Document:

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                                                                    EXHIBIT 10.7

                       SECOND AMENDMENT TO PROMISSORY NOTE

         THIS SECOND AMENDMENT TO PROMISSORY NOTE (this "Second Amendment") is
entered into as of the 1st day of October, 2002, by and between DIVERSICARE
ASSISTED LIVING SERVICES NC II, LLC, a Delaware limited liability company (the
"Borrower"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
(the "Lender").

                                    RECITALS:

         A.       The Borrower executed to the order of the Lender that certain
Promissory Note dated June 4, 1999, in the principal amount of $12,480,000, as
amended by that certain First Amendment to Promissory Note dated July 1, 2002
(the "Note"). Unless otherwise defined herein, capitalized terms shall have the
meaning assigned to them in the Note.

         B.       The Borrower has requested that the Lender extend the Maturity
Date of the Note, and the Lender has agreed, upon certain conditions, one of
which is the execution of this Second Amendment.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the above Recitals and other good
and valuable consideration, the Borrower and the Lender hereby amend the Note as
follows:

         1.       Section 4 of the Note, Maturity Date, is hereby amended to
extend the Maturity Date from September 28, 2002, until December 1, 2002. All
references in the Note to the "Maturity Date" are hereby amended to mean
December 1, 2002.

         Except as expressly amended herein, the Note shall remain in full force
and effect in accordance with its terms and conditions.

         Notwithstanding the execution of this Second Amendment, the
indebtedness evidenced by the Note shall remain in full force and effect, and
nothing contained herein shall be interpreted or construed as resulting in a
novation of such indebtedness. The Borrower acknowledges and agrees that there
are no offsets or defenses to payment of the obligations evidenced by the Note,
as hereby amended, and hereby waives any defense, claim or counterclaim of the
Borrower regarding the obligations of the Borrower under the Note, as hereby
amended. The Borrower represents that there are no conditions of default or
facts or consequences which will or could lead to a default under the
obligations due from the Borrower under the Note, as amended herein, except as
disclosed by Borrower and Diversicare Management Services Co. in that certain
Quarterly Compliance Statement & Census Data report and that certain Compliance
Certificate, each for the period ending June 30, 2002, dated August 13, 2002,
and signed by Borrower's Chief Financial Officer and Executive Vice President.

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         IN WITNESS WHEREOF, the Borrower and Lender have caused this Second
Amendment to be executed by their respective duly authorized representatives, as
of the date first set forth above.

                                     BORROWER:

                                     DIVERSICARE ASSISTED LIVING SERVICES
                                     NC II, LLC, a Delaware limited liability
                                     company

                                     By:  Diversicare Assisted Living Services
                                     NC, LLC
                                     Its: Sole Member

                                     By: /S/ William R. Council, III
                                        ---------------------------------------
                                         Name: William R. Council, III
                                         Title: Executive Vice President and
                                         Chief Financial Officer

                                     LENDER:

                                     GMAC COMMERCIAL MORTGAGE
                                     CORPORATION, a California corporation

                                     By: /S/ Laura McDonald
                                        ---------------------------------------
                                     Its:
                                          -------------------------------------

                                       2<PAGE>
                                                                   EXHIBIT 10.1

                                   AMENDMENT
                                     TO THE
              INDUS INTERNATIONAL, INC. 1997 DIRECTOR OPTION PLAN
            (AS PREVIOUSLY AMENDED JUNE 7, 2000 AND APRIL 23, 2002)

         This Amendment ("Amendment") is made and executed this 29th day of
October, 2002, to be effective as of the date hereof.

         WHEREAS, the Company previously has adopted the Indus International,
Inc. Incentive Director Option Plan (the "Plan"); and

         WHEREAS, the Board of Directors of the Company has duly authorized and
approved the amendment of the Plan to provide that all options issued under the
Plan will vest and become exercisable upon a change in control of the Company;

         NOW, THEREFORE, in accordance with Section 11 of the Plan, the Plan is
hereby amended as follows:

         1.       Merger or Asset Sale. Section 10 of the Plan hereby is
amended by deleting the language in subsection (c) and replacing it with the
following:

                  "(c)     Merger or Asset Sale. Upon a merger of the Company
         with or into another entity or the sale of substantially all of the
         assets of the Company (whether or not such transactions constitute a
         "Change in Control," as defined below), the Plan and all Options
         outstanding hereunder shall terminate, except to the extent provisions
         is made in connection with the transaction for the continuation of the
         Plan and/or the assumption of the outstanding Options (or for the
         substitution for such Options of new options covering the stock of a
         successor entity, or a parent or subsidiary thereof), with appropriate
         adjustments as to the number and kinds of shares and exercise prices,
         in which event the Plan and outstanding Options shall continue in the
         manner and under the terms so provided. In the event of any such
         termination of the Plan, each Optionee shall have the right,
         immediately prior to the occurrence of such termination and during
         such period of not less than 15 days occurring prior to such
         termination as the Committee in its sole discretion may designate, to
         exercise such Option in whole or in part, whether or not such Option
         was otherwise exercisable at the time such termination occurs. Such
         exercise will be contingent upon the consummation of the merger or
         asset sale and will be subject to any additional provisions that the
         Committee may, in its sole discretion, include in any Option
         Agreement.

                  In the event an Optionee's status as a Director (or a
         director of a successor entity) is terminated other than upon the
         Optionee's voluntary resignation, following the assumption or
         substitution of an Option in

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         connection with such a merger or asset sale, the assumed Option (or
         the substitute option) shall become fully exercisable upon such
         termination, including as to Shares for which it would not otherwise
         be exercisable. Thereafter, the Option or option shall remain
         exercisable in accordance with Sections 8(b) through (d) above.

         2.       Change of Control. Section 10 of the Plan hereby is amended
by adding the following as a new subsection (d):

                  "(d)     Change of Control. Notwithstanding the provisions of
         Section 10(c) above, upon the occurrence of a Change of Control, all
         outstanding Options shall become fully vested and exercisable, whether
         or not such Options were otherwise exercisable at the time the Change
         of Control occurs. As used herein, the term "Change of Control" means
         the occurrence of any of the following:

                  (i)      Any "person" (as such term is used in Sections 13(d)
         and 14(d) of the Securities Exchange Act of 1934, as amended) becomes
         the "beneficial owner" (as defined in Rule 13d-3 under said Act),
         directly or indirectly, of securities of the Company representing
         seventy-five percent (75%) or more of the total voting power
         represented by the Company's then outstanding voting securities; or

                  (ii)     Any action or event occurring within a two-year
         period, as a result of which fewer than a majority of the Directors
         are Incumbent Directors. "Incumbent Directors" shall mean Directors
         who either (A) are Directors of the Company as of the date hereof, or
         (B) are elected, or nominated for election, to the Board with the
         affirmative votes of at least a majority of the Incumbent Directors at
         the time of such election or nomination (but shall not include an
         individual whose election or nomination is in connection with an
         actual or threatened proxy contest relating to the election of
         directors to the Company), or (C) are approved by Warburg Pincus LLC
         so long as it is the beneficial owner of not less than twenty-five
         percent (25%) of the then outstanding voting securities; or

                  (iii)    The consummation of a merger or consolidation of the
         Company with any other corporation, other than a merger or
         consolidation which would result in the voting securities of the
         Company outstanding immediately prior thereto continuing to represent
         (either by remaining outstanding or by being converted into voting
         securities of the surviving entity) at least fifty-five percent (55%)
         of the total voting power represented by the voting securities of the
         Company or such surviving entity outstanding immediately after such
         merger or consolidation; or

                  (iv)     The consummation of the sale, lease or other
         disposition by the Company of all or substantially all the Company's
         assets.

                                      -2-
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         The provisions of the Plan, as heretofore amended, shall remain in
full force and effect.

         IN WITNESS HEREOF, the Company has caused this Amendment to be duly
executed as of the date first above written.

                             INDUS INTERNATIONAL, INC.

                             By:      /s/ Adam V. Battani
                                --------------------------------
                             Name:    Adam V. Battani
                                  ------------------------------
                             Title:   VP and General Counsel
                                   -----------------------------

                                      -3-

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