Exhibit 10.49
                                 LOAN AGREEMENT


         This Loan Agreement (this "Agreement") is entered into as of the day of
January, 1998, by and between Barton Acquisition, Inc., a Texas corporation, and
American Physicians Service Group, Inc., a Texas corporation.

                                  DEFINITIONS:

EFFECTIVE DATE:  January 1, 1998

BORROWER:  Barton Acquisition, Inc., a Texas corporation

BORROWER'S ADDRESS:  1301 Capital of Texas Highway, Suite C-300, Austin, Texas  
          78746; Fax: (512) 314-4559

LENDER:  American Physicians Service Group, Inc., a Texas corporation

LENDER'S ADDRESS:  1301 Capital of Texas Highway, Suite C-300, Austin, Texas  
          78746, Fax: (512) 314-4398

NOTE:

         Promissory  Note (Line of Credit) in the  maximum  principal  amount of
         $2,400,000,  (the "Maximum  Principal  Amount")  dated January 1, 1998,
         executed  by  Borrower,  and payable to the order of Lender as provided
         therein (the "Note")

COLLATERAL:       The following described Land and personal property:

        1.        Tract 1: A 0.8800  acre tract now known as Lot 4, Block B, New
                  City  Block  17305,  OAKWELL  FARMS,  UNIT  7B,  PLANNED  UNIT
                  DEVELOPMENT,   City  of  San  Antonio,  Bexar  County,  Texas,
                  according to plat thereof  recorded in Volume 9535,  Page 203,
                  Deed and Plat Records of Bexar County, Texas.

                  Tract 2: All that certain tract or parcel of land,  containing
                  1.6756  acres,  more or less,  being out of the Elijah  Alcorn
                  Survey,  Abstract No. l, situated in Fort Bend County,  Texas.
                  Said 1.6756 acres being all of Commercial Reserve "F" and part
                  of  Commercial  Reserve "D" of the Replat of the Amending Plat
                  for Edgewater,  Section Two (2),  according to the map or plat
                  thereof  recorded in Slide No.  1353/A of the Plat  Records of
                  Fort  Bend  County,   Texas.  Said  1.6756  acres  being  more
                  particularly  described  by metes and  bounds in  Exhibit  "A"
                  attached  hereto and made a part hereof;  together  with those
                  nonexclusive  easement  rights  described  in that Ingress and
                  Egress  Easement,  recorded in Volume  2364,  Page 1480 of the
                  County Clerk Official Records of Fort Bend County,  Texas, and
                  those easement rights reserved in that deed recorded in Volume
                  2364,  Page 1452 of the County Clerk Official  Records of Fort
                  Bend County, Texas.

                  Tract 3: A tract or parcel of land being 0.2008 acres, more or
                  less, located in the Elijah Alcorn League Survey, Abstract No.
                  l, being out of  Commercial  Reserve  "D" of the Replat of the
                  Amending Plat for Edgewater, Section Two (2), according to the
                  map or plat thereof  recorded in Slide No.  1353/A of the Plat
                  
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                  Records of Fort Bend  County,  Texas.  Said 0.2008 acres being
                  more particularly described by metes and bounds in Exhibit "B"
                  attached hereto and made a part hereof.

                  Tract 4: Lot 2A, Block "B", of  RESUBDIVISION  OF LOT 2, BLOCK
                  "B"  MILWOOD  SECTION  SIX, a  subdivision  in Travis  County,
                  Texas,  according to the map or plat,  of record in Volume 95,
                  Page 231, of the Plat Records of Travis County, Texas.

                  Tract 5: Lot 2B, Block "B", of  RESUBDIVISION  OF LOT 2, BLOCK
                  "B"  MILWOOD  SECTION  SIX, a  subdivision  in Travis  County,
                  Texas,  according to the map or plat,  of record in Volume 95,
                  Page 231, of the Plat Records of Travis County, Texas.

                  All  other  real  property  and   improvements  now  owned  or
                  hereafter acquired by Borrower.

         2.       All of Borrower's  assets,  including  without  limitation all
                  accounts,   chattel   paper,   contract   rights,   equipment,
                  inventory,   fixtures,  general  intangibles,  and  investment
                  property,  as  more  particularly  described  in  Exhibit  "C"
                  attached to and incorporated herein by reference.

LOAN DOCUMENTS:  This Agreement,  the Note, the Security Agreement, the Deeds of
Trust  (Security  Agreement,  Assignment  of  Leases  and  Rents  and  Financing
Statement)  ("Deeds  of  Trust"),  and  all  other  documents,  agreements,  and
instruments  now or  hereafter  existing,  evidencing,  securing,  or  otherwise
relating to this Agreement and any transactions  contemplated by this Agreement,
as any of the foregoing items may be modified or supplemented from time to time.

INDEBTEDNESS:  All present and future indebtedness,  obligations and liabilities
of Borrower to Lender, and all renewals,  extensions and modifications  thereof,
arising pursuant to any of the Loan Documents and all interest accruing thereon,
and all other fees, costs,  expenses,  charges and attorneys' fees payable,  and
covenants  performable,  under  any of the  Loan  Documents  (including  without
limitation this Agreement).

                                   Agreement:

         Borrower has requested from Lender the credit accommodations  described
below, and Lender has agreed to provide such credit  accommodations  to Borrower
on the terms and conditions contained herein.  Therefore,  for good and valuable
consideration,  the  receipt  and  sufficiency  of  which  Lender  and  Borrower
acknowledge, Lender and Borrower hereby agree as follows:

                                    ARTICLE I
                                    THE LOANS

         1.1 THE LOANS.  Lender agrees to lend and Borrower  agrees to borrow an
amount not to exceed the Maximum Principal Amount (the "Loans") on the terms and
conditions set forth herein. The Loans will be evidenced by the Note.

         1.2  SECURITY.  Borrower  will  grant to  Lender  a lien  and  security
interest in the Collateral and agrees to do all things  necessary to perfect the
liens and security interests of Lender in such Collateral.

                                   ARTICLE II
                   DESCRIPTION OF CREDIT FACILITIES; ADVANCES

         2.1  REVOLVING  LINE OF  CREDIT.  Subject to and in  reliance  upon the
terms, conditions,  representations and warranties hereinafter set forth, Lender
agrees to make advances (an  "Advance") to 

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Borrower from time to time during the
period from the date hereof to and including  January 1, 2003 ("Maturity  Date")
in an aggregate  amount not to exceed the Maximum  Principal Amount of the Note.
Each  Advance  must  be  either  $1,000.00  or a  higher  integral  multiple  of
$1,000.00.  Funds  borrowed  and  repaid  may  be  reborrowed,  so  long  as all
conditions  precedent  to Advances  are met.  The purpose of the  Advances is to
provide  funds to Borrower for working  capital and for other  general  business
purposes of Borrower.

         2.2 INTEREST AND  REPAYMENT.  Borrower  shall pay the aggregate  unpaid
principal  amount  of all  Advances  in  accordance  with the terms of the Note,
evidencing  the  indebtedness  resulting  from such  Advances.  Interest  on the
Advances  shall be due and  payable  in the manner and at the times set forth in
the Note, with final maturity of the Note being on or before January 1, 2003.

         2.3 MAKING  ADVANCES.  Each  Advance  shall be made within two business
days of written notice (or telephonic notice confirmed in writing) given by noon
(Austin,  Texas  time)  on a  business  day of  Lender  by  Borrower  to  Lender
specifying  the amount and date thereof (which may be the same business day) and
if sent by wired  funds,  at Lender's  option,  the wiring  instructions  of the
deposit account of Borrower to which such Advance is to be deposited.

         2.4  PAYMENTS  AND  COMPUTATIONS.  Borrower  shall  make  each  payment
hereunder  and under the Note on the day when due in lawful  money of the United
States of America to Lender at  Lender's  Address for Payment in same day funds.
All  repayments  of  principal  on the Note  shall  be in a  minimum  amount  of
$1,000.00,  or a higher  integral  multiple of $1,000.00.  All  computations  of
interest  shall be made by  Lender  on the  basis of the  actual  number of days
(including the first day but excluding the last day) in the year (365 or 366, as
the case may be) elapsed,  but in no event shall any such computation  result in
an amount of interest that would cause the interest  contracted for,  charged or
received  by Lender to be in excess of the  amount  that would be payable at the
Highest Lawful Rate, as herein defined.

                                   ARTICLE III
                             CONDITIONS TO ADVANCES

         3.1 CONDITION PRECEDENT TO INITIAL ADVANCE. The obligation of Lender to
make its initial Advance is subject to the condition precedent that Lender shall
have received on or before the day of such Advance the  following,  each in form
and substance  satisfactory to Lender and properly executed by Borrower or other
appropriate  parties:  (a) the Note duly  executed  by  Borrower;  (b) a copy of
Borrower's articles of incorporation, together with all amendments, certified by
the secretary of Borrower;  (c) a corporate resolution executed by the Secretary
of Borrower  authorizing  execution of the Loan  Documents  and the borrowing of
funds hereunder;  (d) the Security Agreement covering the Collateral is executed
and all  necessary  financing  statements  covering the  Collateral  in favor of
Lender have been filed with the Texas Secretary of State; (e) the Deeds of Trust
(Security  Agreement,  Assignment of Rents and Leases and Financing  Statements)
are  executed  and  recorded  in the  appropriate  counties;  and (f) such other
documents,  opinions,  certificates  and  evidences  as  Lender  may  reasonably
request.

         3.2 CONDITIONS PRECEDENT TO EACH ADVANCE. In addition to the conditions
precedent  stated  elsewhere  herein,  Lender shall not be obligated to make any
Advance unless: (a) the representations  and warranties  contained in Article IV
are true and  correct  in all  material  respects  on and as of the date of such
Advance as though made on and as of such date with such changes  therein as have
occurred  without  breach  of  that  certain  Contribution  and  Stock  Purchase
Agreement  (the  "Contribution  Agreement")  dated as of January 1, 1998, by and
among Lender, Borrower, Barton House, Ltd., a Texas limited partnership,  Barton
House at Oakwell Farms, Ltd., a Texas limited partnership,  Uncommon Care, Inc.,
a Texas  corporation,  George R. Bouchard,  John H. Trevey,  Uncommon  Partners,
Ltd., a Texas limited  partnership and the additional parties listed on Appendix
I thereto,  Stock Transfer  Restriction and  Shareholders  Agreement dated as of
January 1, 1998, by and among  Lender,  Borrower,  Barton  House,  Ltd., a Texas
limited  partnership,  Barton  House at Oakwell  Farms,  Ltd.,  a Texas  limited
partnership,  Uncommon Care, Inc., a Texas corporation, George R. Bouchard, John
H.  Trevey,  Uncommon  Partners,  Ltd.,  a  Texas  limited  partnership  and the
additional parties listed on Appendix I thereto,  or this Agreement;  (b) on the

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date of the Advance, no Event of Default,  and no event which, with the lapse of
time or notice or both,  could  become an Event of Default,  has occurred and is
continuing;  (c) there shall have been no material adverse change, as determined
by Lender in its reasonable judgment,  in the financial condition or business of
Borrower;  and (d) Lender shall have  received such other  approvals,  opinions,
documents,  certificates or evidences as Lender may reasonably  request (in form
and substance  reasonably  satisfactory to Lender).  Each request for an Advance
shall be deemed a representation by Borrower that the conditions of this Section
3.2 have been met.

                                   ARTICLE IV
                    BORROWER'S REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants to Lender as follows:

         4.1  GOOD  STANDING.  Borrower  is  a  duly  formed  corporation,  duly
organized and in good standing, under the laws of Texas and has the power to own
its property and to carry on its business in each jurisdiction in which Borrower
operates.

         4.2 AUTHORITY AND COMPLIANCE.  Borrower has full power and authority to
enter into this  Agreement,  to make the  borrowing  hereunder,  to execute  and
deliver the Note and to incur the indebtedness described in this Agreement,  all
of which has been duly authorized by all proper and necessary  corporate action.
No further  consent  or  approval  of any  public  authority  is  required  as a
condition  to the  validity of this  Agreement  or the Note,  and Borrower is in
compliance with all laws and regulatory requirements to which it is subject.

         4.3 BINDING  AGREEMENT.  This Agreement  constitutes,  and the Note and
other  Loan  Documents  when  issued  and  delivered  pursuant  hereto for value
received will constitute,  valid and legally binding  obligations of Borrower in
accordance with their terms.

         4.4 LITIGATION.  There are no proceedings  pending or, to the knowledge
of Borrower,  threatened before any court or administrative agency which will or
may have a material  adverse effect on the financial  condition or operations of
Borrower or any  subsidiary,  except as disclosed to Lender in writing  prior to
the date of this Agreement.

         4.5 NO  CONFLICTING  AGREEMENTS.  There are no charter,  bylaw or stock
provisions of Borrower and no provisions  of any existing  agreement,  mortgage,
indenture or contract binding on Borrower or affecting its property, which would
conflict with or in any way prevent the execution,  delivery, or carrying out of
the terms of this Agreement and the Note.

         4.6 OWNERSHIP OF ASSETS. Borrower has good title to the Collateral, and
the  Collateral is owned free and clear of liens except as provided in the Deeds
of Trust and Security Agreement and as permitted by the Shareholders  Agreement,
Contribution  Agreement and this Agreement.  Borrower will at all times maintain
its tangible property,  real and personal,  in good order and repair taking into
consideration reasonable wear and tear.

         4.7 TAXES. All income taxes and other taxes due and payable through the
date of this Agreement have been paid prior to becoming delinquent.

         4.8 PLACE OF  BUSINESS.  Borrower's  principal  place of business is in
Austin, Travis County, Texas.

         4.9 LEASES. Borrower is not the lessee of any real or personal property
except as has been  disclosed  in writing to Lender in Exhibit  "D"  attached to
this Agreement.

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<PAGE>

                                    ARTICLE V
                        BORROWER'S AFFIRMATIVE COVENANTS

         So long as Borrower may borrow under this  Agreement  and until payment
in full of the  Note  and  performance  of all  other  obligations  of  Borrower
hereunder, Borrower will:

         5.1 FINANCIAL STATEMENTS.  Maintain a system of accounting satisfactory
to Lender  and in  accordance  with  generally  accepted  accounting  principles
consistently   applied,   and  will  permit  Lender's   officers  or  authorized
representatives  to visit and  inspect  Borrower's  books of  account  and other
records at such reasonable times and as often as Lender may desire during office
hours and after reasonable notice to Borrower,  and will pay the reasonable fees
and  disbursements  of any  accountants  or other  agents of Lender  selected by
Lender for the foregoing purposes.  Unless written notice of another location is
given to Lender,  Borrower's  books and  records  will be located at  Borrower's
Address.

                  (a) Furnish to Lender year end financial statements to include
         balance sheet, operating statement and surplus reconciliation, together
         with  an  officer's  certificate  of  compliance  with  this  Agreement
         including  computations of all quantitative  covenants,  within 90 days
         after the end of each annual accounting period.

                  (b)  Furnish  to Lender  quarterly  financial  statements,  to
         include balance sheet and profit and loss  statement,  together with an
         officer's  certificate  of  compliance  with this  Agreement  including
         computations of all quantitative  covenants,  within 45 days of the end
         of each such accounting period.

                  (c) With each balance sheet delivered under subsections (a) or
         (b) of this Section 5.1, an aging of all Accounts Receivable.

                  (d) Promptly provide Lender with such additional  information,
         reports or statements  respecting its business operations and financial
         condition as Lender may reasonably request from time to time.

         5.2 INSURANCE.  Maintain insurance with responsible insurance companies
on  such of its  properties,  in such  amounts  and  against  such  risks  as is
customarily  maintained by similar  businesses  operating in the same  vicinity,
specifically  to  include  a policy  of fire  and  extended  coverage  insurance
covering all assets, and liability insurance,  all to be with such companies and
in such amounts  satisfactory  to Lender and to contain a mortgage clause naming
Lender as its interest may appear.  Evidence of such  insurance will be supplied
to Lender.

         5.3 EXISTENCE AND COMPLIANCE.  Maintain its corporate existence in good
standing and comply with all laws,  regulations  and  governmental  requirements
applicable  to  it  or  to  any  of  its  property,   business   operations  and
transactions.  Borrower  further  agrees to provide  Lender  with  copies of all
instruments filed with the Texas Secretary of State amending and/or renewing its
articles of incorporation.

         5.4 ADVERSE CONDITIONS OR EVENTS.  Promptly advise Lender in writing of
any  condition,  event or act which comes to its  attention  that would or might
materially affect Borrower's financial  condition,  Lender's rights in or to the
Collateral  under this  Agreement or the loan  documents,  and of any litigation
filed against Borrower.

         5.5      TAXES.  Pay all taxes as they become due and payable.

         5.6  MAINTENANCE.  Maintain  all  of  its  tangible  property  in  good
condition and repair,  reasonable wear and tear excepted, and make all necessary
replacements  thereof,  and  preserve and  maintain  all  licenses,  privileges,
franchises,  certificates  and  the  like  necessary  for the  operation  of its
business.

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                                   ARTICLE VI
                          BORROWER'S NEGATIVE COVENANTS

         So long as Borrower may borrow under this  Agreement  and until payment
in full of the  Note  and  performance  of all  other  obligations  of  Borrower
hereunder, Borrower will not, without the prior written consent of Lender:

         6.1  TRANSFER  OF ASSETS.  Enter into any merger or  consolidation,  or
sell,  lease,  assign,  or otherwise dispose of or transfer any assets except in
the normal course of its business.

         6.2 CHANGE IN OWNERSHIP OR STRUCTURE.  Dissolve or liquidate;  become a
party to any merger or consolidation;  reorganize as a professional corporation;
acquire by purchase,  lease or otherwise all or substantially  all of the assets
or capital stock of any corporation or other entity; or sell,  transfer,  lease,
or otherwise dispose of all or any substantial part of its property or assets or
business.

         6.3 LIENS.  From and after the date hereof and except as  permitted  by
the Shareholders Agreement and Contribution Agreement,  knowingly grant, suffer,
or permit  liens on or  security  interests  in  Borrower's  assets,  or fail to
promptly pay all lawful  claims,  whether for labor,  materials,  or  otherwise,
except for purchase money security  interests  arising in the ordinary course of
business.

         6.4 LOANS.  Make any loans,  advances or investments to or in any joint
venture,  corporation or other entity, except for the purchase of obligations of
Lender or U.S.  Government  obligations  or the  purchase  of  federally-insured
certificates of deposit.

         6.5  BORROWINGS.  Except as reflected  in the Deeds of Trust,  Security
Agreement and herein and except for borrowing or incurring any  indebtedness  or
granting any  collateral or security (by way of guaranty or  otherwise)  for any
indebtedness  or  obligation,  with  respect  to (i) open  accounts  payable  to
unaffiliated third parties in the ordinary course of Borrower's  business,  (ii)
any first lien  mortgages  to  unaffiliated  third  parties,  or purchase  money
security interests in favor of unaffiliated vendors or unaffiliated lenders, for
(x) the acquisition  and/or  construction of real property or fixtures purchased
as a site for the operation of residences to provide assisted living services to
senior  citizens with  dementia,  and directly  related  services,  or (y) fixed
assets or personal  property to be located at, and used in  connection  with the
operation of, such residences;  create,  incur,  assume, or become liable in any
manner for any  indebtedness  (for  borrowed  money,  deferred  payment  for the
purchase  of  assets,  lease  payments,  as surety or  guarantor  of the debt of
another,  or  otherwise)  other  than to Lender in  excess  of  $25,000  without
Lender's prior written consent.

         6.6  VIOLATE  OTHER  COVENANTS.  Violate  or fail to  comply  with  any
covenants  or  agreements  regarding  other  debt  which  will or would with the
passage  of time or upon  demand  cause the  maturity  of any  other  debt to be
accelerated.

         6.7 DIVIDENDS.  Declare any dividends (other than dividends  payable in
capital stock of Borrower) on any shares of any class of its capital  stock,  or
apply  any of its  property  or  assets  to the  purchase,  redemption  or other
retirement of any shares of any class of capital stock of Borrower or in any way
amend its capital structure.

         6.8   EXECUTIVE PERSONNEL.  Substantially change its present executive 
or management personnel.

         6.9 CHARACTER OF BUSINESS.  Change the general character of business as
conducted at the date hereof,  or engage in any type of business not  reasonably
related to its business as presently and normally conducted.

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                                   ARTICLE VII
                     EVENTS OF DEFAULT; NOTICE; ACCELERATION

         7.1  EVENTS  OF  DEFAULT.  If one or more of the  following  events  of
default  shall occur and  continue  after  thirty (30) days'  written  notice to
Borrower,  all  outstanding  principal plus unpaid interest of the Loans and any
other indebtedness of Borrower to Lender shall  automatically be due and payable
immediately  and  Lender  shall have no  further  obligation  to fund under this
Agreement  unless and until all events of default have been cured but so long as
Lender has not begun any legal proceedings to enforce its remedies  hereunder or
has foreclosed the Property:

                  (a) Default shall be made in the payment of any installment of
         principal or interest upon the Note,  when due and payable,  whether at
         maturity or otherwise; or

                  (b)  Default  shall be made in the  performance  of any  term,
         covenant or agreement  contained herein or in any of the Deeds of Trust
         or the Security Agreement; or

                  (c) Any  representation or warranty herein contained or in any
         financial statement, certificate, report or opinion submitted to Lender
         in connection  with the Loans or pursuant to the  requirements  of this
         Agreement  excluding,  however,  any  representation or warranty in the
         Contribution Agreement and Shareholders Agreement,  shall prove to have
         been incorrect or misleading in any material respect when made; or

                  (d) Any judgment  against  Borrower or any attachment or other
         levy  against  the  property  of  Borrower  with  respect  to  a  claim
         materially   affecting  Borrower's  financial  status  remains  unpaid,
         unstayed on appeal,  undischarged,  not bonded or not  dismissed  for a
         period of 30 days; or

                  (e)     The bankruptcy, death, or dissolution of any guarantor
         of the Indebtedness; or

                  (f) Borrower makes an assignment for the benefit of creditors,
         admits in writing  its  inability  to pay its debts  generally  as they
         become due, files a petition in bankruptcy, is adjudicated insolvent or
         bankrupt,  petitions or applies to any tribunal for any receiver or any
         trustee of Borrower or any substantial part of its property,  commences
         any action relating to Borrower under any reorganization,  arrangement,
         readjustment of debt,  dissolution or liquidation law or statute of any
         jurisdiction,  whether  now or  hereafter  in  effect,  or if  there is
         commenced  against  Borrower  any such  action,  or Borrower by any act
         indicates its consent to or approval of any trustee for Borrower or any
         substantial part of its property,  or suffers any such  receivership or
         trustee to continue undischarged.

         7.2 LENDER'S  REMEDIES.  Upon the occurrence of an Event of Default and
while it may continue  uncured,  Lender,  without notice of any kind, except for
any notice  required under this  Agreement or any other Loan  Document,  may, at
Lender's  option:  (i) by notice to Borrower,  terminate its  obligation to fund
Advances  hereunder;  (ii)  declare  the  Indebtedness,  in  whole  or in  part,
immediately due and payable; and/or (iii) exercise any other rights and remedies
available to Lender under this Agreement, any other Loan Document, or applicable
laws;  except  that upon the  occurrence  of an Event of  Default  described  in
subsection 7.1(f),  all the Indebtedness shall  automatically be immediately due
and  payable,   and  Lender's   obligation  to  fund  Advances  hereunder  shall
automatically   terminate,   without  notice  of  any  kind  (including  without
limitation  notice of intent  to  accelerate  and  notice  of  acceleration)  to
Borrower or to any  guarantor,  or to any surety or endorser of the Note,  or to
any other person. Borrower and each guarantor, surety, and endorser of the Note,
and any and all other parties liable for the  Indebtedness  or any part thereof,
waive demand,  notice of intent to demand,  presentment  for payment,  notice of
nonpayment,  protest,  notice of protest,  grace, notice of dishonor,  notice of
intent to accelerate maturity, notice of acceleration of maturity, and diligence
in collection.

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         7.3 RIGHT OF SET-OFF. Borrower hereby authorizes Lender, to the maximum
extent permitted under and in accordance with applicable laws, at any time after
the occurrence of an Event of Default which  continues  uncured,  to set-off and
apply  any and all  deposits,  funds or  assets at any time held and any and all
other  indebtedness  at any time  owing by  Lender  to or for the  credit or the
account of  Borrower  against  any and all  Indebtedness,  whether or not Lender
exercises  any  other  right  or  remedy  hereunder  and  whether  or  not  such
Indebtedness are then matured.

                                  ARTICLE VIII
                          GENERAL TERMS AND CONDITIONS

         8.1  NOTICES.  All  notices,  demands,  requests,  approvals  and other
communications  required or permitted hereunder shall be in writing and shall be
deemed to have been given when (a) presented  personally,  or (b) three (3) days
after  deposited in a regularly  maintained mail receptacle of the United States
Postal Service,  postage prepaid,  certified,  return receipt requested,  or (c)
upon receipt of confirmation after sending by facsimile transmission,  addressed
to  Borrower  or  Lender,  as the case may be, at the  respective  addresses  or
facsimile  number for notice set forth on the first page of this  Agreement,  or
such other  address or  facsimile  number as Borrower or Lender may from time to
time designate by written notice to the other.

         8.2 ENTIRE AGREEMENT AND MODIFICATIONS.  The Loan Documents  constitute
the entire  understanding  and agreement between the undersigned with respect to
the  transactions  arising in connection  with the Loans and supersede all prior
written  or oral  understandings  and  agreements  between  the  undersigned  in
connection therewith. No provision of this Agreement or the other Loan Documents
may be modified,  waived, or terminated except by instrument in writing executed
by the party against whom a modification, waiver, or termination is sought to be
enforced,  and, in the case of Lender,  executed by a Vice  President  or higher
level officer of Lender.

         8.3 SEVERABILITY. In case any of the provisions of this Agreement shall
for  any  reason  be  held  to  be  invalid,  illegal,  or  unenforceable,  such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof,  and this Agreement shall be construed as if such invalid,  illegal,  or
unenforceable provision had never been contained herein.

         8.4  CUMULATIVE  RIGHTS  AND NO  WAIVER.  Lender  shall have all of the
rights and remedies  granted in the Loan  Documents  and  available at law or in
equity,  and these  same  rights and  remedies  shall be  cumulative  and may be
pursued  separately,  successively,  or concurrently  against  Borrower,  or the
Collateral or any part thereof, at the sole discretion of Lender. Lender's delay
in  exercising  any right shall not operate as a waiver  thereof,  nor shall any
single or partial  exercise by Lender of any right  preclude any other or future
exercise thereof or the exercise of any other right. Any of Borrower's covenants
and  agreements  may be  waived  by  Lender  but only in  writing  signed  by an
authorized officer of Vice President level or higher of Lender or any subsequent
owner or holder of the Note.  Except as  otherwise  expressly  provided  in this
Agreement  and in the  Note,  Deed of Trust  and  Security  Agreement,  Borrower
expressly waives any presentment,  demand, protest, notice of default, notice of
intent  to  accelerate,  notice  of  acceleration,  notice  of  intent to demand
payment,  or other notice of any kind. No notice to or demand on Borrower in any
case shall, of itself, entitle Borrower to any other or further notice or demand
in similar or other circumstances.  No delay or omission by Lender in exercising
any  power  or  right  hereunder  shall  impair  any  such  right or power or be
construed  as a waiver  thereof,  or the  exercise  of any other  right or power
hereunder.

         8.5  FORM  AND  SUBSTANCE.  All  documents,   certificates,   insurance
policies,  and other items required  under this Agreement to be executed  and/or
delivered to Lender shall be in form and substance  reasonably  satisfactory  to
Lender.

         8.6 LIMITATION ON INTEREST: MAXIMUM RATE. Lender and Borrower intend to
contract in strict  compliance  with  applicable  usury law from time to time in
effect.  To effectuate this intention,  Lender and

                                       8
<PAGE>

Borrower  stipulate and agree
that none of the terms and provisions of the Note and any other  agreement among
such parties, whether now existing or arising hereafter, shall ever be construed
as a contract to pay interest for the use,  forbearance or detention of money in
excess of the Maximum Rate. If, from any possible  construction of any document,
interest would otherwise be payable to Lender in excess of the Maximum Rate, any
such  construction  shall be subject to the  provisions of this Section and such
document  shall be  automatically  reformed and the  interest  payable to Lender
shall be  automatically  reduced to the Maximum Rate permitted under  applicable
law,  without the  necessity of the  execution of any amendment or new document.
Neither  Borrower,  endorsers or other persons now or hereafter  becoming liable
for payment of any portion of the  principal  or interest of the Note shall ever
be liable for any  unearned  interest on the  principal  amount or shall ever be
required  to pay  interest  thereon  in excess of the  Maximum  Rate that may be
lawfully  charged under  applicable law from time to time in effect.  Lender and
any subsequent holder of the Note expressly  disavows any intention to charge or
collect  unearned  or  excessive  interest  or finance  charges in the event the
maturity of the Note, is accelerated. If the maturity of the Note is accelerated
for any reason, whether as a result of a default under the Note, or by voluntary
prepayment,  or otherwise,  any amounts constituting interest, or adjudicated as
constituting  interest,  which  are  then  unearned  and  have  previously  been
collected  by Lender or any  subsequent  holder of the Note  shall be applied to
reduce the principal balance thereof then outstanding, or if such amounts exceed
the unpaid  balance of principal,  the excess shall be refunded to Borrower.  In
the event Lender or any subsequent holder of the Note ever receives, collects or
applies  as  interest  any  amounts  constituting  interest  or  adjudicated  as
constituting  interest which would otherwise  increase the interest to an amount
in excess of the amount  permitted under applicable law, such amount which would
be excessive  interest shall be applied to the reduction of the unpaid principal
balance of the Note, and, if the principal balances of the Note is paid in full,
any remaining  excess shall be paid to Borrower.  In determining  whether or not
the  interest  paid or payable  under the  specific  contingencies  exceeds  the
Maximum Rate  allowed by  applicable  law,  Borrower  and Lender  shall,  to the
maximum  extent   permitted   under   applicable  law,  (i)   characterize   any
non-principal  payment as an expense,  fee or premium,  rather than as interest;
(ii) exclude  voluntary  prepayments  and the effect  thereof;  (iii)  amortize,
prorate,  allocate  and spread,  in equal  parts,  the total  amount of interest
throughout the entire  contemplated  term of the  applicable  Note (as it may be
renewed and extended) so that the interest rate is uniform throughout the entire
term of the Note.  The terms and  provisions  of this section  shall control and
supersede  every other provision of all existing and future  agreements  between
Lender and Borrower. As used in this Agreement, "Maximum Rate" means the maximum
non-usurious  interest  rate  that  at any  time or  from  time  to time  may be
contracted for, taken, reserved,  charged or received on the unpaid principal or
accrued  past due  interest  under  applicable  law and may be greater  than the
applicable  rate,  the parties hereby  stipulating  and agreeing that Lender may
contract for, take,  reserve,  charge or receive interest up to the Maximum Rate
without penalty under any applicable law; and "applicable law" means the laws of
the State of Texas or the laws of the United States of America,  whichever  laws
allow the greater interest,  as such laws now exist or may be changed or amended
or come into effect in the future.  In the event  applicable law provides for an
interest  ceiling under  Chapter One of Title 79, Texas  Revised Civil  Statutes
Annotated, as amended, that ceiling shall be the indicated rate ceiling, subject
to any right  Lender may have in the future to change the method of  determining
the Maximum Rate.

         8.7      NO THIRD PARTY  BENEFICIARY.  This  Agreement  is for the sole
benefit of Lender and Borrower and is not for the benefit of any third party.

         8.8  BORROWER  IN  CONTROL.  In no  event  shall  Lender's  rights  and
interests  under the Loan Documents be construed to give Lender the right to, or
be deemed to indicate that Lender is in control of the  business,  management or
properties  of Borrower  or has power over the daily  management  functions  and
operating decisions made by Borrower.

         8.9 USE OF FINANCIAL AND OTHER INFORMATION. Borrower agrees that Lender
shall be  permitted  to  investigate  and  verify  the  accuracy  of any and all
information furnished to Lender in connection with the Loan Documents, including
without limitation financial  statements,  and to disclose such information,  or
provide  copies of such  information,  to  representatives  appointed by Lender,
including  independent  

                                       9
<PAGE>

accountants,  agents,  attorneys,  asset  investigators,
appraisers   and  any  other  persons   deemed   necessary  by  Lender  to  such
investigation.

         8.10 PARTICIPATION OR SALE OF LOAN. Lender shall have the right to sell
the Note, or participation  interests in the Note to any entity, the majority of
whose voting equity  securities is then owned  directly or indirectly by Lender,
or by Lender and any of the  parties  listed on  Appendix I to the  Shareholders
Agreement ("Lender  Parties") or to any Lender Parties.  Borrower shall execute,
acknowledge and deliver any and all  instruments  requested by Lender to satisfy
such purchasers or participants  that the unpaid  indebtedness  evidenced by the
Note is  outstanding  upon  the  terms  of the  provisions  set out in the  Loan
Documents.  Lender shall have the right to disclose in confidence such financial
information regarding Borrower or the Collateral as may be necessary to complete
any  sale  or  attempted  sale  of  the  Note  or  participations  or  attempted
participations in the Loans,  including  without  limitation all Loan Documents,
financial statements,  projections, internal memoranda, audits, reports, payment
history,  appraisals  and any and all other  information  and  documentation  in
Lender's files relating to Borrower and the Collateral. This authorization shall
be irrevocable in favor of Lender,  and Borrower waives any claims that they may
have against Lender or the party  receiving  information  from Lender  regarding
disclosure  of  information  in Lender's  files,  and further  waive any alleged
damages which they may suffer as a result of such disclosure.

         8.11  FURTHER  ASSURANCES.  Borrower  agrees to execute  and deliver to
Lender,  promptly upon request from Lender,  such other and further documents as
may be  reasonably  necessary or  appropriate  to  consummate  the  transactions
contemplated  herein or to perfect the liens and security interests covering the
Collateral.

         8.12 NUMBER AND GENDER. Whenever used herein, the singular number shall
include the plural and the plural the singular,  and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations, and warranties
of Borrower in this Agreement shall be joint and several obligations of Borrower
and of each Borrower if more than one.

         8.13 CAPTIONS.  The captions,  headings,  and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit, amplify,
or modify the terms and provisions hereof.

         8.14  CONTINUING  AGREEMENT.  This is a  continuing  agreement  and all
rights,  powers,  and remedies of Lender under this Agreement and the other Loan
Documents shall continue in full force and effect until the Note is paid in full
as the same  becomes  due and  payable  and all other  Indebtedness  is paid and
discharged, until Lender has no further obligation to advance moneys to Borrower
under this Agreement, and until Lender, upon request of Borrower, has executed a
written termination statement.  Furthermore,  the parties contemplate that there
may be times when no Indebtedness is owing, but notwithstanding such occurrence,
this Agreement (and all other Loan Documents) shall remain valid and shall be in
full force and effect as to subsequent Indebtedness and Advances,  provided that
Lender has not executed a written termination statement.

         8.15  Applicable  Law. THIS AGREEMENT AND THE LOAN  DOCUMENTS  SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE STATE OF TEXAS AND
THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.

         8.16 REQUIRED CONSENTS AND APPROVALS. Any consent or approval of Lender
required  hereunder  or under any other Loan  Document  executed  in  connection
herewith shall not be required,  or shall be deemed satisfied,  in the event (a)
approval  is required  of at least one of the APS  Designees  (as defined in the
Shareholders  Agreement)  under the Shareholders  Agreement,  and such approval,
together  with the overall  approval of the Board of Directors of Borrower,  has
been so  obtained,  or (b) such  action,  inaction  or  request by  Borrower  is
expressly  permitted,  without any  requirement of approval of Lender or any APS
Designee, under the Shareholders Agreement.

                                       10
<PAGE>

         8.17     NO ORAL  AGREEMENTS.  THE WRITTEN LOAN  AGREEMENT  REPRESENTS
THE FINAL  AGREEMENT  BETWEEN THE PARTIES AND MAY NOT BE  CONTRADICTED BY 
EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR SUBSEQUENT ORAL AGREEMENTS OF THE 
PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


         EXECUTED this 16th day of March, 1998, to be effective January 1, 1998.

                           BORROWER:

                           BARTON ACQUISITION, INC., a Texas corporation



                           By:    /s/ John H. Trevey                            
                           Name:      John H. Trevey                            
                           Title:     CEO                                       


                           LENDER:

                           AMERICAN  PHYSICIANS  SERVICE  GROUP,  INC.,  a Texas
                             corporation



                           By:     /s/ Duane K. Boyd, Jr.                       
                           Name:       Duane K. Boyd, Jr.                       
                           Title:      Senior VP                                

                                       11
<PAGE>


                                    EXHIBIT C

                          Borrower's Personal Property

         (a)  all  equipment,   fixtures,   furnishings,   inventory,   building
materials, and articles of personal property (the "Personalty") now or hereafter
owned by Borrower,  including,  but not limited to the Personalty attached to or
used in or on the Land or in or about the  Improvements or that are necessary or
useful for the complete and  comfortable  use and occupancy of the  Improvements
for the  purposes for which they were or are to be  attached,  placed,  erected,
constructed or developed, or which Personalty is or may be used in or related to
the planning,  development,  financing or operation of the Improvements, and all
renewals of or replacements or substitutions  for any of the foregoing,  whether
or not the same are or shall be attached to the Land or Improvements;

         (b) all water and water rights,  timber,  crops, and mineral  interests
pertaining to the Land;

         (c)      all  plans  and  specifications  for  the  Improvements  and  
for any  future  development  of or construction on the Land;

         (d) all  accounts,  deposits  (including  tenant or  resident  security
deposits),  patient records,  personnel files,  provider agreements,  records of
inspections by governmental agencies,  receivables from Medicare,  Medicaid, the
State of Texas, any health insurance carrier,  or any governmental  agency, bank
accounts, funds,  instruments,  notes or chattel paper arising from or by virtue
of any  transactions or operations  related to the Land, the  Improvements,  the
Personalty, the Leases, or the Rents;

         (e) all Borrower's  rights (but not Borrower's  obligations)  under any
documents,  contracts,  contract  rights,  accounts,  commitments,  construction
contracts (and all payment and performance bonds, statutory or otherwise, issued
by any  surety  in  connection  with any such  construction  contracts,  and the
proceeds of such bonds),  architectural  contracts,  engineering contracts,  and
general intangibles (including without limitation  trademarks,  trade names, and
symbols) arising from or by virtue of any transactions  related to the Land, the
Improvements, or the Personalty;

         (f) all permits,  licenses,  franchises,  certificates,  accreditation,
registrations and authorizations of all federal, state and local governmental or
regulatory  authority,  and other rights and  privileges  obtained in connection
with the Land, the Improvements, or the Personalty and the operation thereof;

         (g) all development rights,  utility commitments,  water and wastewater
taps, living unit equivalents, capital improvement project contracts, letters of
credit,  and utility  construction  agreements with any governmental  authority,
including  municipal utility  districts,  or with any utility companies (and all
refunds and reimbursements thereunder) relating to the Land or the Improvements;

         (h) all proceeds  arising from or by virtue of the sale, lease or other
disposition of the Land, the Improvements, or the Personalty;

         (i)  all  proceeds  (including  premium  refunds)  of  each  policy  of
insurance relating to the Land, the Improvements, or the Personalty;

         (j) all proceeds from the taking of any of the Land, the  Improvements,
the Personalty,  or any rights appurtenant thereto by right of eminent domain or
by private  or other  purchase  in lieu  thereof,  including  change of grade of
streets, curb cuts or other rights of access, for any public or quasi-public use
under any law;

         (k) all right,  title,  and interest of Borrower in and to all streets,
roads, public places, easements, and rights-of-way, existing or proposed, public
or private,  adjacent to or used in connection with, belonging, or pertaining to
the Land;

<PAGE>

         (l) all of Borrower's  rights (but not  Borrower's  obligations)  under
existing  and  future  residency  or  occupancy  agreements,  licenses,  leases,
including subleases,  concession  agreements,  management agreements and any and
all extensions,  renewals,  modifications,  and replacements of such agreements,
upon or of any part of the Land or  Improvements,  including  cash or securities
deposited  and  guaranties  to  secure  performance  by  the  tenants  of  their
obligations thereunder (the "Leases");

         (m) all of the rents, receipts,  royalties,  bonuses,  issues, profits,
revenues,  or other benefits of the Land, the  Improvements,  the Leases, or the
Personalty,  including  those now due or to become due by virtue of any Lease or
other  agreement  for the  occupancy  or use of all or any  part of the  Land or
Improvements (the "Rents");

         (n) all  consumer  goods  located  in,  on,  or  about  the Land or the
Improvements or used in connection with the use or operation  thereof;  however,
neither the term "consumer goods" nor the term "Personalty"  includes  clothing,
furniture,   appliances,  linens,  china,  crockery,   kitchenware,   inventory,
medicines,  drugs or personal  effects used  primarily  for the operation of the
Property;

         (o) all other  interests of every kind and character  that Borrower now
has or at any  time  hereafter  acquires  in  and  to  the  Land,  Improvements,
Personalty,  Leases,  and  Rents  and all  property  that is used or  useful  in
connection   therewith,   including   rights  of  ingress  and  egress  and  all
reversionary  rights or interests of Borrower  with respect to such property and
all of Borrower's rights (but not Borrower's  obligations)  under any covenants,
conditions,  and restrictions for the Land, as the same may be amended from time
to time,  including  Borrower's  rights,  title,  and  interests  thereunder  as
declarant or developer, if applicable; and

         (p)      all products and proceeds of the Personalty.

                                       2
<PAGE>


                                    EXHIBIT D

                            LIST OF BORROWER'S LEASES