Exhibit 10.4

LOAN AGREEMENT


          THIS
LOAN AGREEMENT (this “Agreement”)
is made and entered into this _____ day of March, 2004, by and between ARC
WESTOVER HILLS, L.P., a Tennessee limited partnership (hereinafter called
“Borrower”), and GUARANTY BANK, a federal savings bank (hereinafter called
“Lender”);


ARTICLE I

DEFINITIONS

	
   
	
  1.1     Defined Terms.  As used in this Agreement, the following
  terms shall have the meanings shown:

	
   
	
   

	
   
	
            “Administrative
  Notices”.  All (i) Deficiency
  Notices, (ii) all Agency inspection reports, audits, surveys, investigations,
  reviews and evaluations, and (iii) all notices and written communications
  from any state or any Agency relating to material adjustments in
  reimbursement amounts or to rate reviews, modifications of rates, inflation
  adjustments, rate agreements, and the like.

	
   
	
   

	
   
	
            “Agency”.  The Health Care Financing Administration,
  the Drug Enforcement Administration, the Environmental Protection Agency, any
  other state or federal licensing or regulatory authority (including any
  licensing or regulatory authority responsible for administering or dispensing
  Medicaid or Medicare payments or any other third party payor billing
  policies, procedures, limitations or restrictions), or any other public or
  private agency or organization, including without limitation, any public or
  private accreditation agency or organization.

	
   
	
   

	
   
	
            “Annual
  Debt Coverage Ratio Test” – As defined in Section 3.1(n).

	
   
	
   

	
   
	
            “Business
  Day” means a day (other than a Saturday or Sunday) on which banks are
  open for business in New York City, New York.

	
   
	
   

	
   
	
            “Debt
  Coverage Ratio” – A ratio, as reasonably determined by Lender, the first
  number of which is the Net Operating Income from the Property for the period
  in question and the second of which is Debt Service for such period.

	
   
	
   

	
   
	
            “Debt
  Service”. The actual debt service on the Note.

	
   
	
   

	
   
	
            “Deficiency
  Notices”.  All notices and other
  written communications from any Agency or Governmental Authority which licenses,
  regulates, certifies, accredits or evaluates the Property Related Persons,
  the Property or the operation of the Property by the Property Related Persons
  alleging that the Property Related Persons, the Property or the operation of
  the Property by the Property Related Persons in whole or in part fails to
  comply or, if corrective action is not taken, shall fail to comply with, any
  or all of the Agency’s or Governmental Authority’s requirements for and
  conditions of licensing, regulation, certification or accreditation by or
  participation in programs of the Agency or Governmental Authority or
  otherwise relating to the continuous operation of all or any portion of the
  Property or the programs of the Property Related Persons or the eligibility
  or entitlement of the Property Related Persons to receive reimbursement from
  any Agency or Governmental Authority.




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            “Facility”
  means a 91-unit senior housing facility.

	
   
	
   

	
   
	
            “GAAP”.  Generally accepted accounting principles,
  as from time-to-time in effect in the United States of America, or such
  alternative accounting standard as may be acceptable to the Lender,
  consistently applied.

	
   
	
   

	
   
	
            “Governmental
  Authority”.  The United States,
  the state, the county and the city or any other political subdivision in
  which the Property is located, and any other political subdivision, agency or
  instrumentality having jurisdiction over the Property or any of the Property
  Related Persons.

	
   
	
   

	
   
	
            “Governmental
  Requirements”.  All laws, ordinances,
  statutes, codes, rules, regulations, orders and decrees of any Governmental
  Authority applicable to any of the Property Related Persons or the Property.

	
   
	
   

	
   
	
            “Guarantor”.  American Retirement Corporation, a
  Tennessee corporation.

	
   
	
   

	
   
	
            “Healthcare
  Information Laws”.  As defined in
  Section 3.1(k).

	
   
	
   

	
   
	
            “HIPPA”.  As defined in Section 3.1(k).

	
   
	
   

	
   
	
            “Licenses”.  Any and all licenses, operating permits,
  franchises, and other licenses, authorizations, certifications, permits, or
  approvals, other than construction permits, issued by, or on behalf of, any
  Governmental Authority now existing or at any time hereafter issued, with
  respect to the acquisition, construction, renovation, expansion, leasing,
  ownership and/or operation of the Property, accreditation of the Property,
  any and all operating licenses issued by any Governmental Authority, any and
  all pharmaceutical licenses and other licenses related to the purchase,
  dispensing, storage, prescription or use of drugs, medications, and other
  “controlled substances,” and any and all licenses relating to the operation
  of food or beverage facilities or amenities, if any.

	
   
	
   

	
   
	
            “Loan”.  The $7,177,500 loan made this date by
  Lender to Borrower and evidenced by the Note.

	
   
	
   

	
   
	
            “Managed
  Care Plans”.  Any health
  maintenance organization, preferred provider organization, individual
  practice association, competitive medical plan, referral service or similar
  arrangement, entity, organization, or Person.

	
   
	
   

	
   
	
            “Management
  Agreement”.  The Management
  Agreement dated January 1, 2002, by and between Manager and the Borrower,
  applicable to the Facility, as the same may be amended from time to time.

	
   
	
   

	
   
	
            “Manager”.  ARC Management, LLC, a Tennessee limited liability
  company, and any successor manager of the Facility approved by Lender in
  writing.

	
   
	
   




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            “Material
  Adverse Change”.  As to the
  specified Person, a material adverse change in the business, operations,
  property, condition (financial or otherwise) or prospects of such Person and,
  in addition, as to the Borrower, any material adverse change in (i) the
  ability of the Borrower to perform its obligations under this Agreement or
  any of the other Loan Documents or (ii) the validity or enforceability of
  this Agreement or any of the other Loan Documents or the rights or remedies
  of the Lender hereunder or thereunder.

	
   
	
   

	
   
	
            “Net
  Operating Income”.  The gross
  annual income received by Borrower from the operation of the Property for a
  12 month period, less expenses incurred and/or paid by Borrower in connection
  with the operation and maintenance of the Property that are allocable to such
  period, computed on an accrual basis without regard to depreciation or debt
  service, but otherwise in accordance with generally accepted accounting
  principles consistently applied. 
  Included within the expenses shall be a management fee equal to the
  greater of (i) the actual management fee or (ii) an assumed management fee of
  5%, and annual capital expenditures equal to the greater of (x) actual
  capital expenditures or (y) $300 per unit. 
  Documentation of Net Operating Income and expenses shall be certified
  by an officer of Borrower with detail satisfactory to Lender and shall be
  subject to the approval of Lender.

	
   
	
   

	
   
	
            “Note”.  The $7,177,500 promissory note dated as of
  the date hereof from Borrower to Lender.

	
   
	
   

	
   
	
            “Operating
  Agreements and Management Contracts”. 
  Any and all contracts and agreements previously, now or at any time
  hereafter entered into by the Property Related Persons with respect to the
  acquisition, construction, renovation, expansion, ownership, operation,
  maintenance, use or management of the Property or otherwise concerning the
  operations and business of the Property, including, without limitation, the
  Management Agreement, any and all service and maintenance contracts, any
  employment contracts, any and all management and operating agreements, any
  and all consulting agreements, laboratory servicing agreements, pharmaceutical
  contracts, physician, other clinician or other professional services provider
  contracts, therapy referral, food and beverage service contracts, and other
  contracts for the operation and maintenance of, or provision of services to,
  the Property.

	
   
	
   

	
   
	
            “Participation
  Agreements”.  Any and all third
  party payor participation or reimbursement agreements now or at any time
  hereafter existing for the benefit of the Property Related Persons relating
  to rights to payment or reimbursement from, and claims against, private
  insurers, Managed Care Plans, employee assistance programs, Blue Cross and/or
  Blue Shield, federal, state and local Governmental Authorities, including
  without limitation, Medicare, Medicaid, TRICARE, VA and other third party
  payors.

	
   
	
   

	
   
	
            “Person”.  An individual, a general or limited
  partnership, a limited liability company, a limited liability partnership, a
  corporation, a business trust, a joint stock company, a trust, an
  unincorporated association, a joint venture, a Governmental Authority or
  other entity of whatever nature

	
   
	
   

	
   
	
            “Property”.  As defined in the Security Instrument.

	
   
	
   

	
   
	
            “Property
  Related Persons”.  Borrower and Manager.




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            “Repairs”.  As defined in Section 3.1(l).

	
   
	
   

	
   
	
            “Replacement
  Reserve Escrow Account”.  As
  defined in Section 3.1(l).

	
   
	
   

	
   
	
            “Resident
  Agreements”.  Any and all
  contracts and agreements executed by, or on behalf of any resident or other
  Person seeking residency or occupancy in the Property and related services
  from the Property Related Person.

	
   
	
   

	
   
	
            “Security
  Instrument”.  That certain Deed of
  Trust, Security Agreement and Fixture Filing dated as of the date hereof made
  by Borrower for the benefit of Lender.

	
   
	
   

	
   
	
            “State
  Mandated Reserve Account”.  As
  defined in Section 3.1(o).

	
   
	
   

	
   
	
            “Treasury
  Note Rate”  means the latest
  Treasury Constant Maturity Series yields reported, for the latest day for
  which such yields shall have been so reported as of the applicable Business Day,
  in Federal Reserve Statistical Release H.15 (519) (or any comparable
  successor publication) for actively traded U.S. Treasury securities having a
  constant maturity equal to ten (10) years. 
  Such implied yield shall be determined, if necessary, by (a) converting
  U.S. Treasury bill quotations to bond-equivalent yields in accordance with
  accepted financial practice and, (b) interpolating linearly between reported
  yields.

	
   
	
   

	
   
	
            “Waiver
  Fee”.  As defined in Section
  3.1(n).

	
   
	
   

	
   
	
            “Work
  Inspector”.  As defined in Section
  3.1(l).




Capitalized terms not
otherwise defined herein have the meaning assigned such terms in the Security
Instrument or the Note, as the case may be.


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ARTICLE II

REPRESENTATIONS
AND WARRANTIES

          2.1     Representations
and Warranties of the Borrower.  To
induce the Lender to enter into this Agreement and to make the Loan, the
Borrower hereby represents and warrants to the Lender as of the date hereof as
follows:

          (a)     Litigation.  There is no threatened or pending
revocation, suspension, termination, probation, restriction, limitation or
non-renewal of any material License or any similar accreditation or approval by
or from any organization or Governmental Authority for healthcare providers,
including, without limitation, the issuance of any provisional License or other
License with a term of less than twelve (12) months, as a consequence of any
sanctions imposed by any Governmental Authority.  There is no threatened or pending assessment of any civil or
criminal penalties by any Governmental Authority.

          (b)     Compliance
with Laws.  No Property Related
Person is in violation of any Governmental Requirement pertaining to the
operation of the Property, resident rights, employment practices, health
standards or controls.  Except as
disclosed to the Lender prior to the date hereof, the Property Related Persons
are in compliance with all accreditation standards and requirements to which
each is subject.  The Property Related
Persons have obtained or applied for all Licenses necessary to the ownership of
their property and to the conduct of their activities which, if not obtained,
could materially adversely affect the ability of the Property Related Persons
to conduct the activities of the Property as a licensed Facility, including,
without limitation, as appropriate, the dispensing, storage, prescription,
disposal, and use of drugs, medications and other “controlled substances” and
the maintenance of cafeteria and other food and beverage facilities or
services.  To the extent the Property
Related Persons have applied for any required Licenses which have not yet been
issued, the operation and conduct of the Property by the Property Related
Persons is nonetheless in compliance with all Governmental Requirements.

          (c)     Licenses
and Certifications.  Without
implying any limitation to the other representations and warranties contained
in this Agreement or any of the other Loan Documents, the Property Related
Persons have obtained all Licenses necessary under all Governmental
Requirements for the operation of the Property as a Facility.  With respect to each License, the Property
Related Persons possess or have applied for, (i) no material default has occurred
or is continuing under the terms thereof, and no event has occurred which, with
the giving of notice or the lapse of time, or both, would constitute a material
breach of any condition to the issuance, maintenance, renewal and/or
continuance thereof, (ii) the Property Related Persons have paid all fees,
charges and other expenses to the extent due and payable with respect to, and
have provided all information and otherwise complied with all material
conditions precedent to, the issuance, maintenance, renewal, and continuance of
such License, (iii) none of the Licenses are conditional, provisional,
probationary or restricted in any material way, (iv) the Property Related
Persons have not received any notice from any Governmental Authority relating
to any actual or pending suspension, revocation, restriction, or imposition of
any probationary use of such License, nor has any License been materially
amended, supplemented, rescinded, terminated, or otherwise modified except as
otherwise disclosed in writing to, and approved by, the Lender, (v) no Property
Related Person has made any previous assignment of any of the Licenses to any
Person, except as security for loans and other financial accommodations, if
any, which are to be paid with the proceeds of the Loan and are to be
terminated promptly following the date hereof, (vi) no financing statement
covering any of the Licenses has been executed by a Property Related Person or
is on file in any public office, except for those financing statements relating
to loans and other financial accommodations, if any, which are to be paid with
the proceeds of the Loan and are to be terminated promptly following the date
hereof, and (vii) each License has been issued for a period of at least twelve
(12) months from the date of issuance or for such lesser time to the extent the
issuance for less than twelve (12) months is not the consequence of any
sanctions imposed by any Governmental Authority.


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          (d)     Certain
Payments.  Neither the Borrower nor
any director, officer, member, partner, employee or agent of the Borrower
acting for or on behalf of the Borrower has knowingly and willfully paid or
caused to be paid, directly or indirectly, in connection with the business of
the Borrower:

          (i)      any
bribe, kickback or similar payment to any Governmental Authority or any agent
of any supplier; or

          (ii)     any
contribution to any political party or candidate (other than personal funds of
directors, officers, members, partners, employees or agents not reimbursed by
their respective employers or as otherwise permitted by applicable laws).

	
   
	
  To the best of Borrower’s knowledge, the above
  representation is true and correct with respect to the other Property Related
  Persons.




          (e)     Operating
Agreements and Management Contracts. 
The Borrower has furnished to the Lender photocopies of all material
Operating Agreements and Management Contracts entered into with the Property
Related Persons, and all amendments, supplements and modifications
thereto.  With respect to each such
Operating Agreement and Management Contract, (i) such Operating Agreement and
Management Contract is or will be at the time of execution and delivery thereof
valid and binding on the parties thereto and in full force and effect, (ii) no
material default has occurred or is continuing under the terms thereof, and no
event has occurred which, with the giving of notice or the lapse of time, or
both, would constitute a material default thereunder, and no party thereto has
attempted or threatened to terminate any such Operating Agreement and
Management Contracts, (iii) the Property Related Persons have not made any
previous assignment of the Operating Agreements and Management Contracts to any
Person, except as security for loans and other financial accommodations, if
any, which are to be paid with the proceeds of the Loan and are to be
terminated promptly following the date hereof, and (iv) no financing statement
covering any of the Operating Agreements and Management Contracts is on file in
any public office, except for those financing statements relating to loans and
other financial accommodations which are to be paid with the proceeds of the
Loan and are to be terminated promptly following the date hereof.

          (f)     Participation
Agreements.  The Borrower hereby
represents that the Facility is a private pay retirement community and as such,
no Property Related Person has entered into any Participation Agreement with
respect to the Facility.


          (g)     Hill-Burton
Act.  The Borrower has not, nor to
the best of the Borrower’s knowledge, has any prior owner of the Property
during the twenty (20) year period immediately preceding the date hereof,
received any funds to finance the construction and/or acquisition of the
Property pursuant to Title VI of the Public Health Service Act (commonly
referred to as the Hill-Burton Act) or Title XVI of the Public Health Service
Act.

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          (h)     Fraud
and Abuse.  To the Borrower’s
knowledge, each Property Related Person, its directors, officers and employees
and other Persons providing services on behalf of the Property Related Person
have not engaged in any activities which are in violation of Sections 1128A,
1128C or 1877 of the Social Security Act (42 U.S.C. §§ 1320a-7a, 1320a-7c and
1395nn), the False Claims Act (31 U.S.C. § 3729 et seq.), the Program Fraud
Civil Remedies Act of 1986 (31 U.S.C. § 3801 et seq.) or other federal or state
laws and regulations, including, but not limited to, the following:

          (i)      knowingly
and willfully making or causing to be made a false statement or representation
of a material fact in any application for any benefit or payment;

          (ii)     knowingly
and willfully making or causing to be made a false statement or representation
of a material fact for use in determining rights to any benefit or payment;

          (iii)    failing
to disclose knowledge of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on behalf of another,
with intent to fraudulently secure such benefit or payment;

          (iv)    knowingly
and willfully offering, paying, soliciting, or receiving any remuneration
(including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind (A) in return for referring an individual to a
Person for the furnishing or arranging for the furnishing of any item or
service, (B) in return for purchasing, leasing or ordering, or arranging for or
recommending, purchasing, leasing or ordering any good, facility, service or
item; or


          (v)     billing
a patient, resident or payor for health services specified in 42 U.S.C. §
1395nn or any other similar or comparable federal or state laws, or providing such
health services to a patient or resident, upon a referral from a physician
where such physician has a financial relationship with the Property Related
Person to which no exception applies under each of the applicable laws.

ARTICLE III

COVENANTS AND WARRANTIES

          3.1     Affirmative
Covenants of the Borrower.  The
Borrower agrees as follows:

          (a)     Resident
Agreements.  The Borrower will
submit to the Lender when requested by the Lender, all information requested by
the Lender with respect to all Resident Agreements, excluding, however any
medical information or other protected health information as defined in 45 CFR
§160-103.

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          (b)     Conduct
of Business and Compliance with Laws. 
The Borrower covenants and agrees that it or the Property Related
Persons will (i) materially comply with all Governmental Requirements,
including, without limitation, the Occupational Safety and Health Act of 1970,
regulations issued under the Omnibus Budget Reconciliation Act of 1987, any
Governmental Requirement relating to “informed consents” and rights of
residents, qualifications of staff, staffing requirements and delivery of
services in a manner sufficient to protect the health and safety of residents,
(ii) maintain in full force and effect all Licenses necessary to the ownership
and/or operation of the Property, including, without limitation, the license to
operate the Property, Licenses and other approvals related to the storage,
dispensation, use, prescription and disposal of drugs, medications and other
“controlled substances” and, to the extent offered by the Borrower, the
maintenance of cafeteria and other food and beverage facilities or services,
(iii) maintain or cause to be maintained the standard of care for the residents
of the Property at all times at a level necessary to ensure a level of quality
care and services for the residents of the Property no less than prudent
industry standard for a Facility, (iv) maintain or cause to be maintained a
standard of care in the storage, use, transportation and disposal of all
medical equipment, medical supplies, medical products and medical waste, of any
kind and in any form, that is in accordance with, at least, that of the prudent
industry standard and in conformity with all Governmental Requirements, (v)
operate or cause to be operated the Property in a prudent manner in material
compliance with Governmental Requirements relating thereto and cause all
Licenses, permits, and any other agreements necessary for the use and operation
of the Property remain in effect, (vi) correct or cause to be corrected any
deficiency set forth in any Agency statement of deficiencies, the curing of
which is a condition of continued licensure or for accreditation of the
Property, (vii) maintain or cause to be maintained sufficient inventory and
equipment of types and quantities at the Property to enable the Property
Related Persons to operate the Property adequately, as a Facility and in a
manner which will enable the Borrower to comply with the provisions of the Loan
Documents, and (viii) maintain or cause to be maintained all deposits,
including, without limitation, deposits relating to residents or Resident
Agreements in accordance with customary and prudent business practices and all
Governmental Requirements.

          (c)     Insurance.  The Borrower shall ensure that all
healthcare providers with whom the Property Related Persons contract to provide
services at the Property are insured against claims arising from such services
(including, without limitation, malpractice coverage) with the same limits, if
any, as applicable to the Borrower pursuant to the Loan Documents or otherwise
acceptable to the Lender.


          (d)     Notices.  The Borrower shall promptly notify the
Lender in writing upon obtaining knowledge of the occurrence of:

          (i)      the
receipt by any Property Related Person of any notice, claim or demand from any
Governmental Authority which alleges that a Property Related Person is in
violation of any of the terms of, or has failed to comply with any Governmental
Requirement regulating its operation and business, including, but not limited
to, the Health Care Financing Administration or any division thereof, the
Occupational Safety and Health Act and the Environmental Protection Act;

          (ii)     the
actual, threatened or pending (A) revocation, suspension, probation,
restriction, limitation, forfeiture or refusal to renew of any License, or (B)
the issuance or pending issuance of any License for a period of less than
twelve (12) months, as a consequence of sanctions imposed by any Governmental Authority,
or (C) the assessment or threatened or pending assessment, of any civil or
criminal penalties by any Governmental Authority or agent, or any accreditation
organization;

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          (iii)    any
action, including, but not limited to the amendment of any License, or the
issuance of any new License or certification for the Property, under which a
Property Related Person proposes (A) to develop a new facility or service, (B)
change any existing facility or service, or (C) to eliminate any existing or
proposed service, which action requires the Property Related Person to seek
either a certificate of need approval or exemption from certificate of need
review or which requires amendment of any License or the issuance of any new
License or certificate for the Property; or

          (iv)    any
other development in the business or affairs of the Property Related Persons
which could have a Material Adverse Change;


	
   
	
  in each case describing in detail satisfactory to
  the Lender in its sole discretion the nature thereof and the action the
  Borrower proposes to take with respect thereto.




          (e)     Deficiency
Notices.  Without implying any
limitation on any other provisions of this Agreement or any of the other Loan
Documents, the Borrower will furnish or cause to be furnished to the Lender
promptly after receipt thereof copies of all (A) Deficiency Notices, (B) Agency
inspection reports, audits, surveys, investigations, reviews or evaluations,
(C) notices and written communications from any state or any Agency relating to
material adjustments in reimbursement amounts or to rate reviews, modifications
of rates, inflation adjustments, rate agreements or the like, and (D) responses
by, or on behalf of, the Property Related Persons with respect to any of the foregoing.  The Borrower shall or shall cause the
Property Related Persons to promptly commence and diligently pursue the
correction of the subject of each Deficiency Notice, and shall correct the
subject of the Deficiency Notice promptly, but in any event prior to the
expiration of any period allowed by the Agency for correction.  The Borrower shall, at the Lender’s request,
promptly provide from time to time such cost estimates, reports and other
information as the Lender may require to demonstrate to the Lender’s
satisfaction that the Property Related Persons have the financial and other
ability to effect the correction and are taking the actions required by this
Section.

          (f)     Intentionally
Omitted.

          (g)     Intentionally
Omitted.

          (h)     Census
Report and Surveys.  The Borrower
will furnish to the Lender promptly following the request of the Lender reports
of the Property periodic patient or resident census with a breakdown with
respect to the source of payment, licensure survey results, accreditation
survey results and such other information relating to the operation of the
Property as may reasonably be requested by the Lender from time to time.


          (i)      Renewal
of Agreements.  The Borrower will or
will cause the Property Related Persons to take any and all steps necessary to
renew all Resident Agreements, and Operating Agreements and Management
Contracts, except to the extent that the Borrower deems such renewal to be, in
the exercise of prudent business judgment, contrary to the best interests of
the Borrower.

          (j)      Financial
Statements.  The Borrower shall
provide Lender the following financial statements and information on a
continuing basis during the term of the Loan:

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          (i)      Within
one hundred twenty (120) days after the end of each calendar year, unaudited
financial statements of Borrower and audited financial statements of Guarantor,
prepared by a nationally recognized accounting firm or independent certified
public accountant acceptable to Lender, which statements shall be prepared in
accordance with GAAP, and shall include a balance sheet and statement of income
and expenses for the year then ended. 
Lender reserves the right to require, after an Event of Default, annual
audited financial statements of Borrower.

          (ii)     Within
thirty (30) days after the end of each calendar month, unaudited monthly
financial statements of the operations of the Property, prepared in accordance
with GAAP, which statements shall include a balance sheet and statement of
income and expenses for the calendar month then ended, together with a rent
roll/census of the Property as of the end of such month, certified by a
representative of Borrower to be true and correct to the best of the representative’s
knowledge and belief.

          (iii)    Within
forty-five (45) days of the end of each calendar quarter, a balance sheet and
statement of income and expenses of Borrower and Guarantor for the quarter then
ended, certified by a representative of Borrower and Guarantor, as applicable,
to be true and correct.


          (iv)    The
Lender further reserves the right to require such other financial information
of Borrower, Guarantor and/or the Property in such form and at such other times
(including monthly or more frequently) as Lender shall reasonably deem
necessary, and Borrower agrees promptly to provide or to cause to be provided,
such information to Lender.  All
financial statements must be in the form and detail as Lender may from time to
time reasonably request.

          (v)     Within
forty-five (45) days after the end of each calendar quarter, Guarantor’s
Compliance Certificate in the form attached to the Guaranty and certified by a
representative of Guarantor to be true and correct to the best of the
representative’s knowledge and belief.

          (vi)    Within
forty-five (45) days after the end of each calendar year, a Compliance
Certificate in the form of Schedule I attached hereto and certified by a
representative of the Borrower to be true and correct to the best of the
representative’s knowledge and belief.

          (k)    Compliance
with Healthcare Information Laws. 
Without limiting the generality of any other provision of this Agreement
including, without limitation, any other representation or warranty made
herein, each of the Property Related Persons and the Property is in material
compliance with all applicable statutes, laws, ordinances, rules and
regulations of any federal, state or local governmental authority primarily
relating to the confidentiality of patient healthcare information, including
without limitation the Health Insurance Portability and Accountability Act of
1996, as amended, and the rules and regulations promulgated thereunder (“HIPAA”) (collectively, “Healthcare Information Laws”). The Property
Related Persons have maintained in all material respects all records required
to be maintained by any governmental agency or authority or otherwise under the
Healthcare Information Laws and there are presently no material violations of
the Healthcare Information Laws. 
Throughout the term of the Loan, the Property Related Persons will
comply in all material respects with the Healthcare Information Laws.

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          (l)     Replacement
Reserve Escrow Account.   As
additional security for the Loan, upon request of Lender, Borrower shall
establish and maintain a capital repair reserve (the “Replacement Reserve Escrow Account”) with
Lender for payment of certain non-recurring types of costs and expenses
incurred by Borrower for interior and exterior work to the Property, including,
without limitation, performance of work to the roofs, chimneys, gutters,
downspouts, paving, curbs, driveways, ramps, balconies, porches, patios,
exterior walls, exterior doors and doorways, floor coverings, windows,
elevators and mechanical and HVAC equipment (collectively, the “Repairs”) provided such costs and expenses
are incurred for repairs (A) not incurred for ordinary wear and tear at the
Property and (B) categorized under generally accepted accounting principles as
a capital expense and not as an operating expense.  Upon Lender’s request that the Replacement Reserve Escrow Account
be established and on each and every monthly payment date thereafter under the
Note until the Note is fully paid and performed, Borrower shall deposit in the
Replacement Reserve Escrow Account concurrently with and in addition to the
monthly payment due under the Note a deposit to the Replacement Reserve Escrow
Account in an amount equal to one twelfth (1/12th) of $300 per unit per annum.

	
   
	
       All sums in the
  Replacement Reserve Escrow Account shall be held by Lender in the Replacement
  Reserve Escrow Account to pay the costs and expenses of the Repairs and
  Lender shall, to the extent funds are available for such purpose in the Replacement
  Reserve Escrow Account, disburse to Borrower the amount incurred and paid by
  Borrower in performing such Repairs within 10 days following: (A) the receipt
  by Lender of a written request from Borrower for disbursement from the
  Replacement Reserve Escrow Account and a certification by Borrower that the
  applicable item of Repair has been completed; (B) the delivery to Lender of
  paid invoices, receipts or other evidence satisfactory to Lender, verifying
  the cost and payment of performing the Repairs; (C) for disbursement requests
  in excess of $10,000, the delivery to Lender of (1) affidavits, lien waivers
  or other evidence reasonably satisfactory to Lender showing that all
  materialmen, laborers, subcontractors and any other parties who might or could
  claim statutory or common law liens and are furnishing or have furnished
  material or labor to the Property have been paid all amounts due for labor
  and materials furnished to the Property; and (2) a certification from an
  inspecting architect, engineer or other consultant reasonably acceptable to
  Lender (the “Work Inspector”)
  describing the completed Repairs and verifying the completion of the Repairs
  and the value of the completed Repairs.

	
   
	
   

	
   
	
       Lender shall not be
  required to make advances from the Replacement Reserve Escrow Account more
  frequently than once in any 30 day period or in an amount less than the
  lesser of $5,000 or the total cost of the Repairs for which the disbursement
  is requested.  In making any payment
  from the Replacement Reserve Escrow Account, Lender shall be entitled to rely
  on such request from Borrower without any inquiry into the accuracy, validity
  or contestability of any such amount.

	
   
	
   

	
   
	
       The Replacement
  Reserve Escrow Account shall not, unless otherwise  explicitly required by applicable law, be or be deemed to be
  escrow or trust funds.  The
  Replacement Reserve Escrow Account shall be held in a separate account.  Interest on the funds contained in the
  Replacement Reserve Escrow Account shall be paid by Lender to Borrower upon
  payment in full of the Loan.




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       Upon the occurrence of
  an Event of Default, Lender may, but shall not be obligated, to apply at any
  time the balance then remaining in the Replacement Reserve Escrow Account
  against the Loan in whatever order Lender shall subjectively determine,
  together with a Yield Maintenance Fee arising on account of such
  payment.  Upon full payment of the
  Loan in accordance with its terms or at such earlier time as Lender may
  elect, the balance of the Replacement Reserve Escrow Account plus all
  interest thereon then in Lender’s possession shall be paid over to Borrower
  and no other party shall have any right or claim thereto.  Lender shall have a perfected security
  interest in the Replacement Reserve Escrow Account as additional security to
  secure payment of the Note and Borrower shall execute and deliver to Lender
  such further financing statements and take such other action as Lender may
  require to evidence and/or perfect its security interest in the Replacement
  Reserve Escrow Account, including, without limitation, the execution and
  delivery to Lender of a pledge and security agreement in form reasonably
  satisfactory to Lender.

	
   
	
   

	
   
	
       Funds held in the
  Replacement Reserve Escrow Account are solely for the protection of Lender
  and entail no responsibility on Lender’s part beyond the payment of the
  respective items for which they are held following receipt of bills, invoices
  or statements therefor in accordance with the terms hereof and beyond the
  allowing of due credit for the sums actually received.  Upon assignment of the Loan by Lender, any
  funds in the Replacement Reserve Escrow Account shall be turned over to the
  assignee and any responsibility of Lender, as assignor, with respect thereto
  shall terminate.




          (m)     Management
of the Property.  The management of
the Property shall be by either: (i) Borrower or an entity affiliated with
Borrower approved by Lender for so long as Borrower or said affiliated entity
is managing the Property in a first class manner; or (ii) a professional
property management company approved by Lender.  Such management by an affiliated entity or a professional
property management company shall be pursuant to a written agreement approved
by Lender.  Any management agreement
shall provide for a maximum allowable management fee of 5% of gross
revenues.  In no event shall any manager
be removed or replaced or the terms of any management agreement modified or
amended without the prior written consent of Lender.  After an Event of Default or a default under any management
agreement then in effect, which default is not cured within any applicable
grace or cure period, Lender shall have the right to terminate, or to direct
Borrower to terminate, such management agreement upon 30 days’ notice and to
retain, or to direct Borrower to retain, a new management agent approved by
Lender.  It shall be a condition of
Lender’s consent to any management agreement, whether with an affiliate of
Borrower or otherwise, that such manager enter into an agreement with Lender
whereby the manager acknowledges and agrees to the aforesaid rights of Lender
and as to such other matters as Lender may reasonably require.


          (n)     Annual
Debt Coverage Ratio Test.  Borrower
agrees that if the Property does not meet a minimum Debt Coverage Ratio of at
least 1.30:1 on the trailing twelve months of operations (the “Annual Debt Coverage Ratio Test”) tested as
of each December 31 during the term of the Loan, then Borrower shall pay to
Lender a fee equal to one-fourth percent (0.25%) of the outstanding principal
balance of the Loan (the “Waiver Fee”),
which Waiver Fee shall be paid to Lender as a waiver fee and shall not be
applied to payment of the Note.  The
failure of Borrower to timely pay the Waiver Fee shall be an immediate Event of
Default hereunder.  Borrower will
provide Lender with satisfactory evidence confirming compliance with the Annual
Debt Coverage Ratio Test within forty-five (45) days after the close of
calendar year in the form of the Compliance Certificate attached hereto as Schedule
I.  In the event the Waiver Fee is
construed to be interest under the laws of the State of Texas in any
circumstance, the payment thereof shall not be required to the extent that the
amount thereof, together with other interest payable under the Loan Documents,
exceeds the Maximum Rate, and if such payment has been made at the time it is
determined that such excess exists, Lender shall return such excess to
Borrower, in which event any and all penalties of any kind under applicable law
as a result such excess interest shall be inapplicable.

12






          (o)     Immediate
Repair Obligations.  Reference is
made to the Property Condition Assessment Report dated February 27, 2004
prepared by Commercial Inspectors, LLC Project No. 0075-0019-Guar. covering the
Property.   Borrower covenants and
agrees to complete the repair work (the “Immediate
Repairs”) identified in such Property Condition Assessment Report
within 180 days from the date hereof and provide evidence reasonably satisfactory
to Lender that the Immediate Repairs have been completed, all of which shall be
performed in a manner satisfactory to Lender and shall be subject to inspection
by Lender.  Failure to complete the
Immediate Repairs in the manner and within the time period set forth above
shall constitute an Event of Default under this Agreement.

          3.2     Negative
Covenants of the Borrower.  The
Borrower agrees as follows:

          (a)     Licenses.  The Borrower will not allow any breach,
withdrawal, rating reduction, restriction, suspension, probation, failure to
renew, cancellation, rescission, termination, lapse or forfeiture of any
License, permit, right, franchise or privilege necessary for the ownership or
operation of the Premises for the purposes for which the Property is intended.

          (b)     Agreements.  The Borrower will not allow any breach,
withdrawal, restriction, suspension, probation, failure to renew, cancellation,
rescission, termination, lapse, alteration, forfeiture or modification of any
material Operating Agreements and Management Contracts.

          (c)     Participation
Agreements.  Neither the Borrower
nor any Property Related Persons will be a party to a Participation Agreement
with respect to the Property.

          (d)     Amendments;
Terminations.  The Borrower will not
amend or terminate or agree to amend or terminate any material License or
consent to a waiver of, or waive, any material provisions thereof or amend or
terminate or agree to amend or terminate, any material Operating Agreements and
Management Contracts.


ARTICLE IV

EVENTS OF DEFAULT

          4.1    Events
of Default.  Each of the following
shall be an Event of Default under this Agreement:

          (a)     Any
involuntary, imposed, required, actual, threatened or pending revocation,
suspension, termination, probation, restriction, limitation, forfeiture or
refusal to renew, any License necessary or material to the operation of the
Property as a Facility.

          (b)     Intentionally
Omitted.

          (c)     If
the United States Department of Health and Human Services, Office of the
Inspector General, or any federal, state or local Agency brings a claim, demand
or cause of action against a Property Related Person or any shareholders, partners,
members, directors, officers, employees or agents of a Property Related Person
for violation of Section 1128A, 1128C or 1877 of the Social Security Act (42
U.S.C. §§ 1320a-7a, 1320a-7c and 1395nn), the False Claims Act (31 U.S.C. §
3729 et seq.), the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. §3801 et
seq.) or other similar Governmental Requirements.

13






          (d)     The
failure of Borrower timely and properly to observe, keep or perform any
covenant, agreement, warranty or condition herein required to be observed, kept
or performed if such failure continues for 30 days after receipt by Borrower of
written notice and demand for the performance of such covenant, agreement,
warranty or condition (the “Grace Period”);
provided, however, that the Grace Period shall be extended up to an additional
60 days (for a total of 90 days from the date of default) if (i) Borrower
immediately commences and diligently pursues the cure of such default and
delivers (within the Grace Period) to Lender a written request for more time
and (ii) Lender determines in good faith that (1) such default cannot be cured
within the Grace Period but can be cured within 90 days after the default, (2)
no lien or security interest created by the Loan Documents will be impaired
prior to completion of such cure, and (3) Lender’s immediate exercise of any
remedies provided under the Loan Documents or by law is not necessary for the
protection or preservation of the Property or Lender’s security interest.

          (e)     The
occurrence of an Event of Default (as such term is defined therein) under the
Security Instrument.


          (f)     Any
representation contained herein is false or misleading in any material respect
when made.

          (g)    The
failure of the Property to comply with the Annual Debt Coverage Ratio Test;
provided, however, such failure shall not be an Event of Default if Borrower
timely pays to Lender the Waiver Fee.

ARTICLE V

MISCELLANEOUS

          5.1    Rights
of Lender.  Lender may waive any
default or Event of Default without waiving any other prior or subsequent
default or Event of Default.  Lender may
remedy any Event of Default without waiving the Event of Default remedied.  Neither the failure by Lender to exercise,
nor the delay by Lender in exercising, any right, power or remedy upon any
Event of Default shall be construed as a waiver of such Event of Default or as
a waiver of the right to exercise any such right, power or remedy at a later
date.  No single or partial exercise by
Lender of any right, power or remedy hereunder shall exhaust the same or shall
preclude any other or further exercise thereof, and every such right, power or
remedy hereunder may be exercised at any time and from time to time.  No modification or waiver of any provision
hereof or consent to any departure by Borrower therefrom shall in any event be
effective unless the same shall be in writing and signed by Lender and then
such waiver or consent shall be effective only in the specific instances, for
the purpose for which given and to the extent therein specified.  No notice to nor demand on Borrower in any
case shall of itself entitle Borrower to any other or further notice or demand
in similar or other circumstances.

          5.2    Heirs,
Successors and Assigns.  The terms,
provisions, covenants and conditions hereof shall be binding upon Borrower, and
the heirs, devisees, representatives, successors and assigns of Borrower
including all successors in interest of Borrower in and to all or any part of
the Property, and shall inure to the benefit of the Lender and its heirs,
successors, substitutes and assigns. 
All references in this Agreement to Borrower or Lender shall be deemed
to include all such heirs, devisees, representatives, successors, substitutes
and assigns.

14






          5.3    Severability.  A determination that any provision of this
Agreement is unenforceable or invalid shall not affect the enforceability or
validity of any other provision and any 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 any other persons or circumstances.

          5.4    Gender
and Number.  Within this Agreement,
words of any gender shall be held and construed to include any other gender,
and words in the singular number shall be held and construed to include the
plural, and words in the plural number shall be held and construed to include
the singular, unless in each instance the context otherwise requires.

          5.5    Counterparts.  This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same 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.

          5.6    Joint
and Several.  Where two or more
persons or entities have executed this Agreement as Borrower, the obligations
of Borrower hereunder shall be joint and several.

          5.7    Headings.  The Section headings contained in this
Agreement are for convenience only and shall in no way enlarge or limit the
scope or meaning of the various and several Sections hereof.

          5.8    Amendments.  Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

          5.9    Notice.  Any notice or communication required or
permitted hereunder shall be given in the manner set forth in the Security
Instrument.


          5.10  Time
Is of the Essence.  Time is of the
essence of this Agreement.

          IN
WITNESS WHEREOF, Borrower and Lender have hereunto caused these presents to be
executed on the date first above written.

REMAINDER OF PAGE
INTENTIONALLY BLANK

SIGNATURE PAGES FOLLOW

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SIGNATURE PAGE OF
BORROWER TO

LOAN AGREEMENT

	
   
	
  ARC WESTOVER HILLS, L.P., a Tennessee limited

  partnership

	
   
	
   

	
   
	
  By:
	
  ARC TENNESSEE GP, INC., a Tennessee

  corporation, General Partner

	
   
	
   
	
   

	
   
	
   
	
  By:

	
   
	
   
	
   
	
  

  
	
   
	
   
	
  Name:

	
   
	
   
	
   
	
  

  
	
   
	
   
	
  Title:

	
   
	
   
	
   
	
  

  



16






SIGNATURE PAGE OF
LENDER TO

LOAN AGREEMENT


	
   
	
  GUARANTY BANK, a federal savings bank

	
   
	
   

	
   
	
  By:

	
   
	
   
	
  


  
	
   
	
  Name:  Jeff
  C. Ringwald

	
   
	
  Title:  Vice
  President




17






SCHEDULE I

COMPLIANCE
CERTIFICATE

Annual Debt Coverage Test

Guaranty Bank

8333 Douglas Avenue

Dallas, TX  75225

Attn:  Senior Housing Lending Division

	
   
	
  RE:
	
  Loan Agreement dated March __, 2004 (the
  “Agreement”), by and between ARC Westover Hills, L.P. (the “Borrower”), and
  Guaranty Bank




          The
undersigned officer of Borrower does hereby certify, to the best of his
knowledge and belief, that for the annual financial period ending December 31,
200_____ (the “Fiscal Year End”):

          1.     No
Event of Default has occurred or exists except
_________________________________________________.


          2.     The
Property’s annual Debt Coverage Ratio was:

                  Required          1.30
to 1

                  Actual:
            ___  to 1

          3.     The
financial statements of Borrower and the Property and the rent roll/census
attached hereto are true and correct. 
Copies of the financial statements of Guarantor are attached.

          4.     Capitalized
terms not defined herein shall have the meanings given to such terms in the
Agreement.

          5.     The
manner of calculation of each of the above is attached.

	
   
	
  ARC WESTOVER HILLS, L.P., a Tennessee limited

  partnership

	
   
	
   

	
   
	
  By:
	
  ARC TENNESSEE GP, INC., a Tennessee 

  corporation, General Partner

	
   
	
   
	
   

	
   
	
   
	
  By:

	
   
	
   
	
   
	
  

  
	
   
	
   
	
  Name:

	
   
	
   
	
   
	
  

  
	
   
	
   
	
  Title:

	
   
	
   
	
   
	
  

  



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