AMERICAN RETIREMENT CORP
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>d59445_ex10-1.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
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<P ALIGN=RIGHT><FONT SIZE=2 FACE="TIMES NEW ROMAN">Exhibit 10.1</font></p>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Recording requested by
and<BR>
when recorded return to:</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Thompson &amp; Knight
L.L.P.<BR>
1700 Pacific Avenue, Suite 3300<BR>
Dallas, TX 75201<BR>
Attention: Jeanne Burton</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>NOTICE
OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR
STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED
FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER&#146;S
LICENSE NUMBER.</B></FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B><U>F<Small>OURTH</small> E<small>XTENSION AND </small>M<small>ODIFICATION </small>A<small>GREEMENT</small></U></B></FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
FOURTH EXTENSION AND MODIFICATION AGREEMENT (this &#147;<B>Agreement</B>&#148;) dated as of the ____ day of March, 2004, by and
among ARC CASTLE HILLS, L.P., a Tennessee limited partnership (hereinafter
called &#147;<B>Borrower</B>&#148;), AMERICAN
RETIREMENT CORPORATION, a Tennessee corporation (hereinafter called &#147;<B>ARC</B>&#148;), and GUARANTY BANK (formerly known as
Guaranty Federal Bank, F.S.B.), a federal savings bank (hereinafter called &#147;<B>Lender</B>&#148;);</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">W I T N E S S E T
H:</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Lender made a loan to Castle Hills Delaware Business Trust, a Delaware business
trust (&#147;<B>Original Borrower</B>&#148;) in the
amount of $10,375,000 (the &#147;<B>Loan</B>&#148;),
and in connection with the Loan, Original Borrower executed and delivered to
Lender one certain promissory note (as modified, hereinafter called the &#147;<B>Note</B>&#148;) dated June 22, 2000 payable to the
order of Lender in the original principal sum of $10,375,000, with interest and
principal payable as therein provided, as modified by Second Modification
Agreement dated effective as of April 1, 2001, the Assumption, Extension and
Modification Agreement (as hereinafter defined), and Second Omnibus Extension
and Modification Agreement (herein so called) dated August&nbsp;29, 2003
(collectively, the &#147;Modification Agreements&#148;) a Deed of Trust, Mortgage and
Security Agreement (as modified, hereinafter called the &#147;<B>Deed of Trust</B>&#148;), dated effective June 22,
2000, securing the payment of the Note, covering certain real and personal
property described therein (hereinafter called the &#147;<B>Mortgaged Property</B>&#148;), the real property forming a part of
which is more particularly described in <U>Exhibit A</U> attached hereto and
incorporated herein) recorded under File No. 2000-0106532, Volume 8469, Page
1615, Real Property Records, Bexar County, Texas, as modified by the
Modification Agreements, an Assignment of Leases and Rents (as modified,
hereinafter called the &#147;<B>Assignment</B>&#148;)
dated effective June 22, 2000, providing a source of future payment of the
Note, recorded under File No. 2000-0106533, Volume 8469, Page 1660, Real
Property Records, Bexar County, Texas, as modified by the Modification
Agreements, reference being here made to the Deed of Trust and the Assignment
and the record thereof for all purposes, and that certain Construction Loan
Agreement (as modified, hereinafter called the &#147;<B>Loan Agreement</B>&#148;) dated June 22, 2000 between Original Borrower
and Lender, as modified by Modification Agreement dated effective
September&nbsp;30, 2000 and the Modification Agreements (the foregoing
documents and all other documents executed by Original Borrower, Borrower
and/or any other party or parties evidencing or securing or otherwise in
connection with the loan evidenced by the Note, being herein collectively
called the &#147;<B>Loan Documents</B>&#148;);</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
by that certain Assumption, Extension and Modification Agreement (the &#147;<B>Assumption, Extension and Modification Agreement</B>&#148;)
dated July 26, 2002 by and among Original Borrower, Borrower, ARC, Lender and
others, the Loan was assumed by the Borrower;</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Assumption, Extension and Modification Agreement was recorded under File
No. 20020385359,&#160; Volume 9498, Page
1526, Real Property Records, Bexar County, Texas;</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
ARC executed and delivered to Lender that certain Guaranty (herein so called)
dated June&nbsp;22, 2000, as amended from time to time, with respect to the
Loan; and</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Borrower has requested that Lender modify the terms of the Loan and Lender is
willing to do so on the terms and conditions herein set forth.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, for and in consideration of the mutual covenants contained herein
and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Maturity
Date Extension</U>.&#160; The maturity date
of the Note is hereby extended to April&nbsp;1, 2006.&#160; The liens, security interests, assignments and other rights
evidenced by the Loan Documents are hereby renewed and extended to secure
payment of the Note as extended hereby.&#160;
Borrower has no further right to extend the maturity date of the Note.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Extension
Fee</U>.&#160; In consideration for the
agreements made herein, Borrower will pay to Lender an extension fee in the
amount of $23,243.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Principal
Payment</U>.&#160; Lender hereby waives
payment of the principal payment due on March 1, 2004.&#160; Upon the execution of this Agreement,
Borrower will pay to Lender $1,000,000 in immediately available funds, which
amount shall be applied to the outstanding principal balance of the Loan.&#160; Following such application, the outstanding
principal balance of the Note will be $4,648,524.&#160; Further principal payments on the Note are optional until the
maturity date of the Note, on which date all principal and accrued but unpaid
interest thereon shall be due and payable in full.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Modifications
to Note</U>.&#160; Effective as of the date
hereof, the following definitions replace in their entirety their corresponding
definitions in the Note:</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
definition of &#147;Commercial Based Rate&#148; is deleted and the following is substituted
in lieu thereof:</FONT></P></TD></TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="10%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="90%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Commercial Based Rate&#148; &#151; the rate one percent
  (1.0%) per annum in excess of the base rate announced or published from time
  to time by the Payee, which rate may not be the lowest rate charged by the
  Payee; it being understood and agreed that the Commercial Based Rate shall
  increase or decrease, as the case may be, from time to time as of the
  effective date of each change in the base rate.&#160; In no event shall the Commercial Based Rate be less than six
  and one-half percent (6.5%).</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">2</FONT></P>

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<PAGE>

<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
definition of &#147;LIBO Based Rate&#148; is deleted and the following is substituted in
lieu thereof:</FONT></P></TD></TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="10%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="90%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;LIBO Based Rate&#148; &#151; With respect to any Euro-Dollar
  Amount, the rate per annum (expressed as a percentage) determined by Payee to
  be equal to the sum of (a) the quotient of the LIBO Rate for the Euro-Dollar
  Amount and Interest Period in question divided by (1 minus the Reserve
  Requirement), rounded up to the nearest 1/100 of 1%, and (b) three percent
  (3%).&#160; In no event shall the LIBO
  Based Rate be less than six and one-half percent (6.5%).</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Financial
Covenants</U>.&#160; Section 10 of the
Assumption, Extension and Modification Agreement and Section 5 of the Second
Omnibus Extension and Modification Agreement are deleted in their
entirety.&#160; Capitalized terms not
otherwise defined in this Section 5 have the meaning assigned such terms in the
Loan Agreement.&#160;&#160; Notwithstanding
anything to the contrary contained in the Loan Documents:</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ARC
  Covenants</U>.&#160;&nbsp;&nbsp;Reference is made to
  the Amended and Restated Guaranty (hereafter defined) for covenants regarding
  ARC.</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Property
  Covenants</U>.&#160;&nbsp;&nbsp;Notwithstanding
  anything to the contrary contained in the Loan Documents, throughout the term
  of the Loan, the Mortgaged Property shall maintain a Debt Coverage Ratio (as
  such term is defined in the Note), measured quarterly for the prior three
  month period, as follows:</FONT></P></TD>
 </TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="60%">
 <TR>
  <TD WIDTH="48%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>Required Ratio</B></FONT></P></TD>
  <TD WIDTH="3%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>Test Date</B></FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=TOP>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
  <TD WIDTH="3%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=TOP>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.05 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">June 30, 2004</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.35 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">September 30, 2004</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.60 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">December 31, 2004</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.80 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">March 31, 2005</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.00 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">June 30, 2005</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.10 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">September 30, 2005</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.20 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">December 31, 2005</FONT></P></TD>
 </TR>
</TABLE>

<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">In the event that the Mortgaged Property fails to
  comply with the foregoing covenant, Borrower shall pay to Lender the amount
  of $100,000 within five (5) business days of the earlier to occur of (i) the
  date such noncompliance is reported, or (ii) demand for such payment.&#160; Upon receipt of such payment, Lender shall
  apply the payment to the outstanding principal balance of the Note.&#160; It shall be an immediate Event of Default
  under the Loan Agreement if Borrower fails to make such payment of $100,000
  within the time herein specified.&#160; For
  purposes of this Section 5(b), the term &#147;<B>Debt
  Coverage Ratio</B>&#148; means a ratio, the first number of which is the
  Net Operating Income (as such term is defined in the Note) from the Mortgaged
  Property (Castle Hills only) for the period in question and the second number
  of which is a hypothetical payment equal to the product of (x) an amount
  sufficient to amortize the Loan in equal monthly installments over a 25-year
  period using an interest rate equal to six and one-half percent (6.5%), and
  (y) 3.&#160; Borrower shall submit a
  Compliance Certificate in the form attached hereto as <U>Schedule II</U>
  within forty-five (45) days of each Test Date setting forth the Debt Coverage
  Ratio as of such date.</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">3</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Modification
  of Deed of Trust</U>.&#160; The Deed of
  Trust is modified as follows:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Schedule
  I</U> attached to this Agreement is hereby attached as <U>Schedule I</U> to
  the Deed of Trust.</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clause
  (c) of Paragraph 1.1 is deleted and the following is substituted in lieu
  thereof:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="85%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all
  obligations of ARC to the Noteholder under that certain Amended and Restated
  Guaranty dated March ____, 2004 made by ARC for the benefit of the
  Noteholder, as amended from time to time.</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" COLSPAN="2" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section
  5.34 is deleted and the following is substituted in lieu thereof:&#160; &#147;5.34.&#160;
  <U>Intentionally Omitted</U>.&#148;</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Modification
of Assignment</U>.&#160; <U>Schedule I</U>
attached to this Agreement is hereby attached as <U>Schedule I</U> to the
Assignment.</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Modification
of Loan Agreement</U>.&#160; Section 10.2 of
the Loan Agreement is deleted and the following is substituted in lieu
thereof:&#160; &#147;10.2. &#160;<U>Intentionally Omitted</U>.&#148;</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Transfer
of Partnership Interest</U>.&#160;&#160; Lender
hereby consents to the transfer after the date hereof of the general partner
interest in Borrower from ARC to ARC Tennessee GP, Inc.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Amended
and Restated Guaranty</U>.&#160; Upon the
execution of this Agreement, ARC will deliver to Lender an Amended and Restated
Guaranty in form and substance satisfactory to Lender in place of the
Guaranty.&#160; All references in the Loan
Documents to the Guaranty shall hereafter be references to the Amended and
Restated Guaranty, as modified from time to time.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Waiver</U>.&#160; Lender waives the default as of the December
31, 2003 Test Date under Section 5(b) of the Second Omnibus Extension and
Modification Agreement.&#160; Such waiver is
made without prejudice to Lender&#146;s rights with respect to any future default.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Loan
Document</U>.&#160; This Agreement
constitutes a Loan Document as such term is used in the Loan Agreement.&#160; In the event of a conflict between the terms
of this Agreement and the terms of any Loan Document, the terms of this
Agreement shall control.&#160; References
herein to Loan Documents are references to such agreements as modified from
time to time.</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">4</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Borrower&#146;s
Existence and Authority</U>.&#160; Borrower
hereby represents and warrants that (a) it is the sole legal and beneficial
owner of the lessee&#146;s interest under that certain Second Amended and Restated
Ground Lease dated July&nbsp;26, 2002 between ARC and Borrower; (b) it is a
limited partnership and is duly organized and legally existing under the laws
of the state of its formation and is duly qualified to do business in the state
where the Mortgaged Property is located; (c)&nbsp;the execution and delivery
of, and performance under this Agreement are within its power and authority
without the joinder or consent of any other party and have been duly authorized
by all requisite action and are not in contravention of law or the powers of
Borrower&#146;s organizational documents; (d) this Agreement constitutes the legal,
valid and binding obligations of Borrower enforceable in accordance with its
terms; (e) the execution and delivery of this Agreement by Borrower do not
contravene, result in a breach of or constitute a default under any deed of
trust, loan agreement, indenture or other contract, agreement or undertaking to
which it is a party or by which it or any of its properties may be bound (nor
would such execution and delivery constitute such a default with the passage of
time or the giving of notice or both) and, to the best of its knowledge, do not
violate or contravene any law, order, decree, rule or regulation to which
Borrower is subject; (f) to the best of Borrower&#146;s knowledge, there exists no
uncured default under the Loan Documents, as modified hereby; and (g) Borrower
is owned, directly or indirectly, 100% by ARC.&#160;
Borrower agrees to indemnify and hold Lender harmless against any loss,
claim, damage, liability or expense (including without limitation attorneys&#146;
fees) incurred as a result of any representation or warranty made by it herein
proving to be untrue in any respect.</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>ARC
Existence and Authority</U>.&#160; ARC hereby
represents and warrants that (a)&nbsp;ARC is duly organized and legally
existing under the laws of the state of its incorporation; (b) ARC is the sole
legal and beneficial fee owner of the Mortgaged Property; (c)&nbsp;the
execution and delivery of, and performance under this Agreement are within
ARC&#146;s power and authority without the joinder or consent of any other party and
have been duly authorized by all requisite action and are not in contravention
of law or the powers of ARC&#146;s charter, by-laws or other corporate papers; (d)
this Agreement constitutes the legal, valid and binding obligations of ARC
enforceable in accordance with its terms; and (e) the execution and delivery of
this Agreement by ARC do not contravene, result in a breach of or constitute a
default under any deed of trust, loan agreement, indenture or other contract,
agreement or undertaking to which ARC is a party or by which ARC or any of its
properties may be bound (nor would such execution and delivery constitute such
a default with the passage of time or the giving of notice or both) and do not
violate or contravene any law, order, decree, rule or regulation to which ARC
is subject.&#160; ARC agrees to indemnify and
hold Lender harmless against any loss, claim, damage, liability or expense
(including without limitation attorneys&#146; fees) incurred as a result of any representation
or warranty made by it herein proving to be untrue in any respect.</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">5</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other
Documents</U>.&#160; ARC, Borrower and ARC
Management, LLC agree to execute, upon request from Lender, such other and
further documents as may be necessary (in Lender&#146;s reasonable judgment) to consummate
the transactions contemplated herein or to perfect the liens and security
interests intended to secure the payment of the Loan.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Default</U>.&#160; If ARC or Borrower shall fail to keep or
perform any of the covenants or agreements contained herein or if any
statement, representation or warranty contained herein is false, misleading or
erroneous in any material respect, after the expiration of any grace or cure
period provided by the applicable Loan Documents, such party shall be deemed to
be in default hereunder and Lender shall be entitled at its option to exercise
any and all of the rights and remedies granted pursuant to the Loan Documents,
or to which Lender may otherwise be entitled, whether at law or in equity.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Title
Endorsement</U>.&#160; Contemporaneously with
the execution and delivery hereof, Borrower shall, at Borrower&#146;s sole cost and
expense, obtain and deliver to Lender an endorsement of the Mortgagee Title
Policy insuring the lien of the Deed of Trust under the applicable title
insurance rules and regulations, in form and content reasonably acceptable to
Lender, stating that the company issuing said Mortgagee Title Policy will not
claim that policy coverage has terminated, or that policy coverage has been
reduced, solely by reason of the execution of this Agreement and maintaining
the liability thereunder for the period of limitation applicable to the
indebtedness secured by the lien of the Deed of Trust calculated from the
renewed and extended maturity date as provided herein.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Ratification</U>.&#160; Except as provided herein, the terms and
provisions of the Note, the Deed of Trust, the Assignment, and the other Loan
Documents shall remain unchanged and shall remain in full force and effect.&#160; All references in the Loan Documents to Loan
Documents shall hereafter be references to the Loan Documents as modified by
this Agreement.&#160; The Note, the Deed of
Trust, the Assignment, and the other Loan Documents, as modified and amended
hereby, are hereby ratified and confirmed in all respects by Borrower, ARC and
ARC Management, LLC.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Validity</U>.&#160; ARC and Borrower hereby acknowledge that the
liens, security interests, and assignments created and evidenced by the Deed of
Trust and the assignments created by the Assignment are valid and subsisting
and further acknowledges and agrees that there are no offsets, claims, or
defenses to the Note, Deed of Trust or Assignment or any other Loan Documents.</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Entire
Agreement</U>. This Agreement supersedes and merges all prior and
contemporaneous promises, representations and agreements with respect to its
subject matter.&#160; No modification of this
Agreement or any document referenced herein, or any waiver of rights under any
of the foregoing, shall be effective unless made by supplemental agreement, in
writing, executed by Lender and the affected party or parties.&#160; The parties hereto further agree that this
Agreement may not in any way be explained or supplemented by a prior, existing,
or future course of dealings between the parties or by any prior, existing, or
future performance between the parties pursuant to this Agreement or otherwise.</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">6</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Costs</U>.&#160; Contemporaneous with the execution and
delivery hereof, Borrower shall pay, or cause to be paid, all costs and
expenses incident to the preparation hereof and the consummation of the
transactions specified herein, including without limitation title insurance
policy and/or endorsement charges, recording fees, and reasonable fees and
expenses of legal counsel to Lender.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Release</U>.&#160; ARC and Borrower hereby release, remise,
acquit and forever discharge Lender, together with its employees, agents,
representatives, consultants, attorneys, fiduciaries, participants, servants,
officers, directors, partners, predecessors, successors and assigns, subsidiary
corporations, parent corporations, and related corporate divisions (all of the
foregoing hereinafter called the &#147;<B>Released
Parties</B>&#148;), from any and all actions and causes of action, judgments,
executions, suits, debts, claims, demands, liabilities, obligations, damages
and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, whether heretofore
or hereafter accruing, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and including the
date hereof, and in any way directly or indirectly arising out of or in any way
connected to this Agreement, the Note, the Deed of Trust, the Assignment, or
any other Loan Document, or any of the transactions associated therewith, or
the Mortgaged Property, including specifically but not limited to claims of
usury, <B>REGARDLESS OF WHETHER THE MATTER
RELEASED IS THE RESULT OF THE NEGLIGENCE OF ONE OR MORE OF THE RELEASED
PARTIES.</B></FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Counterpart
Execution</U>.&#160; This Agreement may be
executed in any number of counterparts with the same effect as if all parties
hereto had signed the same document.&#160; All
such counterparts shall be construed together and shall constitute one
instrument, but in making proof hereof it shall only be necessary to produce
one such counterpart, provided that the counterpart produced must be the
counterpart executed by the party against whom enforcement is sought.</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Severance</U>.&#160; If any covenant, condition, or provision
herein contained is held to be invalid by final judgment of any court of
competent jurisdiction, the invalidity of such covenant, condition, or provision
shall not in any way affect any other covenant, condition or provision herein
contained.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Time
of the Essence</U>.&#160; It is expressly
agreed by the parties hereto that time is of the essence with respect to this
Agreement.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Construction</U>.&#160; The parties acknowledge and confirm that
each of their respective attorneys have participated jointly in the review and
revision of this Agreement and that it has not been written solely by counsel
for one party.&#160; The parties hereto
therefore stipulate and agree that the rule of construction to the effect that
any ambiguities are to or may be resolved against the drafting party shall not
be employed in the interpretation of this Agreement to favor any party against
the other.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Governing
Law</U>.&#160; This Agreement and the rights
and duties of the parties hereunder shall be governed for all purposes by the
law of the State of Texas and the law of the United States applicable to
transactions within said State.</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">7</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Successors</U>.&#160; The terms and provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
representatives, successors, and assigns.</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notice
and Agreement</U>.&#160; ARC, Borrower and
Lender hereby take notice of and agree to the following:</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.
  <U>PURSUANT TO SUBSECTION 26.02(b) OF THE TEXAS BUSINESS AND COMMERCE CODE, A
  LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED THEREIN EXCEEDS $50,000 IN VALUE
  IS NOT ENFORCEABLE UNLESS THE AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY
  TO BE BOUND OR BY THAT PARTY&#146;S AUTHORIZED REPRESENTATIVE.</U></FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.
  <U>PURSUANT TO SUBSECTION 26.02(c) OF THE TEXAS BUSINESS AND COMMERCE CODE,
  THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO THE LOAN DOCUMENTS SHALL BE DETERMINED
  SOLELY FROM THE LOAN DOCUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE
  PARTIES ARE SUPERSEDED BY AND MERGED INTO THE LOAN DOCUMENTS.</U></FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.
  <U>THE NOTE, THE DEED OF TRUST, THE ASSIGNMENT, THE OTHER LOAN DOCUMENTS AND
  THIS AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES THERETO AND
  MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
  ORAL AGREEMENTS OF THE PARTIES THERETO.&nbsp;&nbsp;THERE ARE NO UNWRITTEN
  ORAL AGREEMENTS BETWEEN THE PARTIES.</U></FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Bankruptcy
Matters</U>.&#160; Borrower and ARC hereby
acknowledge, represent, warrant, and agree that (i)&nbsp;in exchange for the
covenants and agreements hereunder, each has received valuable consideration,
(ii)&nbsp;this Agreement and the transactions contemplated hereunder are not
made or incurred by it (x)&nbsp;with intent to hinder, delay or defraud or
future creditors of the Borrower or ARC, (y)&nbsp;in contemplation of
insolvency, or (z)&nbsp;after the commission of an act of insolvency; and
(iii)&nbsp;it is not insolvent at the time of, and will not be rendered
insolvent by virtue of the transactions contemplated by this Agreement.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Consent
of Manager</U>.&#160; Manager, as evidenced
by the execution of the Consent attached to this Agreement, hereby joins in
Sections 15 and 18 and ratifies and confirms each of the Loan Documents, as
modified by this Agreement, to which it is a party.</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, this Agreement is executed on the respective dates of
acknowledgment, to be effective as of the date first written above.</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">[<B><I>Remainder of page intentionally left
blank; signatures follow</I></B>]</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">8</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>SIGNATURE
PAGE OF BORROWER<BR>
TO FOURTH EXTENSION AND MODIFICATION AGREEMENT</B></FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>ARC&nbsp;CASTLE&nbsp;HILLS,&nbsp;L.P.</B>,&nbsp;a&nbsp;Tennessee&nbsp;limited<BR>
  partnership</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">American Retirement Corporation, a <BR>
  Tennessee corporation, its general partner</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Name:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Title:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
  </TD>
 </TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="30%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">THE STATE OF TENNESSEE</FONT></P>
  </TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">COUNTY OF DAVIDSON</FONT></P></TD>
  <TD WIDTH="28%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
instrument was acknowledged before me on March __, 2004, by_______________, _______________ of American
Retirement Corporation, a Tennessee corporation, on behalf of said corporation,
in its capacity as general partner of ARC Castle Hills, L.P., a Tennessee
limited partnership, on behalf of said limited partnership.</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">Notary Public, State of
  Tennessee</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">My commission expires:</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">___________________.</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">(printed name)</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">9</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>SIGNATURE
PAGE OF ARC<BR>
TO FOURTH EXTENSION AND MODIFICATION AGREEMENT</B></FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP NOWRAP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>AMERICAN&nbsp;RETIREMENT&nbsp;CORPORATION</B>,
  <BR>a Tennessee corporation</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Name:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Title:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="30%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">THE STATE OF TENNESSEE</FONT></P>
  </TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">COUNTY OF DAVIDSON</FONT></P></TD>
  <TD WIDTH="28%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
instrument was acknowledged before me on March __, 2004, by_______________, _______________, the
_______________ of American Retirement Corporation, a Tennessee corporation, on
behalf of said corporation.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">Notary Public, State of
  Tennessee</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">My commission expires:</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">___________________.</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">(printed name)</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">10</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>SIGNATURE
PAGE OF LENDER<BR>
TO FOURTH EXTENSION AND MODIFICATION AGREEMENT</B></FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>GUARANTY BANK</B>, a
  federal savings bank</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Name:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Title:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="30%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">THE STATE OF TEXAS</FONT></P>
  </TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">COUNTY OF DALLAS</FONT></P></TD>
  <TD WIDTH="28%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">This instrument was
acknowledged before me on March&nbsp;__, 2004, by_________________________, _____________________ of Guaranty
Bank, a federal savings bank, on behalf of said bank.</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">Notary Public, State of Texas</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">My commission expires:</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">___________________.</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">(printed name)</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">11</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>SIGNATURE
PAGE/CONSENT OF MANAGER<BR>
TO FOURTH EXTENSION AND MODIFICATION AGREEMENT</B></FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>ARC&nbsp;MANAGEMENT,&nbsp;LLC</B>,&nbsp;a&nbsp;Tennessee&nbsp;limited<BR>
  liability company</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="3" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">American Retirement Corporation, a <BR>
  Tennessee corporation, its sole member</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Name:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Title:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="30%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">THE STATE OF TENNESSEE</FONT></P>
  </TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="74%" COLSPAN="3" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="25%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">COUNTY OF DAVIDSON</FONT></P></TD>
  <TD WIDTH="28%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&#167;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
instrument was acknowledged before me on March __, 2004, by_______________, _______________ of
American Retirement Corporation, a Tennessee corporation, on behalf of said
corporation, in its capacity as sole member of ARC Management, LLC, a Tennessee
limited liability company, on behalf of said limited liability company.</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">Notary Public, State of
  Tennessee</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">My commission expires:</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">___________________.</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="49%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="36%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">(printed name)</FONT></P></TD>
  <TD WIDTH="14%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">12</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><U>SCHEDULE I</U></FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.</FONT></P></TD>
  <TD WIDTH="95%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Promissory Note dated June 22, 2000, in the original
  principal amount of Ten Million Three Hundred Seventy-Five Thousand and
  No/100 Dollars ($10,375,000.00) made by Castle Hills Delaware Business Trust,
  payable to the order of Guaranty Bank (formerly known as Guaranty Federal
  Bank, F.S.B.), the obligations of Castle Hills Delaware Business Trust under
  the note having been assumed by ARC Castle Hills, L.P., a Tennessee limited
  partnership (such Promissory Note, as amended from time to time, the &#147;<B>Castle Hills Note</B>&#148;).</FONT></P></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">13</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B><U>SCHEDULE II</U></B></FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">COMPLIANCE
CERTIFICATE<BR>
Quarterly Debt Coverage Test</FONT></P>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Guaranty Bank<BR>
8333 Douglas Avenue<BR>
Dallas, TX&#160; 75225<BR>
Attn:&#160; Senior Housing Lending Division</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">RE:</FONT></P></TD>
  <TD WIDTH="90%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Loan Agreement dated June 22, 2000 (the
  &#147;Agreement&#148;), by and between ARC Castle Hills, L.P. (the &#147;Borrower&#148;), and
  Guaranty Bank</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned officer of Borrower does hereby certify that for the quarterly
financial period ending _____________________:</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Event of Default has occurred or exists except <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Property&#146;s Debt Coverage Ratio was:</FONT></P>
<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Required:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="60%">
 <TR>
  <TD WIDTH="48%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>Required Ratio</B></FONT></P></TD>
  <TD WIDTH="3%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN"><B>Test Date</B></FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=TOP>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
  <TD WIDTH="3%" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=TOP>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

  </TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.05 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">June 30, 2004</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.35 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">September 30, 2004</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.60 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">December 31, 2004</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">0.80 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">March 31, 2005</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.00 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">June 30, 2005</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.10 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">September 30, 2005</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">1.20 to 1</FONT></P></TD>
  <TD WIDTH="3%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="48%" VALIGN=BOTTOM>
  <P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">December 31, 2005</FONT></P></TD>
 </TR>
</TABLE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Actual:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;___&#160; to 1</FONT></P>
<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">14</FONT></P>

<HR SIZE=5 NOSHADE>
<PAGE>

<P><FONT SIZE=2 FACE="TIMES NEW ROMAN">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
manner of calculation of the above is attached.</FONT></P>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="5" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">ARC CASTLE HILLS, L.P., a Tennessee limited <BR>
  partnership</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="46%" COLSPAN="5" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">American&nbsp;Retirement&nbsp;Corporation,&nbsp;a&nbsp;Tennessee<BR>
  corporation, General Partner</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">By:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Name:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=2 FACE="TIMES NEW ROMAN">Title:</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" VALIGN=BOTTOM>
  <HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
  </TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="6%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="34%" COLSPAN="2" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>
  <TD WIDTH="53%" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="5%" VALIGN=TOP>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
  <TD WIDTH="40%" COLSPAN="4" VALIGN=BOTTOM>
  <P><FONT SIZE=1>&nbsp;</FONT></P></TD>
 </TR>
 <TR>

  <TD WIDTH=387></TD>
  <TD WIDTH=42></TD>
  <TD WIDTH=27></TD>
  <TD WIDTH=17></TD>
  <TD WIDTH=41></TD>
  <TD WIDTH=206></TD>
 </TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2 FACE="TIMES NEW ROMAN">15</FONT></P>

<HR SIZE=5 NOSHADE>

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