Document:

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                                                                   EXHIBIT 10.35

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement"), effective as of September
4, 2001, is by and between LTC Properties, Inc., a corporation organized under
the laws of the State of Maryland ("LTC" or the "Company"), and Alex Chavez
("Executive").

         NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

         1. Appointment, Title and Duties. LTC hereby employs Executive to serve
            -----------------------------
as its Senior Vice President and Treasurer. In such capacity, Executive shall
report to the Chief Executive Officer and Chief Financial Officer of the
Company, and shall have such duties, powers and responsibilities as are
customarily assigned to a Senior Vice President and Treasurer of a publicly held
corporation, but shall also be responsible to the Board of Directors and to any
committee thereof. In addition, Executive shall have such other duties and
responsibilities as the Chief Executive Officer and Chief Financial Officer may
assign him, with his consent, including serving with the consent or at the
request of the Chief Executive Officer as an officer or on the board of
directors of affiliated corporations.

         2. Term of Agreement. The term of this Agreement shall commence as of
            -----------------
the date hereof and shall extend such that at each and every moment of time
hereafter the remaining term shall be one year.

         3. Acceptance of Position. Executive accepts the position of Senior
            ----------------------
Vice President and Treasurer of LTC, and agrees that during the term of this
Agreement he will faithfully perform his duties and, except as expressly
approved by the Board of Directors of LTC, will devote substantially all of his
business time to the business and affairs of LTC (and, to the extent requested
by the Chief Executive Officer or Chief Financial Officer, LTC Healthcare,
Inc.), and will not engage, for his own account or for the account of any other
person or entity, in a business which competes with LTC. It is acknowledged and
agreed that Executive may serve as an officer and/or director of companies in
which LTC owns voting or non-voting stock. In addition, it is acknowledged and
agreed that Executive may, from time to time, serve as a member of the board of
directors of other companies, in which event the Board of Directors of LTC must
expressly approve such service pursuant to a Board resolution maintained in the
Company's minute books. Any compensation or remuneration which Executive
receives in consideration of his service on the board of directors of other
companies shall be the sole and exclusive property of Executive, and LTC shall
have no right or entitlement at any time to any such compensation or
remuneration.

         4. Salary and Benefits. During the term of this Agreement:
            -------------------

            (a) LTC shall pay to Executive a base salary at an annual rate of
not less than One Hundred Thirty Five Thousand Dollars ($135,000) per annum
("Base Salary"), paid in approximately equal installments at intervals based on
any reasonable Company policy. LTC agrees from time to time to consider
increases in such base salary in the discretion of the Board of Directors. Any
increase, once granted, shall automatically amend this Agreement to provide that
thereafter

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Executive's base salary shall not be less than the annual amount to which such
base salary has been increased.

         (b) Executive shall participate in all health, retirement, Company-paid
insurance, sick leave, disability, expense reimbursement and other benefit
programs which LTC makes available to any of its senior executives, and shall be
eligible for bonuses in the discretion of the Board of Directors.

         (c) Executive shall be entitled to reasonable vacation time, not less
than four (4) weeks per year, provided that not more than two (2) weeks of such
vacation time may be taken consecutively without prior notice to and
non-objection by the Compensation Committee of the Board of Directors or, if
there is no Compensation Committee, the Board of Directors.

         5.  Certain Terms Defined. For purposes of this Agreement:
             ---------------------

         (a) Executive shall be deemed to be "disabled" if a physical or mental
condition shall occur and persist which, in the written opinion of a licensed
physician selected by the Board of Directors in good faith, has rendered
Executive unable to perform the duties set forth in Section 1 hereof for a
period of sixty (60) days or more and, in the written opinion of such physician,
the condition will continue for an indefinite period of time, rendering
Executive unable to return to his duties;

         (b) A termination of Executive's employment by LTC shall be deemed for
"Cause" if, and only if, it is based upon (i) conviction of a felony; (ii)
material disloyalty to the Company such as embezzlement, misappropriation of
corporate assets or, except as permitted pursuant to Section 3 of this
Agreement, breach of Executive's agreement not to engage in business for another
enterprise of the type engaged in by the Company; or (iii) the engaging in
unethical or illegal behavior which is of a public nature, brings LTC into
disrepute, and result in material damage to the Company. The Company shall have
the right to suspend Executive with pay, for a reasonable period to investigate
allegations of conduct which, if proven, would establish a right to terminate
this Agreement for Cause, or to permit a felony charge to be tried. Immediately
upon the conclusion of such temporary period, unless Cause to terminate this
Agreement has been established, Executive shall be restored to all duties and
responsibilities as if such suspension had never occurred;

         (c) A resignation by Executive shall not be deemed to be voluntary and
shall be deemed to be a resignation with "Good Reason" if it is based upon (i) a
diminution in Executive's title, duties, or salary; (ii) a reduction in benefits
which is not part of an across-the-board reduction in benefits of all senior
executive personnel; (iii) a direction by the Board of Directors that Executive
report to any person or group other than the Chief Executive Officer and Chief
Financial Officer or the Board of Directors, or (iv) a geographic relocation of
Executive's place of work a distance for more than seventy-five (75) miles from
LTC's offices located at 300 Esplanade Drive, Suite 1860, Oxnard, California;

         (d) "Affiliate" means with respect to any Person, a Person who,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control, with the Person specified;

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         (e) "Base Salary" means, as of any date of termination of employment,
the highest base salary of Executive in the then current fiscal year or in any
of the last four fiscal years immediately preceding such date of termination of
employment;

         (f) "Beneficial Owner" shall have the meaning given to such term in
Rule 13d-3 under the Exchange Act;

         (g) A "Change in Control" occurs if:

             (i) Any Person or related group of Persons (other than Executive
and his Related Persons, the Company or a Person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities; or

             (ii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other entity), other
than a merger or consolidation which would result in the voting securities of
the Companyoutstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 66-2/3% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person acquires more than 30% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change in Control;
or

             (iii) The Stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or

             (iv) A majority of the members of the Board of Directors of the
Company cease to be Continuing Directors;

         (h) "Code" means the Internal Revenue Code of 1986, as amended.

         (i) "Continuing Director" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date of the Agreement or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.

         (j) "Exchange Act" means the Exchange Act of 1934, as amended.

         (k) "Person" means any individual, corporation, partnership, limited
liability company, trust, association or other entity.

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         (l) "Related Person" means any immediate family member (spouse,
partner, parent, sibling or child whether by birth or adoption) of the Executive
and any trust, estate or foundation, the beneficiary of which is the Executive
and/or an immediate family member of the Executive.

     6.  Certain Benefits Upon Termination. Executive's employment shall be
         ---------------------------------
terminated upon the earlier of (i) the voluntary resignation of Executive with
or without Good Reason; (ii) Executive's death or permanent disability; or (iii)
upon the termination of Executive's employment by LTC for any reason at any
time. In the event of such termination, the below provisions of this Section 6
shall apply.

         (a) If Executive's employment by LTC terminates for any reason other
than as a result of (i) a termination for Cause, or (ii) a voluntary resignation
by Executive without a Good Reason, or (iii) a Change in Control of the Company,
then LTC shall pay Executive a lump sum severance payment equal to one times his
Base Salary; provided that if employment terminates by reason of Executive's
death or disability, then such salary shall be paid only to the extent the
Company has available "key man" life, disability or similar insurance relating
to the death or disability of Executive;

         (b) Upon a Change in Control of the Company whether or not Executive's
employment is terminated thereby, in lieu of the severance payment described in
Section 6(a) above, LTC shall pay Executive a lump sum severance payment in cash
equal to two times his Base Salary;

         (c) If Executive's employment by LTC terminates for any reason, except
for LTC's termination of Executive's employment for Cause or a voluntary
resignation by Executive without a Good Reason, LTC shall offer to Executive the
opportunity to participate in all Company-provided medical and dental plans to
the extent Executive elects and remains eligible for coverage under COBRA and
for a maximum period of eighteen (18) months at Company expense; provided,
however, in the event Executive's employment by LTC terminated upon a Change in
Control of the Company, then Executive shall not be given the opportunity to
participate in any of such medical and dental plans, except to the extent
required by law;

         (d) In the event that Executive's employment terminates by reason of
his death, all benefits provided in this Section 6 shall be paid to his estate
or as his executor shall direct, but payment may be deferred until Executive's
executor or personal representatives has been appointed and qualified pursuant
to the laws in effect in Executive's jurisdiction of residence at the time of
his death;

         (e) LTC shall make all payments pursuant to the foregoing subsections
(a) through (d) within seven (7) days following the date of termination of
Executive's employment or consummation of a Change in Control of the Company, as
applicable;

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         (f)  Notwithstanding the foregoing, LTC shall have no liability under
this Section if Executive's employment pursuant to this Agreement is terminated
by LTC for Cause or by Executive without a Good Reason; provided, however, that
if Executive's employment pursuant to this Agreement is terminated by LTC for
Cause or by Executive without a Good Reason at any time after a Change of
Control which did not result in Executive's employment being terminated, such
post-Change of Control termination by LTC for Cause or by Executive without a
Good Reason shall not affect in any way Executive's entitlement to the lump sum
severance payment described in Section 6(b) above or any other rights, benefits
or entitlements to which Executive may be entitled as a result of such Change of
Control;

     7.  Tax Liability Loan. Upon a Change in Control of the Company, whether or
         ------------------
not Executive's employment is terminated as a result thereof, the Company shall
offer Executive an unsecured loan in the amount necessary to fund Executive's
tax liability arising from the accelerated vesting of restricted shares held by
Executive, if any. Such loan shall be due, in full, in ten (10) years from the
date made and shall bear interest at the then-current Applicable Federal Rate
(the minimum rat necessary to avoid "unstated interest" under Section 7872 of
the Code) with interest payments to be paid to the Company annually. Such loan
shall be evidenced by a promissory note signed by, and with full recourse to,
Executive.

     8.  Indemnification. LTC shall indemnify Executive and hold him harmless
         ---------------
from and against all claims, actions, losses, damages, expense or liabilities
(including expenses of defense and settlement) ("Claim") based upon or in any
way arising from or connected with his employment by LTC, to the maximum extent
permitted by law. To the extent permitted by law, LTC shall advance to Executive
any expenses necessary in connection with the defense of any Claim which is
brought if indemnification cannot be determined to be available prior to the
conclusion of, or the investigation of, such Claim. The parties hereto agree
that each understands and has understood that notwithstanding the above-stated
provisions, nothing herein shall require LTC to hold harmless or indemnify
Executive with respect to any Claim which is brought or asserted against
Executive by LTC. LTC shall investigate in good faith the availability and cost
of directors' and officers' insurance and shall include Executive as an insured
in any directors and officers insurance policy of such insurance it maintains.

     9.  Attorney Fees. In the event that any action or proceeding is brought to
         -------------
enforce the terms and provisions of this Agreement, the prevailing party shall
be entitled to recover reasonable attorney fees.

     10. Notices. All notices and other communications provided to either party
         -------
hereto under this Agreement shall be in writing and delivered by certified or
registered mail to such party at its/his address set forth below its/his
signature hereto, or at such other address as may be designated with postage
prepaid, shall be deemed given when received.

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     11. Construction. In constructing this Agreement, if any portion of this
         ------------
Agreement shall be found to be invalid or unenforceable, the remaining terms and
provisions of this Agreement shall be given effect to the maximum extent
permitted without considering the void, invalid or unenforceable provisions. In
construing this Agreement, the singular shall include the plural, the masculine
shall include the feminine and neuter genders as appropriate, and no meaning in
effect shall be given to the captions of the sections in this Agreement, which
are inserted for convenience of reference only.

     12. Headings. The section headings hereof have been inserted for
         --------
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.

     13. Governing Law. The provisions of this Agreement shall be construed and
         -------------
interpreted in accordance with the internal laws of the State of California as
at the time in effect.

     14. Entire Agreement. This Agreement constitutes the entire agreement and
         ----------------
supersedes all other prior agreements (including the Employment Agreement dated
as of the date hereof) and undertakings, both written and oral, among Executive
and the Company, with respect to the subject matter hereof.

         IN WITNESS WHEREOF, this Agreement shall be effective as of the date
specified in the first paragraph of this Agreement.

                                          LTC PROPERTIES, INC.,
                                          a Maryland corporation

Address: 300 Esplanade St., #1860        /s/ Andre C. Dimitriadis
         Oxnard, CA 93030
                                          Chairman and Chief Executive Officer

                                      By: /s/ Edmund King
                                          Compensation Committee Representative

Address: 127 Los Padres Dr.              /s/ Alex Chavez
         Thousand Oaks, CA 91361

                                        6<PAGE>

                                                                   EXHIBIT 10.36

                                 PROMISSORY NOTE

$7,000,000.00                                           DATE:  December 31, 2001

                               Oxnard, California

     THIS NOTE (THIS "NOTE"), IS MADE BY HEALTHCARE HOLDINGS, INC., A NEVADA
CORPORATION, AS MAKER ("MAKER"), IN FAVOR OF LTC PROPERTIES, INC., A MARYLAND
CORPORATION, AS PAYEE ("PAYEE") IN THE AMOUNT OF SEVEN MILLION DOLLARS
($7,000,000.00).

     At Maturity Date, as hereinafter defined, for value received, Maker hereby
promises to pay to the order of Payee, at Payee's principal place of business in
Oxnard, California, or such other place as Payee may from time to time
designate, the principal sum of Seven Million Dollars ($7,000,000.00) plus
accrued interest at the rate of 5%, compounded annually, ("Compounded Interest")
of One Million Nine Hundred Thirty-Three Thousand Nine Hundred Seventy Dollars
and Ninety-four cents ($1,933,970.94). In addition, during the term of the Note,
Maker shall pay to Payee on an annual basis accrued interest at the rate of 2%
("Annual Interest") on the principal balance of $7,000,000. Therefore, on each
anniversary date of the Note, beginning December 31, 2002 and ending with the
last payment of Annual Interest on December 31, 2006, Maker shall pay to Payee
One Hundred Forty Thousand Dollars ($140,000). All principal and accrued
Compound Interest shall be due on or before December 31, 2006 (the "Maturity
Date"). Principal and interest due hereunder shall be payable in lawful money of
the United States.

     Subject to the limitations described herein, Maker desires to obtain this
Note from Payee to enable Maker to purchase from Payee the right to receive,
1,238,076 shares of common stock of Assisted Living Concepts, Inc. to be
distributed pursuant to the First Amended Joint Plan of Reorganization of
Assisted Living Concepts, Inc. ("ALF") and Carriage House Assisted Living, Inc.
("Plan"), which Plan was subsequently confirmed at a hearing on December 5, 2001
as set forth in, and subject to, that certain Findings of Fact, Conclusions of
Law and Order Under 11 U.S.C. Section 1129 and Rule 3020 of the Federal Rules of
Bankruptcy Procedure Confirming the Plan of the Companies entered on December 5,
2001. Accordingly, this Note represents funds that have been borrowed by Maker
in the aggregate principal amount of Seven Million Dollars ($7,000,000.00) to
make such purchase.

     1. Payments on Maturity Date. Assuming no acceleration by Payee and no\
        -------------------------
prepayment in full of the Loan by Maker, on the Maturity Date, Maker shall pay
to Payee the entire outstanding principal, compound interest and accrued
interest owing to Payee by Maker under this Note.

     2. Prepayments. Maker shall have the right to prepay all or any part of the
        -----------
principal and accrued interest balance of this Note any time without premium,
penalty, or charge of any kind whatsoever; provided, however, there shall be no
discount of any kind for any prepayment.

     3. Security Documents. This Note is a full recourse obligation of the Maker
        ------------------
and is secured by all of the assets of Maker, whether heretofore or hereafter,
including, but not limited to the ALF debentures and ALF common shares currently
held by Maker; and the junior and senior debentures and the common shares to be
distributed by ALF as described in the Plan and a security agreement and/or
other security instruments given by Maker in favor of Payee, (collectively, the
"Security Documents"). Reference is made to the Security Documents for a
description of the collateral provided for therein and the rights of Payee with
respect to such collateral.

     4. Sale of Collateral. Maker may at any time, upon prior notice to Payee of
        ------------------
five (5) business days, sell for cash all or a portion of the Collateral
underlying this Note. One hundred percent (100%) of the proceeds, as hereinafter
defined, must be remitted to the Payee within 3 business days of receipt of such
proceeds. "Proceeds" is defined as total cash received before any costs,
expenses or fees associated with such sale. Such Proceeds, to the extent of the
proceeds, will first be applied to reduce any accrued but unpaid Annual
Interest, second to reduce any accrued but unpaid Compounded Interest and
finally to reduce the principal of the Note.

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     5. Restrictive Covenants. Maker hereby covenants and agrees with Payee
        ---------------------
that, for so long as the obligations of Maker under this Note remain outstanding
under the Note, Maker will comply with all of the following:

     (a) Maker will not, and will not permit any subsidiary of Maker to, create,
assume, incur or suffer to exist any lien or encumbrance of any kind, upon all
or any portion of the Collateral (as defined in the Security Documents).

     (b) Maker will not, and will not permit any subsidiary to pay a dividend,
provide any loan guaranty, lend money or borrow any additional sums beyond this
Note.

     (c) Maker will not, and will not permit any subsidiary to (i) lease, assign
or sell all or substantially all of its property or business to any other Person
(as hereinafter defined), (ii) merge or consolidate with or into any other
Person, (iii) purchase or lease or otherwise acquire all or substantially all of
the assets of any other Person, (iv) sell, transfer, pledge or otherwise dispose
of capital stock of Maker or any of its subsidiaries, (v) liquidate, suspend or
dissolve its business operations, (vi) change its name, identity or corporate,
partnership or other structure, or (vii) change the current principal place of
business or chief executive office, in each case without the prior written
consent of Payee.

     6. Acknowledgement and Restrictive Covenant of LTC Healthcare, Inc., parent
                            ----------------------------------------------------
of Maker ("LTI"). LTI hereby acknowledges that it has heretofore pledged as
--------------
collateral all of the outstanding stock of Maker pursuant to that certain Second
Amended and Restated Promissory Note and Security Agreement dated June 8, 2001,
which obligation remains in effect, and hereby further covenants and agrees with
Payee that, for so long as the obligations of Maker under this Note remain
outstanding, LTI will not pledge the stock of Maker, or otherwise encumber the
stock of Maker, in any manner for any reason.

     7. Change of Control. Notwithstanding anything to the contrary contained
        -----------------
herein, upon a Change of Control (as hereinafter defined) Payee may, in its sole
discretion, declare the entire balance of principal and interest hereon
immediately due and payable, together with all applicable charges and payments
due hereunder, all costs of collection, including reasonable attorneys' fees and
all other costs and expenses incurred, and shall have all remedies available
under the Security Documents, at law or in equity. For purposes of this Note, a
"Change of Control" shall mean and include (i) the sale by Maker, or LTI (each
hereinafter referred to as "Party") and/or any subsidiary of either Party of all
or substantially all of the assets of either Party and its subsidiaries taken as
a whole, (ii) any Acquisition by any person or any persons acting together which
would constitute a "group" for purposes of Section 13(d) of the Exchange Act (a
"Group") of 30% or more of the total voting power of all classes of capital
stock of either Party entitled to vote generally in the election of the Board of
Directors of either Party, (iii) any Acquisition by any person or Group of the
power to elect, appoint or cause the election or appointment of at least a
majority of the members of the Board of Directors of either party, through
beneficial ownership of the capital stock or otherwise, or, (iv) a majority of
the members of the Boards of Directors of either Party cease to be Continuing
Directors (as hereinafter defined). As used herein, "Continuing Directors"
means, as of any date of determination, any member of the Board of Directors of
either party, who (i) was a member of the Boards of Directors of either Party on
the date of this Note, or (ii) was nominated for election or elected to such
Board with the approval of a majority of the Continuing Directors who were
members of such Boards at the time of such nomination or election. For the
purposes of this definition, "Acquisition" of the power or properties and assets
stated in the preceding sentence means the earlier of (a) the actual possession
thereof and (b) the consummation of any transaction or series of related
transactions which, with the passage of time, will give such Person or Persons
that actual possession thereof. As used herein, "Person" shall mean an
individual, corporation, trust, partnership, joint venture, unincorporated
organization, government agency or any agency or political subdivision thereof,
or other entity.

     8. Late Payment Charge; No Waiver. MAKER ACKNOWLEDGES THAT LATE PAYMENT TO
        ------------------------------
PAYEE OF ANY SUMS DUE HEREUNDER WILL CAUSE PAYEE TO INCUR COSTS NOT CONTEMPLATED
HEREUNDER, THE EXACT AMOUNT OF WHICH WILL BE IMPRACTICABLE OR EXTREMELY
DIFFICULT TO ASCERTAIN. SUCH COSTS INCLUDE, BUT ARE NOT LIMITED TO, PROCESSING
AND ACCOUNTING CHARGES. ACCORDINGLY, IF ANY INSTALLMENT IS NOT RECEIVED BY PAYEE
WHEN DUE, OR IF ANY REMAINING PRINCIPAL AND ACCRUED BUT UNPAID INTEREST OWING
UNDER THIS NOTE IS NOT PAID IN FULL ON THE MATURITY DATE, MAKER

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SHALL THEN PAY TO PAYEE AN ADDITIONAL SUM OF FIVE PERCENT (5%) OF THE OVERDUE
AMOUNT AS A LATE CHARGE. THE PARTIES HEREBY AGREE THAT THE LATE CHARGE
REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE COSTS PAYEE WILL INCUR BY
REASON OF LATE PAYMENT. THIS PROVISION SHALL NOT, HOWEVER, BE CONSTRUED AS
EXTENDING THE TIME FOR PAYMENT OF ANY AMOUNT HEREUNDER, AND ACCEPTANCE OF SUCH
LATE CHARGE BY PAYEE SHALL IN NO EVENT CONSTITUTE A WAIVER OF MAKER'S DEFAULT
WITH RESPECT TO SUCH OVERDUE AMOUNT NOR PREVENT PAYEE FROM EXERCISING ANY OF ITS
OTHER RIGHTS AND REMEDIES WITH RESPECT TO SUCH DEFAULT.

     INITIAL: _________
               Maker

     9. Additional Obligation. Maker agrees to purchase the right to receive any
        ---------------------
future distribution of ALF common stock the Payee may be entitled to receive as
a result of the final settlement of the Plan. Such additional purchase shall be
for $5.6539 per share and Maker shall sign an additional note with the same
terms and conditions as this Note.

     10. Default. The occurrence of any of the following shall constitute an
         -------
event of default ("Event of Default") under this Note:

     (a) failure to make any payment of principal, interest, or any other sums
due hereunder within five (5) business days of the date due;

     (b) the occurrence of any breach or default of any other obligation of
Maker, LTI, or any of their respective subsidiaries, monetary or otherwise,
hereunder or otherwise, which breach or default (except as provided below) shall
continue for more than ten (10) calendar days after Maker or LTI has received
written notice thereof from Payee;

     (c) notwithstanding anything to the contrary contained in this Section 10,
immediately upon the breach or default of any provision of Sections 4, 5, 6 and
9 hereof; or

     (d) a breach or default under the Security Documents.

     11. Acceleration Rights; Remedies. Upon the occurrence of an Event of
         -----------------------------
Default or Change of Control hereunder, Payee may, in its sole discretion,
declare the entire balance of principal and interest hereon immediately due and
payable, together with all applicable charges and payments due hereunder, costs
of collection, including reasonable attorneys' fees and all other costs and
expenses incurred, and shall have any and all remedies available under the
Security Documents, at law or in equity.

     12. Attorneys' Fees and Costs. In the event it becomes necessary for Payee
         -------------------------
to utilize legal counsel for the enforcement of this Note or any of its terms,
if Payee is successful in such enforcement by legal proceedings or otherwise,
Payee shall be reimbursed immediately by Maker for all reasonable attorneys'
fees and other costs and expenses.

     13. Waivers. Maker of this Note hereby waives diligence, demand,
         -------
presentment for payment, exhibit of this Note, notice of non-payment or
dishonor, protest and notice of protest, notice of demand, notice of election of
any right of holder hereof, any and all exemption rights against this
indebtedness, and expressly agrees that, at Payee's election, the time for
performance of any obligation under this note may be extended from time to time,
without notice and that no such extension, renewal, or partial release shall
release Maker from its obligation of payment of this Note or any installment
hereof, and consents to offset of any sums owed to Maker by the holder hereof at
any time.

     14. Assignment/Transfer by Payee. Payee, in Payee's sole and absolute
         ----------------------------
discretion, and without notice to Maker, shall have the absolute right to sell,
assign, gift, transfer, convey, encumber or otherwise dispose of all or a
portion of the holder's rights in this Note or any other agreement related
thereto. Maker may not assign, gift,

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transfer, convey, encumber or otherwise dispose of all or a portion of its
rights, nor delegate its duties or obligations under this Note or any other
agreement related thereto.

     15. Governing Law. This Note shall in all respects be interpreted,
         -------------
enforced, and governed by and under the internal law of the State of California
without resort to choice of law principles.

     16. Severability. Every provision hereof is intended to be several. If any
         ------------
provision of this Note is determined by a court of competent jurisdiction to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the other provisions hereof, which shall
remain binding and enforceable.

     17. Compliance With Usury Laws. It is the intention of the parties hereto
         --------------------------
to conform strictly to applicable usury laws regarding the use, forbearance or
detention of the indebtedness evidenced by this Note, whether such laws are not
or hereafter in effect, including the laws of the Untied States of America or
any other jurisdiction whose laws are applicable, and including subsequent
revisions to or judicial interpretations of those laws, in each case to the
extent they are applicable to this Note (the "Applicable Usury Laws"); provided,
however, if such laws shall hereafter permit higher rates of interest, then the
Applicable Usury Laws shall be the laws allowing the higher rate of interest.
Accordingly, the following shall apply:

     (a) If any acceleration of the Maturity Date of this Note or any payment by
maker or any other person or entity results in the amount of interest contracted
for, charged, taken, reserved, received by or paid by Maker or such other person
or entity on the principal amount outstanding, from time to time, on the Note
being deemed to have been in excess of the Maximum Amount (as hereinafter
defined) or if any transaction contemplated hereby would otherwise be usurious
under any Applicable Usury Laws, then, in that event, notwithstanding anything
to the contrary in this Note, it is agreed as follows: (i) the provisions of
this Section 17 shall govern and control; (ii) the aggregate of all interest
under Applicable Usury Laws that is contracted for, charged, taken, reserved or
received under this Note, or under any of the other aforesaid agreements or
instruments or otherwise shall under no circumstances exceed the Maximum Amount,
and any excess shall either be refunded to Maker or applied in reduction of
principal, if permitted by California law, in the sole discretion of Payee;
(iii) neither Maker nor any other person or entity shall be obligated to apply
the amount of such interest to the extent it is in excess of the Maximum Amount;
(iv) any interest contracted for, charge, reserved, taken or received in excess
of the Maximum Amount shall be deemed an accidental or bona fide error and
canceled automatically to the extent of such excess; and (v) the effective rate
of interest on the Loan shall be ipso facto reduced to the Highest Lawful Rate
(as hereinafter defined), and the provision of this Note shall be deemed
reformed, without the necessity of the execution of any new document, so as to
comply with all Applicable Usury Laws. All sums paid, or agreed to be paid, to
Payee for the use, forbearance, or the detention of the indebtedness of Maker to
payee evidenced by this Note shall, to the fullest extent permitted by the
Applicable Usury Laws, be amortized, pro-rated, allocated and spread throughout
the full term of the indebtedness evidenced by this Note so that the actual rate
of interest does not exceed the Highest Lawful Rate in effect at any particular
time during the full term thereof. As used herein, the term "Maximum Amount"
means the maximum non-usurious amount of interest which may be lawfully
contracted for, charged, reserved, taken or received by Payee in connection with
the indebtedness evidenced by this Note under all applicable Usury Laws.

     (b) If at any time interest on the Loan, together with any fees and
additional amounts payable hereunder or under any other agreements or
instruments that are deemed to constitute interest under Applicable Usury Laws
(the "Additional Interest"), exceeds the Highest Lawful Rate, then the amount of
interest to accrue pursuant to this Note shall be limited, notwithstanding
anything to the contrary in this Note, or any other agreement or instrument, to
the amount of interest that would accrue at the Highest Lawful Rate; provided,
however, that to the fullest extent permitted by Applicable Usury Laws, any
subsequent reductions in the interest rate shall not reduce the interest to
accrue pursuant to this Note below the Highest Lawful Rate until the aggregate
amount of interest actually accrued pursuant to this Note, together with all
Additional Interest, equals the amount of Interest which would have accrued if
the Highest Lawful Rate had at all times been in effect and such Additional
Interest, if any, had been paid in full.

     For purposes of this Note, the term "Highest Lawful Rate" means the maximum
rate of interest and other charges (if any such maximum exists) for the
forbearance of the payment of monies, if any that may be

                                       4

<PAGE>

charged, contracted for, reserved, taken or received under all Applicable Usury
Laws on the principal balance of this Note from time to time outstanding.

     18. Notices. Any notice or other communication required or permitted to be
         -------
given under this Note shall be in writing and sent by United States mail,
registered or certified mail, postage prepaid, return receipt requested, and
addressed as follows:

          If to Maker:              Healthcare Holdings, Inc.
          -----------
                                    300 Esplanade Drive, Suite 1865
                                    Oxnard, California 93030
                                    Attention:  Mr. Chris Ishikawa

          with a copy to:           Healthcare Holdings, Inc.
                                    300 Esplanade Drive, Suite 1865
                                    Oxnard, California 93030
                                    Attention:  Legal Department

          If to Parent:             LTC Healthcare, Inc.
          ------------
                                    300 Esplanade Drive, Suite 1865
                                    Oxnard, California 93030
                                    Attention:  Mr. Chris Ishikawa

          If to Payee:              LTC Properties, Inc.
          -----------
                                    300 Esplanade Drive, Suite 1860
                                    Oxnard, California 93030
                                    Attention:  Ms. Wendy Simpson

          with a copy to:           LTC Properties, Inc.
                                    300 Esplanade Drive, Suite 1860
                                    Oxnard, California 93030
                                    Attention:  Legal Department

         or such other address as either party may from time to time specify in
writing to the other in the manner aforesaid. If personally delivered, such
notices or other communications shall be deemed delivered upon delivery. If sent
by United States mail, registered or certified mail, postage prepaid, return
receipt requested, such notices or other communications shall be deemed
delivered upon delivery or refusal to accept delivery as indicated on the return
receipt.

                            [SIGNATURE PAGE FOLLOWS]

                                       5

<PAGE>

         IN WITNESS WHEREOF, the Maker has caused this Note to be executed as of
the date first above written.

                           MAKER:

                           HEALTHCARE HOLDINGS, INC.,
                           a Nevada corporation

                           By: /s/ Andre C. Dimitriadis
                              ---------------------------------------
                           Name: Andre C. Dimitriadis
                           Its:  Chairman and Chief Executive Officer

                           PARENT:

                           LTC HEALTHCARE, INC.,
                           a Nevada corporation

                           By: /s/ Wendy Simpson
                              ---------------------------------------
                           Name: Wendy Simpson
                           Its:  Executive Vice President

                                       6

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