<PAGE>   1
                                                                    EXHIBIT 10.7



                     SECOND AMENDMENT TO GUARANTY AGREEMENT
                                   AND WAIVER


         THIS SECOND AMENDMENT TO GUARANTY AGREEMENT AND WAIVER (hereinafter,
the "Agreement") is entered into as of May 31, 2000 among Alterra Healthcare
Corporation, a Delaware corporation ("Alterra"), Bank of America, N.A., as
Administrative Agent (in such capacity, the "Administrative Agent") and the
Lenders. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings given to them in the Credit Agreement.

                                    RECITALS

         WHEREAS, the Borrowers party thereto, HCR/Alterra Development, LLC, a
Delaware limited liability company (the "Parent"), the Administrative Agent, The
Chase Manhattan Bank, as syndication agent, Deutsche Bank AG New York and/or
Cayman Islands Branches and Bank United, F.S.B., as co-agents and the Lenders
are parties to that certain Credit Agreement dated as of September 30, 1999 (as
amended or modified from time to time, the "Credit Agreement");

         WHEREAS, Alterra entered into that certain Guaranty Agreement dated as
of September 30, 1999 in favor of the Administrative Agent, on behalf of the
Lenders (as amended or modified from time to time, the "Alterra Guaranty
Agreement");

         WHEREAS, Alterra entered into that certain Purchase Agreement (the
"Purchase Agreement") dated as of April 26, 2000 with RDVEPCO, L.L.C., a
Michigan limited liability company, Group One Investors, L.L.C., a Michigan
limited liability company and Holiday Retirement 2000, LLC, a Washington limited
liability company;

         WHEREAS, the Credit Parties have requested that the Lenders amend
certain terms of the Alterra Guaranty Agreement as set forth herein;

         WHEREAS, the Lenders are willing to comply with the foregoing requests,
based upon and subject to the terms and conditions specified in this Agreement.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1. Waiver. Subject to the other terms and conditions of this Agreement,
the Lenders hereby waive compliance with Section 5.1 of the Alterra Guaranty
Agreement to the extent, and only to the extent, necessary to allow Alterra to
issue the Series A Stock (as defined in the Purchase Agreement) and the
Debentures (as defined in the Purchase Agreement) in accordance with the terms
of the Purchase Agreement. Except for the waiver contained herein, this
Agreement does not modify or affect the obligations of Alterra to comply fully
with all terms, conditions and covenants contained in the Alterra Guaranty
Agreement. The waiver contained




<PAGE>   2



herein is a one time waiver and is limited to the waiver specifically described
herein, and nothing contained in this Agreement shall be deemed to constitute a
waiver of any other rights or remedies the Administrative Agent or any Lender
may have under the Alterra Guaranty Agreement or any other Credit Document or
under applicable law.

         2.   Amendments to the Alterra Guaranty Agreement.


              (a)    New Definitions.

                     (i)   A definition of "Debentures" is hereby added to
              Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                           "Debentures" shall have the meaning assigned to such
                     term in the Purchase Agreement.

                     (ii)  A definition of "Debt Service Coverage Ratio" is
              hereby added to Section 1.1 of the Alterra Guaranty Agreement and
              shall read as follows:

                           "Debt Service Coverage Ratio" means, (i) as of the
                     end of the fiscal quarter ending March 31, 2000, for the
                     three month period ending on such date, (ii) as of the end
                     of the fiscal quarter ending June 30, 2000, for the six
                     month period ending on such date, (iii) as of the end of
                     the fiscal quarter ending September 30, 2000, for the nine
                     month period ending on such date and (iv) as of the end of
                     each fiscal quarter of Alterra beginning with the fiscal
                     quarter ending December 31, 2000, for the four fiscal
                     quarter period ending on such date, the ratio of (a) the
                     sum of (I) EBITDA for such period plus (II) Rental Expense
                     for such period, as determined in accordance with GAAP to
                     (b) the sum of (I) cash Interest for such period plus (II)
                     Rental Expense for such period (III) minus interest income
                     for such period, as determined in accordance with GAAP.

                     (iii) A definition of "DeVos Control Group" is hereby added
              to Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                           "DeVos Control Group" means (i) RDV Corporation, a
                     Michigan corporation, Jerry Tubergen, Richard M. DeVos,
                     each of the spouses of Jerry Tubergen and Richard M. DeVos
                     and any of the lineal descendants or spouses of the lineal
                     descendants of any of Jerry Tubergen and Richard M. DeVos
                     and (ii) any trusts established for the benefit of any of
                     the foregoing and any trusts or foundations or other
                     entities controlled by any of the foregoing.

                     (iv)  A definition of "EBITDA" is hereby added to Section
              1.1 of the Alterra Guaranty Agreement and shall read as follows:

                           "EBITDA" means, for any period, with respect to the
                     Consolidated Parties on a consolidated basis, the sum of
                     (i) Net Income for such period plus (ii) the following to
                     the extent deducted in computing such Net

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<PAGE>   3


                     Income: (a) income tax expense, (b) interest expense, (c)
                     depreciation and amortization expense, (d) non-recurring
                     losses related to the sale of assets in an amount not to
                     exceed $25 million and (e) non-recurring losses in
                     connection with any charges related to the reduction or
                     elimination of overhead costs or restructuring of Alterra's
                     stock option program in an amount not to exceed $10
                     million, all as determined in accordance with GAAP minus
                     (iii) the following to the extent added in computing such
                     Net Income: (a) income tax benefit and (b) interest income
                     and (c) extraordinary or non-recurring gains, all as
                     determined in accordance with GAAP.

                     (v)   A definition of "Equity Issuance" is hereby added to
              Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                           "Equity Issuance" means any issuance by a
                     Consolidated Party to any Person of (a) shares of its
                     Capital Stock or other equity interests, (b) any shares of
                     its Capital Stock or other equity interests pursuant to the
                     exercise of options (other than Capital Stock issued to
                     employees and directors pursuant to employees or directors
                     stock option plans and Capital Stock issued to consultants)
                     or warrants, (c) any shares of its Capital Stock or other
                     equity interests pursuant to the conversion of any debt
                     securities to equity or (d) any convertible debt
                     securities. The term "Equity Issuance" shall include (i)
                     the net cash proceeds derived from any such issuance, (ii)
                     the amount of any Indebtedness cancelled, retired or
                     exchanged in connection with such issuance (exclusive of
                     the amount of any debt securities converted to equity (but
                     only to the extent the amount of such equity is included in
                     the calculation of "Equity Issuance")) and/or (iii) with
                     respect to the issuance of convertible debt securities, the
                     amount of the credit given to any purchaser of such
                     securities against the purchase price of such securities.

                     (vi)  A definition of "Facility" is hereby added to Section
              1.1 of the Alterra Guaranty Agreement and shall read as follows:

                           "Facility" means any assisted living facility,
                     Alzheimer's or dementia care facility or independent living
                     facility owned by Alterra.

                     (vii) A definition of "Funded Indebtedness" is hereby added
              to Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                           "Funded Indebtedness" means, with respect to any
                     Person, without duplication, (a) all obligations of such
                     Person for borrowed money (other than convertible
                     securities of the Consolidated Parties which (i) are
                     subordinated to the obligations of Alterra under this
                     Guaranty and (ii) do not have a redemption feature of any
                     kind prior to the full repayment of the Loans), (b) all
                     obligations of such Person evidenced by bonds, debentures,
                     notes or similar instruments, or upon which interest
                     payments are customarily made (other than convertible
                     securities of the




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<PAGE>   4




                     Consolidated Parties which (i) are subordinated to the
                     obligations of Alterra under this Guaranty and (ii) do not
                     have a redemption feature of any kind prior to the full
                     repayment of the Loans), (c) all obligations of such Person
                     under conditional sale or other title retention agreements
                     relating to Property purchased by such Person (other than
                     customary reservations or retentions of title under
                     agreements with suppliers entered into in the ordinary
                     course of business), (d) all obligations of such Person
                     issued or assumed as the deferred purchase price of
                     Property or services purchased by such Person (other than
                     trade debt incurred in the ordinary course of business and
                     due within twelve months of the incurrence thereof) which
                     would appear as liabilities on a balance sheet of such
                     Person, (e) the principal portion of all obligations of
                     such Person under Capital Leases, (f) the maximum amount of
                     all standby letters of credit issued or bankers'
                     acceptances facilities created for the account of such
                     Person and, without duplication, all drafts drawn
                     thereunder (to the extent unreimbursed), (g) the principal
                     portion of all obligations of such Person under Synthetic
                     Leases, (h) all Indebtedness of another Person of the type
                     referred to in clause (a)-(g) above secured by (or for
                     which the holder of such Funded Indebtedness has an
                     existing right, contingent or otherwise, to be secured by)
                     any Lien on, or payable out of the proceeds of production
                     from, Property owned or acquired by such Person, whether or
                     not the obligations secured thereby have been assumed, (i)
                     all Guaranty Obligations of such Person with respect to
                     Indebtedness of the type referred to in clauses (a)-(g)
                     above of another Person and (j) Indebtedness of the type
                     referred to in clauses (a)-(g) above of any partnership or
                     unincorporated joint venture in which such Person is
                     legally obligated or has a reasonable expectation of being
                     liable with respect thereto.

                     (viii) A definition of "Leverage Ratio" is hereby added to
              Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                            "Leverage Ratio" means, as of the end of any fiscal
                     quarter of Alterra, for the four fiscal quarter period
                     ending on such date with respect to the Consolidated
                     Parties on a consolidated basis, the ratio of (a) Funded
                     Indebtedness of the Consolidated Parties on a consolidated
                     basis on the last day of such period to (b) the sum of (i)
                     Net Worth as of such date plus (ii) Funded Indebtedness of
                     the Consolidated Parties on a consolidated basis on such
                     date plus (iii) the amount of convertible securities of the
                     Consolidated Parties outstanding on such date which (A) are
                     subordinated to the obligations of Alterra under this
                     Guaranty and (B) do not have a redemption feature of any
                     kind prior to the full repayment of the Loans plus (iv) the
                     shareholder's equity of those joint ventures for which
                     Alterra has provided guarantees of the Indebtedness of such
                     joint ventures (but only to the extent such Indebtedness is
                     included in the numerator for purposes of the calculation
                     of the Leverage Ratio).

                     (ix) A definition of "Net Income" is hereby added to
              Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:


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<PAGE>   5


                            "Net Income" means, for any period, with respect to
                     the Consolidated Parties on a consolidated basis, net
                     income (excluding extraordinary items) after interest
                     expense, income taxes and depreciation and amortization,
                     all as determined in accordance with GAAP (net of sublease
                     income with respect to such Operating Leases).

                     (x)    A definition of "Net Worth" is hereby added to
              Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                     "Net Worth" means, as of any date with respect to the
                     Consolidated Parties on a consolidated basis, shareholder's
                     equity or net worth, as determined in accordance with GAAP.

                     (xi)   A definition of "Non-Stabilized Project" is hereby
              added to Section 1.1 of the Alterra Guaranty Agreement and shall
              read as follows:

                            "Non-Stabilized Project" means any Facility which
                     (a) has been in operation for at least five full fiscal
                     quarters following the date of the first resident occupancy
                     of such Facility and (b) as of the most recent fiscal
                     quarter end of Alterra does not have a Project Coverage
                     Ratio of at least 1.5 to 1.0.

                     (xii)  A definition of "Prince Control Group" is hereby
              added to Section 1.1 of the Alterra Guaranty Agreement and shall
              read as follows:

                            "Prince Control Group" means (i) Elsa D. Prince,
                     Robert D. Haveman, each of the spouses of Elsa D. Prince
                     and Robert D. Haveman and any of the lineal descendants or
                     spouses of the lineal descendants of any of Elsa D. Prince
                     and Robert D. Haveman and (ii) any trusts established for
                     the benefit of any of the foregoing and any trusts or
                     foundations or other entities controlled by any of the
                     foregoing.

                     (xiii) A definition of "Project Coverage Ratio" is hereby
              added to the Alterra Guaranty Agreement and shall read as follows:

                           "Project Coverage Ratio" means, as of the last day of
                     any fiscal quarter, with respect to any Facility, the ratio
                     of (a) the Project Operating Income for such Facility to
                     (b) the Project Debt Service for such Facility.
                     Notwithstanding the foregoing, (i) for purposes of
                     calculating the Project Coverage Ratio of a Facility that
                     has been in operation for five full fiscal quarters
                     following the date of the first resident occupancy of the
                     Facility, the Project Operating Income for the four fiscal
                     quarter period for which Project Operating Income is being
                     calculated shall be deemed to be the result obtained by
                     multiplying the actual Project Operating Income of such
                     Facility for the three month period ending as of the last
                     day of the applicable fiscal quarter end by 4, (ii) for
                     purposes of calculating the Project Coverage Ratio of such
                     Facility that has been in operation for six



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<PAGE>   6



                     full fiscal quarters following the date of the first
                     resident occupancy of the Facility, the Project Operating
                     Income for the four fiscal quarter period for which Project
                     Operating Income is being calculated shall be deemed to be
                     the result obtained by multiplying the actual Project
                     Operating Income of such Facility for the six month period
                     ending as of the last day of the applicable fiscal quarter
                     end by 2 and (iii) for purposes of calculating the Project
                     Coverage Ratio of a Facility that has been in operation for
                     seven full fiscal quarters following the date of the first
                     resident occupancy of the Facility, the Project Operating
                     Income for the four fiscal quarter period for which Project
                     Operating Income is being calculated shall be deemed to be
                     the result obtained by multiplying the actual Project
                     Operating Income of such Facility for the nine month period
                     ending as of the last day of the applicable fiscal quarter
                     end by 1 1/3.

                     (xiv) A definition of "Project Debt Service" is hereby
              added to Section 1.1 of the Alterra Guaranty Agreement and shall
              read as follows:

                           "Project Debt Service" means, as of any date for the
                     four fiscal quarter period ending on such date, with
                     respect to any Facility, the principal and interest
                     payments which would be due and payable during such four
                     fiscal quarter period (assuming (A) a mortgage style
                     amortization schedule for a loan equal to 75% of such
                     Facility's value (as determined pursuant to an independent
                     appraisal from an appraiser) with a term of twenty-five
                     years and (B) an interest rate equal to the greater of (a)
                     7.5% per annum and (b) the then applicable Treasury Rate
                     plus 2.00% per annum).

                     (xv)  A definition of "Project Operating Income" is hereby
              added to Section 1.1 of the Alterra Guaranty Agreement and shall
              read as follows:

                           "Project Operating Income" means, as of any date for
                     the four fiscal quarter period ending on such date with
                     respect to any Facility, the amount equal to (a) the total
                     operating revenue with respect to the operation of such
                     Facility for such period less (b) total operating expenses
                     with respect to the operation of such Facility for such
                     period (excluding any (i) management fees or (ii) interest
                     paid during such period with respect to the Indebtedness
                     used to construct and/or develop such Facility) plus (c) an
                     amount which, in the determination of total operating
                     expenses for such period has been deducted for (i) total
                     taxes with respect to such Facility for such period and
                     (ii) depreciation and amortization with respect to such
                     Facility for such period less (d) a replacement reserve
                     equal to $250 per year per bed in such Facility less (e) an
                     amount equal to 5% of total operating revenue with respect
                     to the operation of such Facility for such period.

                     (xvi) A definition of "Purchase Agreement" is hereby added
              to Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:



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<PAGE>   7


                            "Purchase Agreement" means that certain Purchase
                     Agreement dated as of April 26, 2000 by and among Alterra,
                     as seller, and RDVEPCO, L.L.C., a Michigan limited
                     liability company, Group One Investors, L.L.C., a Michigan
                     limited liability company and Holiday Retirement 2000, LLC,
                     as purchasers, as amended by that certain First Amendment
                     to Purchase Agreement dated as of May   , 2000.

                     (xvii) A definition of "Rental Expense" is hereby added to
              Section 1.1 of the Alterra Guaranty Agreement and shall read as
              follows:

                            "Rental Expense" means, for any period, with respect
                     to the Consolidated Parties on a consolidated basis, rental
                     expense under Operating Leases, as determined in accordance
                     with GAAP (net of sublease income with respect to such
                     Operating Leases).

              (b)    Amended Definitions.

                     (i)   The definition of "Change of Control" set forth in
              Section 1.1 of the Alterra Guaranty Agreement is hereby amended
              and restated in its entirety to read as follows:

                           "Change of Control" means, except as a result of a
                     transaction permitted under Section 5.3, any Person or two
                     or more Persons acting in concert (other than (i) RDVEPCO,
                     L.L.C., a Michigan limited liability company, (ii) Group
                     One Investors, L.L.C., a Michigan limited liability
                     company, (iii)the DeVos Control Group and (iv) the Prince
                     Control Group) shall have acquired beneficial ownership,
                     directly or indirectly, of, or shall have acquired by
                     contract or otherwise, or shall have entered into a
                     contract or arrangement that, upon consummation, will
                     result in its or their acquisition of, control over, Voting
                     Stock of Alterra (or other securities convertible into such
                     Voting Stock) representing 35% or more of the combined
                     voting power of all Voting Stock of Alterra.

                     (ii)  The definition of "EBITDAR" set forth in Section 1.1
              of the Alterra Guaranty Agreement is hereby deleted in its
              entirety from the Alterra Guaranty Agreement.

                     (iii) The definition of "Interest" set forth in Section 1.1
              of the Alterra Guaranty Agreement is hereby amended and restated
              in its entirety to read as follows:

                           "Interest" means, for any period, with respect to the
                     Consolidated Parties on a consolidated basis, interest
                     expense (including the amortization of debt discount and
                     premium and the interest component under Capital Leases and
                     the implied interest component under synthetic leases), as
                     determined in accordance with GAAP.



                                       7

<PAGE>   8


                     (iiiv) The definition of "Tangible Net Worth" set forth in
              Section 1.1 of the Alterra Guaranty Agreement is hereby deleted in
              its entirety from the Alterra Guaranty Agreement.

              (c)    Information Covenants. A new Section 4.1(j) is hereby added
         to the Alterra Guaranty Agreement and shall read as follows:

                     (j)    Convertible Securities. Alterra shall notify the
              Administrative Agent promptly (and in any event within 5 Business
              Days) of any repurchase of convertible securities permitted by
              Section 5.5(i), specifying (a) the amount of such repurchase and
              (b) the manner in which Alterra made such repayment.

              (d)    Debt Service Coverage Ratio. Section 4.9(a) of the Alterra
         Guaranty Agreement is hereby amended and restated in its entirety to
         read as follows:

                     (a)  Debt Service Coverage Ratio. The Debt Service Coverage
              Ratio, as of the last day of each fiscal quarter of Alterra, shall
              be greater than or equal to:
<TABLE>
<CAPTION>

                     -----------------------------------------------------------------------
                     Fiscal Year   1st Quarter   2nd Quarter    3rd Quarter   4th Quarter
                     -----------------------------------------------------------------------
                     <S>           <C>           <C>           <C>            <C>
                     2000          0.75 to 1.0   0.75 to 1.0    0.75 to 1.0   0.75 to 1.0
                     -----------------------------------------------------------------------
                     2001          0.75 to 1.0   0.82 to 1.0    0.91 to 1.0    1.0 to 1.0
                     -----------------------------------------------------------------------
                     2002          1.06 to 1.0   1.13 to 1.0    1.19 to 1.0
                     -----------------------------------------------------------------------
</TABLE>


              (e)    Leverage Ratio. Section 4.9(b) of the Alterra Guaranty
         Agreement is hereby amended and restated in its entirety to read as
         follows:

                     (b)   Leverage Ratio. The Leverage Ratio, as of the last
              day of each fiscal quarter of Alterra, shall be less than or equal
              to 0.75 to 1.0.

              (f)    Invested Equity. A new Section 4.9(c) is hereby added to
         the Alterra Guaranty Agreement and shall read as follows:

                     (c)   Invested Equity. At all times the sum of (i) Net
              Worth plus (ii) the outstanding amount of the Debentures (as
              defined in the Purchase Agreement) shall be greater than or equal
              to $110,000,000, increased on a cumulative basis as of the end of
              each fiscal quarter of Alterra commencing with the fiscal quarter
              ending March 31, 2000 by (A) an amount equal to 50% of Net Income
              (to the extent positive) for the fiscal quarter then ended plus
              (B) an amount equal to 75% of (I) the sum of the proceeds from any
              Equity Issuance subsequent to December 31, 1999 and (II) the
              aggregate amount of payments of interests in kind with respect to
              Indebtedness of the Consolidated Parties subsequent to December
              31, 1999.

              (g)    Restricted Payments. A new subsection (i) is hereby added
         at the end of Section 5.5 of the Alterra Guaranty Agreement and shall
         read as follows:

              and (i) so long as no Default or Event of Default shall have
         occurred or be continuing and no Default or Event of Default shall
         exist after giving thereto and



                                       8

<PAGE>   9

         subject to the terms of Section 4.1(j), Alterra may repurchase those
         certain convertible securities of Alterra due December 31, 2002 prior
         to their maturity in an amount not exceeding $25,000,000 in the
         aggregate during the term of the Credit Agreement; provided, however,
         Alterra may repurchase an additional amount of such convertible
         securities in an amount not exceeding $15,000,000 in the aggregate
         during the term of the Credit Agreement so long as Alterra finances
         such repurchases with net cash proceeds received by Alterra (I) as a
         result of financing or refinancing properties on a non-recourse basis
         or (II) from the sale of Non-Stabilized Projects.

         3.   Subsidiaries. Schedule 3.12 to the Alterra Guaranty Agreement is
hereby amended and restated in its entirety to read as provided on Schedule 3.12
attached hereto.

         3.   Conditions Precedent. The effectiveness of this Agreement is
subject to the satisfaction of each of the following conditions (in form and
substance satisfactory to the Administrative Agent):

              (a)    The Administrative Agent shall have received executed
         counterparts of this Agreement duly executed by Alterra, the
         Administrative Agent and the Required Lenders.

              (b)    The Administrative Agent shall have received a legal
         opinion of counsel in form and substance reasonably satisfactory to
         the Administrative Agent from counsel to Alterra.

              (c)    Payment by Alterra of all legal fees and expenses of the
         Administrative Agent contained in those certain invoices provided to
         Alterra as of the date hereof.

              (d)    The Administrative Agent shall have received a certified
         copy of the Purchase Agreement (including all schedules and exhibits
         attached thereto), in form and substance satisfactory to the
         Administrative Agent.

              (e)    The Administrative Agent shall have received such other
         documents and information as it deems reasonably necessary.

         4.   Miscellaneous.


              (a)    The term "Alterra Guaranty Agreement" as used in each of
         the Credit Documents shall hereafter mean the Alterra Guaranty
         Agreement as amended by this Agreement. Except as herein specifically
         agreed, the Alterra Guaranty Agreement and the obligations of Alterra
         thereunder are hereby ratified and confirmed and shall remain in full
         force and effect according to its terms.

              (b)    Alterra hereby represents and warrants as follows:

                     (i) Alterra has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement.



                                       9

<PAGE>   10


                     (ii) This Agreement has been duly executed and delivered by
         Alterra and constitutes Alterra's legal, valid and binding obligations,
         enforceable in accordance with its terms, except as such enforceability
         may be subject to (i) bankruptcy, insolvency, reorganization,
         fraudulent conveyance or transfer, moratorium or similar laws affecting
         creditors' rights generally and (ii) general principles of equity
         (regardless of whether such enforceability is considered in a
         proceeding at law or in equity).

                     (iii) No consent, approval, authorization or order of, or
         filing, registration or qualification with, any court or governmental
         authority or third party is required in connection with the execution,
         delivery or performance by Alterra of this Agreement.

              (c)    Alterra hereby represents and warrants to the Lenders that
         (i) the representations and warranties of Alterra set forth in Section
         3 of the Alterra Guaranty Agreement are true and correct as of the date
         hereof, with the same effect as if made on and as of the date hereof
         except to the extent such representations and warranties expressly
         relate to an earlier date and (ii) no unwaived event has occurred and
         is continuing which constitutes a Default or an Event of Default under
         the Alterra Guaranty Agreement.

              (d)    This Agreement may be executed in any number of
         counterparts, each of which when so executed and delivered shall be an
         original, but all of which shall constitute one and the same
         instrument. Delivery of an executed counterpart of this Agreement by
         telecopy shall be effective as an original and shall constitute a
         representation that an executed original shall be delivered.

              (e)    THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
         PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
         ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  [Remainder of page intentionally left blank]














                                       10




<PAGE>   11


         Each of the parties hereto has caused a counterpart of this Agreement
to be duly executed and delivered as of the date first above written.



GUARANTOR:                         ALTERRA HEALTHCARE CORPORATION,
---------                          a Delaware corporation



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


LENDERS:                           BANK OF AMERICA, N.A.,
-------                            as Administrative Agent and as a Lender


                                   By:  /s/ F. Scott Singhoff
                                      --------------------------------
                                   Name: F. Scott Singhoff
                                        ------------------------------
                                   Title: Managing Director
                                         -----------------------------


                                   THE CHASE MANHATTAN BANK


                                   By:  /s/ Dawn Lee Lum
                                      --------------------------------
                                   Name: Dawn Lee Lum
                                        ------------------------------
                                   Title: Vice President
                                          ----------------------------


                                   DEUTSCHE BANK AG NEW YORK AND/OR
                                   CAYMAN ISLAND BRANCHES


                                   By:  /s/
                                      --------------------------------
                                   Name:
                                        ------------------------------
                                   Title:
                                         -----------------------------


                                   BANK UNITED, F.S.B.


                                   By:  /s/ Casey Moore
                                      --------------------------------
                                   Name: Casey Moore
                                        ------------------------------
                                   Title: Vice President
                                         -----------------------------


<PAGE>   12



                                   COMERICA BANK


                                   By:  /s/
                                      --------------------------------
                                   Name:
                                        ------------------------------
                                   Title:
                                         -----------------------------


                                   NATIONAL CITY BANK


                                   By:  /s/
                                      --------------------------------
                                   Name:
                                        ------------------------------
                                   Title:
                                         -----------------------------


                                   THE HUNTINGTON NATIONAL BANK


                                   By:  /s/
                                      --------------------------------
                                   Name:
                                        ------------------------------
                                   Title:
                                         -----------------------------


                                   BANK OF MONTREAL


                                   By:  /s/
                                      --------------------------------
                                   Name:
                                        ------------------------------
                                   Title:
                                         -----------------------------


                                   THE BANK OF NEW YORK


                                   By:  /s/
                                      --------------------------------
                                   Name:
                                        ------------------------------
                                   Title:
                                         -----------------------------




                                       2