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                                                                  EXHIBIT 10.120


                                 LOAN AGREEMENT

         THIS LOAN AGREEMENT (this "Agreement") made and entered into as of this
13th day of December, 1999 between ALTERRA HEALTHCARE CORPORATION, a Delaware
corporation, (the "Company"), and RDVEPCO, L.L.C., a Michigan limited liability
company ("Lender").

                                    Recitals:

         Company desires to borrow from Lender and Lender agrees to lend to
Company on the terms and conditions set forth herein the sum of Fourteen Million
Dollars ($14,000,000.00).

         NOW, THEREFORE, the parties promise and agree as follows:


                                    ARTICLE I
                                   Definitions

         In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply for purposes of this Agreement:

                  "Bankruptcy Law" means Title 11, U.S. Code or any similar
         federal or state law for the relief of debtors.

                  "Business Day" means a day other than a Saturday, a Sunday or
         a day on which banking institutions in the City of Grand Rapids,
         Michigan are authorized by law, regulation or executive order to remain
         closed. If a payment date is not a Business Day, payment may be made on
         the next succeeding day that is a Business Day.

                  "Collateral Real Estate" means the parcels of unimproved real
         estate owned by the Company identified on Exhibit A hereto.

                  "Contract" means any contract, agreement, undertaking or
         commitment (written or oral, formal or informal, firm or contingent) to
         which the Company or any of its Subsidiaries is a party or by which the
         Company, any of its Subsidiaries, or any of their respective assets are
         bound, and which has current operative or executory effect.

                  "Default" means any event that is or with the passage of time
         or the giving of notice or both would be an Event of Default.

                  "GAAP" means generally accepted accounting principles set
         forth from time to time in the opinions and pronouncements of the
         Accounting Principles Board and the American Institute of Certified
         Public Accountants and statements and pronouncements




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         of the Financial Accounting Standards Board (or agencies with similar
         functions of comparable stature and authority within the U.S.
         accounting profession), which are applicable to the circumstances as
         of the date of determination.

                  "Governmental Authority" means the United States, any state or
         municipality, the government of any foreign country, any subdivision of
         any of the foregoing, or any authority, department, commission, board,
         bureau, agency, court, or instrumentality of any of the foregoing.

                  "Hedging Obligations" means, with respect to any Person, the
         obligations of such Person under (i) currency exchange or interest rate
         swap agreements, currency exchange or interest rate cap agreements and
         currency exchange or interest rate collar agreements and (ii) other
         agreements or arrangements designed to protect such Person against
         fluctuations in currency exchange or interest rates.

                  "Holder" means the Lender and any subsequent holder of the
         Note.

                  "Holding" means AHC Purchaser Holding, Inc., a Delaware
         corporation.

                  "Indebtedness" means, with respect to any Person, any
         indebtedness of such Person, whether or not contingent, in respect of
         borrowed money or evidenced by bonds, notes, debentures or similar
         instruments or letters of credit (or reimbursement agreements in
         respect thereof) or banker's acceptances or representing obligations in
         respect of a lease that would at such time be required to be
         capitalized on a balance sheet in accordance with GAAP or the balance
         deferred and unpaid of the purchase price of any property (other than
         contingent or "earnout" payment obligations) or representing any
         Hedging Obligations, except any such balance that constitutes an
         accrued expense or trade payable, if and to the extent any of the
         foregoing indebtedness (other than letters of credit and Hedging
         Obligations) would appear as a liability upon a balance sheet of such
         Person prepared in accordance with GAAP, as well as all indebtedness of
         others secured by a Lien on any asset of such Person (whether or not
         such indebtedness is assumed by such Person) and, to the extent not
         otherwise included, the guarantee, whether or not conditional, by such
         Person of any indebtedness of any other Person.

                  "Lien" means, with respect to any asset, any mortgage, lien,
         pledge, charge, security interest or encumbrance of any kind in respect
         of such asset, whether or not filed, recorded or otherwise perfected
         under applicable law (including any conditional sale or other title
         retention agreement, any lease in the nature thereof, any option or
         other agreement to sell or give a security interest in and any filing
         of or agreement to give any financing statement under the Uniform
         Commercial Code (or equivalent statutes) of any jurisdiction).

                  "Obligations" means any principal, interest, penalties, fees,
         indemnifications, reimbursements, damages and other liabilities payable
         under the documentation governing any Indebtedness.





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                   "Permitted Liens" means (i) Liens for taxes and assessments
         or governmental charges or levies not at the time due, and (ii)
         easements that do not impair or restrict the Company's or Subsidiary's
         use and enjoyment of the property affected thereby.

                  "Person" means any individual, corporation, partnership,
         limited liability company, joint venture, association, joint-stock
         company, trust, unincorporated organization, government or any agency
         or political subdivision thereof or any other entity.

                  "Purchaser" means AHC Purchaser, Inc., a Delaware corporation.

                  "Subsidiary" means any corporation, partnership, limited
         partnership, limited liability company, association or other business
         entity of which securities or other ownership interests representing
         more than fifty percent (50%) of the ordinary voting power are, at the
         time as of which any determination is being made, owned or controlled
         by the Company or one or more Subsidiaries of the Company.

                  "SEC" means the Securities and Exchange Commission.

                  "Subscription and Organizational Agreement" means the
         Subscription and Organizational Agreement between Company, Lender and
         Holding dated as of the date of this Agreement pursuant to which, among
         other things, Lender has agreed to purchase from Holding and Holding
         has agreed to issue and sell to Lender an aggregate of 1,000 shares of
         the Convertible Preferred Stock of Holding.

                  "1934 Act" means the Securities Exchange Act of 1934, as
         amended.

                  "1933 Act" means the Securities Act of 1933, as amended.


                                   ARTICLE II
              Loan; Note; Closing; Closing Date; and Commitment Fee

         2.1. Tranche A Loan; Note. On the terms and conditions set forth in
this Agreement, Lender agrees to lend to Company on the Closing Date the sum of
Fourteen Million Dollars ($14,000,000.00) in principal amount (the "Tranche A
Loan Commitment"). The Fourteen Million Dollars ($14,000,000.00) borrowed by
Company pursuant to the Tranche A Loan Commitment (the "Tranche A Loan") shall
be evidenced by a note in the form of Exhibit B hereto payable to the order of
Lender and dated the Closing Date (the "Tranche A Note"), the terms and
conditions of which, are incorporated in and made a part of this Agreement.

         2.2. Tranche B Loan Commitment. Lender agrees to make a loan to
Purchaser on or before December 30, 1999 (the "Tranche B Loan") substantially on
the terms and conditions set forth in Exhibit C, hereto, subject to (i) the
Closing of the Tranche A Loan occurring, (ii) no

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Default or Event of Default having occurred with respect to the Tranche A Loan,
(iii) GMAC shall be diligently pursuing completion of the Proposed GMAC
Financing, to the reasonable satisfaction of Lender and (iv) documentation of
the Tranche B Loan in form and substance reasonably satisfactory to Lender and
its counsel.

         2.3. Closing; Closing Date. The closing of the Tranche A Loan (the
"Closing") shall occur at 10:00 a.m. at the offices of Company on or before
December 15, 1999 or such other time and place as the parties may agree in
writing (the "Closing Date") upon satisfaction of the terms and conditions to
Lender's obligations as set forth in Article IV, below.

         2.4. Fees. On or before the Closing, the Company agrees to pay to the
Lender the following fees; (i) a Seventy Thousand Dollar ($70,000.00) loan fee
with respect to the Tranche A Loan, and (ii) on behalf of Purchaser One Hundred
and Fifty Thousand Dollar ($150,000.00) commitment fee with respect to the
Tranche B Loan. Neither of such fees shall be prorated in the event of
prepayment of the related loan and the commitment fee with respect to the
Tranche B Loan shall be deemed fully earned when paid and shall not be
non-refundable under any circumstances. If not paid prior to the Closing,
Company agrees that Lender may deduct such fees from the proceeds of the Tranche
A Loan and remit to Company the amount of the Tranche A Loan net of such fees.


                                   ARTICLE III
                        Terms of Tranche A Loan and Note

         3.1.     Interest Rate; Payment; Usury.

                  (a) Provided that no Event of Default has occurred and is
         continuing and subject to the other provisions of this Agreement (i)
         during the period from and including the Closing Date to, but not
         including, the third month anniversary of the Closing Date, the Tranche
         A Loan shall bear interest at the rate of eight percent (8%) per annum;
         (ii) from and including the third month anniversary of the Closing Date
         through the sixth month anniversary of the Closing Date, the Tranche A
         Loan shall bear interest at the rate of nine percent (9%) per annum;
         and (iii) during each monthly period (or portion thereof) from and
         after sixth month anniversary of the Closing Date until the principal
         and all accrued interest on the Tranche A Loan have been paid, the
         Tranche A Loan shall bear interest at a rate that is fifty basis points
         (.5 of 1%) higher than the rate in effect immediately prior to the
         commencement of such monthly period. During any period that an Event of
         Default shall have occurred and be continuing, interest on the Tranche
         A Loan shall accrue at a rate equal to the otherwise applicable
         interest rate plus five hundred basis points (the "Default Interest
         Rate"). Notwithstanding anything contained herein to the contrary, in
         no event shall the interest rate on the Tranche A Loan, including the
         Default Interest Rate, exceed the highest rate permitted by applicable
         law. Interest on the Tranche A Loan, including interest at the Default
         Rate, shall be based on a 360 day year and interest shall accrue and be
         payable for the actual number of calendar days elapsed. Interest shall
         be payable on the third month anniversary of the Closing Date and on
         the




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         same day of each subsequent month until the principal and all accrued
         interest have been paid in full.

                  (b) It is the intention of the Company and Lender to conform
         strictly to applicable usury laws now or hereafter in force, and any
         interest payable under this Agreement or the Note shall be subject to
         reduction to an amount not to exceed the maximum non-usurious amount
         for commercial loans allowed under such applicable usury laws as now or
         hereafter construed by the courts having jurisdiction over such
         matters. In the event such interest (whether designated as interest,
         service charges, points, or otherwise) does exceed the maximum legal
         rate, it shall be (i) canceled automatically to the extent that such
         interest exceeds the maximum legal rate; (ii) if already paid, at the
         option of the Holder, either be rebated to the Company or credited on
         the principal amount of the Tranche A Loan; or (iii) if the Tranche A
         Loan has been prepaid in full, then such excess shall be rebated to the
         Company. It is further agreed, without limitation of the foregoing,
         that all calculations of the rate of interest contracted for, charged,
         or received under this Agreement and the Note that are made for the
         purpose of determining whether such rate exceeds the maximum legal
         rate, shall be made, to the extent permitted by applicable law, by
         amortizing, prorating, allocating, and spreading throughout the full
         stated term of the Tranche A Loan (and any extensions of the term
         thereof that may be hereafter granted) all such interest at any time
         contracted for, charged, or received from the Company or otherwise by
         the Holder so that the rate of interest on account of the Tranche A
         Loan, as so calculated is uniform throughout the term thereof. If the
         Company is exempt or hereafter becomes exempt from applicable usury
         statutes or for any other reason the rate of interest to be charged on
         the Tranche A Loan is not limited by law, none of the provisions of
         this paragraph shall be construed so as to limit or reduce the interest
         or other consideration payable under this Agreement or the Note or
         under the instrument securing payment thereof. The terms and provisions
         of this paragraph shall control and supersede every other provision of
         all agreements between the parties hereto.

         3.2. Maturity. Unless the same shall become due earlier as a result of
acceleration of the maturity, the Tranche A Loan shall mature on the first
anniversary of the Closing Date at which time the outstanding principal balance
of the Tranche A Loan and all accrued and unpaid interest shall become due and
payable.

         3.3. Prepayments. The Company may from time to time prepay the Tranche
A Loan, in whole or in part, at any time. Any partial prepayment shall be
applied first to interest which is accrued and unpaid and then to principal.

         3.4. Manner of Payment. The Company shall make payments in respect of
the Tranche A Loan (including principal and interest) by wire transfer of
immediately available funds to the account specified by the Holder.



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         3.5.     Events of Default.  Each of the following constitutes an
"Event of Default":

                  (i) default for five (5) days in the payment when due of
         interest on the Tranche A Loan;

                  (ii) default in payment when due of the principal of the
         Tranche A Loan;

                  (iii) failure by the Company for 15 days after notice from the
         Holder to comply with the provisions described under Article VI hereof;
         provided, however, if the curing of such failure may not reasonably be
         accomplished within such time frame, the Company shall have such
         additional time as is necessary to effect such cure (not to exceed 30
         days);

                  (iv) failure by the Company for 30 days after notice from the
         Holder to comply with any of its other covenants or agreements in this
         Agreement or the Note; provided, however, if the curing of such failure
         may not reasonably be accomplished within such time frame, the Company
         shall have such additional time as is necessary to effect such cure
         (not to exceed 60 days);

                  (v) any of the representations or warranties of the Company
         set forth in this Agreement or incorporated herein by reference or set
         forth in any statement or schedule delivered pursuant to this Agreement
         was untrue or incorrect in any material respect as of the date of
         execution of this Agreement or as of the Closing Date as if made on
         such date;

                  (vi) default by the Company or any of its Subsidiaries under
         any mortgage, indenture or instrument under which there may be issued
         or by which there may be secured or evidenced any Indebtedness of the
         Company or any of its Subsidiaries, whether such Indebtedness now
         exists, or is created after the date hereof, which default results in
         the acceleration of such Indebtedness prior to its express maturity and
         the principal amount of such Indebtedness, together with the principal
         amount of any other such Indebtedness the maturity of which has been so
         accelerated, aggregates $5,000,000 or more;

                  (vii) failure by the Company or any of its Subsidiaries to pay
         final judgments aggregating in excess of $1,000,000, which judgments
         are not paid, discharged or stayed for a period of 45 days;

                  (viii) the Company or any of its Subsidiaries pursuant to or
         within the meaning of Bankruptcy Law:

                           (a) commences a voluntary case,

                           (b) consents to the entry of an order for relief
                  against it in an involuntary case,





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                           (c) consents to the appointment of a custodian of it
                  or for all or substantially all of its property,

                           (d) makes a general assignment for the benefit of its
                  creditors, or

                           (e) generally is not paying its debts as they become
                  due; or

                  (ix) a court of competent jurisdiction enters an order or
         decree in an involuntary case or proceeding under any Bankruptcy Law
         that:

                           (a) is for relief against the Company or any of its
                  Subsidiaries;

                           (b) appoints a custodian of the Company or any of its
                  Subsidiaries or for all or substantially all of the property
                  of the Company or any of its Subsidiaries; or

                           (c) orders the liquidation of the Company or any of
                  its Subsidiaries;

         and the order or decree remains unstayed and in effect for 60
         consecutive days.

         3.6.     Acceleration.

                  (a) Declaration of Acceleration. If any Event of Default
         occurs and is continuing, the Holder may, upon notice to the Company,
         declare the Tranche A Loan to be due and payable immediately; and upon
         any such declaration all principal and interest on the Tranche A Loan
         shall become immediately due and payable; provided, however, in the
         case of an Event of Default arising from certain events of bankruptcy
         or insolvency described in clauses (viii) and (ix) of Section 3.5
         hereof, with respect to the Company or any Subsidiary, the Tranche A
         Loan shall ipso facto become due and payable without further action or
         notice on the part of the Holder.

                  (b) Rescission. At any time after a declaration of
         acceleration with respect to the Tranche A Loan, the Holder may, in its
         sole discretion, rescind and cancel such declaration and its
         consequences. No such rescission shall affect any subsequent Default or
         impair any right with respect thereto.

         3.7. Other Remedies. If an Event of Default occurs and is continuing,
the Holder may pursue any available remedy to collect the payment of principal
and interest (including interest at the Default Interest Rate) on the Tranche A
Loan or to enforce the performance of any provision of the Note or this
Agreement. A delay or omission by the Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.





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         3.8. Waiver Of Past Defaults. The Holder may waive any existing Default
or Event of Default and its consequences under this Agreement. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Agreement; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.

         3.9. Priorities. Any sums collected by the Holder hereunder and under
the Note shall be applied first to all costs and expenses of collection,
including reasonable attorneys' fees, then to accrued and unpaid interest
(including at the Default Interest Rate to the extent applicable) and then to
principal.


                                   ARTICLE IV
                       Conditions to Lender's Obligations

         4.1. Conditions. Lender's obligation to make the Tranche A Loan shall
be subject to the prior satisfaction of the following conditions, except to the
extent waived by Lender in writing:

                  (a) Company shall have paid to the Lender the loan fee with
         respect to the Tranche A Loan and the commitment fee with respect to
         the Tranche B Loan required pursuant to Section 2.4, above, and shall
         have reimbursed Lender for the fees and expenses for which Company is
         liable pursuant to the terms of Section 7.4, below, to the extent
         documented to Company as of the Closing.

                  (b) With respect to the Collateral Real Estate:

                           (i) Company shall have provided evidence reasonably
                  satisfactory to Lender that the purchase price paid by the
                  Company for the Collateral Real Estate aggregated not less
                  than Eleven Million Dollars ($11,000,000.00);

                           (ii) none of the parcels shall be subject to any Lien
                  unacceptable to Lender;

                           (iii) Lender shall have received the commitment for
                  the issuance by Chicago Title & Trust Company of an ALTA
                  lender's policy of title insurance (without standard
                  exceptions and with such endorsement as directed by Lender)
                  with respect to each parcel (collectively, the "Title
                  Commitments") and

                           (iv) Company shall have executed and caused to be
                  duly recorded mortgages in favor of Lender in forms reasonably
                  acceptable to Lender and its counsel encumbering each and have
                  shall provided evidence thereof to Lender.

                  (c) Holding shall have performed its obligations to issue and
         sell shares of its convertible preferred stock to Lender pursuant to
         the Subscription and Organizational Agreement.




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                  (d) Holding shall have guaranteed the Tranche A Loan in form
         and substance satisfactory to Lender and its counsel and shall have
         pledged to Lender as collateral security for the performance of its
         obligations pursuant to such guaranty all of the issued and outstanding
         shares of Purchaser in form and substance satisfactory to Lender and
         its counsel.

                  (e) Company shall have entered into an agreement with
         Meditrust Acquisition Company LLC, New Meditrust Company LLC and T and
         F Properties, LP to purchase certain assisted living and dementia care
         residences for an aggregate price of approximately $59.1 million in
         form and substance reasonably satisfactory to Lender and its counsel
         (the "Meditrust Agreement"), and the rights of "purchaser" under such
         Meditrust Agreement shall have been assigned to Purchaser.

                  (f) Lender shall have received an opinion of Rogers & Hardin,
         counsel to Company and Holding, in form and substance acceptable to the
         Lender and its counsel.

                  (g) Each of the representations and warranties of the Company
         set forth in this Agreement or incorporated herein by reference or set
         forth in any statement or schedule delivered pursuant to this Agreement
         are true and correct in all material respects as of the date of
         execution of this Agreement and as of the date of the Closing Date as
         if made on such date;

                  (h) The Company shall not be in default with respect to any of
         its covenants and agreements set forth in Article VI of this Agreement
         or set forth elsewhere in this Agreement;

                  (i) No Default or Event of Default shall have occurred and be
         continuing;

                  (j) Lender shall have received a copy of the Company's
         executed term sheet with GMAC Commercial Mortgage ("GMAC") relating to
         mortgage financing for the purchase of 19 assisted living residences,
         as described therein (such financing, the "Proposed GMAC Financing").

         4.2. Waiver; Termination. Lender may waive in writing any of the
conditions to its obligations set forth in Section 4.1 in its sole discretion.
If the conditions to Lender's obligations set forth in Section 4.1, shall not
have been satisfied or waived by Lender on or before December 30, 1999, Lender
may, in its sole discretion, terminate this Agreement without any liability on
the part of the Lender to any other Person.

<PAGE>   10

                                    ARTICLE V
                         Representations and Warranties

         5.1. Representations and Warranties of the Company. In order to induce
the Lender to enter into this Agreement, the Company represents and warrants to
the Lender, which representation and warranties shall survive the Closing and be
independent of any investigation or lack of investigation of Company made by or
on behalf of Lender, as follows:

                  (a) Organization and Standing; Issued and Outstanding Shares.
         Each of the Company, Holding and Purchaser is duly incorporated and
         validly existing under the laws of the State of Delaware, and has all
         requisite corporate power and authority to own or lease its properties
         and assets and to conduct its business as it has been and is proposed
         to be conducted. Each of the Company, Holding and Purchaser is
         qualified to do business and in good standing in each jurisdiction in
         which the failure to so qualify could have a material adverse effect
         upon its assets, properties, liabilities, financial condition, results
         of operations or business. Purchaser has no Subsidiaries and Holding
         has no Subsidiaries other than Purchaser. The Certificate of
         Incorporation of each of Holding and Purchaser is in the form
         previously provided to Lender and the issued and outstanding capital
         stock of each is as set forth in Schedule 5.1(a).

                  (b) Indebtedness and Contracts of Holding and Purchaser.
         Except for the Subscription and Organizational Agreement, the Meditrust
         Agreement, such Contracts or Indebtedness as are contemplated hereby or
         thereby as set forth on Schedule 5.1(b), neither Holding nor Purchaser
         has any Indebtedness or is a party to any Contracts (whether formal or
         informal, written or oral, firm or contingent).

                  (c) Capacity of the Company; Consents; Execution of
         Agreements. The Company has the requisite power, authority, and
         capacity to enter into this Agreement, the Subscription and
         Organizational Agreement and the agreements contemplated hereby and
         thereby and to perform the transactions and obligations to be performed
         by the Company hereunder and thereunder. Except as described on
         Schedule 5.1(c) hereto, no consent, authorization, approval, license,
         permit or order of, or filing with, any Person or Governmental
         Authority is required in connection with the execution and delivery of
         this Agreement, the Subscription and Organizational Agreement and
         agreements contemplated thereby, or the performance by the Company of
         the transactions and obligations to be performed by it hereunder and
         thereunder, except as contemplated by said agreements. The failure to
         obtain any of the consents described on Schedule 5.1(c) prior to the
         Closing Date will not have a material adverse effect upon the Company's
         assets, properties, liabilities, financial condition, results of
         operations or business. The execution and delivery of this Agreement,
         the Subscription and Organizational Agreement and agreements
         contemplated thereby by the Company, and the performance of the
         transactions and obligations contemplated hereby and thereby by the
         Company have been duly authorized by all requisite action of the
         Company and Holding, as applicable. This Agreement has been, and the
         Subscription and Organizational Agreement and agreements contemplated
         thereby will be, duly executed


<PAGE>   11


         and delivered by a duly authorized officer of the Company and
         constitutes, or when executed and delivered will constitute, a valid
         and legally binding agreement of the Company, enforceable in accordance
         with its terms, except as enforcement thereof may be limited by
         bankruptcy, insolvency, reorganization, moratorium or other similar
         laws, both state and federal, affecting the enforcement of creditors'
         rights or remedies in general from time to time in effect and the
         exercise by courts of equity powers or their application of principles
         of public policy.

                  (d) Status of Note. The Note to be issued hereunder, when
         issued by the Company to the Lender pursuant to the terms of this
         Agreement, will be duly authorized and validly issued.

                  (e) Conflicts; Defaults. The execution and delivery of this
         Agreement, the Subscription and Organizational Agreement and agreements
         contemplated thereby by the Company, the execution by Company of the
         Meditrust Agreement and the execution by Holding of a guaranty of the
         Tranche A Loan and a pledge of the shares of Purchaser to secure such
         guaranty, and the performance by the Company and Purchaser of the
         transactions and obligations contemplated hereby and thereby to be
         performed by each will not (i) violate, conflict with, or constitute a
         default under any of the terms or provisions of its certificate of
         incorporation or bylaws, or any provisions of, or result in the
         acceleration of any obligation under, any Contract, note, debt
         instrument, security agreement, or other instrument to which the
         Company, Purchaser or any other Subsidiary is a party or by which the
         Company, Purchaser or any other Subsidiary or any of their respective
         assets is bound; (ii) result in the creation or imposition of any Liens
         or claims upon the assets of the Company, Purchaser or any other
         Subsidiary or their issued and outstanding capital stock (except as
         contemplated by this Agreement); (iii) constitute a violation of any
         law, statute, judgment, decree, order, rule, or regulation of a
         Governmental Authority applicable to the Company, Purchaser or any
         other Subsidiary; or (iv) constitute an event which, after notice or
         lapse of time or both, would result in any of the foregoing. The
         Company is not presently in violation of any provision of its
         certificate of incorporation or bylaws. Neither the Company nor any
         Subsidiary is presently in default in any material respect under any of
         the terms or provisions of any of its material Contracts, notes, debt
         instruments, security agreements, or other instruments, or any order,
         judgment, or decree relating to it or its business or by which it or
         any of its assets is bound.

                  (f) Periodic Reports. The Company has timely filed with the
         SEC all periodic reports heretofore required to be filed by it pursuant
         to the 1934 Act and all such periodic reports (including the financial
         statements or information forming a part thereof) are complete and
         comply, in all material respects, with the requirements of the SEC
         applicable to such periodic reports and financial statements.

                  (g) Compliance with Laws. The Company is not in violation of,
         nor do any of its operations violate in any respect, any statute, law,
         or regulation of any Governmental Authority applicable to the Company,
         any of its assets, or the conduct of its business





<PAGE>   12

         ("Applicable Laws"), the violation of which reasonably could be
         anticipated to have a material adverse effect upon the Company's
         assets, properties, liabilities, financial condition, results of
         operations or business, and no material expenditures are or, based on
         present requirements, will be required of the Company in order for it
         to comply or remain in compliance with any Applicable Laws.

                  (h) Litigation. The Company is not a party to any material
         legal action, suit, claim, investigation or proceeding which is not
         adequately described in a periodic report heretofore filed by the
         Company with the SEC and, to the best of the Company's knowledge and
         belief after due inquiry, there exist no facts or circumstances which
         reasonably could be anticipated to result in any such action, suit,
         claim, investigation, or proceeding.

                  (i) Taxes. The Company has prepared and duly and timely filed
         with each appropriate Governmental Authority, all material federal,
         state, municipal, local and foreign tax returns, information returns
         and other reports required to be filed on or before the date of this
         Agreement and has paid all material taxes required to be paid by the
         Company prior to the date of this Agreement in respect of the periods
         covered by such returns and reports, except such taxes as are being
         contested in good faith.

                  (j) Environmental Compliance. The Company and its Subsidiaries
         are in compliance with all applicable federal, state and local laws and
         requirements (including permit requirements) relating to the protection
         of health or the environment in connection with the ownership,
         operation and condition of its properties and business, except where
         failure to comply would not have material adverse effect.

                  (k) Securities Laws. No consent, authorization, approval,
         permit, or order of or filing with any Governmental Authority is
         required in order for the Company to execute and deliver this Agreement
         or to offer, issue, sell, or deliver the Note. Based in part on the
         representations of the Lender and under the circumstances contemplated
         hereby and under current laws and regulations, the offer, issuance,
         sale and delivery of the Note to the Lender is exempt from the
         prospectus delivery and registration requirements of the 1933 Act.

                  (l) Hedging Obligations. Company and its Subsidiaries do not
         have any outstanding Hedging Obligations except to the extent entered
         into pursuant to and in compliance with any credit agreements to which
         they may be a party.

                  (m) Disclosure. The Company has fully responded to all written
         requests for information and has accurately answered, to the best of
         the Company's knowledge and belief after due inquiry, all written
         questions from the Lender concerning the assets, properties,
         liabilities, financial condition, results of operations, business and
         prospects of the Company, and has not knowingly withheld any facts
         relating thereto which it reasonably believed to be material with
         respect to the assets, properties, liabilities, financial condition,
         results of operations, business or prospects of the Company. No





<PAGE>   13


         information in this Agreement, or in any Schedule or Exhibit attached
         to this Agreement or delivered to Lender in connection herewith,
         contains any untrue statement of a material fact or when considered
         together with all such information delivered to the Lender omits to
         state any material fact necessary in order to make the statements made
         in the light of the circumstances under which they were made, when
         taken as a whole, not misleading. The disclosures made in writing by
         the Company in connection with this Agreement do not contain any untrue
         statement of a material fact nor omit to state a material fact
         necessary to make the statements made therein not misleading. There is
         no fact or circumstance relating to the Company which materially and
         adversely affects or in the future may, in the reasonable business
         judgment of the Company, be expected materially and adversely to affect
         the same which has not been set forth in this Agreement or the
         Schedules hereto.

                 (n) Changes in Circumstances. Since September 30, 1999, the
         Company has not suffered any material adverse change in its assets,
         properties, liabilities, financial condition, results of operations,
         business or prospects except for (i) the previously announced charge to
         be incurred in the fourth quarter of 1999 (the amount of which charge
         has not yet been determined or disclosed) and (ii) the effect on future
         periods of the Company's announced reduction in future new development
         activities.

                 (o) Contracts. Except for this Agreement, the Subscription and
         Organizational Agreement and the agreements contemplated hereby and
         thereby, the Company has filed all material contracts required to be
         filed by Item 601(b)(10) of Regulation S-K under the 1933 Act and the
         1934 Act.

         5.2     Representations and Warranties of the Lender. The Lender
represents and warrants to the Company that:

                 (a) Investment Intent. The Note is being acquired for its own
         account and not with the view to, or for resale in connection with, any
         distribution or public offering thereof within the meaning of the 1933
         Act. The Lender understands that the Note has not been registered under
         the 1933 Act by reason of its issuance in a transaction exempt from the
         registration and prospectus delivery requirements of the 1933 Act
         pursuant to Section 4(2) thereof. It further understands that the Note
         will bear the following legend and agrees that it will hold the Note
         subject thereto:

                  THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES
                  ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
                  ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED,
                  TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME
                  IS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
                  SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
                  IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
                  EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION
                  REASONABLY


<PAGE>   14


                  SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER
                  THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).

                  (b) Capacity of the Lender; Execution of Agreement. Lender has
         all requisite power, authority, and capacity to enter into this
         Agreement, and to perform the transactions and obligations to be
         performed by it hereunder. This Agreement has been duly authorized,
         executed and delivered by it and constitutes its valid and legally
         binding obligation, enforceable in accordance with its terms, except as
         enforcement thereof may be limited by bankruptcy, insolvency,
         reorganization, moratorium or other similar laws, both state and
         federal, affecting the enforcement of creditors' rights or remedies in
         general from time to time in effect and the exercise by courts of
         equity powers or their application of principles of public policy.

                  (c) Accredited Investor. The Lender and each member of Lender
         is an "accredited investor" as defined in Rule 501 (a) of Regulation D
         promulgated under the 1933 Act.


                                   ARTICLE VI
                            Covenants and Agreements

         6.1.      Affirmative Covenants. So long as any Indebtedness remains
outstanding under this Agreement and the Note, the Company covenants and agrees
that it will and will cause each Subsidiary to:

                  (a) Certain Information and SEC Reports. Furnish to Lender in
         form and substance satisfactory to Lender:

                           (i) within five (5) days after the Company learns of
                  the commencement or overtly threatened commencement of any
                  material claim or suit, legal or equitable, or of any
                  administrative, arbitration, or other similar proceeding
                  against the Company or any of its Subsidiaries, or any of
                  their respective businesses, assets, or properties which claim
                  or proceeding, if determined adversely to the Company or such
                  Subsidiary, would be likely to have a material adverse effect
                  on the Company and its Subsidiaries, taken as a whole, written
                  notice of the nature and extent of such suit or proceeding;

                           (ii) within five (5) days after the Company learns of
                  any circumstance or event which reasonably can be expected to
                  have a material adverse effect on the assets, properties,
                  liabilities, financial condition, results of operations,
                  business, or prospects of the Company, written notice of the
                  nature and extent of such circumstance or event;





<PAGE>   15

                           (iii) simultaneous with the transmission thereof to
                  Company's shareholders, copies of (or notice from an EDGAR
                  watch service of) all financial statements, proxy statements,
                  reports and any other general written communications which the
                  Company sends to its shareholders and copies (or notice from
                  an EDGAR watch service of) of all registration statements and
                  all regular, special or periodic reports which it files with
                  the SEC or with any securities exchange on which any of its
                  securities are then listed, and copies of all press releases
                  and other statements made available generally by the Company
                  to the public concerning material developments in the
                  Company's businesses; and

                           (vii) within ten (10) days after the Holder makes a
                  reasonable request therefor, such other data relating to the
                  business, affairs and financial condition of the Company or
                  any of its Subsidiaries.

                  (b) Taxes. Pay and discharge all taxes and other governmental
         charges before the same shall become overdue, unless and to the extent
         only that such payment is being contested in good faith.

                  (c) Insurance. Maintain insurance coverage on its physical
         assets and against other business risks in such amounts and of such
         types as are customarily carried by companies similar in size and
         nature, and in the event of acquisition of additional property, real or
         personal, or of incurrence of additional risks of any nature, increase
         such insurance coverage in such manner and to such extent as prudent
         business judgment and present practice would dictate.

                  (d) Examination of Books. Permit the Lender, through its
         authorized attorneys, accountants and representatives, to examine the
         Company's books, accounts, records, ledgers and assets of every kind
         and description at all reasonable times upon oral or written request of
         the Lender, at the Company's cost and expense (provided that so long as
         the Company shall not be in default, the Company shall be obligated to
         pay for no more than one (1) such examination per year).

                  (e) Notification of Events of Default, Acceleration or
         Material Adverse Effect. Promptly notify the Lender of any condition or
         event which constitutes, or with the passage of time and/or the giving
         of notice would constitute, an Event of Default under this Agreement or
         of any acceleration of the maturity of any Indebtedness aggregating $5
         million or more of the Company, and promptly inform Lender of the
         existence or occurrence of any condition or event (other than
         conditions having an effect on the economy in general) which could
         reasonably be anticipated to have a material adverse effect upon the
         Company's financial condition.

                  (f) Maintenance of Licenses. Maintain in good standing all
         licenses required by any Governmental Authority that may be necessary
         or required for the Company and its Subsidiaries to carry on their
         respective businesses, where the failure to maintain such





<PAGE>   16

         licenses would have a material adverse effect on the Company and its
         Subsidiaries taken as a whole.

                  (g) ERISA Compliance. Comply with all material requirements
         imposed by ERISA as presently in effect or hereafter promulgated,
         including but not limited to, the minimum funding requirements of any
         defined contribution employee benefit plan ("Pension Plan").

                  (h) Compliance with Law. Comply in all material respects with
         all applicable laws, rules, regulations and orders of any Governmental
         Authority, such compliance to include, without limitation, paying
         before the same become delinquent all taxes, assessments, and
         governmental charges imposed upon it or upon its property, including
         without limitation the Collateral Real Estate, except to the extent
         that compliance with any of the foregoing is then being contested in
         good faith by appropriate legal proceedings and with respect to which
         adequate financial reserves have been established on the books and
         records of the Company and except where the failure to comply would not
         have a material adverse effect on the Company and its Subsidiaries,
         taken as a whole.

                 (i) Right of Co-Investment. Prior to issuing any equity
         securities (otherwise than upon the exercise of currently outstanding
         stock options or upon the conversion of currently outstanding
         convertible debentures) for aggregate proceeds of in excess of $25
         million at any time prior to December 31, 2000 (an "Alterra Equity
         Transaction"), the Company shall use reasonable efforts to afford
         Lender the opportunity to co-invest in the Alterra Equity Transaction
         by converting the outstanding Indebtedness under this Agreement and the
         Note into an equity investment in the Company on the terms of the
         Alterra Equity Investment; provided, however, that (i) such
         co-investment right must be exercised by Lender at the time of
         execution of the definitive purchase agreement for the Alterra Equity
         Transaction, and (ii) as a minority participant in such Alterra Equity
         Transaction, Lender acknowledges that its control and voting rights may
         be substantially limited (in the manner required by the principal
         investor in such Alterra Equity Investment).

                 (j) Title Insurance. At the request of Lender, the Company
         shall purchase mortgagee title insurance for the Lender pursuant to the
         Title Commitments.

         6.2. Negative Covenants. The Company covenants and agrees that so long
as any Indebtedness remains outstanding under this Agreement and the Note,
without the prior written consent of Lender, Company will not:

                 (a) No Mergers, Etc. Enter into any merger or consolidation or
         sell, lease, transfer or dispose of all, substantially all, or any
         material part of its assets, except in the ordinary course of its
         business.

                 (b) Limitations on Indebtedness. Become or remain obligated, or
         suffer or permit any Subsidiary to become or remain obligated, for any
         Indebtedness, except:



<PAGE>   17

                           (i)  Indebtedness arising pursuant to this Agreement;
                  and

                           (ii) other Indebtedness, whether now outstanding or
                  hereafter incurred, provided that the sum of all of the
                  Indebtedness of the Company and the Subsidiaries at any time
                  outstanding on a consolidated basis (excluding, however, any
                  Indebtedness arising as a result of acquisitions or business
                  combinations effected after the date of this Agreement) does
                  not exceed $1,850,000,000.00.

                  (c) Limitations on Mortgages. Create or permit to exist any
         Lien on the Collateral Real Estate, other than Permitted Liens and
         mortgages in favor of Lender.


                                   ARTICLE VII
                                  Miscellaneous

         7.1. Waiver and Amendments. No failure or delay on the part of Lender
in the exercise of any power or right, and no course of dealing between Company
and Lender, shall operate as a waiver of such power or right, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. Remedies provided
for herein are cumulative and not exclusive of any remedies which may be
available to the Lender at law or in equity. No notice to or demand on the
Company required hereunder or under the Note shall in any event entitle Company
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of Lender to any other or further action and
any circumstances without notice or demand. No amendment, modification or waiver
of, or consent with respect to, any provision of this Agreement or the Note
shall in any event be effective unless the same shall be in writing and signed
and delivered by Lender. Any waiver of any provision of this Agreement or the
Note, and any consent to any departure by Company from the terms of any
provision of this Agreement or the Note, shall be effective only in the specific
instance and for the specific purpose for which given.

         7.2. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and, if mailed by prepaid
registered or certified mail, return receipt requested, shall be deemed to have
been received on the earlier of the date shown on the receipt or three (3)
Business Days after the post-mark date thereof. Notices may be given by
recognized overnight courier services and shall be deemed to have been received
as of the regularly scheduled time for delivery established by such courier
service. In addition, notices hereunder may be delivered by hand in which event
the notice shall be deemed effective when delivered or by telecopy in which case
it shall be deemed effective upon confirmation of transmission. All notices and
other communications under this Agreement shall be given to the parties hereto
at the following addresses:




<PAGE>   18

         If to Company:

                  Alterra Healthcare Corporation
                  450 N. Sunnyslope Rd., Suite 300
                  Brookfield, WI 53005
                  Attention: President
                  Fax: (414) 789-6182

         With a copy to:

                  Rogers & Hardin
                  2700 International Tower
                  229 Peachtree Street, N.E.
                  Atlanta, Georgia, 30303
                  Attn: Alan Leet, Esq.
                  Fax: (404) 525-2224

         If to Lender:

                  RDVEPCO, L.L.C.
                  c/o RDV Corporation
                  126 Ottawa Avenue, N.W.
                  500 Grand Bank Building
                  Grand Rapids, Michigan 49503
                  Attention: President
                  Fax: (616) 454-4654

         With a copy to:

                  Mr. Robert Haveman
                  190 River Avenue
                  Suite 300
                  Holland, Michigan 49423
                  Fax: (616) 494-8110

                  and

                  Hecht & Lentz
                  333 Bridge, N.W., Suite 330
                  Grand Rapids, MI 49504
                  Attention: David M. Hecht, Esq.
                  Fax: (616) 776-7203

Any party hereto may change the address to which notices shall be directed under
this Section by giving written notice of such change to the other parties.





<PAGE>   19

         7.3. Restriction on Transfer. The Lender acknowledges that the Note has
not been registered under the Securities Act of 1933, as amended, (the "1933
Act") or the securities laws of any state. Accordingly, the Note may not be sold
or otherwise disposed of or transferred, unless such sale, disposition or
transfer is registered under the 1933 Act and applicable state securities laws
or unless the Company has received an opinion of counsel reasonably acceptable
to the Company that such sale, disposition or transfer is exempt from such
registration. The Note shall bear a restrictive legend to the foregoing effect.

         7.4. Expenses. Company shall reimburse Lender for all of its reasonable
out-of-pocket expenses incurred in the negotiation, preparation, execution and
delivery of this Agreement, the Note, the Share Purchase Agreement and, if not
consummated the Tranche B loan documentation and related matters, and all
related due diligence, including, without limitation, the expenses of legal
counsel and accountants. Company shall also reimburse Holder for all of its
out-of-pocket expenses incurred in the administration, waiver, modification and
enforcement of any of its rights under this Agreement and the Note, including,
without limitation, the reasonable expenses of legal counsel and accountants. In
addition, Company shall be responsible for any documentary taxes incurred in
connection with the transactions contemplated by this Agreement and the Note.

         7.5. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction, shall as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

         7.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan without giving effect to
any choice or conflict of law provision or rule (whether of the State of
Michigan or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Michigan.

         7.7. Successors and Assigns. This Agreement shall be binding upon
Company and Lender and their respective successors and assigns, and shall inure
to the benefit of Company and Lender and their successors and assigns.

         7.8. Headings. Headings used in this Agreement are for convenience only
and shall not be used in connection with the interpretation of any provision
hereof.

         7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute one and the same instrument.

                            * * * * * * * * * * * * *

<PAGE>   20



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.

                         THE COMPANY:

                         ALTERRA HEALTHCARE CORPORATION


                         By:  /s/ Mark W. Ohlendorf
                             -----------------------------------
                         Name: Mark W. Ohlendorf
                         Title: Senior Vice President

                         LENDER:



                         RDVEPCO, L.L.C.

                         By:  EDP Assisted Living Properties, L.L.C.,
                                a member

                              By:  Elsa D. Prince Living Trust u/a dated
                                     January 27, 1976

                                     By:   /s/ Elsa D. Prince
                                        -----------------------------------
                                          Elsa D. Prince, Trustee