EXHIBIT 10.98
REGULATORY AGREEMENT U.S. DEPARTMENT OF HOUSING
NURSING HOMES AND URBAN DEVELOPMENT
Office of Housing
Federal Housing Commissioner
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Project Number Mortgagee
143-22015 PM/ALF/REF Red Mortgage Capital, Inc., an Ohio corporation
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Amount of Mortgage Note Date
$2,207,400.00 December 1, 2001
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Mortgage Recorded (State) County Date
California Orange December ___, 2001
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Book Page
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This Agreement entered into this 1st day of December, 2001 between
RETIREMENT INNS II, LLC, a Delaware limited liability company whose address is
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severally, hereinafter referred to as Lessee) and the undersigned FEDERAL
HOUSING COMMISSIONER, (hereinafter called Commissioner).
In consideration of the consent of the Commissioner to the leasing of the
aforesaid project by ARV FULLERTON, L.P., a California limited partnership,
Mortgagor, and in order to comply with the requirements of the National Housing
Act and the Regulations adopted by the Commissioner pursuant thereto, Lessees
agree for themselves, their successors, heirs and assigns, that in connection
with the mortgaged property and the project operated thereon and so long as the
Contract of Mortgage Insurance continues in effect, and during such further
period of time as the Commissioner shall be the owner, holder or reinsurer of
the mortgage, or during any time the Commissioner is obligated to insure a
mortgage on the mortgaged property:
(1) The lease shall be subject and subordinate to the mortgage securing the
note or other obligation endorsed for insurance by the commissioner;
(2) Lessee shall make payments under lease when due;
(3) Payments by the lessee to the lessor shall be sufficient to pay all
mortgage payments including payments to reserves for taxes, insurance,
etc., payments to the Reserve for Replacements, and to take care of
necessary maintenance. If at the end of any calendar year, or any fiscal
year if the project operates on the basis of a fiscal year, payments
under the lease have not been sufficient to take care of the above
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items, the lessor and lessee upon request in writing from the
Commissioner shall renegotiate the amounts due under the lease so that
such amounts shall be sufficient to take care of such items; the
Commissioner shall be furnished by the lessee, within thirty days after
being called upon to do so, with a financial report in form satisfactory
to the Commissioner covering the operations of the mortgaged property
and of the project;
(4) The lessee shall not sublease the project or any part thereof without
the consent of the Commissioner;
(5) The lessee shall at all times maintain in full force and effect a
license from the State or other licensing authority to operate the
project as a nursing home, but the owner shall not be required to
maintain such a license;
(6) Lessee shall maintain in good repair and condition any parts of the
project for the maintenance of which lessee is responsible under the
terms of the lease;
(7) Lessee shall not remodel, reconstruct, add to, or demolish any part of
the mortgaged property or subtract from any real or personal property of
the project;
(8) Lessee shall not use the project for any purpose except the operation of
a nursing home;
(9) If a default is declared by the Commissioner under the provisions of
Paragraph 10 of the Regulatory Agreement entered into by the
lessor-mortgagor and the Commissioner on the 1st day of December, 2001,
a copy of notice of default having been given to the lessee, the lessee
will thereafter make all future payments under the lease to the
Commissioner;
(10) The lease may be cancelled upon thirty days written notice by the
Commissioner given to the lessor and the lessee for a violation of any
of the above provisions unless the violation is corrected to the
satisfaction of the Commissioner within said thirty day period.
(11) The Commissioner must approve any change in or transfer of ownership of
the lessee entity, and any change in or transfer of the management
operation, or control of the project.
(12) The lessee shall not reduce or expand, allow to be reduced or expanded,
or cause the expansion or reduction of the bed capacity of the project
without the consent of
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the Commissioner. Any change in the bed capacity shall violate this
Regulatory Agreement.
(13) The lessee shall not enter into any management contract involving the
project, unless such shall contain a provision that, in the event of
default under the Regulatory Agreement as recited in paragraph 9 (above)
of this Agreement, the management agreement shall be subject to
termination without penalty upon written request of the Commissioner.
Upon such request the lessee shall immediately arrange to terminate the
contract within a period of not more than thirty (30) days and shall
make arrangements satisfactory to the Commissioner for continuing proper
management of the project.
(14) The mortgaged property, equipment, buildings, plans, offices,
apparatus, devices, books, contracts, records, documents, and other
papers relating thereto shall at all times be maintained in reasonable
condition for proper audit and subject to examination and inspection at
any reasonable time by the Commissioner or his duly authorized agents.
Lessee shall keep copies of all written contracts or other instruments
which affect the mortgaged property, all or any of which may be subject
to inspection and examination by the Commissioner or his/her duly
authorized agents.
(15) There shall be full compliance with the provisions of (1) any State or
local laws prohibiting discrimination in housing on the basis of race,
color, creed, or national origin; and (2) with the Regulations of the
Federal Housing Administration providing for non-discrimination and
equal opportunity in housing. It is understood and agreed that failure
or refusal to comply with any such provisions shall be a proper basis
for the Commissioner to take any corrective action he may deem necessary
including, but not limited to, the refusal to consent to a further
renewal of the lease between the mortgagor-lessor and the lessee, the
rejection of applications for FHA mortgage insurance and the refusal to
enter into future contracts of any kind with which the lessee is
identified; and further, if the lessee is a corporation or any other
type of business association or organization which may fail or refuse to
comply with the aforementioned provisions, the Commissioner shall have a
similar right of corrective action (1) with respect to any individuals
who are officers, directors, trustees, managers, partners, associates or
principal stockholders of the lessee; and (2) with respect to any other
type of business association, or organization with which the officers,
directors, trustees, managers, partners, associates or principal
stockholders of the lessee may be identified.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the
date first hereinabove written.
RETIREMENT INNS II, LLC
a Delaware limited liability company
By:
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Manager
December 1, 2001
SECRETARY OF HOUSING AND URBAN
DEVELOPMENT ACTING BY AND
THROUGH THE FEDERAL HOUSING
COMMISSIONER
By:
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Authorized Agent
December 1, 2001
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