Document:

<PAGE>

                                                                    EXHIBIT 10.7

                               PROMISSORY NOTE A

$85,000,000.00                                                New York, New York
                                                                 August 19, 2003

         FOR VALUE RECEIVED, each of the entities set forth on Schedule A
annexed hereto, jointly and severally, as maker, having its principal place of
business at 27442 Portola Parkway, Suite 200, Foothill Ranch, California 92610
(collectively, "BORROWER"), hereby unconditionally promises to pay to the order
of COLUMN FINANCIAL, INC., a Delaware corporation, as lender, having an address
at 11 Madison Avenue, New York, New York 10010 ("LENDER"), or at such other
place as the holder hereof may from time to time designate in writing, the
principal sum of EIGHTY-FIVE MILLION and No/100 DOLLARS ($85,000,000.00), in
lawful money of the United States of America with interest thereon to be
computed from the date of this Promissory Note A at the Applicable Interest
Rate, and to be paid in accordance with the terms of this Promissory Note A and
that certain Loan Agreement, dated the date hereof, between Borrower and Lender
(as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time, the "LOAN AGREEMENT"). All capitalized terms not
defined herein shall have the respective meanings set forth in the Loan
Agreement.

                           ARTICLE 1: PAYMENT TERMS

         Borrower agrees to pay the principal sum of this Promissory Note A and
interest on the unpaid principal sum of this Promissory Note A from time to time
outstanding at the rates and at the times specified in Article 2 of the Loan
Agreement and the outstanding balance of the principal sum of this Promissory
Note A and all accrued and unpaid interest thereon shall be due and payable on
the Maturity Date.

                      ARTICLE 2: DEFAULT AND ACCELERATION

         The Debt shall without notice become immediately due and payable at the
option of Lender if any payment required in this Promissory Note A is not paid
on or prior to the date when due or if not paid on the Maturity Date or on the
happening of any other Event of Default.

                           ARTICLE 3: LOAN DOCUMENTS

         This Promissory Note A is secured by the Mortgages and the other Loan
Documents. All of the terms, covenants and conditions contained in the Loan
Agreement, the Mortgages and the other Loan Documents are hereby made part of
this Promissory Note A to the same extent and with the same force as if they
were fully set forth herein. In the event of a conflict or inconsistency between
the terms of this Promissory Note A and the Loan Agreement, the terms and
provisions of the Loan Agreement shall govern.

                           ARTICLE 4: SAVINGS CLAUSE

         Notwithstanding anything to the contrary, (a) all agreements and
communications between Borrower and Lender are hereby and shall automatically be
limited so that, after taking

<PAGE>

into account all amounts deemed interest, the interest contracted for, charged
or received by Lender shall never exceed the Maximum Legal Rate, (b) in
calculating whether any interest exceeds the Maximum Legal Rate, all such
interest shall be amortized, prorated, allocated and spread over the full amount
and term of all principal indebtedness of Borrower to Lender and (c) if through
any contingency or event Lender receives or is deemed to receive interest in
excess of the Maximum Legal Rate, any such excess shall be deemed to have been
applied toward payment of the principal of any and all then outstanding
indebtedness of Borrower to Lender.

                           ARTICLE 5: NO ORAL CHANGE

         This Promissory Note A may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of Borrower or Lender, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.

                              ARTICLE 6: WAIVERS

         Borrower and all others who may become liable for the payment of all or
any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and non-payment and all other
notices of any kind. No release of any security for the Debt or extension of
time for payment of this Promissory Note A or any installment hereof, and no
alteration, amendment or waiver of any provision of this Promissory Note A, the
Loan Agreement or the other Loan Documents made by agreement between Lender or
any other Person shall release, modify, amend, waive, extend, change, discharge,
terminate or affect the liability of Borrower, and any other Person who may
become liable for the payment of all or any part of the Debt, under this
Promissory Note A, the Loan Agreement or the other Loan Documents. No notice to
or demand on Borrower shall be deemed to be a waiver of the obligation of
Borrower or of the right of Lender to take further action without further notice
or demand as provided for in this Promissory Note A, the Loan Agreement or the
other Loan Documents. If Borrower is a partnership, the agreements herein
contained shall remain in force and be applicable, notwithstanding any changes
in the individuals or entities comprising the partnership, and the term
"BORROWER," as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and their partners shall not
thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and be applicable
notwithstanding any changes in the shareholders comprising, or the officers and
directors relating to, the corporation, and the term "BORROWER" as used herein,
shall include any alternative or successor corporation, but any predecessor
corporation shall not be relieved of liability hereunder. If any Borrower is a
limited liability company, the agreements herein contained shall remain in force
and be applicable, notwithstanding any changes in the members comprising the
limited liability company, and the term "BORROWER" as used herein, shall include
any alternate or successor limited liability company, but any predecessor
limited liability company and their members shall not thereby be released from
any liability. Nothing in the foregoing three sentences shall be construed as a
consent to, or a waiver of, any prohibition or restriction on transfers of
interests in such partnership, corporation or limited liability company, as
applicable, which may be set forth in the Loan Agreement or any other Loan
Document.

                                      -2-

<PAGE>

                              ARTICLE 7: TRANSFER

         Upon the transfer of this Promissory Note A, Borrower hereby waiving
notice of any such transfer, Lender may deliver all the collateral mortgaged,
granted, pledged or assigned pursuant to the Loan Documents, or any part
thereof, to the transferee who shall thereupon become vested with all the rights
herein or under applicable law given to Lender with respect thereto, and Lender
shall thereafter forever be relieved and fully discharged from any liability or
responsibility in the matter; but Lender shall retain all rights hereby given to
it with respect to any liabilities and the collateral not so transferred.

                            ARTICLE 8: EXCULPATION

         The provisions of Section 9.4 of the Loan Agreement are hereby
incorporated by reference into this Promissory Note A to the same extent and
with the same force as if fully set forth herein.

                            ARTICLE 9: GOVERNING LAW

         This Promissory Note A shall be governed in accordance with the terms
and provisions of Section 10.3 of the Loan Agreement.

                              ARTICLE 10: NOTICES

         All notices or other written communications hereunder shall be
delivered in accordance with Section 10.6 of the Loan Agreement.

                         [NO FURTHER TEXT ON THIS PAGE]

                                      -3-

<PAGE>

         IN WITNESS WHEREOF, Borrower has duly executed this Promissory Note A
as of the day and year first above written.

                             BRIARCLIFF NURSING AND REHABILITATION CENTER, LP

                             By: Briarcliff Nursing and Rehabilitation
                                 Center GP, LLC, its general partner

                             CALIFORNIA SECURED RESOURCES, LLC

                             CAREHOUSE HEALTHCARE CENTER, LLC

                             CLAIRMONT BEAUMONT, LP

                             By: Clairmont Beaumont GP, LLC, its general
                                 partner

                             CLAIRMONT LONGVIEW, LP

                             By: Clairmont Longview GP, LLC, its general
                                 partner

                             COLONIAL NEW BRAUNFELS CARE CENTER, LP

                             By: Colonial New Braunfels GP, LLC, its general
                                 partner

                             COLONIAL TYLER CARE CENTER, LP

                             By: Colonial Tyler GP, LLC, its general partner

                             COMANCHE NURSING CENTER, LP

                             By: Comanche Nursing Center GP, LLC, its general
                                 partner

                             CORONADO NURSING CENTER, LP

                             By: Coronado Nursing Center GP, LLC, its general
                                 partner

                             DEVONSHIRE CARE CENTER, LLC

                             FLATONIA OAK MANOR, LP

                             By: Flatonia Oak Manor GP, LLC, its general
                                 partner

                             FOUNTAIN CARE CENTER, LLC

                                    -4-

<PAGE>

                             FOUNTAIN SENIOR ASSISTED LIVING, LLC

                             GUADALUPE VALLEY NURSING CENTER, LP

                             By: Guadalupe Valley Nursing Center GP, LLC, its
                                 general partner

                             HALLETTSVILLE REHABILITATION AND NURSING CENTER, LP

                             By: Hallettsville Rehabilitation GP, LLC, its
                                 general partner

                             HOSPITALITY NURSING AND REHABILITATION CENTER, LP

                             By: Hospitality Nursing GP, LLC, its general
                                 partner

                             LIVE OAK NURSING CENTER, LP

                             By: Live Oak Nursing Center GP, LLC, its general
                                 partner

                             MONUMENT REHABILITATION AND NURSING CENTER, LP

                             By: Monument Rehabilitation GP, LLC, its general
                                 partner

                             OAK CREST NURSING CENTER, LP

                             By: Oak Crest Nursing Center GP, LLC, its general
                                 partner

                             OAKLAND MANOR NURSING CENTER, LP

                             By: Oakland Manor GP, LLC, its general partner

                             SHG SECURED RESOURCES, LP

                             By: Secured Resource Management GP, LLC, its
                                 general partner

                             SOUTHWOOD CARE CENTER, LP

                             By: Southwood Care Center GP, LLC, its general
                                 partner

                             SPRING SENIOR ASSISTED LIVING, LLC

                             TEXAS CITYVIEW CARE CENTER, LP

                                    -5-

<PAGE>

                             By: Texas Cityview Care Center GP, LLC, its
                                 general partner

                             TEXAS HERITAGE OAKS NURSING AND REHABILITATION
                             CENTER, LP

                             By: Texas Heritage Oaks Nursing and
                                 Rehabilitation Center GP, LLC, its general
                                 partner

                             TEXAS SECURED RESOURCES, LLC

                             THE CLAIRMONT TYLER, LP

                             By: The Clairmont Tyler GP, LLC, its general
                                 partner

                             THE EARLWOOD, LLC

                             TOWN AND COUNTRY MANOR, LP

                             By: Town and Country Manor GP, LLC, its general
                                 partner

                             VALLEY HEALTHCARE CENTER, LLC

                             VILLA MARIA HEALTHCARE CENTER, LLC

                             WEST SIDE CAMPUS OF CARE, LP

                             By: West Side Campus of Care GP, LLC, its general
                                 partner

                             WILLOW CREEK HEALTHCARE CENTER, LLC

                             By: \s\ Roland G. Rapp
                                 ---------------------------------------
                                 Name:  Roland G. Rapp
                                 Title:  Secretary

                                      -6-

<PAGE>

                                   SCHEDULE I

                            PROPERTIES AND BORROWERS

<TABLE>
<CAPTION>
                                                                                             BORROWERS
-----------------------------------------------------------------------------------------------------------------------------
                                   TYPE OF
         INDIVIDUAL PROPERTIES     FACILITY      COUNTY        STATE      OPERATOR            FEE OWNERS     MASTER LESSEE
-----------------------------------------------------------------------------------------------------------------------------
<S>    <C>                         <C>          <C>            <C>     <C>                 <C>             <C>
1.     Carehouse Care Center         SNF        Orange          CA     Carehouse           SHG Secured     California Secured
                                                                       Healthcare Center,  Resources, LP   Resources, LLC
                                                                       LLC
-----------------------------------------------------------------------------------------------------------------------------
2.     Devonshire Care Center        SNF        Riverside       CA     Devonshire Care     SHG Secured     California Secured
                                                                       Center, LLC         Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
3.     Fountain Care Center          SNF        Orange          CA     Fountain Care       SHG Secured     California Secured
                                                                       Center, LLC         Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
4.     Fountain Senior Assisted      ALF        Orange          CA     Fountain Senior     SHG Secured     California Secured
       Living                                                          Assisted Living,    Resources, LP   Resources, LLC
                                                                       LLC
-----------------------------------------------------------------------------------------------------------------------------
5.     Spring Assisted Living        ALF        Los Angeles     CA     Spring Senior       SHG Secured     California Secured
       and Retirement                                                  Assisted Living,    Resources, LP   Resources, LLC
                                                                       LLC
-----------------------------------------------------------------------------------------------------------------------------
6.     Earlwood Care Center          SNF        Los Angeles     CA     The Earlwood, LLC   SHG Secured     California Secured
                                                                                           Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
7.     Valley Health Care Center     SNF        Fresno          CA     Valley Healthcare   SHG Secured     California Secured
                                                                       Center, LLC         Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
8.     Villa Maria Care Center       SNF        Santa Barbara   CA     Villa Maria         SHG Secured     California Secured
                                                                       Healthcare Center,  Resources, LP   Resources, LLC
                                                                       LLC
-----------------------------------------------------------------------------------------------------------------------------
9.     Willow Creek Health Care      SNF        Fresno          CA     Willow Creek        SHG Secured     California Secured
       Center                                                          Healthcare Center,  Resources, LP   Resources, LLC
                                                                       LLC
-----------------------------------------------------------------------------------------------------------------------------
10.    Briarcliff Nursing and        SNF        Hidalgo         TX     Briarcliff Nursing  SHG Secured     Texas Secured
       Rehabilitation Center                                           and Rehabilitation  Resources, LP   Resources, LLC
                                                                       Center, LP
-----------------------------------------------------------------------------------------------------------------------------
11.    Clairmont Nursing Home        SNF        Jefferson       TX     Clairmont           SHG Secured     Texas Secured
       (Beaumont)                                                      Beaumont, LP        Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
12.    Clairmont Nursing Home        SNF        Gregg           TX     Clairmont           SHG Secured     Texas Secured
       (Longview)                                                      Longview, LP        Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
13.    Colonial Manor Care           SNF        Comal           TX     Colonial New        SHG Secured     Texas Secured
       Center                                                          Braunfels Care      Resources, LP   Resources, LLC
                                                                       Center, LP
-----------------------------------------------------------------------------------------------------------------------------
14.    Colonial Manor (Tyler)        SNF        Smith           TX     Colonial Tyler      SHG Secured     Texas Secured
                                                                       Care Center, LP     Resources, LP   Resources, LLC
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -7-

<PAGE>

<TABLE>
<CAPTION>
                                                                                             BORROWERS
--------------------------------------------------------------------------------------------------------------------------
                                   TYPE OF
         INDIVIDUAL PROPERTIES     FACILITY      COUNTY        STATE      OPERATOR            FEE OWNERS     MASTER LESSEE
--------------------------------------------------------------------------------------------------------------------------
<S>    <C>                         <C>          <C>            <C>     <C>                 <C>             <C>
15.    Comanche Trail Nursing        SNF        Howard          TX     Comanche Nursing    SHG Secured     Texas Secured
       Center                                                          Center, LP          Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
16.    Coronado Nursing Center       SNF        Taylor          TX     Coronado Nursing    SHG Secured     Texas Secured
                                                                       Center, LP          Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
17.    Oak Manor Nursing Center      SNF        Fayetee         TX     Flatonia Oak        SHG Secured     Texas Secured
                                                                       Manor, LP           Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
18.    Guadalupe Valley Nursing      SNF        Guadalupe       TX     Guadalupe Valley    SHG Secured     Texas Secured
       Center                                                          Nursing Center, LP  Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
19.    Hallettsville Nursing         SNF        Lavaca          TX     Hallettsville       SHG Secured     Texas Secured
       Center                                                          Rehabilitation and  Resources, LP   Resources, LLC
                                                                       Nursing Center, LP
--------------------------------------------------------------------------------------------------------------------------
20.    Lubbock Hospitality House     SNF        Lubbock         TX     Hospitality         SHG Secured     Texas Secured
                                                                       Nursing and         Resources, LP   Resources, LLC
                                                                       Rehabilitation
                                                                       Center, LP
--------------------------------------------------------------------------------------------------------------------------
21.    Live Oak Nursing Center       SNF        Live Oak        TX     Live Oak Nursing    SHG Secured     Texas Secured
                                                                       Center, LP          Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
22.    Monument Hill Nursing         SNF        Fayette         TX     Monument            SHG Secured     Texas Secured
       Center                                                          Rehabilitation and  Resources, LP   Resources, LLC
                                                                       Nursing Center, LP
--------------------------------------------------------------------------------------------------------------------------
23.    Oak Crest Nursing Center      SNF        Aransas         TX     Oak Crest Nursing   SHG Secured     Texas Secured
                                                                       Center, LP          Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
24.    Oakland Manor Nursing         SNF        Lee             TX     Oakland Manor       SHG Secured     Texas Secured
       Center                                                          Nursing Center, LP  Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
25.    Southwood Care Center         SNF        Travis          TX     Southwood Care      SHG Secured     Texas Secured
                                                                       Center, LP          Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
26.    Cityview Care Center          SNF        Tarrant         TX     Texas Cityview      SHG Secured     Texas Secured
                                                                       Care Center, LP     Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
27.    Heritage Oaks Nursing         SNF        Lubbock         TX     Texas Heritage      SHG Secured     Texas Secured
       and Rehabilitation Center                                       Oaks Nursing and    Resources, LP   Resources, LLC
                                                                       Rehabilitation
                                                                       Center, LP
--------------------------------------------------------------------------------------------------------------------------
28.    Clairmont Nursing Home        SNF        Smith           TX     The Clairmont       SHG Secured     Texas Secured
       (Tyler)                                                         Tyler, LP           Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
29.    Town & Country Manor          SNF        Kendall         TX     Town and Country    SHG Secured     Texas Secured
                                                                       Manor, LP           Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
30.    West Side Campus of Care      SNF        Tarrant         TX     West Side Campus    SHG Secured     Texas Secured
                                                                       of Care, LP         Resources, LP   Resources, LLC
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -8-<PAGE>

                                                                    EXHIBIT 10.8

                               PROMISSORY NOTE B-1

$5,000,000.00                                                 New York, New York
                                                                 August 19, 2003

         FOR VALUE RECEIVED, each of the entities set forth on Schedule A
annexed hereto, jointly and severally, as maker, having its principal place of
business at 27442 Portola Parkway, Suite 200, Foothill Ranch, California 92610
(collectively, "BORROWER"), hereby unconditionally promises to pay to the order
of COLUMN FINANCIAL, INC., a Delaware corporation, as lender, having an address
at 11 Madison Avenue, New York, New York 10010 ("LENDER"), or at such other
place as the holder hereof may from time to time designate in writing, the
principal sum of FIVE MILLION and No/100 DOLLARS ($5,000,000.00), in lawful
money of the United States of America with interest thereon to be computed from
the date of this Promissory Note B-1 at the Applicable Interest Rate, and to be
paid in accordance with the terms of this Promissory Note B-1 and that certain
Loan Agreement, dated the date hereof, between Borrower and Lender (as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time, the "LOAN AGREEMENT"). All capitalized terms not defined herein shall
have the respective meanings set forth in the Loan Agreement.

                           ARTICLE 1: PAYMENT TERMS

         Borrower agrees to pay the principal sum of this Promissory Note B-1
and interest on the unpaid principal sum of this Promissory Note B-1 from time
to time outstanding at the rates and at the times specified in Article 2 of the
Loan Agreement and the outstanding balance of the principal sum of this
Promissory Note B-1 and all accrued and unpaid interest thereon shall be due and
payable on the Maturity Date.

                      ARTICLE 2: DEFAULT AND ACCELERATION

         The Debt shall without notice become immediately due and payable at the
option of Lender if any payment required in this Promissory Note B-1 is not paid
on or prior to the date when due or if not paid on the Maturity Date or on the
happening of any other Event of Default.

                           ARTICLE 3: LOAN DOCUMENTS

         This Promissory Note B-1 is secured by the Mortgages and the other Loan
Documents. All of the terms, covenants and conditions contained in the Loan
Agreement, the Mortgages and the other Loan Documents are hereby made part of
this Promissory Note B-1 to the same extent and with the same force as if they
were fully set forth herein. In the event of a conflict or inconsistency between
the terms of this Promissory Note B-1 and the Loan Agreement, the terms and
provisions of the Loan Agreement shall govern.

                           ARTICLE 4: SAVINGS CLAUSE

         Notwithstanding anything to the contrary, (a) all agreements and
communications between Borrower and Lender are hereby and shall automatically be
limited so that, after taking

<PAGE>

into account all amounts deemed interest, the interest contracted for, charged
or received by Lender shall never exceed the Maximum Legal Rate, (b) in
calculating whether any interest exceeds the Maximum Legal Rate, all such
interest shall be amortized, prorated, allocated and spread over the full amount
and term of all principal indebtedness of Borrower to Lender and (c) if through
any contingency or event Lender receives or is deemed to receive interest in
excess of the Maximum Legal Rate, any such excess shall be deemed to have been
applied toward payment of the principal of any and all then outstanding
indebtedness of Borrower to Lender.

                            ARTICLE 5: NO ORAL CHANGE

         This Promissory Note B-1 may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Borrower or Lender, but only by an agreement in writing
signed by the party against whom enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.

                              ARTICLE 6: WAIVERS

         Borrower and all others who may become liable for the payment of all or
any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and non-payment and all other
notices of any kind. No release of any security for the Debt or extension of
time for payment of this Promissory Note B-1 or any installment hereof, and no
alteration, amendment or waiver of any provision of this Promissory Note B-1,
the Loan Agreement or the other Loan Documents made by agreement between Lender
or any other Person shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other Person
who may become liable for the payment of all or any part of the Debt, under this
Promissory Note B-1, the Loan Agreement or the other Loan Documents. No notice
to or demand on Borrower shall be deemed to be a waiver of the obligation of
Borrower or of the right of Lender to take further action without further notice
or demand as provided for in this Promissory Note B-1, the Loan Agreement or the
other Loan Documents. If Borrower is a partnership, the agreements herein
contained shall remain in force and be applicable, notwithstanding any changes
in the individuals or entities comprising the partnership, and the term
"BORROWER," as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and their partners shall not
thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and be applicable
notwithstanding any changes in the shareholders comprising, or the officers and
directors relating to, the corporation, and the term "BORROWER" as used herein,
shall include any alternative or successor corporation, but any predecessor
corporation shall not be relieved of liability hereunder. If any Borrower is a
limited liability company, the agreements herein contained shall remain in force
and be applicable, notwithstanding any changes in the members comprising the
limited liability company, and the term "BORROWER" as used herein, shall include
any alternate or successor limited liability company, but any predecessor
limited liability company and their members shall not thereby be released from
any liability. Nothing in the foregoing three sentences shall be construed as a
consent to, or a waiver of, any prohibition or restriction on transfers of
interests in such partnership, corporation or limited liability company, as
applicable, which may be set forth in the Loan Agreement or any other Loan
Document.

                                      -2-

<PAGE>

                              ARTICLE 7: TRANSFER

         Upon the transfer of this Promissory Note B-1, Borrower hereby waiving
notice of any such transfer, Lender may deliver all the collateral mortgaged,
granted, pledged or assigned pursuant to the Loan Documents, or any part
thereof, to the transferee who shall thereupon become vested with all the rights
herein or under applicable law given to Lender with respect thereto, and Lender
shall thereafter forever be relieved and fully discharged from any liability or
responsibility in the matter; but Lender shall retain all rights hereby given to
it with respect to any liabilities and the collateral not so transferred.

                            ARTICLE 8: EXCULPATION

         The provisions of Section 9.4 of the Loan Agreement are hereby
incorporated by reference into this Promissory Note B-1 to the same extent and
with the same force as if fully set forth herein.

                           ARTICLE 9: GOVERNING LAW

         This Promissory Note B-1 shall be governed in accordance with the terms
and provisions of Section 10.3 of the Loan Agreement.

                              ARTICLE 10: NOTICES

         All notices or other written communications hereunder shall be
delivered in accordance with Section 10.6 of the Loan Agreement.

                         [NO FURTHER TEXT ON THIS PAGE]

                                      -3-

<PAGE>

         IN WITNESS WHEREOF, Borrower has duly executed this Promissory Note B-1
as of the day and year first above written.

                           BRIARCLIFF NURSING AND REHABILITATION CENTER, LP

                           By: Briarcliff Nursing and Rehabilitation Center
                               GP, LLC, its general partner

                           CALIFORNIA SECURED RESOURCES, LLC

                           CAREHOUSE HEALTHCARE CENTER, LLC

                           CLAIRMONT BEAUMONT, LP

                           By: Clairmont Beaumont GP, LLC, its general partner

                           CLAIRMONT LONGVIEW, LP

                           By: Clairmont Longview GP, LLC, its general partner

                           COLONIAL NEW BRAUNFELS CARE CENTER, LP

                           By: Colonial New Braunfels GP, LLC, its general
                               partner

                           COLONIAL TYLER CARE CENTER, LP

                           By: Colonial Tyler GP, LLC, its general partner

                           COMANCHE NURSING CENTER, LP

                           By: Comanche Nursing Center GP, LLC, its general
                               partner

                           CORONADO NURSING CENTER, LP

                           By: Coronado Nursing Center GP, LLC, its general
                               partner

                           DEVONSHIRE CARE CENTER, LLC

                           FLATONIA OAK MANOR, LP

                           By: Flatonia Oak Manor GP, LLC, its general partner

                           FOUNTAIN CARE CENTER, LLC

                           FOUNTAIN SENIOR ASSISTED LIVING, LLC

<PAGE>

                           GUADALUPE VALLEY NURSING CENTER, LP

                           By: Guadalupe Valley Nursing Center GP, LLC, its
                               general partner

                           HALLETTSVILLE REHABILITATION AND NURSING CENTER, LP

                           By: Hallettsville Rehabilitation GP, LLC, its
                               general partner

                           HOSPITALITY NURSING AND REHABILITATION CENTER, LP

                           By: Hospitality Nursing GP, LLC, its general partner

                           LIVE OAK NURSING CENTER, LP

                           By: Live Oak Nursing Center GP, LLC, its general
                               partner

                           MONUMENT REHABILITATION AND NURSING CENTER, LP

                           By: Monument Rehabilitation GP, LLC, its general
                               partner

                           OAK CREST NURSING CENTER, LP

                           By: Oak Crest Nursing Center GP, LLC, its general
                               partner

                           OAKLAND MANOR NURSING CENTER, LP

                           By: Oakland Manor GP, LLC, its general partner

                           SHG SECURED RESOURCES, LP

                           By: Secured Resource Management GP, LLC, its
                               general partner

                           SOUTHWOOD CARE CENTER, LP

                           By: Southwood Care Center GP, LLC, its general
                               partner

                           SPRING SENIOR ASSISTED LIVING, LLC

                           TEXAS CITYVIEW CARE CENTER, LP

<PAGE>

                           By: Texas Cityview Care Center GP, LLC, its general
                               partner

                           TEXAS HERITAGE OAKS NURSING AND REHABILITATION
                           CENTER, LP

                           By: Texas Heritage Oaks Nursing and Rehabilitation
                               Center GP, LLC, its general partner

                           TEXAS SECURED RESOURCES, LLC

                           THE CLAIRMONT TYLER, LP

                           By: The Clairmont Tyler GP, LLC, its general partner

                           THE EARLWOOD, LLC

                           TOWN AND COUNTRY MANOR, LP

                           By: Town and Country Manor GP, LLC, its general
                               partner

                           VALLEY HEALTHCARE CENTER, LLC

                           VILLA MARIA HEALTHCARE CENTER, LLC

                           WEST SIDE CAMPUS OF CARE, LP

                           By: West Side Campus of Care GP, LLC, its general
                               partner

                           WILLOW CREEK HEALTHCARE CENTER, LLC

                           By: \s\ Roland G. Rapp
                               ---------------------------------------
                               Name:  Roland G. Rapp
                               Title:  Secretary

<PAGE>

                                   SCHEDULE A

                            PROPERTIES AND BORROWERS

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<CAPTION>
                                                                                               BORROWERS
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                                   TYPE OF
         INDIVIDUAL PROPERTIES     FACILITY      COUNTY        STATE      OPERATOR            FEE OWNERS         MASTER LESSEE
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<S>    <C>                         <C>          <C>            <C>     <C>                 <C>                 <C>
1.     Carehouse Care Center         SNF        Orange          CA     Carehouse           SHG Secured         California Secured
                                                                       Healthcare Center,  Resources, LP       Resources, LLC
                                                                       LLC
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2.     Devonshire Care Center        SNF        Riverside       CA     Devonshire Care     SHG Secured         California Secured
                                                                       Center, LLC         Resources, LP       Resources, LLC
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3.     Fountain Care Center          SNF        Orange          CA     Fountain Care       SHG Secured         California Secured
                                                                       Center, LLC         Resources, LP       Resources, LLC
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4.     Fountain Senior Assisted      ALF        Orange          CA     Fountain Senior     SHG Secured         California Secured
       Living                                                          Assisted Living,    Resources, LP       Resources, LLC
                                                                       LLC
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5.     Spring Assisted Living        ALF        Los Angeles     CA     Spring Senior       SHG Secured         California Secured
       and Retirement                                                  Assisted Living,    Resources, LP       Resources, LLC
                                                                       LLC
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6.     Earlwood Care Center          SNF        Los Angeles     CA     The Earlwood, LLC   SHG Secured         California Secured
                                                                                           Resources, LP       Resources, LLC
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7.     Valley Health Care Center     SNF        Fresno          CA     Valley Healthcare   SHG Secured         California Secured
                                                                       Center, LLC         Resources, LP       Resources, LLC
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8.     Villa Maria Care Center       SNF        Santa Barbara   CA     Villa Maria         SHG Secured         California Secured
                                                                       Healthcare Center,  Resources, LP       Resources, LLC
                                                                       LLC
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9.     Willow Creek Health Care      SNF        Fresno          CA     Willow Creek        SHG Secured         California Secured
       Center                                                          Healthcare Center,  Resources, LP       Resources, LLC
                                                                       LLC
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10.    Briarcliff Nursing and        SNF        Hidalgo         TX     Briarcliff Nursing  SHG Secured         Texas Secured
       Rehabilitation Center                                           and Rehabilitation  Resources, LP       Resources, LLC
                                                                       Center, LP
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11.    Clairmont Nursing Home        SNF        Jefferson       TX     Clairmont           SHG Secured         Texas Secured
       (Beaumont)                                                      Beaumont, LP        Resources, LP       Resources, LLC
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12.    Clairmont Nursing Home        SNF        Gregg           TX     Clairmont           SHG Secured         Texas Secured
       (Longview)                                                      Longview, LP        Resources, LP       Resources, LLC
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13.    Colonial Manor Care           SNF        Comal           TX     Colonial New        SHG Secured         Texas Secured
       Center                                                          Braunfels Care      Resources, LP       Resources, LLC
                                                                       Center, LP
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14.    Colonial Manor (Tyler)        SNF        Smith           TX     Colonial Tyler      SHG Secured         Texas Secured
                                                                       Care Center, LP     Resources, LP       Resources, LLC
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</TABLE>

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<TABLE>
<CAPTION>
                                                                                               BORROWERS
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                                   TYPE OF
         INDIVIDUAL PROPERTIES     FACILITY      COUNTY        STATE      OPERATOR            FEE OWNERS        MASTER LESSEE
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<S>    <C>                         <C>          <C>            <C>     <C>                 <C>                 <C>
15.    Comanche Trail Nursing        SNF        Howard          TX     Comanche Nursing    SHG Secured         Texas Secured
       Center                                                          Center, LP          Resources, LP       Resources, LLC
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16.    Coronado Nursing Center       SNF        Taylor          TX     Coronado Nursing    SHG Secured         Texas Secured
                                                                       Center, LP          Resources, LP       Resources, LLC
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17.    Oak Manor Nursing Center      SNF        Fayetee         TX     Flatonia Oak        SHG Secured         Texas Secured
                                                                       Manor, LP           Resources, LP       Resources, LLC
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18.    Guadalupe Valley Nursing      SNF        Guadalupe       TX     Guadalupe Valley    SHG Secured         Texas Secured
       Center                                                          Nursing Center, LP  Resources, LP       Resources, LLC
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19.    Hallettsville Nursing         SNF        Lavaca          TX     Hallettsville       SHG Secured         Texas Secured
       Center                                                          Rehabilitation and  Resources, LP       Resources, LLC
                                                                       Nursing Center, LP
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20.    Lubbock Hospitality House     SNF        Lubbock         TX     Hospitality         SHG Secured         Texas Secured
                                                                       Nursing and         Resources, LP       Resources, LLC
                                                                       Rehabilitation
                                                                       Center, LP
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21.    Live Oak Nursing Center       SNF        Live Oak        TX     Live Oak Nursing    SHG Secured         Texas Secured
                                                                       Center, LP          Resources, LP       Resources, LLC
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22.    Monument Hill Nursing         SNF        Fayette         TX     Monument            SHG Secured         Texas Secured
       Center                                                          Rehabilitation and  Resources, LP       Resources, LLC
                                                                       Nursing Center, LP
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23.    Oak Crest Nursing Center      SNF        Aransas         TX     Oak Crest Nursing   SHG Secured         Texas Secured
                                                                       Center, LP          Resources, LP       Resources, LLC
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24.    Oakland Manor Nursing         SNF        Lee             TX     Oakland Manor       SHG Secured         Texas Secured
       Center                                                          Nursing Center, LP  Resources, LP       Resources, LLC
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25.    Southwood Care Center         SNF        Travis          TX     Southwood Care      SHG Secured         Texas Secured
                                                                       Center, LP          Resources, LP       Resources, LLC
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26.    Cityview Care Center          SNF        Tarrant         TX     Texas Cityview      SHG Secured         Texas Secured
                                                                       Care Center, LP     Resources, LP       Resources, LLC
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27.    Heritage Oaks Nursing         SNF        Lubbock         TX     Texas Heritage      SHG Secured         Texas Secured
       and Rehabilitation Center                                       Oaks Nursing and    Resources, LP       Resources, LLC
                                                                       Rehabilitation
                                                                       Center, LP
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28.    Clairmont Nursing Home        SNF        Smith           TX     The Clairmont       SHG Secured         Texas Secured
       (Tyler)                                                         Tyler, LP           Resources, LP       Resources, LLC
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29.    Town & Country Manor          SNF        Kendall         TX     Town and Country    SHG Secured         Texas Secured
                                                                       Manor, LP           Resources, LP       Resources, LLC
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30.    West Side Campus of Care      SNF        Tarrant         TX     West Side Campus    SHG Secured         Texas Secured
                                                                       of Care, LP         Resources, LP       Resources, LLC
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</TABLE>

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