1
EXHIBIT 10.98
REGULATORY AGREEMENT U.S. DEPARTMENT OF HOUSING
NURSING HOMES AND URBAN DEVELOPMENT
Office of Housing
Federal Housing Commissioner
Project Number Mortgagee
121-22029-PM-ALF/REF Red Capital Mortgage, Inc., an Ohio
corporation
Amount of Mortgage Note Date
$3,997,100.00 As of February 1, 2001
Mortgage Recorded (State) County Date
California San Mateo As of February 1, 2001
Book Page
This Agreement entered into as of the 1st day of February, 2001 between
RETIREMENT INNS II, LLC, a Delaware limited liability company whose address is
000 Xxxxxxx Xxxxxx, Xxxxx X-0, Xxxxx Xxxx, Xxxxxxxxxx 00000 (jointly and
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 XXXX CITY, 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
--------------------------------------------------------------------------------
Page 1 of 6
2
year, payments under the lease have not been sufficient to take
care of the above 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 February, 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.
--------------------------------------------------------------------------------
Page 2 of 6
3
(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 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.
--------------------------------------------------------------------------------
Page 3 of 6
4
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on
the date first hereinabove written.
RETIREMENT INNS II, LLC
By: AMERICAN RETIREMENT VILLAS
PROPERTIES II
Its sole member
By: ARV Assisted Living, Inc.
Its General Partner
By:
-------------------------------
Xxxxxxx Xxxxxxxxx
Vice President
February 1, 2001
SECRETARY OF HOUSING AND URBAN
DEVELOPMENT ACTING BY AND
THROUGH THE FEDERAL HOUSING
COMMISSIONER
By:
-------------------------------
Authorized Agent
February 1, 2001
--------------------------------------------------------------------------------
Page 4 of 6
