<PAGE>   1
                                                                    EXHIBIT 10.8


                  SECOND MODIFICATION OF MASTER LOAN AGREEMENT


         THIS SECOND MODIFICATION OF MASTER LOAN AGREEMENT (this "Agreement") is
made as of the 31st day of May, 2000, by and between ALS WEST, INC., a Delaware
corporation ("West"), ALTERRA HEALTHCARE CORPORATION, a Delaware corporation
formerly known as Alternative Living Services, Inc. ("Alterra"), and GUARANTY
FEDERAL BANK, F.S.B., a federal savings bank ("GFB"), as a Lender and as Agent
for the Lenders under the Master Loan Agreement.

                              W I T N E S S E T H:

         WHEREAS, West, Alterra, and GFB have entered into that certain Master
Loan Agreement dated January 8, 1999, as modified by Modification of Master Loan
Agreement dated March 15, 2000 (such Master Loan Agreement and all supplements
thereto and amendments or modifications thereof and all agreements given in
substitution therefor or in restatement, renewal or extension thereof, in whole
or in part, being herein referred to as the "Master Loan Agreement"), which
Master Loan Agreement contemplates a loan facility in the total amount of
$50,000,000 (the "Loan Facility"); and

         WHEREAS, West and Alterra have requested and Lender has agreed to
modify certain provisions of the Master Loan Agreement;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

         1. Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Master Loan Agreement.

         2. Sections 6.17 through 6.19 of the Master Loan Agreement are deleted
and the following are substituted in lieu thereof:

                  Section 6.17. Company Debt Service Coverage Ratio. The Company
         Debt Service Coverage Ratio, as of the last day of each fiscal quarter
         of the Company, 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
</TABLE>


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<PAGE>   2

<TABLE>
<S>                    <C>          <C>          <C>          <C>
         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  1.25 to 1.0
</TABLE>


         Nothing contained herein shall imply an agreement on the part of Lender
         to extend the maturity date of any Project Loan.

                  Section 6.18. Leverage Ratio. The Leverage Ratio, as of the
         last day of each fiscal quarter of the Company, shall be less than or
         equal to 0.75 to 1.0.

                  Section 6.19. 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
         the Company 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 the
         proceeds from any Equity Issuance subsequent to December 31, 1999, and
         75% of the amount of any pay-in-kind dividends or coupons issued
         subsequent to December 31, 1999.

         3. The following are added as Sections 6.22 and 6.23 to the Master Loan
Agreement:

                  Section 6.22. Liquidity. The Company shall maintain Liquidity,
         at the end of each fiscal quarter, of not less than $15,000,000.00. For
         purposes of this Section 6.22, the term "Liquidity" shall mean, at any
         time, the sum of (i) all cash of the Consolidated Parties at such time
         plus (ii) all cash equivalents owned or held by the Consolidated
         Parties at such time plus (iii) all available credit capacity to which
         any Consolidated Party could have drawn upon on the last day of any
         fiscal quarter.

                  Section 6.23. Definitions. As used in Sections 6.17 through
         6.19 and in Section 6.22, the following terms shall have the meanings
         assigned to them in this Section 6.23:

                        (a)  "Capital Stock" means (i) in the case of a
                             corporation, capital stock, (ii) in the case of an
                             association or business entity, any and all shares,
                             interests, participations, rights or other
                             equivalents (however designated) of capital stock,
                             (iii) in the case of a limited liability company,
                             membership interests and (v) any other interest or
                             participation that confers on a Person the right to
                             receive a share of the profits and losses of, or
                             distribution of assets of, the issuing Person.

                        (b)  "Capital Lease" means, as applied to any Person,
                             any lease of any Property (whether real, personal
                             or mixed) by that Person as lessee which, in
                             accordance with GAAP, is or should be accounted for
                             as a capital lease on the balance sheet of that
                             Person.



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<PAGE>   3


                        (c)  "Company 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 the Company
                             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 net of Interest
                             income for such period plus (II) Rental Expense for
                             such period, as determined in accordance with GAAP.

                        (d)  "Consolidated Parties" means a collective reference
                             to the Company and its Subsidiaries, and
                             "Consolidated Party" means any one of them.

                        (e)  "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 Income: (a) income tax expense, (b) interest
                             expense, (c) depreciation and amortization expense,
                             (d) non-cash non-recurring losses arising out of
                             the ordinary course of business (including without
                             limitation any adjustments to the Company's book
                             tax valuation allowance), (e) cash non-recurring
                             net losses related to the sale of assets in an
                             amount not to exceed $25 million and (f) cash
                             non-recurring losses in connection with any charges
                             related to the reduction or elimination of overhead
                             costs or restructuring of the Company'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.

                        (f)  "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


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<PAGE>   4


                             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 evidenced by
                             debentures. The amount of any Equity Issuance shall
                             be the sum of (a) the net cash proceeds derived
                             from such issuance, plus (b) the amount of any
                             indebtedness or debentures cancelled, retired or
                             exchanged in connection with the issuance
                             (exclusive of any indebtedness or debentures
                             cancelled in connection with their conversion to
                             equity), plus (c) the amount for which any TPI-HCR
                             Assignee (as defined in the Purchase Agreement)
                             shall be given a credit against the purchase price
                             for such securities pursuant to Section 8.1 of the
                             Purchase Agreement plus (d) the amount for which
                             any remaining holders of the TPI-HCR Membership
                             Interests (as defined in the Purchase Agreement)
                             shall be given a credit against the purchase price
                             for such securities pursuant to Section 8.2 of the
                             Purchase Agreement or (e) the amount for which any
                             TPI Member (as defined in the Purchase Agreement)
                             shall be given a credit against the purchase price
                             for such securities pursuant to Section 9.1 of the
                             Purchase Agreement.

                        (g)  "Funded Indebtedness" means, with respect to any
                             Person, without duplication, (a) all obligations of
                             such Person for borrowed money, (b) all obligations
                             of such Person evidenced by bonds, debentures,
                             notes or similar instruments, or upon which
                             interest payments are customarily made (expressly
                             excluding, however, the amount of convertible
                             securities of the Consolidated Parties (including
                             the Debentures (as defined in the Purchase
                             Agreement)) outstanding on such date), (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


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<PAGE>   5

                             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.

                        (h)  "Guaranty Obligations" means, with respect to any
                             Person, without duplication, any obligations of
                             such Person (other than endorsements in the
                             ordinary course of business of negotiable
                             instruments for deposit or collection) guaranteeing
                             or intended to guarantee any Indebtedness of any
                             other Person in any manner, whether direct or
                             indirect, and including without limitation any
                             obligation, whether or not contingent, (i) to
                             purchase any such Indebtedness or any Property
                             constituting security therefor, (ii) to advance or
                             provide funds or other support for the payment or
                             purchase of any such Indebtedness or to maintain
                             working capital, solvency or other balance sheet
                             condition of such other Person (including without
                             limitation keep well agreements, maintenance
                             agreements, comfort letters or similar agreements
                             or arrangements) for the benefit of any holder of
                             Indebtedness of such other person, (iii) to lease
                             or purchase property, securities or services
                             primarily for the purpose of assuring the holder of
                             such Indebtedness, or (iv) to otherwise assure or
                             hold harmless the holder of such Indebtedness
                             against loss in respect thereof. The amount of any
                             Guaranty Obligation hereunder shall (subject to any
                             limitations set forth therein) be deemed to be an
                             amount equal to the outstanding principal amount
                             (or maximum principal amount, if larger) of the
                             Indebtedness in respect of which such Guaranty
                             Obligation is made.

                        (i)  "Indebtedness" means, with respect to any Person,
                             without duplication, (a) all obligations of such
                             Person for borrowed money, (b) all obligations of
                             such Person evidenced by bonds, debentures, notes
                             or similar instruments, or upon which interest
                             payments are customarily made, (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


                           5


<PAGE>   6

                             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 six months of the
                             incurrence thereof or such longer period, if the
                             payment of which is being contested in good faith)
                             which would appear as liabilities on a balance
                             sheet of such person, (e) all obligations of such
                             Person under take-or-pay or similar arrangements or
                             under commodities agreements, (f) all Indebtedness
                             of others secured by (or for which the holder of
                             such 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, (g) all Guaranty Obligations of such
                             person, (h) the principal portion of all
                             obligations of such Person under Capital Leases,
                             (i) all obligations of such Person under Hedging
                             Agreements, (j) all obligations of such Person to
                             repurchase any securities which repurchase
                             obligation is related to the issuance thereof, (k)
                             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), (l) all preferred Capital
                             Stock issued by such Person and required by the
                             terms thereof to be redeemed, or for which
                             mandatory sinking fund payments are due, by a fixed
                             date, (m) all other obligations of such person
                             under any arrangement or financing structure
                             classified as debt (for tax purposes) by any
                             nationally recognized rating agency, (n) the
                             principal portion of all obligations of such Person
                             under Synthetic Leases and (o) the Indebtedness of
                             any partnership or unincorporated joint venture in
                             which such Person is a general partner or a joint
                             venturer.

                        (j)  "Interest" means, for any period, with respect to
                             the Consolidated Parties on a consolidated basis,
                             interest expense net of interest income (including
                             the amortization of debt discount and premium and
                             the interest component under Capital Leases and the
                             implied interest component under Synthetic Leases
                             but excluding the amortization of deferred
                             financing costs, amendment fees paid and bridge
                             loan fees paid), as determined in accordance with
                             GAAP.

                        (k)  "Leverage Ratio" means, as of the end of any fiscal
                             quarter of the Company, for the four fiscal quarter
                             period ending on such date with respect to the
                             Consolidated Parties on a consolidated basis,



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<PAGE>   7


                             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)
                             Funded Indebtedness plus (ii) Net Worth as of such
                             date plus (iii) the amount of convertible
                             securities of the Consolidated Parties (including
                             the Debentures (as defined in the Purchase
                             Agreement)) outstanding on such date plus (iv) book
                             equity which exists in entities for which
                             guaranties are included in the definition of Funded
                             Indebtedness.

                        (l)  "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) occurring after December 31,
                             1999.

                        (m)  "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 excluding the impact of net
                             non-recurring losses.

                        (n)  "Operating Leases" means, as applied to any Person,
                             any lease (including, without limitation, leases
                             which may be terminated by the lessee at any time)
                             of any Property (whether real, personal or mixed)
                             which is not a Capital Lease other than any such
                             lease in which that Person is the lessor.

                        (o)  "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 pursuant to First Amendment of even date.

                        (p)  "Property" means, any interest in any kind of
                             property or asset, whether real, personal or mixed,
                             or tangible or intangible.

                        (q)  "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).


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<PAGE>   8


                        (r)  "Subsidiary" means, as to any Person at any time,
                             (a) any corporation more than 50% of whose Capital
                             Stock of any class or classes having by the terms
                             thereof ordinary voting power to elect a majority
                             of the directors of such corporation (irrespective
                             of whether or not at such time, any class or
                             classes of such corporation shall have or might
                             have voting power by reason of the happening of any
                             contingency) is at such time owned by such Person
                             directly or indirectly through subsidiaries, and
                             (b) any partnership, association, joint venture or
                             other entity of which such Person directly or
                             indirectly through subsidiaries owns at such time
                             more than 50% of the Capital Stock.

                        (s)  "Synthetic Lease" means any synthetic lease, tax
                             retention operating lease, off-balance sheet loan
                             or similar off-balance sheet financing product
                             where such transaction is considered borrowed money
                             indebtedness for tax purposes but is classified as
                             an Operating Lease for purposes of GAAP.

         4. Section 8.1(h) of the Master Loan Agreement is deleted and the
following is substituted in lieu thereof:

            (h) A default occurs under any of Sections 6.16 through 6.19, 6.21
or 6.22; or

         5. In consideration of the execution hereof, Alterra shall pay Lender
an extension fee of $125,000 on or before May 31, 2000.

         6. Alterra hereby ratifies and confirms its obligations under each
Guaranty delivered by Alterra in connection with a Project Loan.

         7. West and Alterra each hereby respectively represents and warrants
that (i) it is duly incorporated and legally existing under the laws of the
state of its incorporation; (c) the execution and delivery of, and performance
under this Agreement are within its power and authority without the joinder or
consent of any other party and have been duly authorized by all requisite action
and are not in contravention of law or the powers of its charter, by-laws or
other corporate papers; (d) this Agreement constitutes its legal, valid and
binding obligations, enforceable in accordance with its terms; (e) the execution
and delivery of this Agreement do not contravene, result in a breach of or
constitute a default under any deed of trust, loan agreement, indenture or other
contract, agreement or undertaking to which it is a party or by which it or any
of its properties may be bound (nor would such execution and delivery constitute
such a default with the passage of time or the giving of notice or both) and do
not violate or contravene any law, order, decree, rule or regulation to which it
is subject; and (f) to the best of its knowledge, there exists no uncured
default under the Loan Documents, as modified hereby.


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<PAGE>   9

         8. This Agreement constitutes a Loan Document.

         9. West hereby acknowledges that the liens, security interests and
assignments created and evidenced by the Project Loan Documents and other Loan
Documents are valid and subsisting and further acknowledges and agrees that
there are no offsets, claims or defenses to the Notes, the Project Loan
Documents or any other Loan Documents.

         10. Contemporaneously with the execution and delivery hereof, West
shall pay, or cause to be paid, all costs and expenses incident to the
preparation hereof and the consummation of the transactions specified herein,
including without limitation fees and expenses of legal counsel to GFB.

         11. West and Alterra each hereby releases, remises, acquits and forever
discharges GFB, together with its employees, agents, representatives,
consultants, attorneys, fiduciaries, servants, officers, directors, partners,
predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from any and all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities, obligations,
damages and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, whether heretofore
or hereafter accruing, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and including the
date hereof, and in any way directly or indirectly arising out of or in any way
connected to this Agreement, the Master Loan Agreement, the Notes, the Project
Loan Documents or any other Loan Document, or any of the transactions associated
therewith, or the Collateral, including specifically but not limited to claims
of usury.

         12. The parties acknowledge and confirm that each of their respective
attorneys have participated jointly in the review and revision of this Agreement
and that it has not been written solely by counsel for one party. The parties
hereto therefore stipulate and agree that the rule of construction to the effect
that any ambiguities are to or may be resolved against the drafting party shall
not be employed in the interpretation of this Agreement to favor either party
against the other.

         13. This Agreement and the rights and duties of the parties hereunder
shall be governed for all purposes by the law of the State of Texas and the law
of the United States applicable to transactions within said State.

         14. The terms and provisions hereof shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.

         15. All references in the Loan Documents to the Master Loan Agreement
shall hereafter mean the Master Loan Agreement as modified hereby. Except to the
extent specifically amended and modified by the terms and provisions of this
Agreement, all of the



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<PAGE>   10

terms and provisions of the Master Loan Agreement, as hereby amended, shall
remain in full force and effect and the parties hereto hereby ratify and confirm
all of the terms and provisions of the Master Loan Agreement, as hereby amended.

         16. This Agreement may be executed in any number of counterparts, each
of which when executed and delivered shall be deemed an original, and all of
which, when taken together, shall be deemed to be one document. All such
counterparts shall be construed together and shall constitute one instrument,
but in making proof hereof it shall only be necessary to produce one such
counterpart.

         17. THIS AGREEMENT, THE MASTER LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

             THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.





                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]



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         This Agreement is executed as of the date first written above.

                                     ALS WEST, INC., a Delaware corporation



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


                                     ALTERRA HEALTHCARE CORPORATION, a
                                     Delaware corporation



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


                                     GUARANTY FEDERAL BANK, F.S.B., a federal
                                     savings bank, as Agent and as a Lender



                                     By:          /s/ Deborah M. Laycock
                                        ----------------------------------------
                                        Name:     Deborah M. Laycock
                                              ----------------------------------
                                        Title:    Vice President
                                              ----------------------------------



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