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                                                                   EXHIBIT 10.13

                      Banc One Capital Funding Corporation
                                150 E. Gay Street
                                   24TH Floor
                              Columbus, Ohio 43215

                                 June 28, 1999

Acacia Villa, LLC
245 Fisher Avenue, D-1
Costa Mesa, California 92626

                Re:     Loan in the aggregate amount of $2,116,100 (the "Loan")
                        from Banc One Capital Funding Corporation ("BOCFC") to
                        Retirements Inns II (the "Borrower"), which is a direct
                        or indirect subsidiary or affiliate of ARV Assisted
                        Living, Inc. ("ARV"), secured by first lien deeds of
                        trust on assisted living properties (the "Projects")

Ladies and Gentlemen:

                This will confirm the following agreements by and among BOCFC
and Borrower with respect to the Loan:

        1.      In the engagement letter dated June 10, 1999 from BOCFC to ARV
regarding, among other things, the above-referenced Loan (the "Engagement
Letter"), ARV and the Borrower, in consideration of BOCFC making the Loan,
granted to BOCFC the last right of refusal to arrange or provide any permanent
financing to replace the Loan at or prior to the maturity thereof on July 1,
2001 (the "Maturity Date"). The Loan may be voluntarily prepaid by the Borrower
thereof only during the one hundred eighty (180) day period immediately
preceding the Maturity Date. Said last right of refusal with respect to
permanent financing to replace the Loan will be extinguished if BOCFC exercises
its option to extend the Maturity Date for such Loan as described in the
Engagement Letter and the promissory note of the Borrower evidencing the Loan
(the "Lender Extension Option").

                The terms and conditions of such last right of refusal are as
follows:

                (a)     At any time within the one hundred eighty (180) day
                        period immediately preceding the Maturity Date, Borrower
                        may deliver to BOCFC a copy of any proposal from another
                        lender for permanent financing ("Replacement Financing")
                        to replace the Loan which Borrower desires to accept
                        (the "Replacement Loan Proposal"). BOCFC will have up to
                        ten (10) days from the date of its receipt of the
                        Replacement Loan Proposal, within which to exercise its
                        last right of refusal, but not obligation, by issuing an
                        engagement letter to Borrower thereby notifying Borrower
                        that BOCFC will attempt to arrange for or provide
                        Replacement Financing for the Loan described in the



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                        Replacement Loan Proposal substantially upon the terms
                        and conditions set forth in the Replacement Loan
                        Proposal. BOCFC will also have the right to exercise its
                        Lender Extension Option with respect to such Loan until
                        the ninetieth (90th) day immediately preceding the
                        Maturity Date.

                (b)     If BOCFC exercises its last right of refusal with
                        respect to the Replacement Financing for the Loan, it
                        will have a period of thirty (30) days from the date
                        BOCFC receives all requested third party information,
                        and property information and other underwriting due
                        diligence information requested from Borrower, following
                        the date of such exercise, within which to issue a
                        binding commitment for such Replacement Financing. If
                        BOCFC issues such binding commitment, it will have a
                        period of two weeks following such issuance to close the
                        Replacement Financing. If it does not issue a binding
                        commitment for such Replacement Financing within such
                        period, it will then be deemed to have withdrawn the
                        exercise of its last right of refusal with respect to
                        such Replacement Financing.

                (c)     If BOCFC does not exercise its last right of refusal
                        with respect to the Replacement Financing for Loan
                        within the ten (10) day period referred to in paragraph
                        1(a), or if, after exercising its last right of refusal
                        with respect to such Replacement Financing, it fails to
                        issue a binding commitment for such Replacement
                        Financing within the time period set forth in paragraph
                        1(b), Borrower will be free to obtain such Replacement
                        Financing from the lender issuing the Replacement Loan
                        Proposal substantially upon the terms and conditions set
                        forth in the Replacement Loan Proposal. Borrower shall
                        not obtain Replacement Financing for any Loan without
                        first providing BOCFC with the opportunity to exercise
                        its last right of refusal to provide such Replacement
                        Financing in accordance with paragraphs 1(a) and 1(b)
                        hereof.

                (d)     Notwithstanding the provisions of the preceding
                        paragraphs, if after BOCFC has failed to exercise its
                        last right of refusal with respect to the Replacement
                        Financing for the Loan within the time period set forth
                        in paragraph 1(a), or failed to issue the binding
                        commitment for such Replacement Financing within the
                        time period set forth in paragraph 1(b), Borrower
                        desires to obtain such Replacement Financing from the
                        lender which submitted the Replacement Loan Proposal or
                        from another lender, upon Terms (as hereinafter defined)
                        which are materially different from the Terms set forth
                        in the Replacement Loan Proposal submitted to BOCFC with
                        respect to such Replacement Financing, then BOCFC will
                        have a continuing last right of refusal to arrange or
                        provide for such Replacement Financing upon such
                        materially different Terms and Borrower shall not obtain
                        such Replacement Financing upon such materially
                        different Terms from any other lender without first
                        providing BOCFC with notice of such materially different
                        Terms and the opportunity to exercise its last right of
                        refusal to provide such Replacement Financing upon such
                        materially different Terms in accordance with paragraphs
                        1(a) and (b) hereof. For purposes of this paragraph 1,
                        the



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                        "Terms" of any Replacement Financing shall be: (i) the
                        interest rate; (ii) the loan amount; (iii) the term;
                        (iv) any loan origination and other fees, equity
                        participations, options, warrants or similar
                        consideration provided to the lender; (v) the
                        collateral; and (vi) the guarantor or guarantors.

        2.      In connection with the Loans, Borrower and BOCFC have entered
into that certain Agreement to Amend or Comply, of even date herewith (the
"Agreement to Amend or Comply"), whereby the Borrower has agreed with BOCFC to,
among other things, assist and cooperate with Lender in the event Lender sells
the Loans in whole or in part. By this letter agreement, Borrower and BOCFC
agree that such Agreement to Amend and Comply shall further extend to and apply
to any refinancing of the Loans with FHA, provided, however, that such
refinancing satisfies the following conditions: (i) the interest rate of the
refinancing shall be identical to the applicable interest rate to the Loans;
(ii) no prepayment premium shall be due and payable by the Borrower to BOCFC
with respect to the refinancing of the Loans; (iii) the terms of the refinancing
shall be substantially identical to the terms of the Loans, subject to FHA
requirements; and (iv) the term of the refinancing shall be for a ten (10) year
period.

        3.      Any breach or default by Borrower in the performance of its
obligations under this letter shall constitute a default under the documents
evidencing, securing and guarantying the Loan to which Borrower is a party.

                Please indicate your agreement to the terms set forth herein by
signing a copy of this letter and returning it to the undersigned. Once signed
by all parties, this letter shall constitute a legally binding agreement among
the parties with respect to the matters set forth herein last.


                                        Very truly yours,

                                        Banc One Capital Funding Corporation

                                        By:
                                           -------------------------------------
                                           Michael S. Wood, Vice President



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                        Agreed this 28th day of June, 1999


                                        Acacia Villa, LLC

                                        By:
                                           -------------------------------------
                                           Abdo H. Khoury
                                           Manager



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