Exhibit 10.5


     

    
      	
               Exhibit
                10.5

            


    

    
 

    CONSTRUCTION
      LOAN ADMINISTRATION AGREEMENT

     

    THIS
      CONSTRUCTION LOAN ADMINISTRATION AGREEMENT ("Agreement") is made as of the
      7th
      day of July, 2005, by Bank of America, N.A. ("Bank"),
      and
      the Borrower identified in Exhibit B
      ("Borrower"),
      who
      agree as follows:

     

    RECITALS:

     

    WHEREAS,
      Bank has agreed to loan to Borrower amounts up to an aggregate of Twenty Three
      Million Two Hundred Twelve Thousand Five Hundred Fifty and No/100 Dollars
      ($23,180,008.00) of which of up to $18,721,550 shall be available on a term
      loan
      basis for the purposes of financing and/or refinancing the acquisition costs
      of
      a skilled nursing facility known as Hacienda De Vida, consisting of a 128 bed
      skilled nursing facility and a 44 unit assisted living facility, and up to
      $4,458,458 shall be available for providing financing for the construction
      of a
      21-unit assisted living expansion and a connected 20-unit Alzheimer’s building
      (the "Project"); and

     

    WHEREAS,
      the foregoing loans from Bank shall be evidenced by three (3) notes, being
      a
      $4,458,458.00 construction loan note, a $9,360,775.00 floating rate term note
      and a $9,360,775.00 fixed rate term note; and

     

    WHEREAS,
      the $4,458,458.00 Construction Loan Promissory Note evidencing the construction
      loan (the "Construction Loan") from Bank to Borrower shall be disbursed by
      Bank
      to enable Borrower to construct the 21-unit assisted living expansion and a
      connected 20-unit Alzheimer’s building contiguous to Hacienda De Vida;
      and

     

    WHEREAS,
      Bank requires that disbursements from the Construction Loan be approved by
      Bank
      pursuant to criteria hereinafter set forth; and

     

    WHEREAS,
      the purpose of this Agreement is to set forth the terms and conditions related
      to administration and disbursement of the Construction Loan.

     

    Section 1. -
      ADMINISTRATION OF THE CONSTRUCTION LOAN

     

    Section
      1.1. General
      Information and Purpose.
      The
      Basic Information attached as Exhibit "B"
      and all
      other exhibits, which are made a part of this Agreement and incorporated herein
      by reference, contain definitions of certain terms used herein, and also contain
      other terms, provisions, and conditions applicable to the Construction Loan.
      The
      proceeds of the Construction Loan are to be used by Borrower to pay the cost
      of
      the construction of the Improvements on the Land, and other costs regarding
      the
      Property if and to the extent that such costs are specifically provided for
      in
      the Budget. The Loan Documents, which must be in form, detail and substance
      satisfactory to Bank, evidence the agreements of Borrower and Bank with respect
      to the Construction Loan. Borrower shall comply with all Loan
      Documents.

     

    Section
      1.2. Administration
      of Construction Loan.
      Bank
      agrees to administer the Construction Loan in accordance with the terms and
      conditions of this Agreement. 

     

    
      
        
        

      

      
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    Section
      1.3. Budget.
      The
      Construction Loan amounts are allocated for the costs of the Project shown
      in
      the Budget attached as Exhibit "D".
      The
      Budget has been prepared by the Borrower, and Borrower represents to Bank that
      it includes all projected costs and expenses (the "Aggregate
      Cost")
      incident to the Project, after taking into account the requirements of this
      Agreement. Bank shall not be required to approve a Requisition which includes
      (a) any advance for any cost not set forth in the Budget, (b) any
      advance for any line item in the Budget that, when added to all prior advances
      for that line item, would exceed the lesser of (i) the actual cost incurred
      by Borrower for such line item or (ii) the sum allocated in the Budget
      for
      that line item, (c) any advance for any contingency line item unless
      Bank
      consents to such advance in its sole discretion, reasonably exercised, or
      (d) any advance other than as provided in the Budget or to make any
      advance
      for interest on the Construction Loan after commencement of operations in the
      Improvements if and to the extent that there is sufficient net operating income
      from the Property to cover any such interest. Bank may approve Requisitions
      for
      advances allocated to line items in the Budget for other purposes or in
      different proportions as Bank in its sole discretion deems necessary or
      advisable. Any reallocation of Construction Loan amounts from one Budget line
      item to another, or any other amendment to the Budget, shall be subject to
      Bank's approval prior to the making of any advance of the Construction Loan
      based upon such reallocation or amendment. 

     

    Section
      1.4. Borrower's
      Deposit.
      If at
      any time Bank determines that the sum of (i) the unadvanced portion
      of the
      Construction Loan to which Borrower is entitled, plus (ii) the amounts
      of
      the Aggregate Cost which are scheduled to be paid by Borrower from funds which
      are available, set aside and committed, to Bank's satisfaction, is or will
      be
      insufficient to pay the unpaid actual Aggregate Cost, Borrower shall, within
      seven (7) days after written notice from Bank, deposit with Bank the amount
      of
      the deficiency ("Borrower's
      Deposit")
      in an
      interest-bearing account of Bank's selection with interest earned thereon to
      be
      part of the Borrower's Deposit. Such Borrower's Deposit shall be advanced as
      construction progresses in accordance with this Agreement before any, or any
      additional, Construction Loan disbursements are made. Upon a Default, Bank
      may
      (but shall have no obligation to) apply all or any part of the Borrower's
      Deposit against the unpaid Obligations in such order as Bank
      determines.

     

    Section 2. -
      ADDITIONAL COVENANTS AND AGREEMENTS

     

    Section
      2.1. Plans.
      Borrower assumes full responsibility for the compliance of the Plans and the
      Property and the construction of the Improvements in accordance with all laws,
      governmental requirements and sound building and engineering practices. No
      construction shall be undertaken on the Land except as shown in the Plans.
      No
      plans or specifications, or any changes thereto, except Permitted Changes,
      shall
      be included as part of the Plans until consented to by Bank, all applicable
      governmental authorities, and all parties required under the Loan Documents.
      

     

    Section
      2.2. Contracts.
      Bank
      shall have the right of approval as to parties, terms, and all other matters,
      with respect to (a) any contract for the performance of any work or
      the
      supplying of any labor, materials, or services for the design or construction
      of
      the Improvements, (b) any management, leasing, maintenance or other
      contract pertaining to the Property and (c) the modification, amendment
      or
      termination of any such contracts. Borrower shall not default under any
      contract, Borrower shall not permit any contract to terminate by reason of
      any
      failure of Borrower to perform thereunder, and Borrower shall promptly notify
      Bank of any material default thereunder. Borrower will deliver to Bank, upon
      request of Bank, the names of all persons or entities with whom each contractor
      has contracted or intends to contract for the construction of the Improvements
      or for the furnishing of labor or materials therefore.

     

    
      
        
        

      

      
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    Section
      2.3. Construction
      of the Improvements.
      Borrower shall complete construction of the Improvements, and shall obtain
      a
      permanent unconditional certificate of occupancy and all other permits,
      licenses, and approvals for the occupancy, use and operation of the Improvements
      from all applicable governmental authorities on or before the Completion Date,
      free and clear of all liens except the Loan Documents. Borrower shall correct
      promptly (a) any material defect in the Improvements, (b) any
      material
      departure from the Plans, law, or governmental requirements, or (c) any
      encroachment by any Improvements or structure on any building setback line,
      easement, property line or restricted area. Borrower shall not permit cessation
      of work for a period in excess of fifteen (15) consecutive days. 

     

    Section
      2.4. Changes.
      Without
      Bank's prior written consent, Borrower shall not change or modify the Plans,
      agree to any change order, or allow any extras to any contractor or any
      subcontractor, except that Borrower may make the Permitted Changes if:
i) Borrower
      notifies Bank in writing of the change or extra with appropriate supporting
      documentation and information; ii) Borrower
      obtains the approval of the applicable contractor, Borrower's architect, and
      all
      sureties; iii) the
      structural integrity, quality and standard of workmanship of the Improvements
      is
      not impaired; iv) no
      substantial change in architectural appearance is affected; v) no
      default in any obligation to any person or violation of any law or governmental
      requirement would result from such change or extra; vi) Borrower
      complies with Section 1.4 of this Agreement to cover any excess cost resulting
      from the change or extra; and vii) completion
      of the Improvements by the Completion Date will not be affected. Bank shall
      not
      be obligated to review a proposed change unless it has received all documents
      necessary to review such change, such as the change order, cost estimates,
      plans
      and specifications, and evidence that all approvals by all applicable parties
      have been obtained.

     

    Section
      2.5. Storage
      of Materials.
      Borrower shall cause all materials supplied for, or intended to be utilized
      in
      the construction of the Improvements, but not yet affixed to or incorporated
      into the Improvements on the Land, to be stored on the Land with adequate
      safeguards as required by Bank to prevent loss, theft, damage or commingling
      with other materials or projects. Borrower shall not purchase or order materials
      for delivery more than forty-five (45) days prior to the scheduled incorporation
      of such materials into the Improvements.

     

    Section
      2.6. Inspection.
      Bank or
      Bank's agent may enter upon the Property to inspect the Property and any
      materials at any reasonable time. Borrower will furnish to Bank at any time
      for
      inspection and copying all Plans, shop drawings, specifications, books and
      records, and other documents and information required by Bank.

     

    Section
      2.7. Notice
      to Bank.
      Borrower shall promptly notify Bank in writing of any of the following events,
      specifying in each case the action Borrower has taken or will take with respect
      thereto: viii)any
      violation of any law or governmental requirement; ix)any
      litigation, arbitration or governmental investigation or proceeding instituted
      or threatened against Borrower or the Property or any material development
      therein; x)any
      actual or threatened condemnation of any portion of the Property, any
      negotiations with respect to any such taking, or any loss of or substantial
      damage to the Property; xi)any
      labor
      controversy pending or threatened against Borrower or any contractor or any
      material development in any labor controversy; xii) any
      notice received by Borrower with respect to the cancellation, alteration or
      non-renewal of any insurance coverage maintained with respect to the Property;
      or xiii)any
      failure by Borrower or any contractor to perform any material obligation under
      any construction contract, any event or condition which would permit termination
      of a construction contract or suspension of work thereunder, or any notice
      given
      by Borrower or any contractor with respect to any of the foregoing.

     

    
      
        
        

      

      
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    Section
      2.8. Assignment
      of Contracts and Plans.
      As
      additional security for the payment of the Construction Loan, at Bank's request
      Borrower agrees to transfer and assign to Bank together with such consents
      thereto as Bank may request all of Borrower's rights and interest, but not
      its
      liability, in, under, all existing or future construction, architectural and
      design contracts, and the Plans, and further agrees that all of the same shall
      be covered by the security agreement provisions of the Deed of Trust. Borrower
      represents and warrants that the copy of any contract furnished or to be
      furnished to Bank is and shall be a true and complete copy thereof, that the
      copies of the Plans delivered to Bank are and shall be true and complete copies
      of the Plans, that there have been no modifications thereof which are not fully
      set forth in the copies delivered, and that Borrower's interest therein is
      not
      subject to any claim, setoff, or encumbrance. Neither this assignment nor any
      action by Bank shall constitute an assumption by Bank of any obligation under
      any contract or with respect to the Plans, and Borrower shall continue to be
      liable for all obligations of Borrower with respect thereto, Borrower hereby
      agreeing to perform all of its obligations under any contract. Bank shall have
      the right at any time (but shall have no obligation) to take in its name or
      in
      the name of Borrower such action Bank may determine necessary to cure any
      default under any contract or with respect to the Plans or to protect the rights
      of Borrower or Bank with respect thereto. Bank shall incur no liability if
      any
      action so taken by it or on its behalf shall prove to be inadequate or invalid.
      Borrower indemnifies and holds Bank harmless against and from any loss, cost,
      liability or expense (including, but not limited to, attorneys' fees and
      expenses) incurred in connection with Borrower's failure to perform such
      contracts or any action taken by Bank. Bank may use the Plans for any purpose
      relating to the Improvements. Borrower irrevocably constitutes and appoints
      Bank
      as Borrower's attorney-in-fact, which power of attorney shall be irrevocable
      and
      coupled with an interest, in Borrower's name or in Bank's name to enforce all
      rights of Borrower under any contract or with respect to the Plans.

     

    Section
      2.9. Omitted.

     

    Section
      2.10. Financial
      Statements.
      Borrower shall deliver to Bank the Financial Statements and other statements
      and
      information at the times and for the periods described in the Basic Information,
      as otherwise required by any other Loan Documents and from time to time such
      additional financial statements and information Bank requests.

     

    Section
      2.11. Annual
      Appraisal.
      Bank
      may obtain at Borrower's expense, as required by Bank's policy from time to
      time, an appraisal of any part of the Property prepared in accordance with
      written instructions from Bank by a third-party appraiser engaged directly
      by
      Bank; provided, Borrower will not be required to pay for more than one (1)
      appraisal in any twelve (12) month period. Each such appraiser and appraisal
      shall be satisfactory to Bank (including satisfaction of applicable regulatory
      requirements). The cost of each such appraisal shall be due and payable by
      Borrower on demand and shall be secured by the Loan Documents.

     

    
      
        
        

      

      
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    Section
      2.12. Reports
      and Vouchers.
      Borrower shall (a) promptly deliver to Bank copies of all reports, studies,
      inspections and tests made on the Land, the Improvements or the materials to
      be
      incorporated into the Improvements; and (b) make additional tests Bank
      reasonably requires. Borrower shall immediately notify Bank of such report,
      study, inspection or test that indicates any adverse condition in the Land
      or
      the Improvements.

     

    Section
      2.13. Payment
      of Withholding Taxes.
      Borrower shall not use, or knowingly permit any contractor or subcontractor
      to
      use, any portion of the proceeds of any advance to pay the wages of employees
      unless a portion of the proceeds or other funds are also used to make timely
      payment to or deposit with the United States all amounts of tax required to
      be
      deducted and withheld with respect to such wages under the Internal Revenue
      Code, and to make timely payment to or deposit with any local and/or state
      governmental authority or agency having jurisdiction all amounts of tax required
      to be deducted and withheld with respect to such wages under any applicable
      local and/or state laws.

     

    Section
      2.14. Representations
      and Warranties.
      Borrower hereby represents and warrants to Bank that xiv) to
      the extent required by applicable law, Borrower has filed all necessary tax
      returns and reports and has paid all taxes and governmental charges thereby
      shown to be owing; xv) the
      Plans have been or will, prior to commencement of construction, be approved
      by
      all applicable governmental authorities, accepted by each contractor, complete
      in all material respects, adequate for the construction of the Improvements
      (containing all necessary detail), and in compliance with the Loan Documents,
      all applicable laws, restrictive covenants, and governmental requirements,
      rules, and regulations; xvi) the
      Land is, or will be, separately assessed for tax purposes; xvii) the
      Land and Improvements comply with all laws and governmental requirements,
      including all subdivision and platting requirements, without reliance on any
      adjoining or neighboring property; xviii) the
      Plans will and the Improvements when constructed will comply with all legal
      requirements regarding access and facilities for handicapped or disabled
      persons; xix) Borrower
      has not directly or indirectly conveyed, assigned or otherwise disposed of
      or
      transferred (or agreed to do so) any air rights or other similar rights,
      privileges or attributes with respect to the Property, including those arising
      under any zoning or land use ordinance or other law or governmental requirement;
      xx) the
      construction schedule for the Project is realistic and the Completion Date
      is a
      reasonable estimate of the time required to complete the Project; and
xxi) the
      Financial Statements delivered to Bank are true and correct, and there has
      been
      no material change of Borrower's financial condition from the financial
      condition of Borrower indicated in such Financial Statements.

     

    Section 3. -
      DEFAULT AND REMEDIES

     

    Section
      3.1. Events
      of Default.
      "Default" shall have the meaning set forth in the Loan Agreement.

     

    Section
      3.2. Remedies.
      Upon a
      Default Bank may, at its election, but without any obligation to do so, pursue
      the remedies set forth in the Loan Agreement or in any of the other Loan
      Documents.

     

    
      
        
        

      

      
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    Section 4. -
      GENERAL TERMS AND CONDITIONS

     

    Section
      4.1. Omitted.

     

    Section
      4.2. Bank's
      Consent.
      Except
      where otherwise expressly provided in the Loan Documents, in any instance where
      the approval, consent or the exercise of judgment of Bank is required, the
      granting or denial of such approval or consent and the exercise of such judgment
      shall be (a) within the sole reasonable discretion of Bank; and
      (b) deemed to have been given only by a specific writing intended for
      the
      purpose given and executed by Bank. Notwithstanding any approvals or consents
      by
      Bank, Bank has no obligation or responsibility whatsoever for the adequacy,
      form
      or content of the Plans, the Budget, any contract, any change order, any lease,
      or any other matter incident to the Property or the construction of the
      Improvements. Bank's acceptance of an assignment of the Plans shall not
      constitute approval of the Plans. Any inspection or audit of the Property or
      the
      books and records of Borrower, or the procuring of documents and financial
      and
      other information, by or on behalf of Bank shall be for Bank's protection only,
      and shall not constitute any assumption of responsibility to Borrower or anyone
      else with regard to the condition, construction, maintenance or operation of
      the
      Property, or relieve Borrower of any of Borrower's obligations. Borrower has
      selected all surveyors, architects, engineers, contractors, materialmen and
      all
      other persons or entities furnishing services or materials to the Project.
      Bank
      has no duty to supervise or to inspect the Property or the construction of
      the
      Improvements nor any duty of care to Borrower or any other person to protect
      against, or inform Borrower or any other person of, the existence of negligent,
      faulty, inadequate or defective design or construction of the Improvements.
      Bank
      shall not be liable or responsible for any defect in the Property or the
      Improvements, the performance or default of Borrower, Borrower's architect,
      engineer and contractor, or any other party, or for any failure to construct,
      complete, protect or insure the Improvements, or for the payment of costs of
      labor, materials, or services supplied for the construction of the Improvements,
      or for the performance of any obligation of Borrower whatsoever. Nothing,
      including any advance or acceptance of any document or instrument, shall be
      construed as a representation or warranty, express or implied, to any party
      by
      Bank. Inspection shall not constitute an acknowledgment or representation by
      Bank that there has been or will be compliance with the Plans, Loan Documents,
      applicable laws and governmental requirements or that the construction is free
      from defective materials or workmanship. Inspection whether or not followed
      by
      notice of Default shall not constitute a waiver of any Default then existing,
      or
      a waiver of Bank's right thereafter to insist that the Improvements be
      constructed in accordance with the Plans, Loan Documents, applicable laws,
      and
      governmental requirements. Bank's failure to inspect shall not constitute a
      waiver of any of Bank's rights under the Loan Documents or at law or in
      equity.

     

    Section
      4.3. Miscellaneous.
      This
      Agreement may be executed in several counterparts, all of which are identical,
      and all of which counterparts together shall constitute one and the same
      instrument. A determination that any provision of this Agreement is
      unenforceable or invalid shall not affect the enforceability or validity of
      any
      other provision and the determination that the application of any provision
      of
      this Agreement to any person or circumstance is illegal or unenforceable shall
      not affect the enforceability or validity of such provision as it may apply
      to
      other persons or circumstances. Time shall be of the essence with respect to
      Borrower's obligations under the Loan Documents. This Agreement, and its
      validity, enforcement and interpretation, shall be governed by Tennessee law
      (without regard to any conflict of laws principles) and applicable United States
      federal law.

     

    
      
        
        

      

      
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    Section
      4.4. Notices.
      Unless
      specifically provided otherwise, any notice for purposes of this agreement
      or
      any other Loan Document shall be given in accordance with the provisions of
      the
      Loan Agreement.

     

    Section
      4.5. Successors
      and Assigns.
      This
      Agreement shall be binding upon Borrower, and Borrower's heirs, devisees,
      representatives, successors and assigns, and shall inure to the benefit of
      Bank
      and its successors and assigns, provided, however, that Borrower shall not
      assign or encumber any interest of Borrower under any Loan Document or in any
      proceeds of the Construction Loan without the prior written consent of Bank.
      

     

    Section
      4.6. Modification
      or Termination.
      The
      Loan Documents may only be modified or terminated by a written instrument or
      instruments intended for that purpose and executed by the party against which
      enforcement thereof is asserted. This Agreement shall continue in full force
      and
      effect until the Obligations are paid in full; and all representations and
      warranties and all provisions herein for indemnity of Bank (and any other
      provisions herein specified to survive) shall survive payment in full of the
      Obligations and any release or termination of this Agreement or of any other
      Loan Documents.

     

    Section
      4.7. Costs
      and Expenses.
      Without
      limitation of any Loan Document and to the extent not prohibited by applicable
      laws, Borrower shall pay when due, and reimburse to Bank on demand, and
      indemnify Bank from, all out-of-pocket fees, costs, and expenses paid or
      incurred by Bank in connection with the negotiation, preparation and execution
      of this Agreement and the other Loan Documents (and any amendments, approvals,
      consents, waivers and releases requested, required, proposed or done from time
      to time), or in connection with the disbursement, administration or collection
      of the Construction Loan or the enforcement of the obligations or the exercise
      of any right or remedy of Bank, including xxii) fees
      and expenses of Bank's counsel; xxiii) appraisal,
      re-appraisal and survey costs; xxiv) title
      insurance charges and premiums; xxv) title
      search or examination costs, including abstracts, abstractors' certificates
      and
      uniform commercial code searches; xxvi) judgment
      and tax lien searches for Borrower; xxvii) escrow
      fees; xxviii) fees
      and costs of environmental investigations and site assessments; xxix) recordation
      taxes, documentary taxes, transfer taxes, mortgage taxes and intangible
      recording taxes xxx) filing
      and recording fees, and xxxi) brokerage
      fees. Borrower shall pay all costs and expenses incurred by Bank, including
      attorneys' fees, if the obligations or any part thereof are sought to be
      collected by or through an attorney at law, whether or not involving probate,
      appellate, administrative or bankruptcy proceedings. Borrower shall pay all
      costs and expenses of complying with the Loan Documents, whether or not such
      costs and expenses are included in the Budget. Borrower's obligations under
      this
      Section shall survive the delivery of the Loan Documents, the making of
      advances, the payment in full of the obligations, the release or termination
      of
      the Loan Documents, the foreclosure of the Deed of Trust or conveyance in lieu
      of foreclosure, any bankruptcy or other debtor relief proceeding, and any other
      event whatsoever.

     

    Section
      4.8. Further
      Assurances.
      Borrower will, on request of Bank, xxxii) promptly
      correct any defect, error or omission in any Loan Document; xxxiii) execute,
      acknowledge, deliver, procure, record or file such further instruments and
      do
      such further acts deemed necessary, desirable or proper by Bank to carry out
      the
      purposes of the Loan Documents and to identify and subject to the liens and
      security interest of the Loan Documents any property intended to be covered
      thereby, including any renewals, additions, substitutions, replacements, or
      appurtenances to the Property; xxxiv) execute,
      acknowledge, deliver, procure, file or record any document or instrument deemed
      necessary, desirable, or proper by Bank and to protect the liens or the security
      interest under the Loan Documents against the rights or interests of third
      persons; and xxxv) provide
      such certificates, documents, reports, information, affidavits and other
      instruments and do such further acts deemed necessary, desirable or proper
      by
      Bank to comply with the requirements of any agency having jurisdiction over
      Bank
      or any examiners of such agencies with respect to the Construction Loan,
      Borrower or the Property. Borrower shall pay all costs connected with any of
      the
      foregoing, which shall be a demand obligation owing by Borrower (which Borrower
      hereby promises to pay) to Bank pursuant to this Agreement. 

     

    
      
        
        

      

      
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    Section
      4.9. No
      Assignment.
      Borrower shall not assign, transfer or encumber its rights or obligations under
      any Loan Document or any proceeds of the Construction Loan without the prior
      written consent of Bank.

     

    Section
      4.10. Inducement
      to Bank.
      The
      representations and warranties contained in the Loan Documents xxxvi) are
      made to induce Bank to make the Construction Loan and Bank is relying thereon,
      and xxxvii) shall
      survive any bankruptcy proceedings involving Borrower or the Property,
      foreclosure, or conveyance in lieu of foreclosure.

     

    Section
      4.11. Omitted.

     

    Section
      4.12. Interpretation.
      References to "Dollars," "$," "money," "payments" or other similar financial
      or
      monetary terms are references to lawful money of the United States of America.
      References to Articles, Sections, and Exhibits are, unless specified otherwise,
      references to articles, sections and exhibits of this Agreement. Words of any
      gender shall include each other gender. Words in the singular shall include
      the
      plural and words in the plural shall include the singular. References to
      Borrower shall mean, each person comprising same, jointly and severally.
      References to persons shall include any legal entities, including public or
      governmental bodies, agencies or instrumentalities, and natural persons. The
      words "herein," "hereof," "hereunder" and other similar compounds of the word
      "here" shall refer to the entire Agreement and not to any particular provision
      or section. The words "include" and "including" shall be interpreted as if
      followed by the words "without limitation". Captions and headings in the Loan
      Documents are for convenience only and shall not affect the construction of
      the
      Loan Documents.

     

    Section
      4.13. No
      Partnership, etc.
      The
      relationship between Bank and Borrower is solely that of Bank and borrower.
      Bank
      has no fiduciary or other special relationship with or duty to Borrower and
      none
      is created by the Loan Documents. Nothing contained in the Loan Documents,
      and
      no action taken or omitted pursuant to the Loan Documents, is intended or shall
      be construed to create any partnership, joint venture, association, or special
      relationship between Borrower and Bank or in any way make Bank a co-principal
      with Borrower with reference to the Project, the Property or otherwise. In
      no
      event shall Bank's rights and interests under the Loan Documents be construed
      to
      give Bank the right to control, or be deemed to indicate that Bank is in control
      of, the business, properties, management or operations of Borrower.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    Section
      4.14. Records.
      The
      unpaid amount of the Construction Loan set forth on the books and records of
      Bank maintained in the ordinary course of its business shall be presumptive
      evidence of the amount thereof owing and unpaid, but failure to record any
      such
      amount on the books and records shall not limit or affect the obligations of
      Borrower under the Loan Documents to make payments on the Construction Loan
      when
      due.

     

    Section
      4.15. Exhibits.
      This
      Agreement includes the Exhibits listed below which are marked by "X", all of
      which Exhibits are attached hereto and made a part hereof for all purposes,
      it
      being agreed that if any Exhibit to be executed and delivered contains blanks,
      the same shall be completed correctly and in accordance with this Agreement
      prior to or at the time of the execution and delivery thereof.

     

    

      

        
          	 X	
                  Exhibit
                    "A"

                	-	
                  Legal
                    description of the Land

                
	 X	
                  Exhibit
                    "B"

                	-	
                  Basic
                    Information

                
	 X	
                  Exhibit
                    "C"

                	-	
                  Certain
                    Conditions to Initial Funding

                
	 X	
                  Exhibit
                    "D"

                	-	
                  Budget

                
	 X	
                  Exhibit
                    "E"

                	-	
                  Plans

                
	 X	
                  Exhibit
                    "F"

                	-	
                  Requisitions

                
	 X	
                  Exhibit
                    "F-1"

                	-	
                  Requisition
                    - Draw Request Information

                
	 X	
                  Exhibit
                    "G"

                	-	
                  Survey
                    Requirements

                
	 X	
                  Exhibit
                    "H"

                	-	
                  Architect's
                    Certificate

                


        

      

    

     

    Section
      4.16. Entire
      Agreement.
      The
      Loan Documents constitute the entire understanding and agreement between
      Borrower and Bank with respect to the transactions arising in connection with
      the Construction Loan and supersede all prior written or oral understandings
      and
      agreements between Borrower and Bank with respect to the matters addressed
      in
      the Loan Documents. 

     

    Section
      4.17. Mandatory
      Arbitration.
      Any
      controversy or claim between or among the parties hereto including but not
      limited to those arising out of or relating to this Agreement or any related
      agreements or instruments, including any claim based on or arising from an
      alleged tort, shall be determined by binding arbitration in accordance with
      the
      Federal Arbitration Act (or if not applicable, the applicable state law), the
      Rules of Practice and Procedure for the Arbitration of Commercial Disputes
      of
      Endispute, Inc., doing business as J.A.M.A./Endispute (J.A.M.S.), as amended
      from time to time, and the "Special Rules" set forth below. In the event of
      any
      inconsistency, the Special Rules shall control. Judgment upon any arbitration
      award may be entered in any court having jurisdiction. Any party to this
      Agreement may bring an action, including a summary or expedited proceeding,
      to
      compel arbitration of any controversy or claim to which this agreement applies
      in any court having jurisdiction over such action.

     

    (a)
      Special
      Rules.
      The
      arbitration shall be conducted in Nashville, Davidson County, Tennessee and
      administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is unable
      or legally precluded from administering the arbitration, then the American
      Arbitration Association will serve. All arbitration hearings will be commenced
      within 90 days of the demand for arbitration; further, the arbitrator
      shall
      only, upon a showing of cause, be permitted to extend the commencement of such
      hearing for up to an additional 60 days.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    (b)
      Reservations
      of Rights.
      Nothing
      in this Agreement shall be deemed to (i) limit the applicability of
      any
      otherwise applicable statutes of limitation or repose and any waivers contained
      in this Agreement; or (ii) be a waiver by Bank of the protection afforded
      to it by 12 U.S.C. § 91 or any substantially equivalent state law; or
      (iii) limit the right of Bank (A) to exercise self help remedies
      such
      as (but not limited to) setoff, or (B) to foreclose against any real
      or
      personal property collateral, or (C) to obtain from a court provisional
      or
      ancillary remedies such as (but not limited to) injunctive relief or the
      appointment of a receiver. Bank may exercise such self help rights, foreclose
      upon such property, or obtain such provisional or ancillary remedies before,
      during or after the pendency of any arbitration proceeding brought pursuant
      to
      this Agreement. At Bank's option, foreclosure under a deed of trust or mortgage
      may be accomplished by any of the following: the exercise of a power of sale
      under the deed of trust or mortgage, or by judicial sale under the deed of
      trust
      or mortgage, or by judicial foreclosure. Neither the exercise of self help
      remedies nor the institution or maintenance of an action for foreclosure or
      provisional or ancillary remedies shall constitute a waiver of the right of
      any
      party, including the claimant in any such action, to arbitrate the merits of
      the
      controversy or claim occasioning resort to such remedies.

     

    No
      provision in the Loan Documents regarding submission to jurisdiction and/or
      venue in any court is intended or shall be construed to be in derogation of
      the
      provisions in any Loan Document for arbitration of any controversy or
      claim.

     

    (Remainder
      of
      Page Intentionally Left Blank)

     

     

     

     

     

     

     

     


    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    


    THE
      WRITTEN 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.

     

    EXECUTED
      and DELIVERED as of the ___ day of ___________, 2005.

     

    
      	
              Borrower’s
                Address

              for
                Notices:

            	 	
              BORROWER:

            
	
               

              111
                Westwood Place, Suite 200

              Brentwood,
                Tennessee 37027

            	 	
              ARC
                HDV, LLC

            
	 	 	
              By:

            	 
	 	 	 
	 	 	
              Name:

            	 
	 	 	 
	 	 	
              Title:

            	 
	
              The
                Federal Tax Identification

              Number
                of Borrower: _______________

            	 	 


    

    


     

    
      	
              Bank’s
                Address

              for
                Notices:

            	 	
              BANK:

            
	
               

              TN1-100-08-07

              414
                Union Street, 4th Fl.

              Nashville,
                TN 37239-1697

              Attention:
                Healthcare Lending

            	 	
              BANK
                OF AMERICA, N.A.

               

            
	 	
              By:

            	 
	 	 
	 	
              Name:

            	 
	 	 
	 	 	
              Title:

            	 


    

    


     

    


    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     



    EXHIBIT
      "A"

     

    PARCEL
      NO. 1:

    


    THAT
      PORTION OF THE NORTHEAST QUARTER OF SECTION 16, TOWNSHIP 3 NORTH, RANGE 1 EAST
      OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA,
      DESCRIBED AS FOLLOWS:

    


    COMMENCING
      AT A HALF-INCH REBAR FOUND AT THE NORTH QUARTER CORNER OF SAID SECTION 16,
      FROM
      WHICH A ONE-INCH IRON BAR AT THE NORTHEAST CORNER OF SAID SECTION BEARS NORTH
      87
      DEGREES 41 MINUTES 30 SECONDS EAST, A DISTANCE OF 2691.76 FEET;

    


    THENCE
      NORTH 87 DEGREES 41 MINUTES 30 SECONDS EAST, ALONG THE NORTH LINE OF THE
      NORTHEAST QUARTER OF SAID SECTION, A DISTANCE OF 1043.98 FEET TO THE POINT
      OF
      BEGINNING;

    


    THENCE
      CONTINUING NORTH 87 DEGREES 41 MINUTES 30 SECONDS EAST, ALONG THE NORTH LINE
      OF
      SAID NORTHEAST QUARTER, A DISTANCE OF 827.66 FEET TO THE CENTERLINE OF PLAZA
      DEL
      RIO BOULEVARD AS SHOWN ON THE PLAZA DEL RIO MAP OF DEDICATION, ACCORDING TO
      BOOK
      344 OF MAPS, PAGE 47;

     

    THENCE
      SOUTH 02 DEGREES 18 MINUTES 30 SECONDS EAST, ALONG SAID CENTERLINE, A DISTANCE
      OF 658.71 FEET TO A HALF-INCH REBAR FOUND AT THE NORTHEAST CORNER OF THAT PARCEL
      OF LAND DESCRIBED AS 88-331437 OF OFFICIAL RECORDS OF MARICOPA
      COUNTY;

     

    THENCE
      SOUTH 87 DEGREES 41 MINUTES 30 SECONDS WEST, ALONG THE NORTH LINE OF SAID
      PARCEL, A DISTANCE OF 692.63 FEET TO A COTTON-SPINDLE WITH TAG (#24738) FOUND
      AT
      THE NORTHWEST CORNER OF SAID PARCEL;

     

    THENCE
      SOUTH 02 DEGREES 18 MINUTES 30 SECONDS EAST, ALONG THE WEST LINE OF SAID PARCEL,
      A DISTANCE OF 41.30 FEET TO A HALF-INCH REBAR FOUND;

     

    THENCE
      SOUTH 87 DEGREES 41 MINUTES 30 SECONDS WEST, A DISTANCE OF 105.01 FEET TO A
      POINT;

     

    THENCE
      NORTH 02 DEGREES 18 MINUTES 30 SECONDS WEST, A DISTANCE OF 307.06 FEET TO A
      BRASS CAP FOUND FLUSH;

     

    THENCE
      SOUTH 87 DEGREES 41 MINUTES 30 SECONDS WEST, A DISTANCE OF 30.02 FEET TO A
      HALF-INCH REBAR WITH CAP (LS #13562) FOUND AT THE SOUTHEAST CORNER OF THAT
      PARCEL DESCRIBED IN 89-277884 OF OFFICIAL RECORDS OF MARICOPA
      COUNTY;

     

    THENCE
      NORTH 02 DEGREES 18 MINUTES 30 SECONDS WEST, A DISTANCE OF 392.95 FEET TO THE
      POINT OF BEGINNING.

     

    PARCEL
      NO. 2:

     

    NON-EXCLUSIVE
      EASEMENTS FOR DRAINAGE, WALKWAY, PARKING AND ACCESS AS SET FORTH IN EASEMENT
      AGREEMENT RECORDED MARCH 31, 1997 AS 97-0763185 OF OFFICIAL RECORDS AND
      RE-RECORDED AS 97-0769793 OF OFFICIAL RECORDS; ASSIGNMENT OF EASEMENT RECORDED
      AS 98-1153322 OF OFFICIAL RECORDS AND FIRST AMENDMENT RECORDED AS 2000-0123884
      OF OFFICIAL RECORDS.

     

    


    
      
        
        

      

      
        Exhibit
          A
          - Page 1

        
          

        

      

      
        
        

      

    




    EXHIBIT
      "B"

     

    BASIC
      INFORMATION

     

    
      	
              A.

            	
              SPECIFIC
                DEFINITIONS:

            


    

     

    1. "Additional
      Land"
      means
      certain individual parcels that bisect the Land including closure of an existing
      public right-of-way, all as reflected in the approved Plans.

     

    2. "Agent
      to Request Advance"
      means
      Ross Roadman and/or Bill Sheriff.

     

    3. "Appraised
      Value"
      means
      $33,075,000.

     

    4. "Architect"
      means
      The Orcutt/Winslow Partnership.

     

    5. "Borrower"
      means
      ARC HDV, LLC.

     

    6. "Completion
      Date"
      means
      November 1, 2006.

     

    7. "Construction
      Account"
      means
      account no. _________________.

     

    8. "Improvements"
      means
      all on-site and off-site improvements to the Land for a 40-unit assisted living
      facility, all as reflected in the approved Plans for the Project, to be
      constructed on the Land, together with all fixtures, tenant improvements, and
      appurtenances now or later to be located on the Land and/or in such
      improvements.

     

    9. "Permitted
      Changes"
      means
      changes to the Plans or Improvements, provided the cost of any single change
      or
      extra does not exceed $50,000.00 and the aggregate amount of all such changes
      and extras (whether positive or negative) does not exceed
      $200,000.00.

     

    10. "Project"
      means
      the Land, the construction of the Improvements, and if applicable, the leasing
      and operation of the Improvements.

     

    11. "Title
      Insurer"
      means
      First American Title Insurance Company.

     

    
      	
              B.

            	
              GENERAL
                DEFINITIONS:

            


    

     

    1. "Architect's
      Certificate"
      means
      the Architect's Certificate attached hereto as Exhibit
      "H".

     

    2. "Budget"
      means
      the budget and cost itemization for the Project attached as Exhibit "D".

     

    3. "Deed
      of Trust"
      means
      the Deed of Trust, Assignment of Rents, Security Agreement and Financing
      Statement described in the Loan Agreement.

     

    4. "Default"
      is
      defined in Section 3.1.

     

    5. "Environmental
      Agreement"
      means
      the Environmental Indemnity Agreement dated of even date herewith, between
      Borrower and Bank.

     

    
      
        
        

      

      
        Exhibit
          B
          - Page 1

        
          

        

      

      
        
        

      

    

    6. "Land"
      means
      the real estate described in Exhibit "A".

     

    7. "Loan
      Agreement"
      means
      the Loan Agreement of even date herewith between Bank and Borrower, as the
      same
      may be amended, modified or restated from time to time.

     

    8. "Plans"
      means
      the plans and specifications listed in Exhibit "E".

     

    9. "Property"
      means
      Borrower's estate in the Land, the Improvements and all other property
      constituting the Project.

     

    10. "Title
      Insurance"
      means
      the title insurance described in Exhibit "C".

     

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

     

    


    
      
        
        

      

      
        Exhibit
          B
          - Page 2

        
          

        

      

      
        
        

      

    



    EXHIBIT
      "C"

     

    CERTAIN
      CONDITIONS PRECEDENT TO INITIAL FUNDING

     

    1. Fees
      and Expenses.
      Borrower shall have paid all other fees, costs and expenses then required to
      be
      paid pursuant to this Agreement and any other Loan Documents.

     

    2. Financial
      Statements.
      Bank
      shall have received and approved the Financial Statements of Borrower or any
      other party required by any loan application or commitment or otherwise required
      by Bank.

     

    3. Appraisal.
      Bank
      shall have received and approved a market value appraisal which appraises the
      Property on a "completed value" basis at not less than the Appraised Value.
      The
      appraiser and appraisal must be satisfactory to Bank (including satisfaction
      of
      applicable regulatory requirements) and the appraiser must be engaged directly
      by Bank.

     

    4. Draw
      Schedule and Budget.
      Bank
      shall have received and approved Borrower's proposed cash flow, draw schedule,
      and construction schedule, for the Project.

     

    5. Architect's
      Certificate; Budget.
      Bank
      shall have received the executed Architect's Certificate from the Architect.
      To
      the extent not previously delivered in final form, Borrower shall also prepare
      and deliver the final Budget to be attached as Exhibit “D”.

     

    6. Authorization.
      Bank
      shall have received and approved evidence Bank requires of the existence, good
      standing, authority and capacity of Borrower and American Retirement Corporation
      to execute, deliver, and perform the Loan Documents, including but not limited
      to:

     

    (a) For
      each
      partnership (including a joint venture): (i) a true and certified copy
      of
      an executed copy of the partnership agreement and all amendments thereto, and
      (ii) for each limited partnership, an original of the certificate of
      limited partnership accompanied by a certificate, dated within sixty (60) days
      of the Construction Loan closing, that the copy is true and complete issued
      by
      the appropriate governmental official of the jurisdiction of formation, and
      satisfactory evidence of registration or qualification to do business in the
      state where Borrower's principal place of business is located and the State
      where the Project is located.

     

    (b) For
      each
      corporation: (i) a certified copy of its articles of incorporation and
      by-laws, and all amendments thereto, (ii) a certificate of incumbency
      of
      all of its officers who will be authorized to execute or attest any of the
      Loan
      Documents, (iii) a copy of resolutions approving the Loan Documents
      and
      authorizing the transactions contemplated in this Agreement,
      (iv) certificates, dated within sixty (60) days of the Construction
      Loan
      closing, of existence, good standing and qualification to do business in the
      state of its creation and, if different, in the state where the Project is
      located, issued by the appropriate governmental officials.

     

    (c) For
      each
      limited liability company: (i) a certified copy of its Articles of
      Organization and Operating Agreement, and all amendments thereof, (ii) a
      Certificate of Incumbency of its managers or other individuals who will be
      authorized to execute or attest any of the Loan Documents, (iii) a copy
      of
      Resolutions approving the Loan Documents and authorizing the transactions
      contemplated in this Agreement, (iv) Certificates, dated within sixty
      (60)
      days of the Construction Loan Closing, of existence, good standing and
      qualification to do business in the state of its creation, and, if different,
      in
      the state where the project is located, issued by the appropriate governmental
      officials.

     

    
      
        
        

      

      
        Exhibit C
          - Page 1

        
          

        

      

      
        
        

      

    

    (d) All
      certificates, resolutions, and consents required by Bank applicable to the
      foregoing.

     

    7. Loan
      Documents.
      Borrower and each other person or entity required by Bank shall have duly
      executed, acknowledged and/or sworn to as required, recorded or filed, and
      delivered to Bank all Loan Documents then required by Bank, dated the date
      of
      this Agreement, all in form and content satisfactory to Bank.

     

    8. Opinions.
      Bank
      shall have received the written opinion of counsel satisfactory to Bank for
      the
      Borrower, addressed to Bank, dated the date of this Agreement.

     

    9. Survey;
      No Special Flood Hazard.
      Bank
      shall have received two (2) prints of an original survey of the Land and
      improvements thereon dated not more than sixty (60) days prior to the date
      of
      this Agreement (or dated such earlier date, if any, as is satisfactory to the
      Title Insurer, but in any event not more than one hundred eighty (180) days
      prior to the date of this Agreement) satisfactory to Bank and the Title Insurer
      and otherwise complying with Exhibit "G",
      together with a flood insurance policy in an amount equal to the lesser of
      the
      maximum Construction Loan amount or the maximum amount of flood insurance
      available under the Flood Disaster Protection Act of 1973, as amended, and
      otherwise in compliance with the requirements of the Loan Documents, or evidence
      satisfactory to Bank that none of the Land is located in a flood hazard
      area.

     

    10. Title
      Insurance.
      Bank
      shall have received and approved one or more title insurance policies, as Bank
      may require, issued by the Title Insurer, on a coinsurance and/or reinsurance
      basis if and as required by Bank, insuring that the Deed of Trust constitutes
      a
      valid first lien covering the Borrower's fee simple estates and all improvements
      thereon, and subject only to those exceptions and encumbrances (regardless
      of
      rank or priority) Bank approves, in a form acceptable to Bank and containing
      such affirmative coverages as may be required by Bank, and with all "standard"
      exceptions which can be deleted, including the exception for matters which
      a
      current survey would show, deleted to the fullest extent authorized under
      applicable title insurance rules, and Borrower shall satisfy all requirements
      therefore; containing no exception for standby fees or real estate taxes other
      than those for 2005 and no exception for subsequent assessments for prior years;
      providing full coverage against mechanics' and materialmen's liens to the extent
      authorized under applicable title insurance rules, and Borrower shall satisfy
      all requirements therefore; insuring that no restrictive covenants shown in
      the
      Title Insurance have been violated, and that no violation of the restrictions
      will result in a reversion or forfeiture of title; insuring that fee simple
      indefeasible or marketable (as coverage is available) fee simple title to the
      Land and Improvements is vested in Borrower; containing such endorsements as
      Bank may require and are available under applicable title insurance rules,
      and
      Borrower shall satisfy all requirements therefore; insuring any easements,
      leasehold estates or other matters appurtenant to or benefiting the Land and/or
      the Improvements as part of the insured estate; insuring the right of access
      to
      the Land to the extent authorized under applicable title insurance rules, and
      Borrower shall satisfy all requirements therefore; and containing provisions
      acceptable to Bank regarding advances of Construction Loan amounts after
      closing. 

     

    
      
        
        

      

      
        Exhibit C
          - Page 2

        
          

        

      

      
        
        

      

    

    11. Plans.
      Bank
      shall have received and approved two (2) true and correct copies of all existing
      Plans (including the site plan), together with satisfactory evidence that all
      applicable governmental authorities, Borrower, Borrower's architect, engineer,
      and contractors have approved the same.

     

    12. Contracts.
      At the
      request of Bank, Bank shall have received and approved (a) a list
      containing the names and addresses of all existing contractors, architects,
      engineers, and other suppliers of services and materials for the Project, their
      respective contract amounts, and a copy of their contracts; and (b) duly
      executed, acknowledged and delivered originals from each contractor, architect,
      engineer, subcontractor, or supplier of services or materials required by Bank,
      of (i) consents or other agreements satisfactory to Bank and
      (ii) agreements satisfactory to Bank subordinating all rights, liens,
      claims and charges they may have or acquire against Borrower or the Property
      to
      the rights, liens and security interests of Bank.

     

    13. Insurance
      Policies.
      Bank
      shall have received and approved the insurance policies initially required
      by
      Bank, pursuant to the Loan Documents, together with evidence satisfactory to
      Bank that all premiums therefore have been paid and that the policies are in
      full force and effect.

     

    14. Environmental
      Compliance/Report.
      Bank
      shall have received and approved evidence satisfactory to Bank that no portion
      of the Land is "wetlands" under any applicable law and that the Land does not
      contain and is not within or near any area designated as a hazardous waste
      site
      by any governmental authority, that neither the Property nor any adjoining
      property contains or has ever contained any substance classified as hazardous
      or
      toxic (or otherwise regulated, such as, without limitation, asbestos, radon
      and/or petroleum products) under, and that neither the Property nor any use
      or
      activity thereon violates or is or could be subject to any response,
      remediation, clean-up or other obligation under, any law or governmental
      requirement pertaining to health or the environment, including without
      limitation, a written report of an environmental assessment of the Property,
      made by an engineering firm, and of a scope and in form and content satisfactory
      to Bank, complying with Bank's established guidelines, showing that there is
      no
      evidence of any such substance which has been generated, treated, stored,
      released or disposed of in the Property, and such additional evidence as may
      be
      required by Bank. All reports, drafts of reports, and recommendations, whether
      written or oral, from such engineering firm shall be made available and
      communicated to Bank.

     

    15. Soil
      Reports.
      Bank
      shall have received and approved a soil composition test and any other tests
      reasonably deemed necessary by Bank, satisfactory to Bank, and performed by
      a
      licensed professional engineer satisfactory to Bank, if requested by
      Bank.

     

    16. Access,
      Utilities, and Laws.
      Bank
      shall have received and approved (a) satisfactory evidence that the
      Property abuts and has fully adequate direct and free access to one or more
      public streets, dedicated to public use, fully installed and accepted by the
      appropriate governmental authority, that all costs and expenses of the
      installation and acceptance thereof have been paid in full, and that there
      are
      no restrictions on the use and enjoyment of such streets which would adversely
      affect the Project; (b) letters from the applicable utility companies
      or
      governmental authorities confirming that all utilities necessary for the
      Improvements are available at the Land in sufficient capacity, together with
      evidence satisfactory to Bank of paid impact fees or utility reservation
      deposits or connection fees required to assure the timely availability of such
      services; (c) satisfactory evidence that all applicable zoning ordinances,
      restrictive covenants and governmental requirements affecting the Property
      permit the use for which the Property is intended and have been or will be
      complied with without the necessity of variance and without the Property being
      a
      nonconforming use; (d) evidence satisfactory to Bank that the Land and
      Improvements comply and will comply with all laws and governmental requirements
      regarding subdivision and platting and would so comply if the Land and the
      Improvements thereon were conveyed as a separate parcel; (e) a true
      and
      correct copy of a valid building permit for the Improvements, together with
      all
      other permits and approvals necessary for construction of the Improvements;
      and
      (f) evidence satisfactory to Bank of compliance by Borrower and the
      Property, and the proposed construction, use and occupancy of the Improvements,
      with such other applicable laws and governmental requirements as Bank may
      request, including all laws and governmental requirements regarding access
      and
      facilities for handicapped or disabled persons including, without limitation
      and
      to the extent applicable, The Federal Architectural Barriers Act (42 U.S.C.
      § 4151 et seq.), The Fair Housing Amendments Act of 1988 (42 U.S.C.
§ 3601 et seq.), The Americans With Disabilities Act of 1990 (42 U.S.C.
      § 12101 et seq.), The Rehabilitation Act of 1973 (29 U.S.C. § 794) and
      any applicable state requirements.

     

    
      
        
        

      

      
        Exhibit C
          - Page 3

        
          

        

      

      
        
        

      

    

    17. Parking.
      Bank
      shall have received evidence satisfactory to the Bank that there is sufficient
      onsite parking for the improvements to be constructed thereon.

     

    18. Omitted.

     

    19. Tax
      and Standby Fee Certificates.
      Bank
      shall have received and approved satisfactory evidence (a) of the identity
      of all taxing authorities and utility districts (or similar authorities) having
      jurisdiction over the Property or any portion thereof; (b) that all
      taxes,
      standby fees, impact fees, and any other similar charges have been paid,
      including copies of receipts or statements marked "paid" by the appropriate
      authority; and (c) that the Land is a separate tax lot or lots with
      separate assessment or assessments of the Land and Improvements, independent
      of
      any other land or improvements, or will be reassessed shortly after Closing
      to
      reflect same.

     

    20. Omitted.

     

    21. Compliance
      With Warranties.
      All
      representations and warranties of the Borrower contained in this Agreement
      shall
      be true and correct as of the date of disbursement.

     

    22. Omitted.

     

    23. Other
      Documents.
      Borrower and any other person or entity, shall have delivered to Bank, in form
      and content satisfactory to Bank, such other documents and certificates as
      Bank
      may reasonably request.

     

     

    
      
        
        

      

      
        Exhibit C
          - Page 4

        
          

        

      

      
        
        

      

    



    EXHIBIT
      "D"

     

    BUDGET

     

    Certified
      Cost Breakdown to be supplied by Borrower

     

     

     

     

     

     

     

     

     

    


    
      
        
        

      

      
        Exhibit D
          - Page 1

        
          

        

      

      
        
        

      

    



    EXHIBIT
      "E"

     

    PLANS

     

    (See
      Bank
      file)

     

     

     

     

     

     

     

     

    


    
      
        
        

      

      
        Exhibit E
          - Page 1

        
          

        

      

      
        
        

      

    




    EXHIBIT
      "F"

     

    ADVANCES

     

    1. Requisition.
      A
      "Requisition" means a properly completed and executed written application by
      the
      Agent to Request Advance to Bank in the form of Exhibit
      "F-1"
      (or in
      another form approved by Bank) setting forth the amount of Construction Loan
      proceeds desired, together with such schedules, affidavits, releases, waivers,
      statements, invoices, bills, and other documents, certificates and information
      required by Bank. At least five (5) business days before the requested date
      of
      each advance, Borrower shall deliver a Requisition to Bank. Borrower shall
      be
      entitled to an advance only in an amount approved by Bank in accordance with
      the
      terms of this Agreement and the Loan Documents. Bank shall not be required
      to
      make advances more frequently than once each calendar month. Bank shall, only
      upon the satisfaction of all applicable conditions of this Agreement and the
      Loan Documents, make the requested advance to Borrower on a business day within
      five (5) business days after such satisfaction. Each Requisition, and Borrower's
      acceptance of any advance, shall be deemed to ratify and confirm that all
      representations and warranties in the Loan Documents remain true and correct
      as
      of the date of the Requisition and the advance, respectively.

     

    2. Advances.
      Subject
      to Section 6 of this Exhibit "F"
      all
      advances made to Borrower shall be disbursed in accordance with the terms
      hereof. All such advances shall be for payments of the costs and expenses
      specified in the Budget for which the advances were made, and for no other
      purpose. Following receipt and approval of a Requisition, all supporting
      documentation and information, Bank will determine the amount of the advance
      it
      will make in accordance with this Agreement, the Loan Documents and the Budget
      and the following standards:

     

    (a) For
      construction work advances will initially be made on the basis of ninety percent
      (90%) of the costs shown on the application for payment from the contractor
      reviewed and approved by Bank of the work or material in place on the
      Improvements that comply with the terms of the Loan Documents, minus all
      previous advances and all amounts required to be paid by Borrower, as described
      in Columns (B) and (C) of the Budget, until the Project is fifty percent
      (50%) complete; thereafter, no additional retainage will be required and
      advances will be funded on the basis of one hundred percent (100%) of the costs
      shown on the application.

     

    (b) Advances
      will not be made for building materials or furnishings that are not yet
      incorporated into the Improvements ("stored materials") unless the stored
      materials are in Borrower's possession and satisfactorily stored on the
      Land.

     

    3. Omitted.

     

    4. Conditions
      to All Advances. As conditions precedent to Bank’s approval of each advance made
      pursuant to a Requisition in addition to all other requirements contained in
      the
      other Loan Documents, Borrower must satisfy the following conditions as
      determined by Bank:

     

    (a) properly
      completed Requisition with all supporting information.

     

    
      
        
        

      

      
        Exhibit F
          - Page 1

        
          

        

      

      
        
        

      

    

    (b) No
      Default or any event which, with the giving of notice or the lapse of time,
      or
      both, could become a Default exists.

     

    (c) The
      representations and warranties made in the Loan Documents must be true and
      correct on and as of the date of each advance.

     

    (d) Each
      subcontract or other contract for labor, materials, services and/or other work
      included in a Draw Request shall have been duly executed and delivered by all
      parties thereto and shall be effective, and Bank shall have received a true,
      complete copy of a fully executed copy of each such subcontract or other
      contract as Bank may have requested.

     

    (e) No
      mechanics or materialmen's lien or other encumbrance shall have been filed
      and
      remain in effect against the Property, and releases or waivers of mechanics'
      liens and receipted bills showing payment of all amounts due to all parties
      who
      have furnished materials or services or performed labor of any kind in
      connection with the Property shall have been obtained or Borrower shall bond
      off
      under the provisions of applicable law any lien or claim of lien filed for
      record, within thirty (30) days of the date of notice to Borrower of filing
      of
      said claim.

     

    (f) The
      Title
      Insurance shall have been endorsed and down-dated in a manner satisfactory
      to
      Bank to increase the coverage by the amount of each advance through the date
      of
      each such advance with no additional title change or exception not approved
      by
      Bank.

     

    (g) To
      the
      extent requested by Bank, Bank shall have received written certification by
      Borrower's architect, that to the best of such party's knowledge, information,
      and belief, construction is in accordance with the Plans, the quality of the
      work for which the advance is requested is in accordance with the applicable
      contract, the amount of the advance requested represents work in place based
      on
      on-site observations and the data compromising the Draw Request, the work has
      progressed as indicated, and the applicable contractor is entitled to payment
      of
      the amount certified.

     

    (h) To
      the
      extent requested by Bank, Bank shall have received (i) a foundation
      survey
      made immediately after, but in no event later than ten (10) days after, the
      laying of the foundation of each building or structure of the Improvements
      satisfactory to Bank complying with Exhibit "G",
      (ii) a certificate of Borrower's architect stating that based on personal
      inspection, the foundations have been completed in accordance with the Plans
      and
      are satisfactory in all respects, and (iii) a bearing-capacity test
      report
      with respect to the excavated footings and foundations, reviewed and approved
      by
      the Borrower's architect.

     

    (i) To
      the
      extent requested by Bank, Bank shall have received within ten (10) days after
      the pouring of concrete for any Improvements, a report satisfactory to Bank
      of
      the results of concrete tests made at the time the concrete is
      poured.

     

    (j) Bank
      shall have received within ten (10) days after the compaction of any soil for
      construction, a report satisfactory to Bank of the results of soil tests, if
      applicable.

     

    (k) As
      of the
      date of making such advance, no event shall have occurred, nor shall any
      condition exist, that could have an adverse effect on the enforceability of
      the
      Loan Documents, be materially adverse to the financial condition of Borrower,
      impair the ability of Borrower to fulfill its material obligations under the
      Loan Documents, or otherwise have any adverse effect whatsoever on the
      Property.

     

    
      
        
        

      

      
        Exhibit F
          - Page 2

        
          

        

      

      
        
        

      

    

    (l) The
      Improvements shall not have been damaged and not repaired.

     

    (m) Borrower
      shall have paid all amounts required to be paid by Borrower under the
      Budget.

     

    (n) Borrower
      shall have made the Borrower's Deposit if required by Section 1.4 of
      this
      Agreement.

     

    (o) Borrower
      shall have delivered to Bank such other information, documents and supplemental
      legal opinions as may be required by Bank.

     

    (p) With
      respect to any advance to pay a contractor, Bank shall have received original
      applications for payments in form approved by Bank, containing a breakdown
      by
      trade and/or other categories acceptable to Bank, executed and certified by
      each
      contractor and Borrower's architect, accompanied by invoices.

     

    (q) Borrower
      shall provide Bank with copies of all field reports of the Project architect
      and
      engineer at Bank's request.

     

    5. Final
      Advance for Improvements. The final advance for the Improvements (including
      retainage) shall not be made until thirty (30) days after the Bank shall have
      received the following:

     

    (a) Certificates
      from Borrower's architect, engineer and contractor, certifying that the
      Improvements (including any off-site improvements) have been completed in
      accordance with, and as completed comply with, the Plans and all laws and
      governmental requirements; and Bank shall have received two (2) sets of detailed
      "as built" Plans approved in writing by Borrower, Borrower's architect, and
      each
      contractor, including plans and specifications for architectural, structural,
      mechanical, plumbing, electrical and site development (including storm drainage,
      utility lines and landscaping) work.

     

    (b) Final
      affidavits (in a form approved by Bank) from Borrower's architect, engineer,
      and
      each contractor certifying that each of them and their subcontractors, laborers,
      and materialmen has been paid in full for all labor and materials for
      construction of the Improvements; and final lien releases or waivers (in a
      form
      approved by Bank) by Borrower's architect, engineer, contractor, and all
      subcontractors, materialmen, and other parties who have supplied labor,
      materials, or services for the construction of the Improvements, or who
      otherwise might be entitled to claim a contractual, statutory or constitutional
      lien against the Property.

     

    (c) The
      Title
      Insurance shall be endorsed to remove any exception for mechanics' or
      materialmen's liens or pending disbursements, with no additional title change
      or
      exception objectionable to Bank, and with such other endorsements required
      by
      Bank.

     

    (d) Evidence
      satisfactory to Bank that all laws and governmental requirements have been
      satisfied, including receipt by Borrower of all necessary governmental licenses,
      certificates of need and permits (including certificates of occupancy) with
      respect to the completion, use, occupancy and operation of the Improvements,
      together with evidence satisfactory to Bank that all such licenses,
      certificates, and permits are in full force and effect and have not been
      revoked, canceled or modified.

     

    
      
        
        

      

      
        Exhibit F
          - Page 3

        
          

        

      

      
        
        

      

    

    (e) Two
      (2)
      copies of a final as-built survey satisfactory to Bank and complying with
Exhibit
      "G".

     

    6. Omitted.

     

    7. Conditions
      and Waivers.
      All
      conditions precedent to the obligation of Bank to approve any advance are
      imposed hereby solely for the benefit of Bank and the parties under the Loan
      Documents, and no other party may require satisfaction of any such condition
      precedent or be entitled to assume that Bank will refuse to make any advance
      in
      the absence of strict compliance with such conditions precedent. Any requirement
      of this Agreement may be waived, in whole or in part, in a specific written
      waiver intended for that purpose and signed by Bank. Bank shall have the right
      to approve and verify the periodic progress, costs incurred by Borrower, and
      the
      estimated costs remaining to be incurred. No advance shall constitute an
      approval or acceptance by Bank of any construction work, a waiver of any
      condition precedent to any further advance, or preclude Bank from thereafter
      declaring the failure of Borrower to satisfy such condition precedent to be
      a
      Default. No waiver by Bank of any condition precedent or obligation shall
      preclude Bank from requiring such condition or obligation to be met prior to
      making any other advance or from thereafter declaring the failure to satisfy
      such condition or obligation to be a Default.

     

     

     

     

     

     

     


    
      
        
        

      

      
        Exhibit F
          - Page 4

        
          

        

      

      
        
        

      

    


    EXHIBIT
      "F-1"

     

    REQUISITION

     

    


     

    Borrower
      shall use AIA Forms G702 and G703 for all draw requests.

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        Exhibit F
          - Page 5

        
          

        

      

      
        
        

      

    



    EXHIBIT
      "G"

     

    SURVEY
      REQUIREMENTS

     

    1. Field
      Note Description.
      The
      Survey shall contain a certified metes and bounds description complying with
      the
      following: (i) the beginning point shall be established by a monument
      located at the beginning point, or by reference to a nearby monument;
      (ii) the sides of the Land shall be described by giving the distances
      and
      bearings of each; (iii) the distances, bearings, and angles shall be
      taken
      from an instrument survey by a registered professional engineer or registered
      professional land surveyor; (iv) curved sides shall be described by
      data
      including: length of arc, central angle, radius of circle for the arc and chord
      distance, and bearing; (v) the description shall be a single perimeter
      description of the entire Land. If and as instructed, there shall also be a
      separate metes and bounds description of one or more constituent tracts out
      of
      the Land; (vi) the description shall include a reference to all streets,
      alleys, and other rights-of-way that abut the Land, and the width of all
      rights-of-way mentioned shall be given the first time these rights-of-way are
      referred to; (vii) for each boundary line abutting a street, road, alley
      or
      other means of access, the description must, in calling the boundary line,
      state
      that the boundary line and the right-of-way line are the same; (viii) if
      the Land has been recorded on a map or plat as part of an abstract or
      subdivision, reference to such recording data shall be made; and (ix) the
      total acreage and square footage of the Land shall be certified.

     

    2. Lot
      and Block Description.
      If the
      Land consists of one or more complete lots or blocks included within a properly
      established recorded subdivision or addition, then a lot and block description
      will be an acceptable substitute for a metes and bounds description, provided
      that the lot and block description must completely and properly identify the
      name or designation of the recorded subdivision or addition and give the
      recording information therefore.

     

    3. Map
      or
      Plat.
      The
      Survey shall also contain a certified map or plat clearly showing the following:
      (i) the Land; (ii) the relation of the point of beginning of
      the Land
      to the monument from which it is fixed; (iii) all easements, streets,
      roads, alleys and rights-of-way on or abutting the Land, showing recording
      information therefore by volume and page; (iv) if the Land has been
      recorded on a map or plat as part of an abstract or subdivision, all survey
      lines must be shown, and all lot and block lines (with distances and bearings)
      and numbers, must be shown; (v) the established building setback lines,
      if
      any, including those by restrictive covenant, recorded plat and zoning ordinance
      (identifying the source in each case, by volume and page reference if
      applicable); (vi) all easements appurtenant to said Land, with recording
      information by volume and page; (vii) the boundary lines of the street
      or
      streets abutting the Land and the width of said streets and the width of the
      rights-of-way therefore; (viii) the distance from the nearest intersecting
      street or road to the Land; (ix) all structures and improvements on
      the
      Land (with designation and dimensions of each party wall, if any) with
      horizontal lengths of all sides and the relation thereof by distances to
      (A) all boundary lines of the Land, (B) easements,
      (C) established building lines and (D) street lines; (x) the
      types of materials comprising the exterior walls and roofs of all buildings;
      (xi) all street addresses of improvements on the Land; (xii) all
      curb
      cuts, driveways, fences, sidewalks, stoops and landscaping; (xiii) the
      number of stories of all multi-story structures; (xiv) the location,
      type
      and size of all utility lines as they service the Land and improvements (sewer,
      water, gas, electric and telephone); (xv) all encroachments and
      protrusions, if any, from or upon the Land or any improvements thereon or upon
      any easement, building setback line or other restricted area, with exact
      measurements; (xvi) all parking and paved areas, including the number
      of
      vehicles that may be parked; (xvii) all distances, angles and other
      calls
      contained in the legal description; (xviii) the location, type and size
      of
      all monuments, and as to each monument, indication whether it was found or
      placed by the surveyor; (xix) the boundaries of any flood hazard area
      or
      flood plain area in which any part of the Land lies, with the map number, date
      and source (governmental authority) of each flood map shown; (xx) all
      surface water bodies or courses; (xxi) the date of any revisions subsequent
      to the initial survey prepared pursuant to these requirements; (xxii) a
      legend explaining the meaning of all symbols used on the plat; and
      (xxiii) the scale of all distances and dimensions on the plat.

     

    
      
        
        

      

      
        Exhibit G
          - Page 1

        
          

        

      

      
        
        

      

    

    4. Certification.
      The
      certification for the property description and the map or plat shall be
      addressed to Bank, Borrower and the Title Insurer, signed by the surveyor (a
      registered professional land surveyor or registered professional engineer),
      bearing current date, registration number, and seal, and shall be in form
      reasonably acceptable to Bank.

     

    


     

    
      
        
        

      

      
        Exhibit G
          - Page 2

        
          

        

      

      
        
        

      

    




    EXHIBIT
      "H"

     

    ARCHITECT'S
      CERTIFICATE

     

    The
      undersigned ("Architect") hereby states the following to Bank of America, N.A.,
      a national banking association ("Lender"), regarding the Plans and
      Specifications described on the Schedule
      of Plans and Specifications
      attached
      hereto ("Plans and Specifications"), and any agreements ("Agreements") between
      Architect and ARC HDV, LLC ("Borrower") or American Retirement Corporation
      pertaining to the construction of the improvements described in the Plans and
      Specifications (the "Improvements"), such Improvements to be located upon
      certain land in Peoria, Maricopa County, Arizona, as more particularly described
      in Exhibit "A",
      attached hereto and made a part hereof by reference (said land and the
      Improvements being collectively referred to as the "Property"). Architect
      further represents and warrants to and agrees with Lender as
      follows:

     

    1. Architect
      is licensed and authorized to practice architecture under the laws of the State
      of Arizona and is familiar with the federal, state, and local laws and
      ordinances relevant to the construction of the Improvements. Architect prepared
      all of the Plans and Specifications or such Plans and Specifications were
      prepared under Architect's supervision and direction, and Architect is
      responsible therefore.

     

    2. Attached
      hereto as Exhibit "B"
      is a
      true and complete copy of all written Agreements.

     

    3. The
      Plans
      and Specifications are final, complete and adequate for the construction of
      the
      Improvements, and, as of the date hereof, there have been no modifications
      thereof except as described on the attached Schedule.

     

    4. To
      the
      best of Architect's professional knowledge (a) the Improvements, if
      constructed in accordance with the Plans and Specifications, will fully comply
      with all applicable governmental statutes, ordinances, codes, and regulations
      (including but not limited to those relating to access and facilities for
      handicapped persons), applicable restrictive covenants and the approved site
      plan; and (b) the structural design of the Improvements, the proposed
      method of construction, the foundation plan, and the materials specified by
      the
      Plans and Specifications for the project are adequate and appropriate for the
      contemplated Improvements and for the soil conditions at the construction
      site.

     

    5. Architect
      has no counterclaim, right of set-off, defense or like right against Lender
      or
      Borrower, and Architect acknowledges that Architect has been paid in full for
      all services and costs in connection with the Agreements and the Plans and
      Specifications and the preparation thereof except fees to be paid hereafter
      for
      additions or changes thereto or for inspection of construction of the
      Improvements.

     

    6. If
      Borrower defaults in making any payment or in performing any other obligation
      under the Agreements, Architect shall promptly give Lender written notice
      thereof. If Architect learns of any default in payment due to any subcontractor
      or other person supplying labor or materials in connection with the
      architectural work for the project, Architect shall similarly advise Lender
      thereof.

     

    
      
        
        

      

      
        Exhibit H
          - Page 1

        
          

        

      

      
        
        

      

    

    7. Nothing
      herein shall be construed to create any duty owing by Lender to Architect.
      Architect is executing this Certificate to induce Lender to make a loan to
      Borrower pursuant to that certain Loan Agreement by and between Borrower and
      Lender, and Architect understands that Lender would not do so but for
      Architect's execution and delivery of this Certificate.

     

    Executed
      this _____ day of ___________, 2005.

     

    
      	
              ARCHITECT

            
	 
	
              By:

            	 
	
              Name:

            	 
	
              Title:

            	 


    

    


     


    
      
        
        

      

      
        Exhibit H
          - Page 2

        
          

        

      

      
        
        

      

    


    EXHIBIT
      "A"

     

    Property

     

     

     

     

     

     

     


    
      
        
        

      

      
        Exhibit H
          - Page 3

        
          

        

      

      
        
        

      

    


    EXHIBIT
      "B"

     

    Agreements

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        Exhibit H
          - Page 4