EXHIBIT 10.2 LOAN AGREEMENT

July 7, 2005

This Loan Agreement (the “Agreement”) dated as of July 7, 2005, by and between Bank of America, N.A., a national banking association (“Bank”) and the Borrower described below:

WHEREAS, Borrower desires to purchase from Maybrook Realty, Inc., all of its right, title and interest in and to a certain leasehold estate and interest in Freedom Plaza Care Center, including without limitation all improvements thereon, and Borrower also desires to purchase from Sun Health Properties, Inc. the fee simple property associated with the same site, including without limitation all of the fee simple property underlying the existing ground lease between Sun Health Properties, Inc., and Maybrook Realty, Inc., plus some additional property;

WHEREAS, Borrower has requested term loans from Bank to fund the costs of said real estate acquisitions, and Bank has agreed to fund same subject to the terms, provisions and conditions hereof;

WHERAS, Borrower has also requested a construction loan to provide funding for the construction of a 21-unit assisted living expansion and a connected 20-unit Alzheimer's building, and Bank has also approved of same subject to the terms, provisions and conditions hereof and also subject to the terms, provisions and conditions of a Construction Loan Administration Agreement of even date herewith between Bank and Borrower;

NOW THEREFORE, in consideration of these premises and intending to be legally bound, Bank and ARC HDV, LLC hereby agree as follows:

I.   DEFINITIONS AND REFERENCE TERMS . In addition to any other terms defined herein, the following terms shall have the meaning set forth with respect thereto:.

1.   Banking Day . Banking Day shall mean a day for dealings by and between banks, excluding Saturday, Sunday and any day which shall be a legal holiday in the City of Nashville, Davidson County, Tennessee or a day on which banking institutions in the City of Nashville, Davidson County, Tennessee are authorized to close.

2.   Borrower . ARC HDV, LLC, a Tennessee limited liability company.

3.   Borrower’s Address shall be 111 Westwood Place, Suite 200, Brentwood, Tennessee 37027.

4.   Collateral . The Collateral shall mean and refer to all that property described in the Deed of Trust and all other properties of the Borrower in which the Bank may now or hereafter be granted a lien and/or security interest or which at any time are in the possession or control of the Bank.

5.   Construction Loan Administration Agreement . The Construction Loan Administration Agreement shall mean and refer to that certain Construction Loan Administration Agreement of even date herewith by and between Borrower and Bank

6.   Deed of Trust . Deed of Trust shall mean and refer to that certain Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement which is dated of even date herewith from Borrower to Bank and recorded in the Records of Maricopa County, Arizona securing, among other Obligations, Notes A , B and C.

7.   Default Rate . The Default Rate shall have the meaning given it in the respective Note.

8.   Environmental Laws . Environmental Laws shall mean all federal, state, local and foreign laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, spills, releases or threatened releases of any pollutant, contaminant or Hazardous Substance into the environment (including without limitation indoor air, ambient air, surface water, ground water or land), or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or Hazardous Substances including, but not limited to, the Comprehensive Environmental Response Compensation and Liability Act, as amended (42 U.S.C. §§9601 et seq .), the Resource Conservation and Recovery Act, as amended (42 U.S.C. §§6901 et seq .), the Clean Water Act, as amended (33 U.S.C. §§1251 et seq .), the Clean Air Act, as amended (42 U.S.C. §§7401 et seq .), the Toxic Substance Control Act, as amended (15 U.S.C. §§2601 et seq .), and any and all rules, regulations, codes, standards, plans, orders, decrees, judgments, injunctions, notices or demand letters issued, entered, promulgated or approved thereunder.

9.   Equipment . Equipment shall mean all of Borrower’s then owned or existing and future acquired or arising machinery, apparatus, equipment, fixtures, motor vehicles, and other tangible personal property of every kind and description used in the Borrower’s business operations or owned by the Borrower or in which the Borrower has an interest, and all parts and accessories and all increases and accessions thereto and substitutions and replacements therefor.

10.   Fixed Charge   Coverage Ratio . Fixed Charge Coverage Ratio shall mean, for any period of determination, that ratio computed by dividing the sum of Borrower’s net income plus depreciation/amortization plus rent/lease expense by the sum of Borrower’s interest expense plus scheduled principal payments plus scheduled rent/lease payments.

11.   Freedom Plaza Care Center. Freedom Plaza Care Center shall mean and refer to that certain 128 bed skilled nursing and 44 unit assisted living facility which Borrower has purchased from Maybrook Realty, Inc. and Sun Health Properties, Inc. located in Maricopa County, Arizona.

12.   Guarantor . Guarantor means American Retirement Corporation, a Tennessee Corporation.

13.   Guaranty . Guaranty shall mean the limited guaranty of American Retirement Corporation, a Tennessee Corporation with respect to the indebtedness evidenced by Notes A, B and C in form and substance satisfactory to the Bank guaranteeing the payment and performance of said indebtedness and any other guaranty of the Obligations hereafter executed and delivered to Bank.

14.   Hazardous Materials . Hazardous Materials shall mean any hazardous, toxic or dangerous waste, substance or material, regulated or controlled pursuant to any Environmental Law, now or at any time hereafter in effect, including, without limiting the generality of the foregoing, asbestos, PCBs, petroleum products (including crude oil, natural gas, natural gas liquids, liquefied natural gas or synthetic gas) or any other substance defined as a “hazardous substance,”“extremely hazardous waste,”“restricted hazardous waste,”“hazardous material,”“hazardous chemical,”“hazardous waste,”“hazardous air pollutant,”“regulated substance,”“toxic chemical,”“toxic substance” or other similar term in any Environmental Law.

15.   Loan(s) . Loan(s) means collectively any and all loans heretofore or hereafter made by Bank to the Borrower pursuant to and in accordance with the terms of this Agreement, including without limitation those evidenced by Note A, Note B, and Note C.

16.   Loan Documents . Loan Documents shall mean and refer to this Agreement, Note A, Note B, Note C, the Deed of Trust, the Assignment of Rents and Leases, the Security Agreement, the Guaranty Agreement, the Construction Loan Administration Agreement, and any and all promissory notes executed and/or assumed by Borrower in favor of Bank and all other documents, instruments, guarantees, certificates and agreements executed and/or delivered by Borrower, any guarantor or third party in connection with the Loan.

17.   Note A . Note A shall be that certain floating rate Promissory Note dated of even date herewith, executed by Borrower in the amount of Nine Million Three Hundred Sixty Thousand Seven Hundred Seventy Five and No/100 Dollars ($9,360,775.00), together with all extensions, renewals and modifications thereof.

18.   Note B . Note B shall be that certain fixed rate Promissory Note dated of even date herewith executed by Borrower in the amount of Nine Million Three Hundred Sixty Thousand Seven Hundred Seventy Five and 00/100 Dollars ($9,360,775.00), together with all extensions, renewals and modifications thereof.

19.   Note C. Note C shall be that certain floating rate Construction Loan Promissory Note dated of even date herewith executed by Borrower in the amount of Four Million Four Hundred Fifty Eight Thousand Four Hundred Fifty Eight and No/100 Dollars ($4,458,458.00), together with all extensions, renewals and modifications thereof.

20.   Obligations . Obligations shall mean, individually and collectively, the duties, obligations and liabilities of the Borrower to the Bank described in this Agreement or in the other Loan Documents, obligations under all notes, contracts of suretyship, guaranty or accommodation made by the Borrower in favor of the Bank, letters of credit, and all other obligations of the Borrower to the Bank, however and whenever created, arising, or evidenced, whether direct or indirect, through assignment from third parties, absolute, contingent, or otherwise, primary or secondary, now or hereafter existing, or due or to become due.

21.   Obligor . Obligor shall mean the Borrower, the Guarantor under a Guaranty and each other party at any time primarily or secondarily, directly or indirectly liable on any of the Obligations.

22.   Permitted Liens . Permitted Liens shall mean:

(a)   Liens or charges for current taxes, assessments or other governmental charges which are not delinquent or remain payable without any penalty, or the validity of which is contested in good faith by appropriate proceedings upon stay of execution of the enforcement thereof and for which appropriate reserves have been established in accordance with GAAP;

(b)   deposits or pledges to secure:

(c)   statutory liens on property arising in the ordinary course of business which, in the aggregate, do not materially impair the use of such property or materially detract from the value of such property;

(d)   Liens existing on the date hereof and described on Exhibit “B” , attached to the Deed of Trust, and Liens created after the date hereof to which the Bank has consented in writing;

(e)   Purchase money liens on any equipment hereafter acquired provided that the obligation secured by such lien does exceed the fair cost of the equipment, the lien attaches only to the equipment so acquired, and the debt is permitted by Section V.4 below; and

(f)   Liens in favor of the Bank.

23.   Person . Person shall mean any individual, joint venture, partnership, firm, corporation, limited liability company, trust, unincorporated organization or other organization or entity, or a governmental body or any department or agency thereof.

24.   Premises . Premises shall mean all real properties owned or leased by Borrower or on which any of Borrower’s assets may be located from time to time.

25.   Subsidiary . Subsidiary shall mean as to any designated corporation, any other corporation more than twenty percent (20%) of the shares of voting stock of which is owned, directly or indirectly, by such designated corporation, and shall include subsidiaries of a subsidiary.

Accounting Terms . All accounting terms not specifically defined or specified herein shall have the meanings generally attributed to such terms under generally accepted accounting principles (“GAAP”), as in effect from time to time, consistently applied, with respect to the financial statements referenced in Sections III.11and IV.2 below.

II.         LOANS . Bank hereby agrees to make certain loans to Borrower as follows:

1.   Bank agrees to make term loans to Borrower in the aggregate outstanding principal amount of Eighteen Million Seven Hundred Twenty One Thousand Five Hundred Fifty and No/100 Dollars ($18,721,550.00). The obligation to repay the term Loans is evidenced by Note A and Note B, together with any other promissory notes heretofore or hereafter executed by Borrower in favor of Bank and any and all renewals, extensions or rearrangements thereof (being sometimes hereafter collectively referred to as the “Term Notes”) having a maturity date, repayment terms and interest rate as set forth in each Note.

2.   The Loan evidenced by Note C provides for a committed line (the “Line”) in the amount of up to Four Million Four Hundred Fifty Eight Thousand Four Hundred Fifty Eight and No/100 Dollars ($4,458,458.00) under which Borrower may borrow funds pursuant to the Construction Loan Administration Agreement. The Loan is not revolving. An amount repaid may not be reborrowed.

III.       REPRESENTATIONS AND WARRANTIES . Borrower hereby represents and warrants to Bank as follows:

1.   Good Standing . Borrower is a limited liability company, duly organized, validly existing and in good standing under the laws of Tennessee and has the power and authority to own its property and to carry on its business in each jurisdiction in which Borrower does business.

2.   Authority and Compliance . Borrower has full power and authority to execute and deliver the Loan Documents and to incur and perform the obligations provided for therein, all of which have been duly authorized by all proper and necessary action of the appropriate governing body of Borrower. No consent or approval of any public authority or other third party is required as a condition to the validity of any Loan Document, and Borrower is in compliance with all laws and regulatory requirements to which it is subject.

3.   Foreign Qualification . The Borrower is duly qualified, licensed or domesticated and in good standing as a foreign limited liability company, duly authorized to do business in all jurisdictions in which the character of its properties owned or the nature of its activities conducted makes such qualification, licensing or domestication necessary.

4.   Compliance with Articles of Organization, Operating Agreement, and Other Instruments, Etc . (a) The Borrower is not in violation of any term of its Articles of Organization, its Operating Agreement, and no event, status or condition has occurred or is existing which upon notice or lapse of time, or both, would constitute a violation thereof; (b) the Borrower is not in violation of any material term of any mortgage, indenture or agreement relating to outstanding borrowings to which it is a party, or of any judgment, decree or order to which it is subject, or of any other instrument, lease, contract or agreement to which it is a party, or of any statute, or governmental rule or regulation applicable to it, and no event, status or condition has occurred or is existing which upon the giving of notice or lapse of time, or both, would constitute a material violation of any such term; (c) the execution, delivery and performance of this Agreement and the other instruments and agreements provided for by this Agreement to which the Borrower is, or is to be, a party, and the carrying out of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of the Borrower and will not result in any violation of the organizational documents of the Borrower, or any violation of or constitute a default under any term described in (b) above, or result in the creation of any mortgage, lien, encumbrance or charge upon any of the properties or assets of the Borrower pursuant to any term described in (b) above; and (d) there is no term described in (b) above which materially and adversely affects or in the future may (so far as the Borrower can now foresee) materially and adversely affect the business, prospects, condition, affairs or operations of the Borrower or any of its properties or assets.

5.   Subsidiaries . The Borrower has no Subsidiary.

6.   Binding Agreement . This Agreement and the other Loan Documents executed by Borrower constitute valid and legally binding obligations of Borrower, enforceable in accordance with their terms.

7.   Litigation . There is no proceeding involving Borrower pending or, to the knowledge of Borrower, threatened before any court or governmental authority, agency or arbitration authority, except as disclosed to Bank in writing and acknowledged by Bank prior to the date of this Agreement.

8.   No Conflicting Agreements . There is no operating agreement, membership agreement or other document pertaining to the organization, power or authority of Borrower and no provision of any existing agreement, mortgage, indenture or contract binding on Borrower or affecting its property, which would conflict with or in any way prevent the execution, delivery or carrying out of the terms of this Agreement and the other Loan Documents.

9.   Ownership of Assets . Borrower has or will acquire (a) good and marketable title to its properties and assets, and its assets are free and clear of liens except for Permitted Liens, (b) good and marketable title to its leasehold estates, and (c) its properties, assets and leasehold interests are subject to no covenant, restriction, easement, right, lease, or Lien, other than Permitted Liens.

10.   Taxes . All taxes and assessments due and payable by Borrower have been paid or are being contested in good faith by appropriate proceedings and the Borrower has filed all tax returns which it is required to file.

11.   Financial Statements . The financial statements of Borrower heretofore delivered to Bank have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved and fairly present Borrower’s financial condition as of the date or dates thereof, and there has been no material adverse change in Borrower’s financial condition or operations since December 31, 2004. To the best of Borrower’s knowledge, all factual information furnished by Borrower to Bank in connection with this Agreement and the other Loan Documents is and will be accurate and complete on the date as of which such information is delivered to Bank and is not and will not be incomplete by the omission of any material fact necessary to make such information not misleading.

12.   Environmental Laws .

i.   The Borrower has obtained all permits, licenses and other authorizations, if any, which are required under Environmental Laws for the operation of the Borrower’s business and the Borrower is in compliance with all terms and conditions of required permits, licenses and authorizations, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, notifications, schedules and timetables contained in the Environmental Laws;

ii.   The Borrower is not aware of and has not received notice of the disposal or release or presence of Hazardous Materials (other than in the normal course of business) on any of its properties, or of any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance on the part of the Borrower with Environmental Laws, or may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, demand, suit, lien, proceeding, hearing, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials;

iii.   All assets of the Borrower are free from Hazardous Materials except for Hazardous Materials used, maintained or handled by the Borrower in the ordinary course of business and the use and disposal of any and all such Hazardous Materials is effected by the Borrower in compliance with all applicable Environmental Laws; and

iv.   There is not pending or threatened against the Borrower or Guarantor and neither the Borrower nor Guarantor knows of any facts or circumstances that might give rise to, any civil, criminal or administrative action, suit, demand, claim, hearing, notice or demand letter, notice of violation, environmental lien, investigation, or proceeding relating in any way to Environmental Laws.

13.   Continuation of Representation and Warranties . All representations and warranties made under this Agreement shall be deemed to be made at and as of the date hereof and at and as of the date of any future advance under any Loan.

IV.      AFFIRMATIVE COVENANTS . Until full payment and performance of all obligations of Borrower under the Loan Documents, Borrower will, unless Bank consents otherwise in writing (and without limiting any requirement of any other Loan Document):

  1.   Financial Condition . Maintain Borrower’s financial condition, determined on a consistent basis throughout the period involved except to the extent modified by the following definitions. Borrower shall maintain at all times a positive stockholders’ equity.

  2.   Financial Statements and Other Information . Maintain a system of accounting satisfactory to Bank and applied on a consistent basis throughout the period involved, permit Bank’s officers or authorized representatives to visit and inspect Borrower’s books of account and other records at such reasonable times and as often as Bank may desire, and pay the reasonable fees and disbursements of any accountants or other agents of Bank selected by Bank for the foregoing purposes. Unless written notice of another location is given to Bank, Borrower’s books and records will be located at Borrower’s chief executive office set forth above. All financial statements called for below shall be prepared in form and content acceptable to Bank and, in the case of annual statements, prepared in accordance with GAAP and, with respect to the Guarantor, audited by independent certified public accountants reasonably acceptable to Bank.

In addition, Borrower will provide or cause to be provided to Bank the following:

i.   Copies of filed federal income tax returns of Borrower for each taxable year, within twenty (20) days after filing but in any event not later than one hundred twenty (120) days after the close of each such taxable year;

ii.   Year-end financial Statements of Borrower, provided annually within sixty (60) days after the close of each fiscal year, said statements to include a balance sheet and profit and loss statement and to be prepared in accordance with GAAP;

iii.   Financial statements (including a balance sheet and profit and loss statement) of Borrower for each quarter of each fiscal year of Borrower, within forty-five (45) days after the close of each such period;

iv.   Compliance certificate for (and executed by an authorized representative of) Borrower concurrently with and dated as of the date of delivery of each of the financial statements as required in paragraph iii, above, containing (a) a certification that the financial statements of even date are true and correct and that the Borrower is not in default under the terms of this Agreement, and (b) computations and conclusions, in such detail as Bank may request, with respect to compliance with this Agreement and the other Loan Documents, including computations of all quantitative covenants such as the Fixed Charge Coverage Ratio;

v.   Audited financial statements of Guarantor, for each fiscal year of Guarantor, as soon as reasonably practicable and in any event within one hundred (100) days after the close of each fiscal year, including an unqualified opinion from an independent auditor;

vi.   Financial statements (including a balance sheet and profit and loss statement) of Guarantor for each quarter of each fiscal year of Guarantor, within forty-five (45) days after the close of each such period;

vii.   Compliance certificate for (and executed by an authorized representative of) Guarantor for significant senior lenders concurrently with and dated as of the date of delivery of each of the financial statements as required in paragraph vi, above, containing (a) a certification that the financial statements of even date are true and correct and that the Guarantor is not in default under the terms of any agreements with said significant senior lenders, and (b) computations and conclusions, in such detail as Bank may request, with respect to compliance with Guarantor’s agreements with significant senior lenders, including computations of all quantitative covenants;

viii.   Promptly upon the filing of same with the Health Care Financing Administration (“HCFA”) and/or any Arizona state survey agency, copies of all reports required to be submitted to such agencies including without limitation all reports required to c