Document:

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                                                                  Exhibit 10.107

                               GUARANTY AGREEMENT

     THIS GUARANTY AGREEMENT (this "Agreement") is made this 19th day of
February, 2002, by ARV ASSISTED LIVING, INC., a Delaware corporation
("Guarantor"), to and for the benefit of RED MORTGAGE CAPITAL, INC., an Ohio
corporation ("Lender").

                                R E C I T A L S

     WHEREAS, Lender has previously made a loan (the "Loan") to Retirement Inns
III, LLC, a Delaware limited liability company ("Borrower"), in the principal
sum of Eight Million Two Hundred Nine Thousand Nine Hundred Dollars ($8,209,900)
evidenced by that certain Multifamily Note dated June 27, 1999, issued by
Borrower to the order of Lender (the "Original Note"), as amended by that
certain First Amendment to Multifamily Note dated December 28, 2000 between
Borrower and Lender (the "First Amendment to Note" and together with the
Original Note, the "Existing Note"), as further amended by that certain Second
Amendment to Multifamily Note dated as of even date herewith between Borrower
and Lender (the "Second Amendment to Note") (the Original Note, as amended by
the First Amendment to Note and the Second Amendment to Note, is herein called
the "Note"), secured in part, by that certain Multifamily Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing dated as of June 27,
1999 by the Borrower for the benefit of Lender (the "Original Deed of Trust"),
recorded among the Official Records of Ventura County, California (the "Land
Records") on June 28, 1999 as Instrument No. 99-122405, as amended by that
certain Amendment to Multifamily Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing dated as of August 31, 1999 between Borrower and
Lender (the "First Amendment to Deed of Trust"), recorded among the Land Records
on September 10, 1999 as Instrument No. 99-173435, as affected by that certain
Confirmatory Assignment of Multifamily Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of December 12, 2000, effective
as of October 2, 2000, by Banc One Capital Funding Corporation, an Ohio
corporation to Provident Mortgage Capital, Inc., now known as Red Mortgage
Capital, Inc. (the "Confirmatory Assignment", and together with the Original
Deed of Trust and the First Amendment to Deed of Trust, the "Existing Deed of
Trust"), recorded among the Land Records on January 31, 2001 as Instrument No.
2001-0018605-00, as further amended by that certain Second Amendment to
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of even date herewith between Borrower and Lender (the "Second
Amendment to Deed of Trust"), recorded among the Land Records simultaneously
with the execution of this Agreement (the Existing Deed of Trust, as amended by
the Second Amendment to Deed of Trust, is herein called the "Deed of Trust");
and

     WHEREAS, Borrower has requested and Lender has agreed pursuant to the terms
and conditions of that certain Master Modification Agreement dated as of the
date

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hereof by and among the Borrower, the Lender and the Guarantor (the
"Modification Agreement") to (i) increase the principal sum of the Loan to
$11,980,000 (the "Increase"), (ii) extend the Maturity Date (as defined in the
Existing Note) of the Loan to July 1, 2003 (the "Extension") and (iii) change
the interest rate of the Loan to 8.50% (the "Rate Change"); and

     WHEREAS, Guarantor is the parent company of Borrower and has obtained
material benefits from the Loan and will obtain material benefits from the Loan
as increased, extended and otherwise amended pursuant to the Modification
Agreement; and

     WHEREAS, Lender has required that Guarantor guaranty a portion of the Loan
pursuant to the terms of this Agreement as a condition to agreeing to the
Increase, the Extension and the Rate Change, and entering into the Modification
Agreement.

     NOW, THEREFORE, in consideration of the premises, the mutual entry of the
Modification Agreement by the parties thereto, the Increase, the Extension, the
Rate Change and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor and Lender hereby agree
as follows:

                                    ARTICLE I

                      DEFINITIONS AND RULES OF CONSTRUCTION

     SECTION 1.1. Definitions. All capitalized terms which are not specifically
defined in this Agreement shall have the meanings assigned to such terms in the
Deed of Trust. In addition, the terms defined in the Preamble and Recitals
hereto and elsewhere herein shall have the respective meanings specified therein
or elsewhere herein, and the following terms shall have the following meanings:

     "ARVP III" means American Retirement Villas Properties III, L.P., a
California limited partnership.

     "ARVP III Pledge Agreement" means that certain American Retirement Villas
Properties III, L.P. Partnership Interest Pledge Agreement dated as of the date
hereof by Guarantor to and for the benefit of Lender.

     "Cash Collateral Agreement" means that certain Cash Collateral Pledge
Agreement dated as of the date hereof by Borrower for the benefit of Lender.

     "Collateral" means (a) (i) the partnership unit certificates of ARV PIII
and SGRV now owned or in the future acquired by Guarantor, (ii) any (if any)
certificates representing or evidencing the partnership units of ARVP III and
SGRV owned by Guarantor, (iii) any and all other property which may be delivered
to or held by Lender pursuant to the provisions of the ARV PIII Pledge Agreement
and the SGRV Pledge Agreement, and (iv) subject to the provisions of the ARV
PIII Pledge Agreement and the SGRV Pledge Agreement, all payments of principal
or interest, distributions, dividends,

<PAGE>

cash, income, profits instruments, securities and other property from time to
time received, receivable or otherwise distributed in respect of, in exchange
for or upon conversion of, the partnership units of ARV PIII and SGRV owned by
Guarantor, and (v) subject to the provisions of the ARV PIII Pledge Agreement
and the SGRV Pledge Agreement, any and all voting and other rights, powers and
privileges accruing or incidental to an owner of the partnership units of ARV
PIII or SGRV and the other property referred to in clauses (i) through (iv); and
(b) all cash and non-cash proceeds and products of the portion of the Collateral
described in clause (a) above.

     "Enforcement Costs" means any and all funds, costs, expenses and charges of
any nature whatsoever (including, without limitation, attorney's fees and
expenses) advanced, paid or incurred by or on behalf of Lender under or in
connection with the administration or enforcement of this Agreement, including,
without limitation, (a) the compliance of Guarantor with any covenant, warranty,
representation or agreement of Guarantor made in or pursuant to this Agreement
or any of the other Loan Documents, and (b) the exercise, preservation,
maintenance, protection, operation, management, enforcement, collection, sale or
other disposition of, or realization upon, this Agreement, all or any part of
the Collateral and the rights and remedies of Lender hereunder, under applicable
law and otherwise.

     "Event of Default" has the meaning set forth in Article V.

     "Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity or person exercising applicable
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, administration, official, service or other
instrumentality of the United States of America, of any state within the United
States of America, of any territory or possession of the United States of
America, of the District of Columbia, of any municipality within the United
States of America, or of any other governmental entity.

     "Lien" means any interest in property securing any obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the lien, encumbrance, pledge, or security interest arising from a deed of
trust, mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes.

     "Loan Documents" shall have the meaning set forth in the Modification
Agreement.

     "Obligations" means collectively and includes (i) all present and future
liabilities and obligations of any kind and nature whatsoever of Borrower to
Lender both now existing and hereafter arising under, as a result of, on account
of, or in connection with, the Loan, (ii) the Note and any extensions, renewals
or replacements thereof, amendments thereto and restatements or modifications
thereof made at any time or from time to time hereafter, and/or (iii) the other
Loan Documents, including, without

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limitation, future advances, principal, interest, indemnities, fees, late
charges, enforcement costs and other costs and expenses, whether direct,
contingent joint, several, joint and several, matured or unmatured, and (iv) any
other financing or other financial arrangement provided by Lender to Borrower.
In addition, Obligations shall include all Enforcement Costs hereunder.

     "Person" or "person" means and includes an individual, a company, a
corporation, a partnership, a joint venture, a trust, an unincorporated
association, a Governmental Authority or any other entity.

     "SGRV" means San Gabriel Retirement Villa, L.P., a California limited
partnership.

     "SGRV Pledge Agreement" means that certain San Gabriel Retirement Villa
Partnership Interest Pledge Agreement dated as of the date hereof by Guarantor
to and for the benefit of Lender.

     "UCC" means the Uniform Commercial Code as in effect in the State of
California.

     SECTION 1.2. Rules of Construction. Unless otherwise defined herein and
unless the context otherwise requires, all terms used herein which are defined
by the UCC shall have the same meanings assigned to them by the UCC unless and
to the extent varied by this Agreement. The words "hereof", "herein", and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and section, subsection, schedule, and exhibit references are
references to sections or subsections of, or schedules or exhibits to, as the
case may be, this Agreement unless otherwise specified. As used herein, the
singular number shall include the plural, the plural the singular, and the use
of the masculine, feminine or neuter gender shall include all genders, as the
context may require.

                                   ARTICLE II

                                  THE GUARANTY

     SECTION 2.1. The Guaranty. Guarantor absolutely, unconditionally and
irrevocably guarantees to Lender the due and punctual payment in full (and not
merely the collectibility) of the Obligations; provided, however, that absent
fraud or willful misconduct on behalf of Guarantor, Lender's sole right of
recourse against Guarantor shall be against the Collateral in an amount not to
exceed $1,000,000. The guaranty of Guarantor under this Agreement is a guaranty
of payment and performance and not merely of collection or enforceability and
shall remain in full force and effect until all of the Obligations are
indefeasibly paid in full. Guarantor agrees that:

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               (a) The obligations of Guarantor under this Agreement shall be
               performed without demand by Lender and shall be unconditional
               irrespective of the genuineness, validity, regularity or
               enforceability of the Note, or any other Loan Document, and
               without regard to any other circumstance which might otherwise
               constitute a legal or equitable discharge of a surety or a
               guarantor. Guarantor hereby waives any and all benefits and
               defenses under California Civil Code Section 2810 and agrees that
               by doing so Guarantor shall be liable even if Borrower had no
               liability at the time of execution of the Note or any other Loan
               Document, or thereafter ceases to be liable. Guarantor hereby
               waives any and all benefits and defenses under California Civil
               Code Section 2809 and agrees that by doing so Guarantor's
               liability may be larger in amount and more burdensome than that
               of Borrower. Guarantor hereby waives the benefit of all
               principles or provisions of law, statutory or otherwise, which
               are or might be in conflict with the terms of this Agreement and
               agrees that Guarantor's obligations shall not be affected by any
               circumstances, whether or not referred to in this Agreement,
               which might otherwise constitute a legal or equitable discharge
               of a surety or a guarantor. Guarantor hereby waives the benefits
               of any right of discharge under any and all statutes or other
               laws relating to guarantors or sureties and any other rights of
               sureties and guarantors thereunder. Without limiting the
               generality of the foregoing, Guarantor hereby waives, to the
               fullest extent permitted by law, diligence in collecting the
               Obligations, presentment, demand for payment, protest, all
               notices with respect to the Note and this Agreement which may be
               required by statute, rule of law or otherwise to preserve
               Lender's rights against Guarantor under this Agreement, including
               notice of acceptance, notice of any amendment of the Loan
               Documents, notice of the occurrence of any default or Event of
               Default, notice of intent to accelerate, notice of acceleration,
               notice of dishonor, notice of foreclosure, notice of protest, and
               notice of the incurring by Borrower of any obligation or
               indebtedness. Guarantor also waives, to the fullest extent
               permitted by law, all rights to require Lender to (i) proceed
               against Borrower, (ii) if Borrower is a partnership, proceed
               against any general partner of Borrower, (iii) proceed against or
               exhaust any collateral held by Lender to secure the repayment of
               the Obligations, or (iv) pursue any other remedy it may now or
               hereafter have against Borrower, or, if Borrower is a
               partnership, any general partner of Borrower, including any and
               all benefits under California Civil Code Sections 2845, 2849 and
               2850.

               (b) Guarantor understands that the exercise by Lender of certain
               rights and remedies afforded Lender in other Loan Documents may
               affect or eliminate Guarantor's right of subrogation against
               Borrower and that Guarantor may therefore incur a partially or
               totally nonreimbursable liability under this Agreement.
               Nevertheless, Guarantor hereby authorizes and empowers Lender to
               exercise, in its sole and absolute discretion, any

<PAGE>

                  right or remedy, or any combination thereof, which may then be
                  available, since it is the intent and purpose of Guarantor
                  that the obligations under this Agreement shall be absolute,
                  independent and unconditional under any and all circumstances.
                  Guarantor expressly waives any defense (which defense, if
                  Guarantor had not given this waiver, Guarantor might otherwise
                  have) to a judgment against Guarantor by reason of a
                  nonjudicial foreclosure. Without limiting the generality of
                  the foregoing, Guarantor hereby expressly waives any and all
                  benefits under (i) California Code of Civil Procedure Section
                  580a (which Section, if Guarantor had not given this waiver,
                  would otherwise limit Guarantor's liability after a
                  nonjudicial foreclosure sale to the difference between the
                  obligations of Guarantor under this Agreement and the fair
                  market value of the property or interests sold at such
                  nonjudicial foreclosure sale), (ii) California Code of Civil
                  Procedure Sections 580b and 580d (which Sections, if Guarantor
                  had not given this waiver, would otherwise limit Lender's
                  right to recover a deficiency judgment with respect to
                  purchase money obligations and after a nonjudicial foreclosure
                  sale, respectively), and (iii) California Code of Civil
                  Procedure Section 726 (which Section, if Guarantor had not
                  given this waiver, among other things, would otherwise require
                  Lender to exhaust all of its security before a personal
                  judgment could be obtained for a deficiency). Notwithstanding
                  any foreclosure of the lien of the ARV PIII Pledge Agreement
                  or the SGRV Pledge Agreement, whether by the exercise of the
                  power of sale contained in the ARV PIII Pledge Agreement or
                  the SGRV Pledge Agreement or by an action for judicial
                  foreclosure, Guarantor shall remain bound under this
                  Agreement.

                  (c) In accordance with California Civil Code Section 2856,
                  Guarantor also waives any right or defense based upon an
                  election of remedies by Lender, even though such election
                  (e.g., nonjudicial foreclosure with respect to any collateral
                  held by Lender to secure repayment of the Obligations)
                  destroys or otherwise impairs the subrogation rights of
                  Guarantor or the right of Guarantor (after payment of the
                  obligations guaranteed by Guarantor under this Agreement) to
                  proceed against Borrower for reimbursement, or both, by
                  operation of California Code of Civil Procedure Section 580d
                  or otherwise.

                  (d) In accordance with California Civil Code Section 2856,
                  Guarantor waives any and all other rights and defenses
                  available to Guarantor by reason of California Civil Code
                  Sections 2787 through 2855, inclusive, including any and all
                  rights or defenses Guarantor may have by reason of protection
                  afforded to Borrower with respect to any of the obligations of
                  Guarantor under this Agreement pursuant to the antideficiency
                  or other laws of the State of California limiting or
                  discharging Borrower's Obligations, including California Code
                  of Civil Procedure Sections 580a, 580b, 580d, and 726.

<PAGE>

                    (e) In accordance with California Civil Code Section 2856,
                    Guarantor agrees to withhold the exercise of any and all
                    subrogation and reimbursement rights against Borrower,
                    against any other person, and against any collateral or
                    security for the Obligations, including any such rights
                    pursuant to California Civil Code Sections 2847 and 2848,
                    until the Obligations have been indefeasibly paid and
                    satisfied in full, all obligations owed to Lender under the
                    Loan Documents have been fully performed, and Lender has
                    released, transferred or disposed of all of its right, title
                    and interest in such collateral or security.

                    (f) At any time or from time to time and any number of
                    times, without notice to Guarantor and without affecting the
                    liability of Guarantor, (i) the time for payment of the
                    principal of or interest on the Obligations may be extended
                    or the Obligations may be renewed in whole or in part; (ii)
                    the time for Borrower's performance of or compliance with
                    any covenant or agreement contained in the Note or any other
                    Loan Document, whether presently existing or hereinafter
                    entered into, may be extended or such performance or
                    compliance may be waived; (iii) the maturity of the
                    Obligations may be accelerated as provided in the Note or
                    any other Loan Document; (iv) the Note or any other Loan
                    Document may be modified or amended by Lender and Borrower
                    in any respect, including an increase in the principal
                    amount; and (v) any security for the Obligations may be
                    modified, exchanged, surrendered or otherwise dealt with or
                    additional security may be pledged or mortgaged for the
                    Obligations.

                    (g) If more than one person executes this Agreement, the
                    obligations of those persons under this Agreement shall be
                    joint and several. Lender, in its discretion, may (i) bring
                    suit against Guarantor, or any one or more of the persons
                    constituting Guarantor, jointly and severally, or against
                    any one or more of them; (ii) compromise or settle with any
                    one or more of the persons constituting Guarantor, or any
                    other obligor of the Obligations, including Borrower, for
                    such consideration as Lender may deem proper; (iii) release
                    one or more of the persons constituting Guarantor, or any
                    other obligor of the Obligations, including Borrower, from
                    liability; and (iv) otherwise deal with Guarantor and any
                    other obligor of the obligations, including Borrower, or any
                    one or more of them, in any manner, and no such action shall
                    impair the rights of Lender to collect from Guarantor any
                    amount guaranteed by Guarantor under this Agreement. Nothing
                    contained in this paragraph shall in any way affect or
                    impair the rights or obligations of Guarantor with respect
                    to any other obligor of the Obligations.

                    (h) Any indebtedness of Borrower held by Guarantor now or in
                    the future is and shall be subordinated to the Obligations
                    and any such indebtedness of Borrower shall be collected,
                    enforced and received by

<PAGE>

                  Guarantor, as trustee for Lender, but without reducing or
                  affecting in any manner the liability of Guarantor under the
                  other provisions of this Agreement.

                  (i) Guarantor shall have no right of, and hereby waives any
                  claim for, subrogation or reimbursement against Borrower or
                  any general partner of Borrower by reason of any payment by
                  Guarantor under this Agreement, whether such right or claim
                  arises at law or in equity or under any contract or statute,
                  until the Obligations have been paid in full and there has
                  expired the maximum possible period thereafter during which
                  any payment made by Borrower to Lender with respect to the
                  Obligations could be deemed a preference under the United
                  States Bankruptcy Code.

                  (j) If any payment by Borrower is held to constitute a
                  preference under any applicable bankruptcy, insolvency, or
                  similar laws, or if for any other reason Lender is required to
                  refund any sums to Borrower, such refund shall not constitute
                  a release of any liability of Guarantor under this Agreement.
                  It is the intention of Lender and Guarantor that Guarantor's
                  obligations under this Agreement shall not be discharged
                  except by Guarantor's performance of such obligations and then
                  only to the extent of such performance.

<PAGE>

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     Guarantor represents and warrants to Lender that the following statements
are true, correct and complete:

     SECTION 3.1. Authority. Guarantor has full power and authority to guaranty
the Obligations of Borrower under the Note and to execute, deliver and perform
the obligations of Guarantor in accordance with the terms of this Agreement
without the consent or approval of any Person other than any consent or approval
which has been obtained.

     SECTION 3.2. Review of Documents; Financial Statements; Taxes Etc. (a)
Guarantor has or has had an opportunity to examine the Loan Documents existing
on the date hereof, (b) Guarantor has a direct or indirect financial interest in
Borrower and the Loan to Borrower by the Lender will result in financial
benefits to the Guarantor, (c) the most recent financial statements of Guarantor
heretofore furnished to the Lender correctly and accurately present the
financial condition of Guarantor as of the date of such financial statement in
all material respects, and no material adverse change in the financial condition
of Guarantor has occurred since the date of such financial statement, (d)
Guarantor has filed, or has obtained extensions for the filing of, all federal,
state and local tax returns required to be filed by Guarantor, and has paid all
taxes shown as due on such returns, and (e) this Agreement constitutes the valid
and binding obligation of Guarantor enforceable in accordance with its terms.

     SECTION 3.3. Survival. All representations and warranties contained in or
made under or in connection with this Agreement (a) shall survive the execution,
delivery and performance of this Agreement, and (b) shall be true, correct and
complete at all times during which any of the Obligations (or commitments
therefor) are outstanding with the same effect as if such representations and
warranties had been made at such times.

                                   ARTICLE IV

                                    COVENANTS

     SECTION 4.1. Further Assurances. Guarantor covenants and agrees with Lender
that Guarantor shall, from time to time, at its expense, execute, deliver,
acknowledge and cause to be duly filed, recorded or registered, if applicable,
any other certificate, agreement, statement, instrument or other document and
take any other action that from time to time may be necessary or desirable, or
that Lender may reasonably request, in order to create, grant, convey, confirm,
preserve, validate or better assure to Lender the rights intended to be granted,
now or in the future, to Lender under this Agreement and the other Loan
Documents.

<PAGE>

                                    ARTICLE V

                                     DEFAULT

     The occurrence of any one or more of the following events shall constitute
a default under the provisions of this Agreement, and the term "Event of
Default" means, whenever it is used in this Agreement, any one or more of the
following events:

     SECTION 5.1. Payment of Obligations. If any of the Obligations are not paid
as and when due and payable in accordance with the provisions of this Agreement,
the Note, and/or any of the other Loan Documents after giving effect to any
applicable grace or cure periods, if any;

     SECTION 5.2. Perform, etc. Other Provisions of This Agreement and other
Loan Documents. The failure of Guarantor to perform, observe or comply with any
of the provisions of this Agreement not otherwise covered by other subsections
of this Section 5 or any of the other Loan Documents, and such failure is not
cured to the satisfaction of Lender within a period of thirty (30) days after
the date of written notice thereof by Lender to Guarantor (or, whenever such a
failure is such that it cannot be cured within thirty (30) days after Guarantor
is given notice thereof, then within sixty (60) days from the date after
Guarantor is given notice thereof if, in the sole but reasonable discretion of
Lender, Guarantor is taking appropriate corrective action to cure the failure
and such failure will not impair the ability of Guarantor to perform its
obligations under this Agreement and the other Loan Documents or otherwise
adversely affects Lender's security in or right to the Collateral).

     SECTION 5.3. Performance of Provisions of the other Loan Documents. If an
Event of Default (as defined in the Deed of Trust) occurs, or subject to
applicable notice and cure periods provided therein, if Borrower or Guarantor,
as applicable, fails to perform, observe, or comply with any of the provisions
of the Note or any of the other Loan Documents.

     SECTION 5.4. Representations and Warranties. If any representation or
warranty contained herein or any statement or representation made in any
certificate or other information at any time given by or on behalf of Guarantor
or Borrower or furnished in connection with this Agreement or any of the other
Loan Documents shall prove to be false or incorrect in any material respect on
the date as of which made;

     SECTION 5.5. Liquidation, Termination, Dissolution, etc. If Guarantor,
SGRV, ARV PIII or Borrower shall liquidate, dissolve or terminate its existence,
or if, without the prior written consent of Lender, any change occurs in the
ownership or control of Guarantor, Borrower, SGRV or ARV PIII;

     SECTION 5.6. Inability to Pay Debts. If Guarantor, Borrower, SGRV or ARV
PIII admits in writing or in sworn testimony the inability to pay its debts as
they mature or shall make any assignment for the benefit of any of its
creditors;

<PAGE>

     SECTION 5.7. Bankruptcy. If proceedings in bankruptcy, or for
reorganization of Guarantor, Borrower, SGRV or ARV PIII, or for the readjustment
of any debts of Guarantor, Borrower, SGRV or ARV PIII, under the Bankruptcy
Code, as amended, or any part thereof, or under any other applicable laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced against or by Guarantor, Borrower, SGRV or ARV PIII
(provided, however, that with respect to any such proceedings not instituted by
Guarantor, Borrower, SGRV or ARV PIII, such proceedings will not be an Event of
Default if discharged within ninety (90) days of their commencement);

     SECTION 5.8. Receiver. A receiver or trustee shall be appointed for
Guarantor, Borrower, SGRV or ARV PIII or for any substantial part of the assets
of Guarantor, Borrower, SGRV or ARV PIII, or any proceedings shall be instituted
for the dissolution or the full or partial liquidation of the Guarantor,
Borrower, SGRV or ARV PIII (provided, however, that with respect to any such
appointments not requested or instituted by Guarantor, Borrower, SGRV or ARV
PIII, such appointment or proceedings will not be an Event of Default if such
receiver or trustee is discharged within ninety (90) days of his or her
appointment and/or such proceedings are discharged within ninety (90) days of
their commencement).

                                   ARTICLE VI

                               RIGHTS AND REMEDIES

     SECTION 6.1. Rights and Remedies. Upon the occurrence of an Event of
Default under the provisions of this Agreement, an amount equal to the lesser of
(i) total of the Obligations then outstanding (whether matured or unmatured and
regardless of whether any portion of such Obligations are then due and payable
by Borrower), or (ii) $1,000,000 (absent fraud or willful misconduct, in which
event the total amount of the Obligations then outstanding as set forth in
clause (i) above), shall immediately and automatically be due and payable by
Guarantor to Lender, without further action by, or notice of any kind from,
Lender unless expressly provided for herein, and Lender may at any time and from
time to time thereafter exercise any powers, rights and remedies available to
Lender under the provisions of this Agreement, the other Loan Documents and
applicable laws to liquidate the Collateral, all such powers, rights and
remedies being cumulative and enforceable alternatively, successively or
concurrently. Each and every Event of Default hereunder shall give rise to a
separate cause of action hereunder, and separate actions may be brought
hereunder as each cause of action arises.

     SECTION 6.2. Application. The proceeds of any payment for the payment of
all or any part of the Obligations coming into Lender's possession may be held,
segregated, or applied by Lender to any of the Obligations, whether matured or
unmatured, in such order and manner as Lender may determine in its sole
discretion.

<PAGE>

     SECTION 6.3. No Waiver, etc. No failure or delay by Lender to
insist upon the strict performance of any term, condition, covenant or agreement
of this Agreement or of the other Loan Documents, or to exercise any right,
power or remedy consequent upon a breach thereof, shall constitute a waiver of
any such term, condition, covenant or agreement or of any such breach, or
preclude Lender from exercising any such right, power or remedy at any later
time or times. By accepting payment after the due date of any amount payable
under this Agreement or under any of the other Loan Documents, Lender shall not
be deemed to waive the right either to require prompt payment when due of all
other amounts payable under this Agreement or under any of the other Loan
Documents, or to declare a default for failure to effect such prompt payment of
any such other amount. The payment by Guarantor, or any other Person and the
acceptance by Lender or any other amount due and payable under the provisions of
this Agreement or the other Loan Documents at any time during which a default or
Event of Default exists shall not in any way or manner be construed as a waiver
of such default or Event of Default by Lender or preclude Lender from exercising
any right of power or remedy consequent upon such default or Event of Default.

                                   ARTICLE VII

                                  MISCELLANEOUS

     SECTION 7.1. Course of Dealing; Amendment. No course of dealing between
Lender and Guarantor shall be effective to amend, modify or change any provision
of this Agreement or the other Loan Documents. Lender shall have the right at
all times to enforce the provisions of this Agreement and the other Loan
Documents in strict accordance with the provisions hereof and thereof,
notwithstanding any conduct or custom on the part of Lender in refraining from
so doing at any time or times. The failure of Lender at any time or times to
enforce its rights under such provisions, strictly in accordance with the same,
shall not be construed as having created a custom in any way or manner contrary
to specific provisions of this Agreement or the other Loan Documents or as
having in any way or manner modified or waived the same. This Agreement may not
be amended, modified, or changed in any respect except by an agreement in
writing signed by Lender and Guarantor.

     SECTION 7.2. Waiver of Default. Lender may, at any time and from time to
time, execute and deliver to Guarantor a written instrument waiving, on such
terms and conditions as Lender may specify in such written instrument, any of
the requirements of this Agreement or any Event of Default or default and its
consequences, provided, that any such waiver shall be for such period and
subject to such conditions as shall be specified in any such instrument. In the
case of any such waiver, Guarantor and Lender shall be restored to their former
positions prior to such Event of Default or default and shall have the same
rights as they had hereunder. No such waiver shall extend to any subsequent or
other Event of Default or default, or impair any right consequent thereto and
shall be effective only in the specific instance and for the specific purpose
for which given.

<PAGE>

     SECTION 7.3. Guaranty Absolute. All rights and remedies of Lender hereunder
and under applicable laws, the guaranty and all agreements and obligations of
Guarantor hereunder shall be absolute and unconditional irrespective of, and
shall not be released, discharged, impaired or affected by (a) any lack of
validity or enforceability of the Note, or any of the other Loan Documents, (b)
any change in the amount of any or all of the Obligations or any change in the
time, manner or place of payment of any or all of the Obligations or any change
of any other provision or term of any or all of the Obligations, (c) any
amendment to, or modification or waiver of, consent to, or departure from, any
of the provisions of any of the Loan Documents, (d) any exchange, substitution,
release, addition or non-perfection of any collateral and security for any of
the Obligations, (e) the release of, in whole or in part, any Person, including,
without limitation, Borrower or Guarantor, obligated or liable for the payment
of all or any part of the Obligations or any attempt, pursuit, enforcement or
exhaustion of any rights or remedies Lender may have against any such Person or
against any collateral and security for any or all of the Obligations, (f) the
failure, omission, lack of diligence or delay by Lender to exercise or enforce
any rights and remedies it may have under any of the Loan Documents or
applicable laws, and (g) any other event or circumstance which might otherwise
constitute a legal or equitable discharge, release or defense of Guarantor or of
the Collateral.

     SECTION 7.4. Notices. All notices, requests and demands to or upon the
parties to this Agreement shall be deemed to have been given or made when
delivered by hand, or when deposited in the mail, postage prepaid by registered
or certified mail, return receipt requested, or, in the case of telegraphic
notice, when delivered to the telegraphic company and when properly transmitted,
addressed as provided under the Deed of Trust (the address of the Guarantor
shall for all notice purposes be the same as the Borrower's address set forth in
the Deed of Trust).

     SECTION 7.5. Enforcement Costs. Guarantor shall pay to Lender upon demand
all Enforcement Costs. Enforcement Costs shall be included in the Obligations
secured hereby.

     SECTION 7.6. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Lender in order to
carry out the intentions of the parties hereto as nearly as may be possible, (b)
the invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction, and (c) the parties hereto shall endeavor, in good faith,
negotiations to replace the invalid or unenforceable provisions with valid and
enforceable provisions, the economic effect of which comes as close as possible
to that of the invalid or unenforceable provisions.

     SECTION 7.7. Assignment. Lender may, without prior notice to, or consent
of, Guarantor, sell, assign or transfer to any Person or Persons all or any part
of the Obligations, and in the event of any such assignment and rights and
remedies of Lender hereunder shall extend to, and vest in, any such assignee or
assignees who shall have the right to enforce the provisions of this Agreement
as fully as Lender, provided that Lender shall continue to have the unimpaired
right to enforce the provisions of this Agreement as to so much of

<PAGE>

the Obligations that it has not sold, assigned or transferred. Guarantor will
fully cooperate with Lender in connection with any such assignment and will
execute and deliver such consents and acceptances to any such assignment and
amendments to this Agreement in order to effect any such assignment (including,
without limitation, the appointment of Lender as agent for itself and all
assignees).

     SECTION 7.8. Survival. All representations, warranties and covenants
contained among the provisions of this Agreement shall survive the execution and
delivery of this Agreement and all other Loan Documents.

     SECTION 7.9. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Guarantor and Lender and their respective personal
representatives, successors and assigns, except that Guarantor shall not have
the right to assign their rights hereunder or any interest herein without the
prior written consent of Lender.

     SECTION 7.10. Continuing Agreement. This Agreement shall be continuing and
binding on Guarantor regardless of how long before or after the date hereof any
of the Obligations were or are incurred. This Agreement shall terminate when all
of the Obligations have been indefeasibly paid in full and no commitments
therefor are outstanding.

     SECTION 7.11. Applicable Law. This Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the laws of the State of California, both in interpretation and performance.

     SECTION 7.12. Exhibits and Schedules. Any exhibits and schedules attached
to this Agreement are an integral part hereof and are hereby incorporated herein
and included in the term "this Agreement."

     SECTION 7.13. Headings. Article, Section, paragraph, and clause headings in
this Agreement are included herein for convenience of reference only, shall not
constitute a part of this Agreement for any other purpose, and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.

     SECTION 7.14. Jurisdiction and Venue. Guarantor agrees that any controversy
arising under or in relation to this Agreement shall be litigated exclusively in
Ventura County, California (the "the Jurisdiction"). The state and federal
courts and authorities with jurisdiction in the Jurisdiction shall have
exclusive jurisdiction over all controversies which shall arise under or in
relation to this Agreement, the Note or any other Loan Document. Guarantor
irrevocably consents to service, jurisdiction, and venue of such courts for any
such litigation and waives any other venue to which it might be entitled by
virtue of domicile, habitual residence, or otherwise.

<PAGE>

     SECTION 7.15. WAIVER OF JURY TRIAL. GUARANTOR AND LENDER EACH (A) AGREES
NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS
AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS GUARANTOR AND LENDER THAT
IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH
RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE
FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY,
KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

<PAGE>

     IN WITNESS WHEREOF, Guarantor has executed and delivered this Agreement
under its seal as of the day and year first written above.

ATTEST:                                    ARV ASSISTED LIVING, INC.,
                                           a Delaware corporation

_____________________                      By: /s/ Abdo H. Khoury
(SEAL)                                        -------------------------------
                                           Name:   Abdo H. Khoury
                                           Title:  President<PAGE>

                                                                  Exhibit 10.108

                        CASH COLLATERAL PLEDGE AGREEMENT

     THIS CASH COLLATERAL PLEDGE AGREEMENT (this "Agreement") is made this 19th
day of February, 2002, by RETIREMENT INNS III, LLC, a Delaware limited liability
company (the "Pledgor"), to and for the benefit of RED MORTGAGE CAPITAL, INC.,
an Ohio corporation (the "Lender").

                                 R E C I T A L S

     WHEREAS, the Lender has previously made a loan to the Pledgor in the
original principal amount of Eight Million Two Hundred Nine Thousand Nine
Hundred Dollars ($8,209,900) (the "Loan") pursuant to the terms of that certain
Multifamily Note dated as of June 27, 1999, by Pledgor to the order of the
Lender (the "Original Note"), as amended pursuant to the terms of that certain
First Amendment to Multifamily Note dated as of December 28, 2000 between
Pledgor and Lender (the "First Amendment to Note" and together with the Original
Note, the "Existing Note"), as further amended pursuant to the terms of that
certain Second Amendment to Multifamily Note dated as of even date herewith
between Pledgor and Lender (the "Second Amendment to Note") (the Original Note,
as amended by the First Amendment and the Second Amendment, as the same may be
from time to time, renewed, extended, further amended, restated, supplemented or
otherwise modified is herein called the "Note") and is secured, in part, by a
first mortgage lien on the real property (the "Mortgaged Property") described on
Exhibit A to that certain Multifamily Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing dated as of June 27, 1999 by Pledgor for
the benefit of the Lender (the "Original Deed of Trust"), recorded among the
Official Records of Ventura County, California (the "Land Records") on June 28,
1999 as Instrument No. 99-122405, as amended by that certain Amendment to
Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of August 31, 1999 between Pledgor and the Lender (the "First
Amendment to Deed of Trust"), recorded among the Land Records on September 10,
1999 as Instrument No. 99-173435, as affected by that certain Confirmatory
Assignment of Multifamily Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing dated as of December 12, 2000, effective as of October 2,
2000, by Banc One Capital Funding Corporation, an Ohio corporation to Provident
Mortgage Capital, Inc., now known as Red Mortgage Capital, Inc. (the
"Confirmatory Assignment", and together with the Original Deed of Trust and the
First Amendment to Deed of Trust, the "Existing Deed of Trust"), recorded among
the Land Records on January 31, 2001 as Instrument No. 2001-0018605-00, as
further amended by that certain Second Amendment to Multifamily Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing dated as of even date
herewith between Pledgor and Lender (the "Second Amendment to Deed of Trust")
(the Original Deed of Trust, as amended by the First Amendment to Deed of Trust
and the Second Amendment to Deed of Trust, as the same may be from time to time
renewed, extended, further amended, restated, supplemented or otherwise modified
is herein called the "Deed of Trust"); and

     WHEREAS, the Pledgor has requested and the Lender has agreed pursuant to
the terms and conditions of that certain Master Modification Agreement dated as
of even date herewith by and among the Pledgor, ARV Assisted Living, Inc., a
Delaware corporation (the "Guarantor"), and the Lender (the "Modification
Agreement") to (i) increase the principal sum of the Loan to $11,980,000 (the
"Increase"), (ii) extend the Maturity Date (as such term is defined in the
Existing Note) of the Loan to July 1, 2003 (the "Extension"), and (iii) change
the interest rate of the Loan to 8.50% (the "Rate Change"); and

     WHEREAS, as a condition to the Extension, the Increase and the Rate Change,
Lender has required Pledgor to deposit with and pledge to Lender cash in the
amount of Two Million Dollars ($2,000,000) (the "Deposit"), and to grant to
Lender a continuing security interest in and to such Deposit.

<PAGE>

     NOW, THEREFORE, in consideration of the Extension, the Rate Change, the
Increase, these premises and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Pledgor and Lender hereby
agree as follows:

                                    ARTICLE I

                      DEFINITIONS AND RULES OF CONSTRUCTION

     Definitions. All capitalized terms which are not specifically defined in
this Agreement shall have the meanings assigned to such terms in the Deed of
Trust. In addition, the terms defined in the Preamble and Recitals hereto and
elsewhere herein shall have the respective meanings specified therein or
elsewhere herein, and the following terms shall have the following meanings:

     "Cash Collateral Account" means that certain account entitled the "ARV/RMC
Cash Pledge Account," to be established and maintained by Lender, and any
successor or replacement account designated and pledged to Lender as the "Cash
Collateral Account" under this Agreement; and which account shall be an interest
bearing account, bearing interest (calculated monthly) at the then money market
rate of interest obtainable by Lender.

     "Collateral" has the meaning set forth in Section 2.2.

     "Deposit" has the meaning set forth in the Recitals.

     "Enforcement Costs" means any and all funds, costs, expenses and charges of
any nature whatsoever (including, without limitation, attorney's fees and
expenses) advanced, paid or incurred by or on behalf of Lender under or in
connection with the administration or enforcement of this Agreement, including,
without limitation, (a) the compliance of Pledgor with any covenant, warranty,
representation or agreement of Pledgor made in or pursuant to this Agreement or
any of the other Loan Documents, and (b) the exercise, preservation,
maintenance, protection, operation, management, enforcement, collection, sale or
other disposition of, or realization upon, this Agreement, all or any part of
the Collateral, the Security Interest and the rights and remedies of Lender
hereunder, under applicable law and otherwise.

     "Event of Default" has the meaning set forth in Article V.

     "Loan Documents" has the meaning set forth in the Modification Agreement.

     "Lien" means any mortgage, deed of trust, pledge, security interest,
assignment, encumbrance, judgment, lien, claim or charge of any kind in, on, of
or in respect of, any asset or property or any rights to any asset or property,
including, without limitation, (a) any interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to any such asset or property, and (b) the filing of, or any agreement
to give, any financing statement relating to any such asset or property under
the Uniform Commercial Code of any jurisdiction.

     "Obligations" means all past, present and future indebtedness, liabilities,
and obligations of Borrower and/or any other Person to Lender of any kind,
nature or description whatsoever under, arising as a result of, pursuant to,
and/or in connection with, the provisions of this Agreement, the Note and/or any
of the other Loan Documents, including, without limitation, (a) such
indebtedness, liabilities, and obligations of Pledgor to Lender which consist of
principal, interest, fees, late charges, attorneys' fees, Enforcement Costs,
collection costs, due or to become due, future advances, direct, indirect,
primary, secondary, joint, several, joint and several, fixed or contingent,
liquidated or unliquidated, regardless of how they arise or by what agreement or
instrument they may be evidenced or whether they are evidenced by any agreement
or instrument, and whether incurred as maker, endorser, surety, guarantor or
otherwise, (b) any and all renewals, extensions, and rearrangements of any such
indebtedness, liabilities, and obligations, (c) the "Obligations" as such term
is described and defined in any other Loan Documents, and (d) any other
obligations, either direct or indirect, of Pledgor to Lender.

                                       2

<PAGE>

     "Person" means and includes an individual, a corporation, a partnership, a
joint venture, a trust, a limited liability company, an unincorporated
association, a government or political subdivision or agency thereof, or any
other entity.

     "Security Interest" means the security interest and other Liens in the
Collateral granted hereunder.

     "UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of California.

     Rules of Construction. Unless otherwise defined herein and unless the
context otherwise requires, all terms used herein which are defined by the UCC
shall have the same meanings assigned to them by the UCC unless and to the
extent varied by this Agreement. The words "hereof", "herein", and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
section, subsection, schedule, and exhibit references are references to sections
or subsections of, or schedules or exhibits to, as the case may be, this
Agreement unless otherwise specified. As used herein, the singular number shall
include the plural, the plural the singular, and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.

                                   ARTICLE II

                                 THE COLLATERAL

Deposits with Lender.

     (a) Pledgor hereby covenants and agrees to make the Deposit with Lender
concurrently with the execution by the Pledgor and the Lender of the
Modification Agreement.

     (b) Lender hereby covenants and agrees upon execution of the Modification
Agreement to (i) establish and maintain the Cash Collateral Account and (ii)
deposit the Deposit into the Cash Collateral Account upon receipt thereof.

     The Pledge. In order to secure the full and punctual payment of the
Obligations, and to secure Pledgor's performance under this Agreement and the
performance of the other Loan Documents, Pledgor hereby transfers, pledges,
assigns, sets over, delivers and grants to Lender a first priority continuing
lien and security interest in and to all of the following property of Pledgor,
both now owned and existing and hereafter created, acquired and arising (all
being collectively referred to as the "Collateral") and all right, title and
interest of Pledgor in and to the Collateral:

          (a) Deposits into the Cash Collateral Account. (i) All deposits by
Pledgor, including, but not limited to the Deposit, into the Cash Collateral
Account; and

          (b) Proceeds. All cash and non-cash proceeds and products of the
portion of the Collateral described in clause (a) above, including, without
limitation, all property or deposit accounts which may from time to time be
acquired directly or indirectly with any proceeds of such Collateral.

          SECTION 2.3. Interest on Cash Collateral Account. Until the occurrence
of an Event of Default, all interest, dividends, cash, income or other property
now or hereafter accrued, payable or distributable under, on, to or by reason of
the Cash Collateral Account shall be credited against interest due on the Note
for the immediately succeeding month after such accrued interest, dividend,
cash,

                                       3

<PAGE>

income or other property is calculated. Upon the occurrence of an Event of
Default, all interest, dividends, cash, income or other property shall accrue to
and become part of the amounts on deposit in the Cash Collateral Account and
part of the Collateral for the benefit of Lender, and shall not be distributable
to Borrower at any time except upon payment in full of all Obligations and the
termination of this Agreement.

          SECTION 2.4. Security Interest Security Only. The Security Interest is
granted as security only and shall not subject Lender to, or transfer or in any
way affect or modify, any obligation or liability of Pledgor with respect to any
of the Collateral or any transaction in connection therewith.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     Pledgor represents and warrants to Lender that the following statements are
true, correct and complete:

     Title and Authority. As of the date hereof, Pledgor is the owner of the
Collateral, subject only to the Lien hereof. Pledgor has full power and
authority to grant the Security Interest to Lender in the Collateral pursuant
hereto and to execute, deliver and perform the obligations of Pledgor in
accordance with the terms of this Agreement without the consent or approval of
any Person other than any consent or approval which has been obtained.

     Survival. All representations and warranties contained in or made under or
in connection with this Agreement (a) shall survive the execution, delivery and
performance of this Agreement, and (b) shall be true, correct, and complete at
all times during which any of the Obligations (or commitments therefor) are
outstanding with the same effect as if such representations and warranties had
been made at such times.

                                   ARTICLE IV

                                    COVENANTS

     Pledgor covenants and agrees with Lender as follows:

     Title, Liens and Taxes. Pledgor shall, at its cost and expense, take any
and all actions necessary to defend its title to the Collateral against all
Persons other than Lender and to defend the Security Interest of Lender in the
Collateral and the priority (or intended priority) thereof, against any adverse
Lien of any nature whatsoever. Except to the extent contested in good faith,
Pledgor will pay all taxes and assessments levied or placed on the Collateral
prior to the date when any interest or penalty would accrue for the nonpayment
thereof.

     Further Assurances. Pledgor shall, from time to time, at its expense,
execute, deliver, acknowledge and cause to be duly filed, recorded or registered
any statement, transfer, assignment, endorsement, instrument, paper, agreement
or other document and take any other action that from time to time may be
necessary or desirable, or that Lender may reasonably request, in order to
create, preserve, continue, perfect,

                                       4

<PAGE>

confirm or validate the Security Interest or to enable Lender to obtain the full
benefits of this Agreement or to exercise and enforce any of its rights, powers
and remedies hereunder. Pledgor shall pay all costs of, and incidental to, the
filing, recording or registration of any such document as well as any
recordation, transfer or other tax required to be paid in connection with any
such filing, recordation or registration. Pledgor hereby covenants to save
harmless and indemnify Lender from and against any liability resulting from the
failure to pay any required documentary stamps, recordation and transfer taxes
and recording costs incurred by Lender in connection with this Agreement which
covenant shall survive the termination of this Agreement and the payment of all
other Obligations. Pledgor agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement signed by
Pledgor in connection with this Agreement shall be sufficient as a financing
statement.

     Care and Protection of Collateral. Pledgor shall perform, observe, and
comply with all of the terms and provisions to be performed, observed or
complied with by it under each contract, agreement or obligation relating to the
Collateral. Lender shall have no duty to, and Pledgor hereby releases Lender
from all claims for loss or damage caused by the failure of Lender to, collect,
protect, preserve or enforce any of the Collateral or preserve rights against
account debtors and prior parties to the Collateral other than claims arising
from Lender's gross negligence or willful misconduct.

     Other Liens, Withdrawals, etc. Without the prior written consent of Lender,
Pledgor will not (a) assign, transfer, dispose of, pledge or grant or permit a
Lien to exist on, the Collateral or (b) withdraw any moneys or funds on deposit
pursuant to the Cash Collateral Account, including, but not limited to, the
Deposit.

                                    ARTICLE V

                                     DEFAULT

     The occurrence of any one or more of the following events shall constitute
a default under the provisions of this Agreement, and the term "Event of
Default" means, whenever it is used in this Agreement, any one or more of the
following events:

     Payment of Obligations. If any of the Obligations are not paid as and when
due and payable in accordance with the provisions of this Agreement, the Note
and/or any of the other Loan Documents after giving effect to any applicable
grace or cure periods, if any;

     Perform, etc. Other Provisions of This Agreement and other Loan Documents.
The failure of Pledgor to perform, observe or comply with any of the provisions
of this Agreement not otherwise covered by other subsections of this Section 5
or any of the other Loan Documents, and such failure is not cured to the
satisfaction of Lender within a period of thirty (30) days after the date of
written notice thereof by Lender to Pledgor (or, whenever such a failure is such
that it cannot be cured within thirty (30) days after Pledgor is given notice
thereof, then within sixty (60) days from the date after Pledgor is given notice
thereof if, in the sole but reasonable discretion of Lender, Pledgor is taking
appropriate corrective action to cure the failure and such failure will not
impair the ability of Borrower to perform its obligations under this Agreement
and the other Loan Documents or otherwise adversely affects Lender's security in
or right to the Collateral).

                                       5

<PAGE>

     Performance of Provisions of the other Loan Documents. If an Event of
Default (as defined in the Deed of Trust) occurs, or subject to applicable
notice and cure periods provided therein, if Pledgor fails to perform, observe
or comply with any of the provisions of the Note or any of the other Loan
Documents.

     Representations and Warranties. If any representation or warranty contained
herein or any statement or representation made in any certificate or other
information at any time given by or on behalf of Pledgor or furnished in
connection with this Agreement or any of the other Loan Documents shall prove to
be false or incorrect in any material respect on the date as of which made;

     Liquidation, Termination, Dissolution, etc. If Pledgor shall liquidate,
dissolve or terminate its existence, or if, without the prior written consent of
Lender, any change occurs in the ownership or control of Pledgor;

     Inability to Pay Debts. If Pledgor admits in writing or in sworn testimony
the inability to pay its debts as they mature or shall make any assignment for
the benefit of any of its creditors;

     Bankruptcy. If proceedings in bankruptcy, or for reorganization of Pledgor,
or for the readjustment of any debts of Pledgor, under the Bankruptcy Code, as
amended, or any part thereof, or under any other applicable laws, whether state
or federal, for the relief of debtors, now or hereafter existing, shall be
commenced against or by Pledgor (provided, however, that with respect to any
such proceedings not instituted by Pledgor, such proceedings will not be an
Event of Default if discharged within ninety (90) days of their commencement);

     Receiver. A receiver or trustee shall be appointed for Pledgor or for any
substantial part of the assets of Pledgor, or any proceedings shall be
instituted for the dissolution or the full or partial liquidation of the Pledgor
(provided, however, that with respect to any such appointments not requested or
instituted by Pledgor, such appointment or proceedings will not be an Event of
Default if such receiver or trustee is discharged within ninety (90) days of his
or her appointment and/or such proceedings are discharged within ninety (90)
days of their commencement).

                                   ARTICLE VI

                               RIGHTS AND REMEDIES

     Rights and Remedies of Lender. Upon and after the occurrence of an Event of
Default, Lender may, without notice or demand other than expressly provided for
under the provisions of this Agreement, apply the Collateral to the repayment of
any and all Obligations then outstanding in accordance with Section 6.2 below,
and exercise in any jurisdiction in which enforcement hereof is sought, any and
all rights and remedies Lender may have under this Agreement or any other Loan
Document, or under applicable law, including the rights and remedies of a
secured party under the UCC, all such rights

                                       6

<PAGE>

and remedies being cumulative and enforceable alternatively, successively or
concurrently.

     Application. The Collateral may be held, segregated, or applied by Lender
to any of the Obligations, whether matured or unmatured, in such order and
manner as Lender may determine in its sole discretion.

     No Waiver, etc. No failure or delay by Lender to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement or
of any of the other Loan Documents, or to exercise any right, power or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach, or preclude Lender from
exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement
or under any of the other Loan Documents, Lender shall not be deemed to waive
the right either to require prompt payment when due of all other amounts payable
under this Agreement or under any of the other Loan Documents, or to declare a
default for failure to effect such prompt payment of any such other amount. The
payment by Pledgor, or any other Person and the acceptance by Lender or any
other amount due and payable under the provisions of this Agreement or the other
Loan Documents at any time during which a default or Event of Default exists
shall not in any way or manner be construed as a waiver of such default or Event
of Default by Lender or preclude Lender from exercising any right of power or
remedy consequent upon such default or Event of Default.

                                   ARTICLE VII

                                  MISCELLANEOUS

     Course of Dealing; Amendment. No course of dealing between Lender and
Pledgor shall be effective to amend, modify or change any provision of this
Agreement or the other Loan Documents. Lender shall have the right at all times
to enforce the provisions of this Agreement and the other Loan Documents in
strict accordance with the provisions hereof and thereof, notwithstanding any
conduct or custom on the part of Lender in refraining from so doing at any time
or times. The failure of Lender at any time or times to enforce its rights under
such provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or the other Loan Documents or as having in any way or manner
modified or waived the same. This Agreement may not be amended, modified, or
changed in any respect except by an agreement in writing signed by Lender and
Pledgor.

     Waiver of Default. Lender may, at any time and from time to time, execute
and deliver to Pledgor a written instrument waiving, on such terms and
conditions as Lender may specify in such written instrument, any of the
requirements of this Agreement or any Event of Default or Default and its
consequences, provided, that any such waiver shall be for such period and
subject to such conditions as shall be specified in any such instrument. In the
case of any such waiver, Pledgor and Lender

                                       7

<PAGE>

shall be restored to their former positions prior to such Event of Default or
default and shall have the same rights as they had hereunder. No such waiver
shall extend to any subsequent or other Event of Default or default, or impair
any right consequent thereto and shall be effective only in the specific
instance and for the specific purpose for which given.

     Security Interest Absolute. All rights and remedies of Lender hereunder and
under applicable laws, the Security Interest and all agreements and obligations
of Pledgor hereunder shall be absolute and unconditional irrespective of, and
shall not be released, discharged, impaired or affected by (a) any lack of
validity or enforceability of the Note or any of the other Loan Documents, (b)
any change in the amount of any or all of the Obligations or any change in the
time, manner or place of payment of any or all of the Obligations or any change
of any other provision or term of any or all of the Obligations, (c) any
amendment to, or modification or waiver of, consent to, or departure from, any
of the provisions of any of the Loan Documents, (d) any exchange, substitution,
release, addition or non-perfection of any collateral and security for any of
the Obligations, (e) the release of, in whole or in part, any Person, including,
without limitation, Pledgor, obligated or liable for the payment of all or any
part of the Obligations or any attempt, pursuit, enforcement or exhaustion of
any rights or remedies Lender may have against any such Person or against any
collateral and security for any or all of the Obligations, (f) the failure,
omission, lack of diligence or delay by Lender to exercise or enforce any rights
and remedies it may have under any of the Loan Documents or applicable laws, and
(g) any other event or circumstance which might otherwise constitute a legal or
equitable discharge, release or defense of Pledgor or of the Collateral.

     Notices. All notices, requests and demands to or upon the parties to this
Agreement shall be deemed to have been given or made when delivered by hand, or
when deposited in the mail, postage prepaid by registered or certified mail,
return receipt requested, or, in the case of telegraphic notice, when delivered
to the telegraphic company and when properly transmitted, addressed as provided
under the Deed of Trust.

     Performance for Pledgor. Pledgor hereby appoints Lender the
attorney-in-fact of Pledgor for the purpose of carrying out the ministerial
provisions of this Agreement and taking any action and executing any instrument
which Lender may deem necessary or advisable to accomplish the purposes hereof,
which appointment is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, Lender shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in Lender's name or in the name of Pledgor, to the extent
necessary or advisable to accomplish the purposes hereof (a) to ask for, demand,
sue for, collect, receive, receipt and give acquittance for any and all moneys
due or to become due and under and by virtue of any Collateral, (b) to give full
discharge for all or any part of the Collateral, (c) to settle, compromise,
prosecute or defend any action, claim or proceeding with respect to all or any
part of the Collateral, (d) to sell, assign, endorse, pledge, transfer and make
any agreement respecting all or any part of the Collateral, or (e) otherwise
deal with all or any part of the Collateral as though Lender were the absolute
owner thereof; provided, however, that nothing herein

                                       8

<PAGE>

contained shall, and no action taken by Lender or omitted to be taken with
respect to the Collateral or any part thereof, give rise to any defense,
counterclaim or offset in favor of Pledgor or to any claim or action against
Lender.

     Enforcement Costs. Pledgor shall pay to Lender upon demand all Enforcement
Costs. Enforcement Costs shall be included in the Obligations secured hereby.

     Severability. If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of Lender in order to carry out the
intentions of the parties hereto as nearly as may be possible, (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction, and (c) the parties hereto shall endeavor, in good faith,
negotiations to replace the invalid or unenforceable provisions with valid and
enforceable provisions, the economic effect of which comes as close as possible
to that of the invalid or unenforceable provisions.

     Assignment. Lender may, without prior notice to, or consent of, Pledgor,
sell, assign or transfer to any Person or Persons all or any part of the
Obligations, and in the event of any such assignment, the Security Interest and
rights and remedies of Lender hereunder shall extend to, and vest in, any such
assignee or assignees who shall have the right to enforce the provisions of this
Agreement as fully as Lender, provided that Lender shall continue to have the
unimpaired right to enforce the provisions of this Agreement as to so much of
the Obligations that it has not sold, assigned or transferred. Pledgor will
fully cooperate with Lender in connection with any such assignment and will
execute and deliver such consents and acceptances to any such assignment and
amendments to this Agreement in order to effect any such assignment (including,
without limitation, the appointment of Lender as agent for itself and all
assignees).

     Survival. All representations, warranties and covenants contained among the
provisions of this Agreement shall survive the execution and delivery of this
Agreement and all other Loan Documents.

     Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Pledgor and Lender and their respective personal representatives,
successors and assigns, except that Pledgor shall not have the right to assign
their rights hereunder or any interest herein without the prior written consent
of Lender.

     Continuing Agreement. This Agreement and the Security Interest shall be
continuing and binding on Pledgor regardless of how long before or after the
date hereof any of the Obligations were or are incurred. This Agreement and the
Security Interest shall terminate when all of the Obligations have been
indefeasibly paid in full and no commitments therefor are outstanding, at which
time Lender will reassign and deliver to Pledgor, against receipt, such of the
Collateral as still held by Lender (if any) and not sold

                                       9

<PAGE>

or otherwise applied by Lender pursuant to the terms hereof. Any such
reassignment shall be without recourse to or warranty by Lender at the expense
of Pledgor.

     Applicable Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the laws
of the State of Ohio, both in interpretation and performance.

     Duplicate Originals and Counterparts. This Agreement may be executed in any
number of duplicate originals or counterparts, each of such duplicate originals
or counterparts shall be deemed to be an original and all taken together shall
constitute but one and the same instrument.

     Exhibits and Schedules. Any exhibits and schedules attached to this
Agreement are an integral part hereof and are hereby incorporated herein and
included in the term "this Agreement."

     Headings. Article, Section, paragraph, and clause headings in this
Agreement are included herein for convenience of reference only, shall not
constitute a part of this Agreement for any other purpose, and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.

     Termination. The Security Interest granted hereby shall terminate upon the
payment in full of the Obligations. Upon such termination, Lender shall take all
such actions as may be reasonably requested by Pledgor to evidence the release
of the Security Interest granted hereby.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]

                                       10

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     IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above.

ATTEST:                              RETIREMENT INNS III, LLC,
                                     a Delaware limited liability company

                                     By: /s/ Abdo Khoury             (SEAL)
---------------------                   -------------------------------
                                        Name:  Abdo H. Khoury
                                        Title: Manager

ATTEST:                              RED MORTGAGE CAPITAL, INC.,
                                     an Ohio corporation

                                     By:                                (SEAL)
---------------------                   -------------------------------
                                        Name:
                                        Title:

                                       11

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