive of any other right or remedy contained herein or in any of the
other Loan Documents and each and every such right and remedy shall be
cumulative and concurrent, and may be enforced separately, successively or
together, and may be exercised from time to time as often as may be deemed
necessary or desirable by Holder.

          12.9          Incorporation by Reference.  All of the agreements,
conditions, covenants and provisions contained in each of the Loan Documents are
hereby made a part of this Note to the same extent and with the same force and
effect as if they were fully set forth herein.  Borrower

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covenants and agrees to keep and perform, or cause to be kept and performed, all
such agreements, conditions, covenants and provisions strictly in accordance
with their terms.

          12.10          Joint and Several Liability.  If Borrower consists of
more than one person and/or entity, each such person and/or entity agrees that
its liability hereunder is joint and several.

          12.11          Business Purpose.  Borrower represents and warrants
that the Loan evidenced by this Note is being obtained solely for the purpose of
acquiring or carrying on a business, professional or commercial activity and is
not for personal, agricultural, family or household purposes.

          12.12          Interest Limitation.  Notwithstanding anything to the
contrary contained herein or in the Mortgage or in any other of the Loan
Documents, the effective rate of interest on the obligation evidenced by this
Note shall not exceed the lawful maximum rate of interest permitted to be paid. 
Without limiting the generality of the foregoing, in the event that the interest
charged hereunder results in an effective rate of interest higher than that
lawfully permitted to be paid, then such charges shall be reduced by the sum
sufficient to result in an effective rate of interest permitted and any amount
which would exceed the highest lawful rate already received and held by Holder
shall be applied to a reduction of principal and not to the payment of
interest.  Borrower agrees that for the purpose of determining highest rate
permitted by law, any non-principal payment (including, without limitation, Late
Fees and other fees) shall be deemed, to the extent permitted by law, to be an
expense, fee or premium rather than interest.

          12.13          Modification.  This Note may be modified, amended,
discharged or waived only by an agreement in writing signed by the party against
whom enforcement of such modification, amendment, discharge or waiver is sought.

          12.14          Time of the Essence.  Time is strictly of the essence
of this Note.

          12.15          Negotiable Instrument.  Borrower agrees that this Note
shall be deemed a negotiable instrument, even though this Note may not otherwise
qualify, under applicable law, absent this paragraph, as a negotiable
instrument.

          12.16          Interest Rate After Judgment.  If judgment is entered
against Borrower on this Note, the amount of the judgment entered (which may
include principal, interest, fees, Late Fees and costs) shall bear interest at
the Default Rate, to be determined on the date of the entry of the judgment.

          12.17          Relationship.  Borrower and Holder intend that the
relationship between them shall be solely that of creditor and debtor.  Nothing
contained in this Note or in any of the other Loan Documents shall be deemed or
construed to create a partnership, tenancy-in-common, joint tenancy, joint
venture or co-ownership by or between Borrower and Holder.

          12.18          Waiver of Automatic Stay.  BORROWER HEREBY AGREES THAT,
IN CONSIDERATION OF LENDER’S AGREEMENT TO MAKE THE LOAN AND IN RECOGNITION THAT
THE FOLLOWING COVENANT IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN, IN
THE EVENT THAT  BORROWER SHALL (A) FILE WITH ANY BANKRUPTCY COURT OF COMPETENT

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JURISDICTION OR BE THE SUBJECT OF ANY PETITION UNDER ANY SECTION OR CHAPTER OF
TITLE 11 OF THE UNITED STATES CODE, AS AMENDED (THE “BANKRUPTCY CODE”), OR
SIMILAR LAW OR STATUTE; (B) BE THE SUBJECT OF ANY ORDER FOR RELIEF ISSUED UNDER
THE BANKRUPTCY CODE OR SIMILAR LAW OR STATUTE; (C) FILE OR BE THE SUBJECT OF ANY
PETITION SEEKING ANY REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT,
LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL
OR STATE ACT OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR OTHER RELIEF FOR
DEBTORS; (D) HAVE SOUGHT OR CONSENTED TO OR ACQUIESCED IN THE APPOINTMENT OF ANY
TRUSTEE, RECEIVER, CONSERVATOR, OR LIQUIDATOR; OR (E) BE THE SUBJECT OF AN
ORDER, JUDGMENT OR DECREE ENTERED BY ANY COURT OF COMPETENT JURISDICTION
APPROVING A PETITION FILED AGAINST ANY BORROWER FOR ANY REORGANIZATION,
ARRANGEMENT, COMPOSITION, READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR
RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO
BANKRUPTCY, INSOLVENCY OR RELIEF FOR DEBTORS, THEN, TO THE EXTENT PERMITTED BY
APPLICABLE LAW AND SUBJECT TO COURT APPROVAL, HOLDER SHALL THEREUPON BE
ENTITLED, AND BORROWER HEREBY IRREVOCABLY CONSENTS TO, AND WILL NOT CONTEST, AND
AGREES TO STIPULATE TO, RELIEF FROM ANY AUTOMATIC STAY OR OTHER INJUNCTION
IMPOSED BY SECTION 362 OF THE BANKRUPTCY CODE OR SIMILAR LAW OR STATUTE
(INCLUDING, WITHOUT LIMITATION, RELIEF FROM ANY EXCLUSIVE PERIOD SET FORTH IN
SECTION 1121 OF THE BANKRUPTCY CODE) OR OTHERWISE, ON OR AGAINST THE EXERCISE OF
THE RIGHTS AND REMEDIES OTHERWISE AVAILABLE TO HOLDER AS PROVIDED IN THE LOAN
DOCUMENTS, AND AS OTHERWISE PROVIDED BY LAW, AND BORROWER HEREBY IRREVOCABLY
WAIVES ITS RIGHTS TO OBJECT TO SUCH RELIEF.

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          IN WITNESS WHEREOF, Borrower has executed and sealed this Note or
caused it to be executed and sealed on its behalf by its duly authorized
representatives, the day and year first above written, and the obligations under
this Note shall be binding upon Borrower’s successors and assigns. 

WITNESS:

 

BORROWER:

 

 

 

 

 

ARV HILLCREEK, LLC,
a California limited liability company

 

 

 

 

 

--------------------------------------------------------------------------------

 

By:

/s/ ABDO KHOURY

(Seal)

--------------------------------------------------------------------------------

 

 

--------------------------------------------------------------------------------

 

[Print name]

 

 

Abdo Khoury

 

 

 

 

Manager

 

 

 

 

 

 

ACKNOWLEDGED BY GUARANTOR THIS __________ DAY OF JULY, 2002:

 

 

 

 

 

 

 

 

 

ARV ASSISTED LIVING, INC.,
a Delaware corporation

 

 

 

 

 

 

 

 

 

By:

/s/ ABDO KHOURY

(SEAL)

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

Abdo Khoury

 

 

 

 

 

President

 

 

 

 

11