-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ri+Ki8UgdLB3KPfidja75YLIdhGi3zxkhWaL6geTaNgmmA0q58iWcyxKAgMb2d1a g5E7R7BgIv3HliaNf3lFjA== 0001095811-01-502335.txt : 20010516 0001095811-01-502335.hdr.sgml : 20010516 ACCESSION NUMBER: 0001095811-01-502335 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RETIREMENT VILLAS PROPERTIES II CENTRAL INDEX KEY: 0000830156 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330278155 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-20413 FILM NUMBER: 1639819 BUSINESS ADDRESS: STREET 1: 245 FISCHER AVE STE D1 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7147517400 MAIL ADDRESS: STREET 2: 245 FISCHER AVE STE D1 CITY: COSTA MESA STATE: CA ZIP: 92626 10-Q 1 a72807e10-q.txt FORM 10-Q FOR QUARTER ENDED MARCH 31,2001 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ___________ COMMISSION FILE NUMBER: 0-26468 AMERICAN RETIREMENT VILLAS PROPERTIES II, L.P. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 33-0278155 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 245 FISCHER AVENUE, D-1 COSTA MESA, CA 92626 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The aggregate market value of the voting units held by non-affiliates of registrant, computed by reference to the price at which units were sold, was $16,696,569 (for purposes of calculating the preceding amount only, all directors, executive officers and unitholders holding 5% or greater of the registrant's units are assumed to be affiliates). The number of Units outstanding as of May 15, 2001 was 35,020. ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS American Retirement Villas Properties II (a California limited partnership) Condensed Balance Sheets (Unaudited) (In thousands) ASSETS
MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ Properties, at cost: Land $ 11,453 $ 11,453 Buildings and improvements, less accumulated depreciation of $8,339 and $8,120 at March 31, 2001 and December 31, 2000, respectively 20,227 20,157 Leasehold property and improvements, less accumulated depreciation of $1,282 and $1,274 at March 31, 2001 and December 31, 2000, respectively 225 222 Furniture, fixtures and equipment, less accumulated depreciation of $1,617 and $1,497 at March 31, 2001 and December 31, 2000, respectively 1,167 1,190 -------- -------- Net properties 33,072 33,022 Cash and cash equivalents 2,587 2,177 Other assets, including impound accounts of $3,498 and $2,974 at March 31, 2001 and December 31, 2000, respectively 4,852 4,357 -------- -------- $ 40,511 $ 39,556 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Notes payable $ 41,850 $ 41,226 Accounts payable 297 341 Accrued expenses 1,791 1,492 Amounts payable to affiliate 109 128 Distributions payable to Partners 4 25 -------- -------- Total liabilities 44,051 43,212 -------- -------- Partners' capital (deficit): General partners' capital 1 1 Special limited partners 111 111 Limited partners' capital, 35,020 units outstanding (3,652) (3,768) -------- -------- Total partners' capital (3,540) (3,656) -------- -------- Commitments and contingencies $ 40,511 $ 39,556 ======== ========
See accompanying notes to the unaudited financial statements. 2 3 American Retirement Villas Properties II (a California limited partnership) Condensed Statements of Operations (Unaudited) (In thousands, except unit data)
FOR THE THREE MONTHS ENDED MARCH 31, ----------------------- 2001 2000 ------- ------- Revenues: Rent $ 4,670 $ 4,157 Assisted living 927 912 Interest and other 120 106 ------- ------- Total revenues 5,717 5,175 ------- ------- Costs and expenses: Rental property operations 3,011 2,771 Assisted living 683 699 General and administrative 167 121 Communities rent 92 88 Depreciation and amortization 440 578 Property taxes 203 164 Advertising 57 110 Interest 891 904 ------- ------- Total costs and expenses 5,544 5,435 ------- ------- Income (loss) from operations before income tax expense and extraordinary item 173 (260) Income tax expense -- 2 ------- ------- Income (loss) from operations before extraordinary item 173 (262) Extraordinary loss from extinguishment of debt due to refinancing (56) -- ------- ------- Net income (loss) $ 117 $ (262) ======= ======= Income (loss) per limited partner unit Income (loss) before extraordinary item $ 5.14 $ (7.42) Net loss from extraordinary item (1.84) -- ------- ------- Net income (loss) $ 3.30 $ (7.42) ======= =======
See accompanying notes to the unaudited financial statements. 3 4 American Retirement Villas Properties II (a California limited partnership) Condensed Statements of Cash Flows (Unaudited) (In thousands)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------ 2001 2000 -------- ------- Cash flows from operating activities: Net income (loss) $ 117 $ (262) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 440 578 Extraordinary loss from extingishment of debt 56 -- Change in assets and liabilities: (Increase) decrease in other assets (330) 394 Increase (decrease) in accounts payable & accrued expenses 254 142 Increase (decrease) in amounts payable to affiliates (19) (110) -------- ------- Net cash provided by operating activities 518 742 -------- ------- Cash flows used in investing activities: Capital expenditures (341) (346) Refund of purchase deposit, net -- (1) -------- ------- Net cash used in investing activities (341) (347) -------- ------- Cash flows provided by (used in) financing activities: Principal repayments on notes payable (9,603) (120) Proceeds from notes payable 10,227 -- Mortgage Insurance (200) -- Loan fees (170) -- Distributions paid (21) (49) -------- ------- Net cash provided by (used in) financing activities 233 (169) -------- ------- Net increase in cash 410 226 Cash at beginning of period 2,177 2,002 -------- ------- Cash at end of period $ 2,587 $ 2,228 ======== ======= Supplemental disclosure of cash flow information - Cash paid during the period for interest $ 680 $ 904 ======== =======
See accompanying notes to the unaudited financial statements. 4 5 American Retirement Villas Properties II, L.P. (a California limited partnership) Notes to Condensed Financial Statements (Unaudited) March 31, 2001 (1) SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION BASIS OF ACCOUNTING American Retirement Villas Properties II maintains records on the accrual method of accounting for financial reporting and Federal and state tax purposes. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Partnership and its subsidiaries. Subsidiaries, which include limited partnerships and limited liability companies in which we have controlling interests, have been consolidated into the financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. CARRYING VALUE OF REAL ESTATE Property, furniture and equipment are stated at cost less accumulated depreciation which is charged to expense on a straight-line basis over the estimated useful lives of the assets as follows: Buildings and improvements...................... 27.5 to 35 years Leasehold property and improvements............. Lease term Furniture, fixtures and equipment............... 3 to 7 years We review our long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In reviewing recoverability, we estimate the future cash flows expected to result from using the assets and eventually disposing of them. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based upon the asset's fair value. USE OF ESTIMATES In the preparation of our financial statements in conformity with generally accepted accounting principles, we have made estimates and assumptions that affect the following: o reported amounts of assets and liabilities at the date of the financial statements; o disclosure of contingent assets and liabilities at the date of the financial statements; and o reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IMPOUND ACCOUNTS The U.S. Department of Housing and Urban Development ("HUD") finances certain of our properties. HUD holds our funds in impound accounts for payment of property taxes, insurance and future property improvements (replacement reserves) on these properties. We include these impound accounts in other assets. 5 6 LOAN FEES We amortize loan fees using the interest method over the term of the notes payable and include them in other assets. REVENUE RECOGNITION Rent agreements with tenants are on a month-to-month basis. We apply advance deposits to the first month's rent. Revenue is recognized in the month earned for rent and assisted living services. (2) TRANSACTIONS WITH AFFILIATES We have an agreement with ARV Assisted Living, Inc. ("ARV"), our Managing General Partner, providing for a property management fee of five percent of gross revenues amounting to $284,000 and $257,000 for the three-month periods ended March 31, 2001 and 2000, respectively. Additionally, we pay to ARV a partnership management fee of ten percent of cash flow before distributions, as defined in the Partnership Agreement, which amounted to $84,000 and $43,000 for the three-month periods ended March 31, 2001 and 2000, respectively. (2) NOTES PAYABLE Notes payable consist of the following at March 31, 2001 and December 31, 2000 (in thousands):
MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ Notes payable, bearing interest at fixed rate of 9.15, payable in monthly installments of principal and interest totaling $16.2 collateralized by property, maturities ranging from January 2001 through January 2002 ................................................. $ 1,870 $11,448 Notes payable, bearing interest at rates of 7.75% and 8.06%, payable in monthly installments of principal and interest totaling $283.0 collateralized by property, maturities ranging from January 2036 to March 2036 ................................................... 39,980 29,778 ------- ------- 41,850 41,226 Less amounts payable in the next year ................................ 2,090 3,866 ------- ------- $39,760 $37,360 ======= =======
The future annual principal payments of the notes payable at March 31, 2001 are as follows (in thousands): Twelve month period ending March 31, 2002............ $2,090 Twelve month period ending March 31, 2003............ 240 Twelve month period ending March 31, 2004............ 260 Twelve month period ending March 31, 2005............ 281 Twelve month period ending March 31, 2006............ 304 Thereafter........................................... 38,675 ------ $41,850
In the quarter ended March 31, 2001, certain notes payable were refinanced and the prior debt extinguished, resulting in an extraordinary loss due to the remaining costs which were written off at the time of the refinancing. 6 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operating Results Before Extraordinary Item For the Three Months Ended March 31, 2001 and 2000 (Unaudited) (In millions)
(DOLLARS IN MILLIONS) For the Three Months Ended March 31, ------------------ Increase/ 2001 2000 (decrease) ------ ------ ---------- Revenues: Assisted living community revenue ................. $ 5.6 $ 5.1 10.42% Interest and other revenue ........................ 0.1 0.1 12.85% ------ ------ ------ Total revenues ............................ 5.7 5.2 10.47% ------ ------ ------ Costs and expenses: Assisted living operating expenses ................ 3.7 3.5 6.48% General and administrative ........................ 0.2 0.1 38.42% Communities rent .................................. 0.1 0.1 4.68% Depreciation and amortization ..................... 0.4 0.6 (23.96)% Property taxes .................................... 0.2 0.2 23.32% Advertising ....................................... 0.0 0.1 (47.95)% Interest .......................................... 0.9 0.9 (1.47)% ------ ------ ------ Total costs and expenses .................. 5.5 5.5 2.01% ------ ------ ------ Net income (loss) before extraordinary loss $ 0.2 $ (0.3) 165.89% ====== ====== ======
Assisted living community revenue increased $0.5 million, or 10.42%, from $5.1 million for the quarter ended March 31, 2000 to $5.6 million for the quarter ended March 31, 2001 primarily due to the following: o an increase in the average rate per occupied unit to $2,230 for the three-month period ended March 31, 2001 as compared with $2,099 for the three-month period ended March 31, 2000; and o an increase in average occupancy for our assisted living communities to 90.7% for the three-month period ended March 31, 2001 as compared with 88.0% for the three-month period ended March 31, 2000. Interest and other revenue remained relatively constant. Assisted living operating expenses increased $0.2 million, or 6.48%, from $3.5 million for the quarter ended March 31, 2000 to $3.7 million for the quarter ended March 31, 2001 primarily due to the following: o increased wages of staff; o incentive programs; and o increased worker's compensation premiums. General and administrative expense increased $0.05 million, or 38.42%, from $0.12 million for the quarter ended March 31, 2000 to $0.17 million for the quarter ended March 31, 2001 primarily due to inflation. Community rent expense remained relatively constant. Depreciation and amortization expense decreased $0.2 million, or 23.96%, from $0.6 million for the quarter ended March 31, 2000 to $0.4 million for the quarter ended March 31, 2001 primarily due to the reduced amortization of loan fees as a result of the refinancing of certain loans. Property tax expense increased 23.32% due to increased property values for the quarter ended March 31, 2001 compared to the quarter ended March 31, 2000. The decrease in advertising expenses is due to decreased advertising in the 2001 quarter. Interest expense remained relatively constant as the increase in debt was offset by lower interest rates. 7 8 LIQUIDITY AND CAPITAL RESOURCES Our unrestricted cash balances were $2.6 million and $2.2 million at March 31, 2001 and December 31, 2000, respectively. We expect the cash generated from operations from our properties and our ability to refinance certain ALCs will be adequate to pay operating expenses, make necessary capital improvements, and meet required principal reductions of debt. On a long-term basis, our liquidity is sustained primarily from cash flow provided by operating activities. During the quarter ending March 31, 2001 cash provided by operating activities was $0.5 million compared $0.7 million during the quarter ending March 31, 2000. The cash provided by operating activities during the quarter ended March 31, 2001 was a result of: net income of $0.1 million, adjusted for non-cash charges of: o $0.4 million of depreciation and amortization expense; o $0.3 million increase in net liabilities; and o $0.1 million from extraordinary loss from write off of loan fees; offset by o $0.3 million increase in other assets. During the quarter ended March 31, 2001 cash used in investing activities was $0.3 million compared to cash used in investing activities of $0.3 million during the quarter ended March 31, 2000. The cash used by investing activities during the 2001 quarter was primarily the result of $0.3 million for purchase of furniture and equipment. During the quarter ended March 31, 2001 cash provided by financing activities was $0.2 million as compared to cash used in financing activities of $0.2 million for the quarter ended March 31, 2000. The cash provided by financing activities during 2001 quarter was a result of: o $10.2 million of borrowing under notes payable; offset by: o $9.6 million of repayments of notes payable; and o $0.2 million of mortgage insurance. o $0.2 million of loan fees. As of March 31, 2001, of our 10 assisted living communities, 8 are owned directly, one is operated under a long-term operating lease, and one is owned subject to a ground lease. We contemplate spending approximately $835,000 for capital expenditures during 2001 for physical improvements at our communities. As of March 31, 2001 we have made approximately $341,000 in capital expenditures. Funds for these improvements are expected to be available from operations. We are not aware of any trends, other than national economic conditions which have had, or which may be reasonably expected to have, a material favorable or unfavorable impact on the revenues or income from the operations or sale of properties. We believe that if the inflation rate increases we will be able to pass the subsequent increase in operating expenses onto the residents of the communities by way of higher rental and assisted living rates. The implementation of price increases is intended to lead to an increase in revenue, however, those increases may result in an initial or permanent decline in occupancy and/or a delay in increasing occupancy. If this occurs, revenues may remain constant or decline. ITEM 3. QUANATITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks related to fluctuations in the interest rates on our fixed rate notes payable. With respect to our fixed rate notes payable, changes in the interest rates affect the fair market value of the notes payable, but not our earnings or cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until the earlier of maturity and any required refinancing of such debt. We do not currently have any variable interest rate debt and, therefore, are not subject to interest rate risk associated with variable interest rate debt. Currently, we do not utilize interest rate swaps. Less than 1% of our total assets and total contract revenues as of and for the periods ended March 31, 2001 and 2000 were denominated in currencies other than the U.S. Dollar; accordingly, we believe that we have no material exposure to foreign currency 8 9 exchange risk. This materiality assessment is based on the assumption that the foreign currency exchange rates could change unfavorably by 10%. We have no foreign currency exchange contracts. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are from time to time subject to lawsuits and other matters in the normal course of business. While we cannot predict the results with certainty, we do not believe that any liability from any such lawsuits or other matters will have a material effect on our financial position, results of operations, or liquidity. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY-HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on 8K were filed for the quarter ending March 31, 2001. Exhibit 10.1 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.4 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.5 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.6 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.7 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.8 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.9 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.10 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.11 Loan Agreement by and between Banc One Capital Funding Corporation and Retirement Inns II, LLC(1) LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.12 Letter Agreement as to the Loans in the aggregate amount of $39,703,100 from Banc One Capital Funding Corporation to Retirements Inns II LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999. Exhibit 10.15 Note and Agreement as to Retirement Inns II, LLC LLC, incorporated by reference to 10Q for June 30, 1999 filed August 2, 1999.
9 10 Exhibit 10.75 Deed of Trust Note of ARV Burlingame, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.75 on April 2, 2001. Exhibit 10.76 Allonge #1 to Deed of Trust Note of ARV Burlingame, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.76 on April 2, 2001. Exhibit 10.77 Deed of Trust between ARV Burlingame, L.P. and Fidelity National Title Insurance, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.77 on April 2, 2001. Exhibit 10.78 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Burlingame, L.P. and Secretary of Housing and Urban Development, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.78 on April 2, 2001. Exhibit 10.79 Regulatory Agreement Nursing Homes Projects between ARV Burlingame, L.P. and Federal Housing Commissioner, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.79 on April 2, 2001. Exhibit 10.80 Deed of Trust Note of ARV Campbell, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.80 on April 2, 2001. Exhibit 10.81 Allonge #1 to Deed of Trust Note of ARV Campbell, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.81 on April 2, 2001. Exhibit 10.82 Deed of Trust between ARV Campbell, L.P. and Fidelity National Title Insurance, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.82 on April 2, 2001. Exhibit 10.83 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Campbell, L.P. and Secretary of Housing and Urban Development, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.83 on April 2, 2001. Exhibit 10.84 Regulatory Agreement Nursing Homes Projects between ARV Campbell, L.P. and Federal Housing Commissioner, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.84 on April 2, 2001. Exhibit 10.85 Deed of Trust Note of ARV Sunnyvale, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.85 on April 2, 2001. Exhibit 10.86 Allonge #1 to Deed of Trust Note of ARV Sunnyvale, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.86 on April 2, 2001. Exhibit 10.87 Deed of Trust between ARV Sunnyvale, L.P. and Fidelity National Title Insurance, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.87 on April 2, 2001. Exhibit 10.88 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Sunnyvale, L.P. and Secretary of Housing and Urban Development, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.88 on April 2, 2001. Exhibit 10.89 Regulatory Agreement Nursing Homes Projects between ARV Sunnyvale, L.P. and Federal Housing Commissioner, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.89 on April 2, 2001. Exhibit 10.90 Deed of Trust Note of ARV Valley View, L.P. to Red Mortgage Capital, Inc., incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.90 on April 2, 2001. Exhibit 10.91 Deed of Trust between ARV Valley View, L.P. and Fidelity National Title Insurance, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.91 on April 2, 2001. Exhibit 10.92 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Valley View, L.P. and Secretary of Housing and Urban Development, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.92 on April 2, 2001. Exhibit 10.93 Regulatory Agreement Nursing Homes Projects between ARV Valley View, L.P. and Federal Housing Commissioner, incorporated by reference to our 10K filed with the Securities and Exchange Commission as exhibit 10.93 on April 2, 2001. Exhibit 10.94 Deed of Trust Note of ARV Daly City, L.P. to Red Mortgage Capital, Inc. Exhibit 10.95 Allonge #1 to Deed of Trust Note of ARV Daly City, L.P. to Red Mortgage Capital, Inc. Exhibit 10.96 Deed of Trust between ARV Daly City, L.P. and Fidelity National Title Insurance. Exhibit 10.97 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Daly City, L.P. and Secretary of Housing and Urban Development. Exhibit 10.98 Regulatory Agreement Nursing Homes Projects between ARV Daly City, L.P. and Federal Housing Commissioner. Exhibit 10.99 Deed of Trust Note of ARV Fremont, L.P. to Red Mortgage Capital, Inc. Exhibit 10.100 Allonge #1 to Deed of Trust Note of ARV Fremont, L.P. to Red Mortgage Capital, Inc.
10 11 Exhibit 10.101 Deed of Trust between ARV Fremont, L.P. and Fidelity National Title Insurance. Exhibit 10.102 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Fremont, L.P. and Secretary of Housing and Urban Development. Exhibit 10.103 Regulatory Agreement Nursing Homes Projects between ARV Fremont, L.P. and Federal Housing Commissioner.
11 12 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN RETIREMENT VILLAS PROPERTIES II, A CALIFORNIA LIMITED PARTNERSHIP, BY THE FOLLOWING PERSONS ON OUR BEHALF. ARV ASSISTED LIVING, INC. By: /s/ DOUGLAS M. PASQUALE ------------------------------- Douglas M. Pasquale Chief Executive Officer Date: May 15, 2001 Pursuant to the requirements of the Securities Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DOUGLAS M. PASQUALE Chief Executive Officer May 15, 2001 - ----------------------------------------------------- (Principal Executive Officer) Douglas M. Pasquale /s/ ABDO H. KHOURY President and Chief Financial Officer May 15, 2001 - ----------------------------------------------------- (Principal Financial & Accounting Officer) Abdo H. Khoury
12 13 EXHIBIT INDEX Exhibit 10.94 Deed of Trust Note of ARV Daly City, L.P. to Red Mortgage Capital, Inc. Exhibit 10.95 Allonge #1 to Deed of Trust Note of ARV Daly City, L.P. to Red Mortgage Capital, Inc. Exhibit 10.96 Deed of Trust between ARV Daly City, L.P. and Fidelity National Title Insurance. Exhibit 10.97 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Daly City, L.P. and Secretary of Housing and Urban Development. Exhibit 10.98 Regulatory Agreement Nursing Homes Projects between ARV Daly City, L.P. and Federal Housing Commissioner. Exhibit 10.99 Deed of Trust Note of ARV Fremont, L.P. to Red Mortgage Capital, Inc. Exhibit 10.100 Allonge #1 to Deed of Trust Note of ARV Fremont, L.P. to Red Mortgage Capital, Inc. Exhibit 10.101 Deed of Trust between ARV Fremont, L.P. and Fidelity National Title Insurance. Exhibit 10.102 Regulatory Agreement for U.S. Department of Housing Multifamily Housing Projects between ARV Fremont, L.P. and Secretary of Housing and Urban Development. Exhibit 10.103 Regulatory Agreement Nursing Homes Projects between ARV Fremont, L.P. and Federal Housing Commissioner.
EX-10.94 2 a72807ex10-94.txt EXHIBIT 10.94 1 EXHIBIT 10.94 DEED OF TRUST NOTE $3,997,100.00 San Francisco, California As of February 1, 2001 FOR VALUE RECEIVED, the undersigned, ARV DALY CITY, L.P., a California limited partnership, promises to pay RED MORTGAGE CAPITAL, INC., an Ohio corporation, or order, at its principal office at 150 East Gay Street, 22nd Floor, Columbus, Ohio 43215 or at such other place as may be designated in writing by the holder of this Note, the principal sum of THREE MILLION NINE HUNDRED NINETY-SEVEN THOUSAND ONE HUNDRED AND 00/100THS DOLLARS ($3,997,100.00), with interest thereon from the date hereof at the rate of Seven and three-quarters per centum (7.75%) per annum on the unpaid balance until paid. The principal and interest shall be payable in monthly installments as follows: Interest alone shall be due and payable on the first day of March, 2001. Thereafter, commencing on April 1, 2001, monthly installments of principal and interest at the rate of Seven and three-quarters per centum (7.75%) per annum shall be due and payable in the sum of TWENTY SEVEN THOUSAND SIX HUNDRED SIXTY-SIX AND 96/100THS DOLLARS ($27,666.96) each, such payments to continue monthly thereafter on the first day of each succeeding month until the entire indebtedness has been paid in full. In any event, the balance of principal (if any) remaining unpaid, plus accrued interest, shall be due and payable on March 1, 2036. The installments of principal and interest shall be applied first to interest at the rate aforesaid upon the principal sum or so much thereof as shall from time to time remain unpaid, and the balance thereof shall be applied on account of principal. Both principal and interest under this Note, as well as the additional payments set forth in the Deed of Trust shall be payable at the office of RED MORTGAGE CAPITAL, INC., at its principal office at 150 East Gay Street, 22nd Floor, Columbus, Ohio 43215 or such other place as the holder may designate in writing. Prepayment of this Note is subject to the terms and provisions set forth in Allonge #1 attached hereto and incorporated herein by this reference. If default be made in the payment of any installment under this Note, and if the default is not made good prior to the due date of the next such installment, the entire principal sum and accrued interest shall at once become due and payable without notice at the option of the holder of this Note. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default. The makers and endorsers severally waive diligence, presentment, protest, and demand, and also notice of protest, dishonor, and nonpayment of this Note, and expressly agree that this Note, or any payment thereunder, may be extended from time to time, and consent to the acceptance of further security for this Note, including other types of security, all without in any way affecting the liability of the makers and endorsers hereof. The right to plead any and all statutes of limitations as a defense to any demand on this Note, or any guaranty thereof, or to any agreement to pay the same, or to any demand secured by the Deed of Trust, (hereinafter defined) or other security, securing this Note, or any and all obligations, or liabilities arising out of or in connection with said Note or Deed of Trust by any of the parties hereto, is expressly waived by each and every of the makers, endorsers, guarantors or sureties. Principal and interest are payable in lawful money of the United States. If action be instituted on this Note, the undersigned promise(s) to pay in addition to the costs and disbursements allowed by law such sum as the Court may adjudge reasonable as attorney's fees in said action. This Note is secured by a Deed of Trust, of even date herewith, to Fidelity National Title Insurance Company, as Trustee, on real estate situated in the City of Daly City, County of San Mateo, California (the "Deed of Trust"). In the event any installment or part of any installment due hereunder becomes delinquent for more than fifteen (15) days, there shall be due, at the option of the holder, in addition to other sums due hereunder, a sum equal to two percent (2%) of the amount of such installment of principal and interest so delinquent. Whenever under the law of the jurisdiction where the property is located, the amount of any such late charge is considered to be additional interest, this 2 -2- provision shall not be effective if the rate of interest specified in this Note, together with the amount of the late charge, would aggregate an amount in excess of the maximum rate of interest permitted and would constitute usury. All parties to this Note, whether principal, surety, guarantor, or endorser hereby waive presentment for payment, demand, protect, notice of protest, and notice of dishonor. Notwithstanding any other provision contained in this Note, it is agreed that the execution of this Note shall impose no personal liability on the maker hereof (nor any of its present or future limited or general partners) for payment of the indebtedness evidenced hereby and in the event of a default, the holder of this Note shall look solely to the property described in the Deed of Trust and to the rents, issues and profits thereof in satisfaction of the indebtedness evidenced hereby and will not seek or obtain any deficiency or personal judgment against the maker hereof (nor any of its present or future limited or general partners) except such judgment or decree as may be necessary to foreclose and bar its interest in the property and all other property mortgaged, pledged, conveyed or assigned to secure payment of this Note, except as set out in the Deed of Trust of even date given to secure this indebtedness. IN WITNESS WHEREOF, the undersigned has caused this Note to be executed in its name and on its behalf by its Vice President, thereunto duly authorized the day and year first above written. ARV DALY CITY, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership General Partner By: ARV Assisted Living, Inc. a Delaware corporation General Partner By: ------------------------------- Douglas Armstrong Vice President ================================================================================ I HEREBY CERTIFY that this is the Note described in and secured by the Deed of Trust of even date herewith, and in the same principal amount as herein stated, to Fidelity National Title Insurance Company, Trustee(s), on real estate in the City of Daly City, San Mateo County, California. Dated this ____ day of February, 2001. [SEAL] ------------------------------- Notary Public My Commission Expires: ---------------------- EX-10.95 3 a72807ex10-95.txt EXHIBIT 10.95 1 EXHIBIT 10.95 ALLONGE #1 TO DEED OF TRUST NOTE OF ARV DALY CITY, L.P. TO RED MORTGAGE CAPTIAL, INC. IN THE ORIGINAL PRINCIPAL SUM OF $3,997,100.00 DATED AS OF FEBRUARY 1, 2001 ------------------------------------------------------------------------------ 1 Except as provided in Paragraphs 2, and 3 below, Maker may not prepay any sums due under this Mortgage Note (the "Note") prior to April 1, 2006. Commencing on April 1, 2006, Maker may prepay, upon thirty (30) days advance written notice to the holder, the indebtedness evidenced by this Note, in whole or in an amount equal to one or more monthly installments of the principal next due, on the last day of any month, provided such prepayment is accompanied by the applicable prepayment penalty (expressed as a percentage of the principal amount so prepaid) set forth below:
PREPAYMENT PERIOD PREPAYMENT PENALTY ----------------- ------------------ April 1, 2006 through March 31, 2007 5% April 1, 2007 through March 31, 2008 4% April 1, 2008 through March 31, 2009 3% April 1, 2009 through March 31, 2010 2% April 1, 2010 through March 31, 2011 1% April 1, 2011 and thereafter None
All such prepayments, including the principal sum so prepaid, interest thereon to and including the date of such prepayment and the prepayment penalty due in connection therewith, shall be in immediately available Federal Funds. . 2. Notwithstanding any prepayment prohibition imposed and/or penalty required by this Allonge #1 with respect to voluntary prepayments made prior to April 1, 2010, the indebtedness may be prepaid in whole or in part without the consent of the holder and without prepayment premium if the Commissioner determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the Federal Government. 3. The provisions of Paragraph 1 of this Allonge #1 shall not apply and no prepayment premium shall be collected by the holder with respect to any prepayment which is made by or on behalf of Maker from insurance proceeds as a result of damage to the property or condemnation awards which may, at the option of the holder, be applied to reduce the indebtedness evidenced by the Note pursuant to the terms of the Mortgage given of even date to secure the indebtedness evidenced by the Note. 4. A reduction in the principal amount of the Note required by the Commissioner at the time of Initial/Final Endorsement by the Commissioner as a result of the Commissioner's cost certification requirements shall not be construed as a prepayment hereunder. If a reduction is required by the Commissioner as aforesaid, or if any prepayment from any source (to the extent permitted herein) is made, the remaining payments due on the Note may, with the approval of the holder and the Commissioner, be recast such that the required monthly payments of principal and interest shall be in equal amounts sufficient to amortize the Note over the then remaining term thereof. ARV DALY CITY, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership, General Partner By: ARV Assisted Living, Inc. a Delaware corporation, General Partner By: ------------------------------- Douglas Armstrong Vice President EX-10.96 4 a72807ex10-96.txt EXHIBIT 10.96 1 EXHIBIT 10.96 DEED OF TRUST With Assignment of Rents THIS DEED OF TRUST, made into as of the 1st day of February, 2001, by and between ARV DALY CITY, L.P., a California limited partnership, with offices at 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626, herein called Trustor, and FIDELITY NATIONAL TITLE INSURANCE COMPANY, a California corporation, Trustee(s), and RED MORTGAGE CAPITAL, INC., an Ohio corporation, with offices at 150 East Gay Street, 22nd Floor, Columbus, Ohio 53215, herein called Beneficiary. WITNESSETH: That Trustor grants, transfers, and assigns to Trustee in trust, upon the trusts, covenants, conditions and agreements and for the uses and purposes hereinafter contained, with power of sale, all that real property situate, lying and being in San Mateo County, State of California, described as follows: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF. Together with the rents, issues, and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues, and profits; and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot-water boilers, stoves, ranges, elevators and motors, bath tubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantels, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty; and Together with all building materials and equipment now or hereafter delivered to said premises and intended to be installed therein; and Together with all articles of personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the lands described which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals 2 -2- or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner, and said Trustor agrees to execute a Security Agreement covering the aforesaid fixtures and articles of personal property, at the time of placing such personal property or any part thereof in the building or buildings to be erected on the lands herein described in the manner and form required by law, at its expense and satisfactory to the Beneficiary. To have and to hold the property hereinbefore described together with appurtenances to the Trustee, its or his successors and assigns forever. FOR THE PURPOSE of securing performance of each agreement of Trustor herein and payment of a just indebtedness of the Trustor to the Beneficiary in the principal sum of THREE MILLION NINE HUNDRED NINETY-SEVEN THOUSAND ONE HUNDRED AND NO/100THS DOLLARS ($3,997,100.00), evidenced by its Note of even date herewith, bearing interest from date on outstanding balances at Seven and three quarters percent (7.75 %) per annum, said principal and interest being payable in monthly installments as provided in said Note with a final maturity of March 1, 2036, which Note is identified as being secured hereby by a certificate thereon. Said Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions thereof, however evidenced. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: 1. That it will pay the Note at the times and in the manner provided therein; 2. That it will not permit or suffer the use of any of the property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed; 3. That the Regulatory Agreement, if any, executed by the Trustor and the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner, which is being recorded simultaneously herewith, is incorporated in and made a part of this Deed of Trust. Upon default under the Regulatory Agreement and upon the request of the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner, the Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable; 4. That all rents, profits and income from the property covered by this Deed of Trust are hereby assigned to the Beneficiary for the purpose of discharging the debt hereby secured. Permission is hereby given to Trustor so long as no default exists hereunder, to collect such rents, profits and income for use in accordance with the provisions of the Regulatory Agreement; That the Trustor grants to the holder or holders of the Note secured hereby the right and power to appoint a substitute Trustee or Trustees hereunder for any reason whatsoever by instrument of appointment duly executed and acknowledged by the holder or holders of the Note and to be filed for record in the office wherein this Deed of Trust is recorded. Such power of appointment may be exercised as often as deemed necessary by the holder or holders of the Note. Upon such appointment, the substitute Trustee or Trustees shall be vested with all the rights, powers, authority and duties vested in the Trustee hereunder; 5. That upon default hereunder or under the aforementioned Regulatory Agreement, Beneficiary shall be entitled to the Appointment of a receiver by any court having jurisdiction, 3 -3- without notice, to take possession and protect the property described herein and operate same and collect the rents, profits and income therefrom; 6. That at the option of the Trustor the principal balance secured hereby may be reamortized on terms acceptable to the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner if a partial prepayment results from an award in condemnation in accordance with provisions of Paragraph 21 herein, or from an insurance payment made in accordance with provisions of Paragraph 7 herein, where there is a resulting loss of project income; 7. That the Trustor will keep the improvements now existing or hereafter erected on the deeded property insured against loss by fire and such other hazards, casualties, and contingencies, as may be stipulated by the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner upon the insurance of the Deed of Trust and other hazards as may be required from time to time by the Beneficiary, and all such insurance shall be evidenced by standard fire and extended coverage insurance policy or policies, in amounts not less than necessary to comply with the applicable Coinsurance Clause percentage, but in no event shall the amounts of coverage be less than 80 percent of the Insurable Values or not less than the unpaid balance of the insured Deed of Trust, whichever is the lesser, and in default thereof the Beneficiary shall have the right to effect insurance. Such policies shall be endorsed with standard Mortgagee clause with loss payable to the Beneficiary and the Secretary of Housing and Urban Development as their interests may appear, and shall be deposited with the Beneficiary; The insurance carrier providing the insurance shall be chosen by Trustor, subject to approval by Beneficiary, provided that such approval shall not be unreasonably withheld. That if the premises covered hereby, or any part thereof, shall be damaged by fire or other hazard against which insurance is held as hereinabove provided, the amounts paid by any insurance company in pursuance of the contract of insurance to the extent of the indebtedness then remaining unpaid, shall be paid to the Beneficiary, and, at its option, may be applied to the debt or released for the repairing or rebuilding of the premises. Any unexpired insurance shall inure to the benefit of, and pass to, the purchaser of the property covered thereby at any Trustee's sale held hereunder; 8. Together with and in addition to the monthly payments of interest or of principal and interest payable under the terms of said Note, to pay to Beneficiary monthly until said Note is fully paid, beginning on the first day of the first month after the date hereof, the following sums: (a) An amount sufficient to provide the Beneficiary with funds to pay the next mortgage insurance premium if this instrument and the Note secured hereby are insured, or a monthly service charge, if they are held by the Secretary of Housing and Urban Development, as follows: (I) If and so long as said Note of even date and this instrument are insured or are reinsured under the provisions of the National Housing Act, an amount sufficient to accumulate in the hands of the Beneficiary one month prior to its due date the annual mortgage insurance premium, in order to provide such Beneficiary with funds to pay such premium to the Secretary of Housing and Urban Development, pursuant to the National Housing Act, as amended, and applicable Regulations thereunder, or 4 -4- (II) Beginning with the first day of the month following an assignment of this instrument and the Note secured hereby to the Secretary of Housing and Urban Development, a monthly service charge which shall be an amount equal to one-twelfth of one-half percent (1/12 of 1/2%) of the average outstanding principal balance due on the Note computed for each successive year beginning with the first of the month following such assignment, without taking into account delinquencies or prepayments. (b) A sum equal to the ground rents, if any, next due, plus the premiums that will next become due and payable on policies of fire and other property insurance covering the premises covered hereby, plus water rates, taxes and assessments next due on the premises covered hereby (all as estimated by the Beneficiary) less all sums already paid therefor divided by the number of months to elapse before one month prior to the date when such ground rents, premiums, water rates, taxes and assessments will become delinquent, such sums to be held by Beneficiary in trust to pay said ground rents, premiums, water rates, taxes, and special assessments. (c) All payments mentioned in the two preceding subsections of this paragraph and all payments to be made under the Note secured hereby shall be added together and the aggregate amount thereof shall be paid each month in a single payment to be applied by Beneficiary to the following items in the order set forth: (I) premium charges under the Contract of Insurance with the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner or service charge; (II)ground rents, taxes, special assessments, water rates, fire and other property insurance premiums; (III) interest on the Note secured hereby; (IV)amortization of the principal of said Note. 9. Any excess funds accumulated under paragraph (b) above remaining after payment of the items therein mentioned, shall be credited to subsequent monthly payments of the same nature required thereunder; but if any such item shall exceed the estimate therefor, the Trustor shall without demand forthwith make good the deficiency. Failure to do so before the due date of such item shall be a default hereunder. In case of termination of the Contract of Mortgage Insurance by prepayment of the mortgage in full, or otherwise (except as hereinafter provided), accumulations under paragraph (a) above not required to meet payments due under the Contract of Mortgage Insurance, shall be credited to the Trustor. If the property is sold under foreclosure or is otherwise acquired by the Beneficiary after default, any remaining balance of the accumulations under paragraph (b) above shall be credited to the principal of the debt as of the date of commencement of foreclosure proceedings or as of the date the property is otherwise acquired; and accumulations under paragraph (a) above shall be similarly applied unless required to pay sums due to the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner under the Contract of Mortgage Insurance; 5 -5- 10. To keep said property in good condition and repair, not to remove or demolish any buildings thereon; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged, or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor; to comply with all laws affecting said property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said property in violation of law and/or covenants, conditions and/or restrictions affecting said property; not to permit or suffer any alterations of or addition to the buildings or improvements hereafter constructed in or upon said property without the consent of the Beneficiary; 11. To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of evidence of title and attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear; 12. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; may commence, appear in and/or defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; may pay, purchase, contest, or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, may pay necessary expenses, employ counsel, and pay his reasonable fees; 13. The Beneficiary shall have the right to pay mortgage insurance premiums or fire and other property insurance premiums when due to the extent that monthly payments made hereunder for the purpose of meeting same are insufficient. All such payments made by the Beneficiary shall be added to the principal sum secured hereby; 14. To pay immediately and without demand all sums so expended by Beneficiary or Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in said Note; 15. N/A 16. The Trustor further covenants that it will not voluntarily create, suffer, or permit to be created against the property subject to this Deed of Trust any lien or liens inferior or superior to the lien of this Deed of Trust and further that it will keep and maintain the same free 6 -6- from the claim of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on said premises; 17. That the improvements upon the premises, covered by the Deed of Trust, and all plans and specifications comply with all municipal ordinances and regulations and all of other regulations made or promulgated, now or hereafter, by lawful authority, and that the same will comply with all such municipal ordinances and regulations and with the rules of the applicable fire rating or inspection organization, bureau, association or office; 18. That so long as this Deed of Trust and the said Note secured hereby are insured under the provisions of the National Housing Act, or held by the Secretary of Housing and Urban Development, it will not execute or file for record any instrument which imposes a restriction upon the sale or occupancy of the mortgaged property on the basis of race, color, creed or national origin. ABOVE IT IS MUTUALLY AGREED THAT: 19. Trustor herein agrees to pay to Beneficiary or to the authorized loan servicing representative of the Beneficiary a charge not to exceed $15 for providing a statement regarding the obligation secured by this Deed of Trust as provided by Section 2954, Article 2, chapter 2, Title 14, Part 4, Division 3, of the Civil Code of the State of California. 20. N/A 21. Should the property or any part thereof be taken or damaged by reason of any public improvement or condemnation preceding, or damaged by fire, or earthquake, or in any other manner, the Beneficiary shall be entitled to all compensation, awards, and other payments or relief therefor, and shall be entitled at its option to commence, appear in and prosecute in its own name any action to proceedings, or to make any compromise or settlement in connection with such taking or damage. All awards of compensation in connection with condemnation for public use of or a taking of any of that property, shall be paid to the Beneficiary to be applied to the amount due under this Note secured hereby in (1) amounts equal to the next maturing installment or installments or principal and (2) with any balance to be credited to the next payment due under the Note. All awards of damages in connection with any condemnation for public use of or injury to any residue of that property shall be paid to the Beneficiary to be applied to a fund held for and on behalf of the Trustor which fund shall, at the option of the 7 -7- Beneficiary, and with the prior approval of the Secretary of Housing and Urban Development, either be applied to the amount due under the Note as specified in the preceding sentence, or be disturbed for the restoration or repair of the damage to the residue. No amount applied to the reduction of the principal amount due in accordance with (1) shall be considered an optional prepayment as the term is used in this Deed of Trust and the Note secured hereby, nor relieve the Trustor from making regular monthly payments commencing on the first day of the first month following the date of receipt of the award. The Beneficiary is hereby authorized in the name of the Trustor to execute and deliver valid acquittances for such awards and to appeal from such award; 22. Upon default by Trustor in making any monthly payment provided for herein or in the Note secured hereby, and if such default is not made good prior to the due date of the next such installment, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trust, all sums secured hereby shall, at the option of the Beneficiary, be deemed to have become immediately due and payable, and shall thereupon be collectable by foreclosure of this Deed of Trust. In the event of default, Trustee hereunder shall be, and is authorized and empowered when given notice to do so by Beneficiary after such default, to cause the property to be sold, which notice Trustee shall cause to be duly filed for record. 23. After the lapse of such time as may then be required by law following the recordation of said notice of defaults, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said property by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser its Deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in the Deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary, may purchase at the sale. The Trustee shall apply the proceeds of sale to payment of (1) the expenses of such sale, together with the reasonable expenses of this trust including therein reasonable Trustee's fees or attorney's fees for conducting the sale, and the actual cost of publishing, recording, mailing and posting notice of the sale; (2) the cost of any search and/or other evidence of title procured in connection with such sale and revenue stamps on Trustees' Deed; (3) all sums expended under the terms hereof, not then repaid, with accrued interest at the rate specified in said Note; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto; 24. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed and its place of record which, when duly recorded in the proper office of the county or counties in which the property is situated, shall be conclusive proof of proper appointment of the successor trustee. In the event of default, Trustee hereunder shall be, and is authorized and empowered when given notice to do so by Beneficiary after such default to cause the property to be sold, which notice Trustee shall cause to be duly filed for record. 8 -8- 25. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed is hereby waived to the full extent permissible by law; 26. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and said Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters or fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto;" 27. The trust created hereby is irrevocable by Trustor; 28. This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term "Beneficiary" shall include not only the original Beneficiary hereunder but also any future owner and holder including pledgees, of the Note secured hereby. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. All obligations of each Trustor hereunder are joint and several; 29. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee; 30. The Undersigned TRUSTOR REQUESTS that a copy of any notice of default and of any notice of sale hereunder be mailed to him at the mailing address opposite his name hereto. Failure to insert such address shall be deemed a waiver of any request hereunder for a copy of such notices. Mailing Address for Notices 245 Fischer Avenue, Suite D-1 Costa Mesa, California 92626 31. Notwithstanding any other provision contained herein or in the Note, hereinabove referred to, it is agreed that the execution of the Note shall impose no personal liability upon the Trustor for payment of the indebtedness evidenced thereby and in the event of a default, the Beneficiary, as holder of the Note, shall look solely to the property subject to this Deed of Trust and to the rents, issues and profits thereof in satisfaction of the indebtedness evidenced by the Note and will not seek or obtain any deficiency or personal judgment against the Trustor except such judgment or decree as may be necessary to foreclose or bar its interest in the property subject to this Deed of Trust and all other property mortgaged, pledged, conveyed or assigned to secure payment of the Note; provided, that nothing in this condition and no action so taken shall operate to impair any obligation of the Trustor under the Regulatory Agreement herein referred to and made a part hereof. 32. Notwithstanding any other provision contained herein or in the Note, hereinafter referred to, it is agreed that the execution of the Note shall impose no personal liability upon the Trustor (or any of its present or future limited and general partners) for payment of the 9 -9- indebtedness evidenced thereby and in the event of a default, the Beneficiary, as holder of the Note, shall look solely to the property subject to this Deed of Trust and to the rents, issues and profits thereof in satisfaction of the indebtedness evidenced by the Note and will not seek or obtain any deficiency or personal judgment against the Trustor (or any of its present or future limited and general partners) except such judgment or decree as may be necessary to foreclose or bar its interest in the property subject to this Deed of Trust and all other property mortgaged, pledged, conveyed or assigned to secure payment of the Note; provided, that nothing in this condition and no action so taken shall operate to impair any obligation of the Trustor under the Regulatory Agreement herein referred to and made a part hereof. IN WITNESS WHEREOF the Trustor has caused its name to be hereunto subscribed by its duly authorized General Partner as of the day and year herein first above written. ARV DALY CITY, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership General Partner By: ARV Assisted Living, Inc. a Delaware corporation General Partner By: ------------------------------- Douglas Armstrong Vice President 10 -10- CALIFORNIA ------------------------------------------ DEED OF TRUST ------------------------------------------ Between ARV DALY CITY, L.P. Trustor and FIDELITY NATIONAL TITLE INSURANCE COMPANY Trustee, and RED MORTGAGE CAPITAL, INC. Beneficiary. ========================================== Dated: February 1, 2001 Recorded: February___, 2001 at minutes past in Liber at page records of San Mateo County, California RECORDER'S INSTRUCTIONS Index this document as a Deed of Trust and as an Assignment of Rents. Escrow No. Order No. EX-10.97 5 a72807ex10-97.txt EXHIBIT 10.97 1 EXHIBIT 10.97 REGULATORY AGREEMENT FOR U.S. DEPARTMENT OF HOUSING MULTIFAMILY HOUSING PROJECTS AND URBAN DEVELOPMENT Office of Housing Federal Housing Commissioner Under Sections 207,220,221(d)(4), 231 and 232, Except Nonprofits Project No. 121-22029-PM-ALF/REF Mortgagee: RED MORTGAGE CAPITAL, INC. Amount of Mortgage Note: $3,997,100.00 Date: February 1, 2001 Mortgage: Recorded: State: California County: San Mateo Date: February 1, 2001 Concurrently Herewith Book __________ Page ____________
Originally endorsed for insurance under Section 232 pursuant to Section 223(f) of the National Housing Act, as amended. This Agreement entered into as of the 1st day of February, 2001, between ARV DALY CITY, L.P., a California limited partnership whose address is 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626, their successors, heirs, and assigns (jointly and severally, hereinafter referred to as Owners) and the undersigned SECRETARY OF HOUSING AND URBAN DEVELOPMENT and his successors (hereinafter referred to as Secretary). In consideration of the endorsement for insurance by the Secretary of the above described note or in consideration of the consent of the Secretary to the transfer of the mortgaged property or the sale and conveyance of the mortgaged property by the Secretary, and in order to comply with the requirements of the National Housing Act, as amended, and the Regulations adopted by the Secretary pursuant thereto, Owners 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 Secretary shall be the owner, holder or reinsurer of the mortgage, or during any time the Secretary is obligated to insure a mortgage on the mortgage property: 1. Owners, except as limited by paragraph 17 hereof, assume and agree to make promptly all payments due under the note and mortgage. 2 -2- 2. (a) Owners shall establish or continue to maintain a reserve fund for replacements by the allocation to such reserve fund in a separate account with the mortgagee or in a safe and responsible depository designated by the mortgagee, concurrently with the beginning of payments towards amortization of the principal of the mortgage insured or held by the Secretary of an amount equal to $3,388.75 per month unless a different date or amount is approved in writing by the Secretary. Said monthly deposit consists of $1,966.17 for Realty and $1,422.58 for Non-Realty. In addition, the Owner has made an initial deposit to the fund of $190,694.00. Such fund, whether in the form of a cash deposit or invested in obligations of, or fully guaranteed as to principal by, the United States of America shall at all times be under the control of the mortgagee. Disbursements from such fund, whether for the purpose of effecting replacement of structural elements and mechanical equipment of the project or for any other purpose, may be made only after receiving the consent in writing of the Secretary. In the event that the owner is unable to make a mortgage note payment on the due date and that payment cannot be made prior to the due day of the next such installment or when the mortgagee has agreed to forgo making an election to assign the mortgage to the Secretary based on a monetary default, or to withdraw an election already made, the Secretary is authorized to instruct the mortgagee to withdraw funds from the reserve fund for replacements to be applied to the mortgage payment in order to prevent or cure the default. In addition, in the event of a default in the terms of the mortgage, pursuant to which the loan has been accelerated, the Secretary may apply or authorize the application of the balance in such fund to the amount due on the mortgage debt as accelerated. (b) Where Owners are acquiring a project already subject to an insured mortgage, the reserve fund for replacements to be established will be equal to the amount due to be in such fund under existing agreements or charter provisions at the time Owners acquire such project, and payments hereunder shall begin with the first payment due on the mortgage after acquisition, unless some other method of establishing and maintaining the fund is approved in writing by the Secretary. 3. Real property covered by the mortgage and this agreement is described in Exhibit A attached hereto. (This paragraph 4 is not applicable to cases insured under Section 232). N/A 3 -3- N/A 5. (a) If the mortgage is originally a Secretary-held purchase money mortgage, or is originally endorsed for insurance under any Section other than Sections 231 or 232 and is not designed primarily for occupancy by elderly persons, Owners shall not in selecting tenants discriminate against any person or persons by reason of the fact that there are children in the family. (b) If the mortgage is originally endorsed for insurance under Section 221, Owners shall in selecting tenants give to displaced persons or families an absolute preference or priority of occupancy which shall be accomplished as follows: (1) For a period of sixty (60) days from the date of original offering, unless a shorter period of time is approved in writing by the Secretary, all units shall be held for such preferred applicants, 4 -4- after which time any remaining unrented units may be rented to non-preferred applicants; (2) Thereafter, and on a continuing basis, such preferred applicants shall be given preference over non-preferred applicants in their placement on a waiting list to be maintained by the Owners; and (3) Through such further provisions agreed to in writing by the parties. (c) Without the prior written approval of the Secretary not more than 25% of the number of units in a project insured under Section 231 shall be occupied by persons other than elderly persons. (d) All advertising or efforts to rent a project insured under Section 231 shall reflect a bona fide effort of the Owners to obtain occupancy by elderly persons. 6. Owners shall not without the prior written approval of the Secretary: (a) Convey, transfer, or encumber any of the mortgaged property, or permit the conveyance, transfer or encumbrance of such property. (b) Assign, transfer, dispose of, or encumber any personal property of the project, including rents, or pay out any funds except from surplus cash, except for reasonable operating expenses and necessary repairs. (c) Convey, assign, or transfer any beneficial interest in any trust holding title to the property, or the interest of any general partner in a partnership owning the property, or any right to manage or receive the rents and profits from the mortgaged property. (d) Remodel, add to, reconstruct, or demolish any part of the mortgaged property or subtract from any real or personal property of the project. (e) Make, or receive and retain, any distribution of assets or any income of any kind of the project except surplus cash and except on the following conditions: (1) All distributions shall be made only as of and after the end of a semiannual or annual fiscal period, and only as permitted by the law of the applicable jurisdiction; 5 -5- (2) No distribution shall be made from borrowed funds, prior to the completion of the project or when there is any default under this Agreement or under the note or mortgage; (3) Any distribution of any funds of the project, which the party receiving such funds is not entitled to retain hereunder, shall be held in trust separate and apart from any other funds; and (4) There shall have been compliance with all outstanding notices of requirements for proper maintenance of the project. (f) Engage, except for natural persons, in any other business or activity, including the operation of any other rental project, or incur any liability or obligation not in connection with the project. (g) Require, as a condition of the occupancy or leasing of any unit in the project, any consideration or deposit other than the prepayment of the first month's rent plus a security deposit in an amount not in excess of one month's rent to guarantee the performance of the covenants of the lease. Any funds collected as security deposits shall be kept separate and apart from all other funds of the project in a trust account the amount of which shall at all times equal or exceed the aggregate of all outstanding obligations under said account. (h) Permit the use of the dwelling accommodations or nursing facilities of the project for any purpose except the use which was originally intended, or permit commercial use greater than that originally approved by the Secretary. 7. Owners shall maintain the mortgaged premises, accommodations and the grounds and equipment appurtenant thereto, in good repair and condition. In the event all or any of the buildings covered by the mortgage shall be destroyed or damaged by fire or other casualty, the money derived from any insurance on the property shall be applied in accordance with the terms of the mortgage. 8. Owners shall not file any petition in bankruptcy or for a receiver or in insolvency or for reorganization or composition, or make any assignment for the benefit of creditors or to a trustee for creditors, or permit an adjudication in bankruptcy or the taking possession of the mortgaged property or any part thereof by a receiver or the seizure and sale of the mortgaged property or any part hereof under judicial process or pursuant to any power of sale, and fail to have such adverse actions set aside within forty-five (45) days. 6 -6- 9. (a) Any management contract entered into by Owners or any of them involving the project shall contain a provision that, in the event of default hereunder, it shall be subject to termination without penalty upon written request by the Secretary. Upon such request Owners shall immediately arrange to terminate the contract within a period of not more than thirty (30) days and shall make arrangements satisfactory to the Secretary for continuing proper management of the project. (b) Payment for services, supplies, or materials shall not exceed the amount ordinarily paid for such services, supplies, or materials in the area where the services are rendered or the supplies or materials furnished. (c) 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 Secretary or his duly authorized agents. Owners 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 Secretary or his duly authorized agents. (d) The books and accounts of the operations of the mortgaged property and of the project shall be kept in accordance with the requirements of the Secretary. (e) Within sixty (60) days following the end of each fiscal year the Secretary shall be furnished with a complete annual financial report based upon an examination of the books and records of mortgagor prepared in accordance with the requirements of the Secretary, prepared and certified to by an officer or responsible Owner and, when required by the Secretary, prepared and certified by a Certified Public Accountant, or other person acceptable to the Secretary. (f) At the request of the Secretary, his agents, employees, or attorneys, the Owners shall furnish monthly occupancy reports and shall give specific answers to questions upon which information is desired from time to time relative to income, assets, liabilities, contracts, operation, and condition of the property and the status of the insured mortgage. (g) All rents and other receipts of the project shall be deposited in the name of the project in a financial institution, whose deposits are insured by an agency of the Federal Government. Such funds shall be withdrawn only in accordance with the provisions of this Agreement for expenses of the project or for distributions of 7 -7- surplus cash as permitted by paragraph 6(e) above. Any Owner receiving funds of the project other than by such distribution of surplus cash shall immediately deposit such funds in the project bank account and failing so to do in violation of this Agreement shall hold such funds in trust. Any Owner receiving property of the project in violation of this Agreement shall hold such funds in trust. At such time as the Owners shall have lost control and/or possession of the project, all funds held in trust shall be delivered to the mortgagee to the extent that the mortgage indebtedness has not been satisfied. (h) If the mortgage is insured under Section 232: 1. The Owners or lessees shall at all times maintain in full force and effect from the state or other licensing authority such license as may be required to operate the project as a nursing home and shall not lease all or part of the project except on terms approved by the Secretary. 2. The Owners shall suitably equip the project for nursing home operations. 3. The Owners shall execute a Security Agreement and Financing Statement (or other form of chattel lien) upon all items of equipment, except as the Secretary may exempt, which are not incorporated as security for the insured mortgage. The Security Agreement and Financing Statement shall constitute a first lien upon such equipment and shall run in favor of the mortgagee as additional security for the insured mortgage. (i) If the mortgage is insured under Section 231, Owners or lessees shall at all times maintain in full force and effect from the state or other licensing authority such license as may be required to operate the project as housing for the elderly. 10. Owners will comply with the provisions of any Federal, State, or local law prohibiting discrimination in housing on the grounds of race, color, religion or creed, sex, or national origin, including Title VIII of the Civil Rights Act of 1968 (Public Law 90-284; 82 Stat. 73), as amended, Executive Order 11063, and all requirements imposed by or pursuant to the regulations of the Department of Housing and Urban Development implementing these authorities (including 24 CFR Parts 100, 107 and 110, and Subparts I and M of Part 200). 11. Upon a violation of any of the above provisions of this Agreement by Owners, the Secretary may give written notice thereof, to Owners, by registered or certified mail, addressed to the addresses stated in this Agreement, or such other addresses 8 -8- as may subsequently, upon appropriate written notice thereof to the Secretary, be designated by the Owners as their legal business address. If such violation is not corrected to the satisfaction of the Secretary within thirty (30) days after the date such notice is mailed or within such further time as the Secretary determines is necessary to correct the violation, without further notice the Secretary may declare a default under this Agreement effective on the date of such declaration of default and upon such default the Secretary may: (a) (i) If the Secretary holds the note - declare the whole of said indebtedness immediately due and payable and then proceed with the foreclosure of the mortgage; (ii) If said note is not held by the Secretary - notify the holder of the note of such default and request holder to declare a default under the note and mortgage, and holder after receiving such notice and request, but not otherwise, at its option, may declare the whole indebtedness due, and thereupon proceed with foreclosure of the mortgage, or assign the note and mortgage to the Secretary as provided in the Regulations; (b) Collect all rents and charges in connection with the operation of the project and use such collections to pay the Owners' obligations under this Agreement and under the note and mortgage and the necessary expenses of preserving the property and operating the project. (c) Take possession of the project, bring any action necessary to enforce any rights of the Owners growing out of the project operation, and operate the project in accordance with the terms of this Agreement until such time as the Secretary in his discretion determines that the Owners are again in a position to operate the project in accordance with the terms of this Agreement and in compliance with the requirements of the note and mortgage. (d) Apply to any court, state or Federal, for specific performance of this Agreement, for an injunction against any violation of the Agreement, for the appointment of a receiver to take over and operate the project in accordance with the terms of the Agreement, or for such other relief as may be appropriate, since the injury to the Secretary arising from a default under any of the terms of this Agreement would be irreparable and the amount of damage would be difficult to ascertain. 9 -9- 12. As security for the payment due under this Agreement to the reserve fund for replacements, and to secure the Secretary because of his liability under the endorsement of the note for insurance, and as security for the other obligations under this Agreement, the Owners respectively assign, pledge and mortgage to the Secretary their rights to the rents, profits, income and charges of whatsoever sort which they may receive or be entitled to receive from the operation of the mortgaged property, subject, however, to any assignment of rents in the insured mortgage referred to herein. Until a default is declared under this Agreement, however, permission is granted to Owners to collect and retain under the provisions of this Agreement such rents, profits, income, and charges, but upon default this permission is terminated as to all rents due or collected thereafter. 13. As used in this Agreement the term: (a) "Mortgage" includes "Deed of Trust", "Chattel Mortgage", "Security Instrument", and any other security for the note identified herein, and endorsed for insurance or held by the Secretary; (b) "Mortgagee" refers to the holder of the mortgage identified herein, its successors and assigns; (c) "Owners" refers to the persons named in the first paragraph hereof and designated as Owners, their successors, heirs and assigns; (d) "Mortgaged Property" includes all property, real, personal or mixed, covered by the mortgage or mortgages securing the note endorsed for insurance or held by the Secretary; (e) "Project" includes the mortgaged property and all its other assets of whatsoever nature or wheresoever situate, used in or owned by the business conducted on said mortgaged property, which business is providing housing and other activities as are incidental thereto; (f) "Surplus Cash" means any cash remaining after: (1) the payment of: (i) All sums due or currently required to be paid under the terms of any mortgage or note insured or held by the Secretary; 10 -10- (ii) All amounts required to be deposited in the reserve fund for replacements; (iii) All obligations of the project other than the insured mortgage unless funds for payment are set aside or deferment of payment has been approved by the Secretary; and (2) the segregation of: (i) An amount equal to the aggregate of all special funds required to be maintained by the project; and (ii) All tenant security deposits held. (g) "Distribution" means any withdrawal or taking of cash or any assets of the project, including the segregation of cash or assets for subsequent withdrawal within the limitations of Paragraph 6(e) hereof, and excluding payment for reasonable expenses incident to the operation and maintenance of the project. (h) "Default" means a default declared by the Secretary when a violation of this Agreement is not corrected to his satisfaction within the time allowed by this Agreement or such further time as may be allowed by the Secretary after written notice; (i) "Section" refers to a Section of the National Housing Act, as amended. (j) "Displaced persons or families" shall mean a family or families, or a person, displaced from an urban renewal area, or as the result of government action, or as a result of a major disaster as determined by the President pursuant to the Disaster Relief Act of 1970. (k) "Elderly person" means any person, married or single, who is sixty-two years of age or over. 14. This instrument shall bind, and the benefits shall inure to, the respective Owners, their heirs, legal representatives, executors, administrators, successors in office or interest, and assigns, and to the Secretary and his successors so long as the contract of mortgage insurance continues in effect, and during such further time as the Secretary shall be the owner, holder, or reinsurer of the mortgage, or obligated to reinsure the mortgage. 11 -11- 15. Owners warrant that they have not, and will not, execute any other agreement with provisions contradictory of, or in opposition to, the provisions hereof, and that, in any event, the requirements of this Agreement are paramount and controlling as to the rights and obligations set forth and supersede any other requirements in conflict therewith. 16. The invalidity of any clause, part or provision of this Agreement shall not affect the validity or the remaining portions thereof. 17. The following Owners: ARV Daly City, L.P., a California limited partnership, and all present and future limited and general partners thereof, do not assume personal liability for payments due under the note and mortgage, or for the payments to the reserve for replacements, or for matters not under their control, provided that said Owners shall remain liable under this Agreement only with respect to the matters hereinafter stated; namely: (a) for funds or property of the project coming into their hands which, by the provisions hereof, they are not entitled to retain; and (b) for their own acts and deeds or acts and deeds of others which they have authorized in violation of the provisions hereof. (To be executed with formalities for recording a deed to real estate) 12 -12- All references herein to the terms "nursing home" or nursing homes" shall mean and include the terms "assisted living facility" and "assisted living facilities." See Rider I attached hereto and made a part hereof. IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date first hereinabove written. ARV DALY CITY, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership General Partner By: ARV Assisted Living, Inc. a Delaware corporation General Partner By: -------------------------------------- Douglas Armstrong 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 EX-10.98 6 a72807ex10-98.txt EXHIBIT 10.98 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 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626 (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 DALY 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: ------------------------------- Douglas Armstrong 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 EX-10.99 7 a72807ex10-99.txt EXHIBIT 10.99 1 EXHIBIT 10.99 DEED OF TRUST NOTE $2,985,800.00 San Francisco, California As of February 1, 2001 FOR VALUE RECEIVED, the undersigned, ARV FREMONT, L.P., a California limited partnership, promises to pay RED MORTGAGE CAPITAL, INC., an Ohio corporation, or order, at its principal office at 150 East Gay Street, 22nd Floor, Columbus, Ohio 43215 or at such other place as may be designated in writing by the holder of this Note, the principal sum of TWO MILLION NINE HUNDRED EIGHTY-FIVE THOUSAND EIGHT HUNDRED AND 00/100THS DOLLARS ($2,985,800.00), with interest thereon from the date hereof at the rate of Seven and three-quarters per centum (7.75%) per annum on the unpaid balance until paid. The principal and interest shall be payable in monthly installments as follows: Interest alone shall be due and payable on the first day of March, 2001. Thereafter, commencing on April 1, 2001, monthly installments of principal and interest at the rate of Seven and three-quarters per centum (7.75%) per annum shall be due and payable in the sum of TWENTY THOUSAND SIX HUNDRED SIXTY-SIX AND 99/100THS DOLLARS ($20,666.99) each, such payments to continue monthly thereafter on the first day of each succeeding month until the entire indebtedness has been paid in full. In any event, the balance of principal (if any) remaining unpaid, plus accrued interest, shall be due and payable on March 1, 2036. The installments of principal and interest shall be applied first to interest at the rate aforesaid upon the principal sum or so much thereof as shall from time to time remain unpaid, and the balance thereof shall be applied on account of principal. Both principal and interest under this Note, as well as the additional payments set forth in the Deed of Trust shall be payable at the office of RED MORTGAGE CAPITAL, INC., at its principal office at 150 East Gay Street, 22nd Floor, Columbus, Ohio 43215 or such other place as the holder may designate in writing. Prepayment of this Note is subject to the terms and provisions set forth in Allonge #1 attached hereto and incorporated herein by this reference. If default be made in the payment of any installment under this Note, and if the default is not made good prior to the due date of the next such installment, the entire principal sum and accrued interest shall at once become due and payable without notice at the option of the holder of this Note. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default. The makers and endorsers severally waive diligence, presentment, protest, and demand, and also notice of protest, dishonor, and nonpayment of this Note, and expressly agree that this Note, or any payment thereunder, may be extended from time to time, and consent to the acceptance of further security for this Note, including other types of security, all without in any way affecting the liability of the makers and endorsers hereof. The right to plead any and all statutes of limitations as a defense to any demand on this Note, or any guaranty thereof, or to any agreement to pay the same, or to any demand secured by the Deed of Trust, (hereinafter defined) or other security, securing this Note, or any and all obligations, or liabilities arising out of or in connection with said Note or Deed of Trust by any of the parties hereto, is expressly waived by each and every of the makers, endorsers, guarantors or sureties. Principal and interest are payable in lawful money of the United States. If action be instituted on this Note, the undersigned promise(s) to pay in addition to the costs and disbursements allowed by law such sum as the Court may adjudge reasonable as attorney's fees in said action. This Note is secured by a Deed of Trust, of even date herewith, to Fidelity National Title Insurance Company, as Trustee, on real estate situated in the City of Fremont, County of Alameda, California (the "Deed of Trust"). In the event any installment or part of any installment due hereunder becomes delinquent for more than fifteen (15) days, there shall be due, at the option of the holder, in addition to other sums due hereunder, a sum equal to two percent (2%) of the amount of such installment of principal and interest so delinquent. Whenever under the law of the jurisdiction where the property is located, the amount of any such late charge is considered to be additional interest, this 2 -2- provision shall not be effective if the rate of interest specified in this Note, together with the amount of the late charge, would aggregate an amount in excess of the maximum rate of interest permitted and would constitute usury. All parties to this Note, whether principal, surety, guarantor, or endorser hereby waive presentment for payment, demand, protect, notice of protest, and notice of dishonor. Notwithstanding any other provision contained in this Note, it is agreed that the execution of this Note shall impose no personal liability on the maker hereof (nor any of its present or future limited or general partners) for payment of the indebtedness evidenced hereby and in the event of a default, the holder of this Note shall look solely to the property described in the Deed of Trust and to the rents, issues and profits thereof in satisfaction of the indebtedness evidenced hereby and will not seek or obtain any deficiency or personal judgment against the maker hereof (nor any of its present or future limited or general partners) except such judgment or decree as may be necessary to foreclose and bar its interest in the property and all other property mortgaged, pledged, conveyed or assigned to secure payment of this Note, except as set out in the Deed of Trust of even date given to secure this indebtedness. IN WITNESS WHEREOF, the undersigned has caused this Note to be executed in its name and on its behalf by its Vice President, thereunto duly authorized the day and year first above written. ARV FREMONT, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership General Partner By: ARV Assisted Living, Inc. a Delaware corporation General Partner By: ------------------------------- Douglas Armstrong Vice President ================================================================================ I HEREBY CERTIFY that this is the Note described in and secured by the Deed of Trust of even date herewith, and in the same principal amount as herein stated, to Fidelity National Title Insurance Company, Trustee(s), on real estate in the City of Fremont, Alameda County, California. Dated this ____ day of February, 2001. [SEAL] ------------------------------- Notary Public My Commission Expires: --------------------- EX-10.100 8 a72807ex10-100.txt EXHIBIT 10.100 1 EXHIBIT 10.100 ALLONGE #1 TO DEED OF TRUST NOTE OF ARV FREMONT, L.P. TO RED MORTGAGE CAPITAL, INC. IN THE ORIGINAL PRINCIPAL SUM OF $2,985,800.00 DATED AS OF FEBRUARY 1, 2001 ------------------------------------------------------------------------------ 1. Except as provided in Paragraphs 2, and 3 below, Maker may not prepay any sums due under the Mortgage Note (the "Note") prior to April 1, 2011. Commencing on April 1, 2011, upon thirty (30) days advance written notice to the Holder, Maker may prepay the indebtedness evidenced by this Note, in whole or in an amount equal to one or more monthly payments of principal next due, on the last day of any month. All such prepayments, including the principal sum and interest thereon to and including the date of such prepayment, shall be in immediately available Federal Funds. 2. Notwithstanding any prepayment prohibition imposed and/or penalty required by this Allonge #1 with respect to voluntary prepayments made prior to April 1, 2011, the indebtedness may be prepaid in whole or in part without the consent of the holder and without prepayment premium if the Commissioner determines that prepayment will avoid a mortgage insurance claim and is therefore in the best interest of the Federal Government. 3. The provisions of Paragraph 1 of this Allonge #1 shall not apply and no prepayment premium shall be collected by the holder with respect to any prepayment which is made by or on behalf of Maker from insurance proceeds as a result of damage to the property or condemnation awards which may, at the option of the holder, be applied to reduce the indebtedness evidenced by the Note pursuant to the terms of the Mortgage given of even date to secure the indebtedness evidenced by the Note. 4. A reduction in the principal amount of the Note required by the Commissioner at the time of Initial/Final Endorsement by the Commissioner as a result of the Commissioner's cost certification requirements shall not be construed as a prepayment hereunder. If a reduction is required by the Commissioner as aforesaid, or if any prepayment from any source (to the extent permitted herein) is made, the remaining payments due on the Note may, with the approval of the holder and the Commissioner, be recast such that the required monthly payments of principal and interest shall be in equal amounts sufficient to amortize the Note over the then remaining term thereof. ARV FREMONT, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership, General Partner By: ARV Assisted Living, Inc. a Delaware corporation, General Partner By: ------------------------------- Douglas Armstrong Vice President END OF ALLONGE #1 EX-10.101 9 a72807ex10-101.txt EXHIBIT 10.101 1 EXHIBIT 10.101 DEED OF TRUST With Assignment of Rents THIS DEED OF TRUST, made into as of the 1st day of February, 2001, by and between ARV FREMONT, L.P., a California limited partnership, with offices at 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626, herein called Trustor, and FIDELITY NATIONAL TITLE INSURANCE COMPANY, a California corporation, Trustee(s), and RED MORTGAGE CAPITAL, INC., an Ohio corporation, with offices at 150 East Gay Street, 22nd Floor, Columbus, Ohio 53215, herein called Beneficiary. WITNESSETH: That Trustor grants, transfers, and assigns to Trustee in trust, upon the trusts, covenants, conditions and agreements and for the uses and purposes hereinafter contained, with power of sale, all that real property situate, lying and being in Alameda County, State of California, described as follows: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF. Together with the rents, issues, and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues, and profits; and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot-water boilers, stoves, ranges, elevators and motors, bath tubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantels, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty; and Together with all building materials and equipment now or hereafter delivered to said premises and intended to be installed therein; and Together with all articles of personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the lands described which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals 2 -2- or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner, and said Trustor agrees to execute a Security Agreement covering the aforesaid fixtures and articles of personal property, at the time of placing such personal property or any part thereof in the building or buildings to be erected on the lands herein described in the manner and form required by law, at its expense and satisfactory to the Beneficiary. To have and to hold the property hereinbefore described together with appurtenances to the Trustee, its or his successors and assigns forever. FOR THE PURPOSE of securing performance of each agreement of Trustor herein and payment of a just indebtedness of the Trustor to the Beneficiary in the principal sum of TWO MILLION NINE HUNDRED EIGHTY-FIVE THOUSAND EIGHT HUNDRED AND NO/100THS DOLLARS ($2,985,800.00), evidenced by its Note of even date herewith, bearing interest from date on outstanding balances at Seven and three-quarters percent (7.75%) per annum, said principal and interest being payable in monthly installments as provided in said Note with a final maturity of March 1, 2036, which Note is identified as being secured hereby by a certificate thereon. Said Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions thereof, however evidenced. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: 1. That it will pay the Note at the times and in the manner provided therein; 2. That it will not permit or suffer the use of any of the property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed; 3. That the Regulatory Agreement, if any, executed by the Trustor and the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner, which is being recorded simultaneously herewith, is incorporated in and made a part of this Deed of Trust. Upon default under the Regulatory Agreement and upon the request of the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner, the Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable; 4. That all rents, profits and income from the property covered by this Deed of Trust are hereby assigned to the Beneficiary for the purpose of discharging the debt hereby secured. Permission is hereby given to Trustor so long as no default exists hereunder, to collect such rents, profits and income for use in accordance with the provisions of the Regulatory Agreement; That the Trustor grants to the holder or holders of the Note secured hereby the right and power to appoint a substitute Trustee or Trustees hereunder for any reason whatsoever by instrument of appointment duly executed and acknowledged by the holder or holders of the Note and to be filed for record in the office wherein this Deed of Trust is recorded. Such power of appointment may be exercised as often as deemed necessary by the holder or holders of the Note. Upon such appointment, the substitute Trustee or Trustees shall be vested with all the rights, powers, authority and duties vested in the Trustee hereunder; 5. That upon default hereunder or under the aforementioned Regulatory Agreement, Beneficiary shall be entitled to the Appointment of a receiver by any court having jurisdiction, 3 -3- without notice, to take possession and protect the property described herein and operate same and collect the rents, profits and income therefrom; 6. That at the option of the Trustor the principal balance secured hereby may be reamortized on terms acceptable to the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner if a partial prepayment results from an award in condemnation in accordance with provisions of Paragraph 21 herein, or from an insurance payment made in accordance with provisions of Paragraph 7 herein, where there is a resulting loss of project income; 7. That the Trustor will keep the improvements now existing or hereafter erected on the deeded property insured against loss by fire and such other hazards, casualties, and contingencies, as may be stipulated by the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner upon the insurance of the Deed of Trust and other hazards as may be required from time to time by the Beneficiary, and all such insurance shall be evidenced by standard fire and extended coverage insurance policy or policies, in amounts not less than necessary to comply with the applicable Coinsurance Clause percentage, but in no event shall the amounts of coverage be less than 80 percent of the Insurable Values or not less than the unpaid balance of the insured Deed of Trust, whichever is the lesser, and in default thereof the Beneficiary shall have the right to effect insurance. Such policies shall be endorsed with standard Mortgagee clause with loss payable to the Beneficiary and the Secretary of Housing and Urban Development as their interests may appear, and shall be deposited with the Beneficiary; The insurance carrier providing the insurance shall be chosen by Trustor, subject to approval by Beneficiary, provided that such approval shall not be unreasonably withheld. That if the premises covered hereby, or any part thereof, shall be damaged by fire or other hazard against which insurance is held as hereinabove provided, the amounts paid by any insurance company in pursuance of the contract of insurance to the extent of the indebtedness then remaining unpaid, shall be paid to the Beneficiary, and, at its option, may be applied to the debt or released for the repairing or rebuilding of the premises. Any unexpired insurance shall inure to the benefit of, and pass to, the purchaser of the property covered thereby at any Trustee's sale held hereunder; 8. Together with and in addition to the monthly payments of interest or of principal and interest payable under the terms of said Note, to pay to Beneficiary monthly until said Note is fully paid, beginning on the first day of the first month after the date hereof, the following sums: (a) An amount sufficient to provide the Beneficiary with funds to pay the next mortgage insurance premium if this instrument and the Note secured hereby are insured, or a monthly service charge, if they are held by the Secretary of Housing and Urban Development, as follows: (I) If and so long as said Note of even date and this instrument are insured or are reinsured under the provisions of the National Housing Act, an amount sufficient to accumulate in the hands of the Beneficiary one month prior to its due date the annual mortgage insurance premium, in order to provide such Beneficiary with funds to pay such premium to the Secretary of Housing and Urban Development, pursuant to the National Housing Act, as amended, and applicable Regulations thereunder, or 4 -4- (II) Beginning with the first day of the month following an assignment of this instrument and the Note secured hereby to the Secretary of Housing and Urban Development, a monthly service charge which shall be an amount equal to one-twelfth of one-half percent (1/12 of 1/2%) of the average outstanding principal balance due on the Note computed for each successive year beginning with the first of the month following such assignment, without taking into account delinquencies or prepayments. (b) A sum equal to the ground rents, if any, next due, plus the premiums that will next become due and payable on policies of fire and other property insurance covering the premises covered hereby, plus water rates, taxes and assessments next due on the premises covered hereby (all as estimated by the Beneficiary) less all sums already paid therefor divided by the number of months to elapse before one month prior to the date when such ground rents, premiums, water rates, taxes and assessments will become delinquent, such sums to be held by Beneficiary in trust to pay said ground rents, premiums, water rates, taxes, and special assessments. (c) All payments mentioned in the two preceding subsections of this paragraph and all payments to be made under the Note secured hereby shall be added together and the aggregate amount thereof shall be paid each month in a single payment to be applied by Beneficiary to the following items in the order set forth: (I) premium charges under the Contract of Insurance with the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner or service charge; (II) ground rents, taxes, special assessments, water rates, fire and other property insurance premiums; (III) interest on the Note secured hereby; (IV) amortization of the principal of said Note. 9. Any excess funds accumulated under paragraph (b) above remaining after payment of the items therein mentioned, shall be credited to subsequent monthly payments of the same nature required thereunder; but if any such item shall exceed the estimate therefor, the Trustor shall without demand forthwith make good the deficiency. Failure to do so before the due date of such item shall be a default hereunder. In case of termination of the Contract of Mortgage Insurance by prepayment of the mortgage in full, or otherwise (except as hereinafter provided), accumulations under paragraph (a) above not required to meet payments due under the Contract of Mortgage Insurance, shall be credited to the Trustor. If the property is sold under foreclosure or is otherwise acquired by the Beneficiary after default, any remaining balance of the accumulations under paragraph (b) above shall be credited to the principal of the debt as of the date of commencement of foreclosure proceedings or as of the date the property is otherwise acquired; and accumulations under paragraph (a) above shall be similarly applied unless required to pay sums due to the Secretary of Housing and Urban Development, acting by and through the Federal Housing Commissioner under the Contract of Mortgage Insurance; 5 -5- 10. To keep said property in good condition and repair, not to remove or demolish any buildings thereon; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged, or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor; to comply with all laws affecting said property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said property in violation of law and/or covenants, conditions and/or restrictions affecting said property; not to permit or suffer any alterations of or addition to the buildings or improvements hereafter constructed in or upon said property without the consent of the Beneficiary; 11. To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of evidence of title and attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear; 12. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; may commence, appear in and/or defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; may pay, purchase, contest, or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, may pay necessary expenses, employ counsel, and pay his reasonable fees; 13. The Beneficiary shall have the right to pay mortgage insurance premiums or fire and other property insurance premiums when due to the extent that monthly payments made hereunder for the purpose of meeting same are insufficient. All such payments made by the Beneficiary shall be added to the principal sum secured hereby; 14. To pay immediately and without demand all sums so expended by Beneficiary or Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in said Note; N/A 16. The Trustor further covenants that it will not voluntarily create, suffer, or permit to be created against the property subject to this Deed of Trust any lien or liens inferior or superior to the lien of this Deed of Trust and further that it will keep and maintain the same free 6 -6- from the claim of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on said premises; 17. That the improvements upon the premises, covered by the Deed of Trust, and all plans and specifications comply with all municipal ordinances and regulations and all of other regulations made or promulgated, now or hereafter, by lawful authority, and that the same will comply with all such municipal ordinances and regulations and with the rules of the applicable fire rating or inspection organization, bureau, association or office; 18. That so long as this Deed of Trust and the said Note secured hereby are insured under the provisions of the National Housing Act, or held by the Secretary of Housing and Urban Development, it will not execute or file for record any instrument which imposes a restriction upon the sale or occupancy of the mortgaged property on the basis of race, color, creed or national origin. ABOVE IT IS MUTUALLY AGREED THAT: 19. Trustor herein agrees to pay to Beneficiary or to the authorized loan servicing representative of the Beneficiary a charge not to exceed $15 for providing a statement regarding the obligation secured by this Deed of Trust as provided by Section 2954, Article 2, chapter 2, Title 14, Part 4, Division 3, of the Civil Code of the State of California. N/A 21. Should the property or any part thereof be taken or damaged by reason of any public improvement or condemnation preceding, or damaged by fire, or earthquake, or in any other manner, the Beneficiary shall be entitled to all compensation, awards, and other payments or relief therefor, and shall be entitled at its option to commence, appear in and prosecute in its own name any action to proceedings, or to make any compromise or settlement in connection with such taking or damage. All awards of compensation in connection with condemnation for public use of or a taking of any of that property, shall be paid to the Beneficiary to be applied to the amount due under this Note secured hereby in (1) amounts equal to the next maturing installment or installments or principal and (2) with any balance to be credited to the next payment due under the Note. All awards of damages in connection with any condemnation for public use of or injury to any residue of that property shall be paid to the Beneficiary to be applied to a fund held for and on behalf of the Trustor which fund shall, at the option of the 7 -7- Beneficiary, and with the prior approval of the Secretary of Housing and Urban Development, either be applied to the amount due under the Note as specified in the preceding sentence, or be disturbed for the restoration or repair of the damage to the residue. No amount applied to the reduction of the principal amount due in accordance with (1) shall be considered an optional prepayment as the term is used in this Deed of Trust and the Note secured hereby, nor relieve the Trustor from making regular monthly payments commencing on the first day of the first month following the date of receipt of the award. The Beneficiary is hereby authorized in the name of the Trustor to execute and deliver valid acquittances for such awards and to appeal from such award; 22. Upon default by Trustor in making any monthly payment provided for herein or in the Note secured hereby, and if such default is not made good prior to the due date of the next such installment, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trust, all sums secured hereby shall, at the option of the Beneficiary, be deemed to have become immediately due and payable, and shall thereupon be collectable by foreclosure of this Deed of Trust. In the event of default, Trustee hereunder shall be, and is authorized and empowered when given notice to do so by Beneficiary after such default, to cause the property to be sold, which notice Trustee shall cause to be duly filed for record. 23. After the lapse of such time as may then be required by law following the recordation of said notice of defaults, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said property by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser its Deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in the Deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary, may purchase at the sale. The Trustee shall apply the proceeds of sale to payment of (1) the expenses of such sale, together with the reasonable expenses of this trust including therein reasonable Trustee's fees or attorney's fees for conducting the sale, and the actual cost of publishing, recording, mailing and posting notice of the sale; (2) the cost of any search and/or other evidence of title procured in connection with such sale and revenue stamps on Trustees' Deed; (3) all sums expended under the terms hereof, not then repaid, with accrued interest at the rate specified in said Note; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto; 24. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed and its place of record which, when duly recorded in the proper office of the county or counties in which the property is situated, shall be conclusive proof of proper appointment of the successor trustee. In the event of default, Trustee hereunder shall be, and is authorized and empowered when given notice to do so by Beneficiary after such default to cause the property to be sold, which notice Trustee shall cause to be duly filed for record. 8 -8- 25. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed is hereby waived to the full extent permissible by law; 26. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and said Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters or fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto;" 27. The trust created hereby is irrevocable by Trustor; 28. This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term "Beneficiary" shall include not only the original Beneficiary hereunder but also any future owner and holder including pledgees, of the Note secured hereby. In this Deed, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. All obligations of each Trustor hereunder are joint and several; 29. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee; 30. The Undersigned TRUSTOR REQUESTS that a copy of any notice of default and of any notice of sale hereunder be mailed to him at the mailing address opposite his name hereto. Failure to insert such address shall be deemed a waiver of any request hereunder for a copy of such notices. Mailing Address for Notices 245 Fischer Avenue, Suite D-1 Costa Mesa, California 92626 31. Notwithstanding any other provision contained herein or in the Note, hereinabove referred to, it is agreed that the execution of the Note shall impose no personal liability upon the Trustor for payment of the indebtedness evidenced thereby and in the event of a default, the Beneficiary, as holder of the Note, shall look solely to the property subject to this Deed of Trust and to the rents, issues and profits thereof in satisfaction of the indebtedness evidenced by the Note and will not seek or obtain any deficiency or personal judgment against the Trustor except such judgment or decree as may be necessary to foreclose or bar its interest in the property subject to this Deed of Trust and all other property mortgaged, pledged, conveyed or assigned to secure payment of the Note; provided, that nothing in this condition and no action so taken shall operate to impair any obligation of the Trustor under the Regulatory Agreement herein referred to and made a part hereof. 32. Notwithstanding any other provision contained herein or in the Note, hereinafter referred to, it is agreed that the execution of the Note shall impose no personal liability upon the Trustor (or any of its present or future limited and general partners) for payment of the 9 -9- indebtedness evidenced thereby and in the event of a default, the Beneficiary, as holder of the Note, shall look solely to the property subject to this Deed of Trust and to the rents, issues and profits thereof in satisfaction of the indebtedness evidenced by the Note and will not seek or obtain any deficiency or personal judgment against the Trustor (or any of its present or future limited and general partners) except such judgment or decree as may be necessary to foreclose or bar its interest in the property subject to this Deed of Trust and all other property mortgaged, pledged, conveyed or assigned to secure payment of the Note; provided, that nothing in this condition and no action so taken shall operate to impair any obligation of the Trustor under the Regulatory Agreement herein referred to and made a part hereof. IN WITNESS WHEREOF the Trustor has caused its name to be hereunto subscribed by its duly authorized General Partner as of the day and year herein first above written. ARV FREMONT, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership General Partner By: ARV Assisted Living, Inc. a Delaware corporation General Partner By: ------------------------ Douglas Armstrong Vice President 10 -10- (Notary Acknowledgement) 11 -11- CALIFORNIA ================================================================================ DEED OF TRUST ================================================================================ Between ARV FREMONT, L.P. Trustor and FIDELITY NATIONAL TITLE INSURANCE COMPANY Trustee, and RED MORTGAGE CAPITAL, INC. Beneficiary. ================================================================================ Dated: February _1, 2001 Recorded: February __, 2001 at minutes past in Liber at page records of Alameda County, California RECORDER'S INSTRUCTIONS Index this document as a Deed of Trust and as an Assignment of Rents. Escrow No. Order No. EX-10.102 10 a72807ex10-102.txt EXHIBIT 10.102 1 EXHIBIT 10.102 REGULATORY AGREEMENT FOR U.S. DEPARTMENT OF HOUSING MULTIFAMILY HOUSING PROJECTS AND URBAN DEVELOPMENT Office of Housing Federal Housing Commissioner Under Sections 207,220,221(d)(4), 231 and 232, Except Nonprofits Project No. 121-22031-PM-ALF/REF Mortgagee: RED MORTGAGE CAPITAL, INC. Amount of Mortgage Note: $2,985,800.00 Date: February 1, 2001 Mortgage: Recorded: State: California County: Alameda Date: February 1, 2001 Concurrently Herewith Book Page ---------- -------------
Originally endorsed for insurance under Section 232 pursuant to Section 223(f) of the National Housing Act, as amended. This Agreement entered into as of the 1st day of February, 2001, between ARV FREMONT, L.P., a California limited partnership whose address is 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626, their successors, heirs, and assigns (jointly and severally, hereinafter referred to as Owners) and the undersigned SECRETARY OF HOUSING AND URBAN DEVELOPMENT and his successors (hereinafter referred to as Secretary). In consideration of the endorsement for insurance by the Secretary of the above described note or in consideration of the consent of the Secretary to the transfer of the mortgaged property or the sale and conveyance of the mortgaged property by the Secretary, and in order to comply with the requirements of the National Housing Act, as amended, and the Regulations adopted by the Secretary pursuant thereto, Owners 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 Secretary shall be the owner, holder or reinsurer of the mortgage, or during any time the Secretary is obligated to insure a mortgage on the mortgage property: 1. Owners, except as limited by paragraph 17 hereof, assume and agree to make promptly all payments due under the note and mortgage. 2 -2- 2. (a) Owners shall establish or continue to maintain a reserve fund for replacements by the allocation to such reserve fund in a separate account with the mortgagee or in a safe and responsible depository designated by the mortgagee, concurrently with the beginning of payments towards amortization of the principal of the mortgage insured or held by the Secretary of an amount equal to $3,242.33 per month unless a different date or amount is approved in writing by the Secretary. Said monthly deposit consists of $1,948.50 for Realty and $1,293.83 for Non-Realty. In addition, the Owner has made an initial deposit to the fund of $64,925.00. Such fund, whether in the form of a cash deposit or invested in obligations of, or fully guaranteed as to principal by, the United States of America shall at all times be under the control of the mortgagee. Disbursements from such fund, whether for the purpose of effecting replacement of structural elements and mechanical equipment of the project or for any other purpose, may be made only after receiving the consent in writing of the Secretary. In the event that the owner is unable to make a mortgage note payment on the due date and that payment cannot be made prior to the due day of the next such installment or when the mortgagee has agreed to forgo making an election to assign the mortgage to the Secretary based on a monetary default, or to withdraw an election already made, the Secretary is authorized to instruct the mortgagee to withdraw funds from the reserve fund for replacements to be applied to the mortgage payment in order to prevent or cure the default. In addition, in the event of a default in the terms of the mortgage, pursuant to which the loan has been accelerated, the Secretary may apply or authorize the application of the balance in such fund to the amount due on the mortgage debt as accelerated. (b) Where Owners are acquiring a project already subject to an insured mortgage, the reserve fund for replacements to be established will be equal to the amount due to be in such fund under existing agreements or charter provisions at the time Owners acquire such project, and payments hereunder shall begin with the first payment due on the mortgage after acquisition, unless some other method of establishing and maintaining the fund is approved in writing by the Secretary. 3. Real property covered by the mortgage and this agreement is described in Exhibit A attached hereto. (This paragraph 4 is not applicable to cases insured under Section 232). 4. N/A 3 -3- N/A 5. (a) If the mortgage is originally a Secretary-held purchase money mortgage, or is originally endorsed for insurance under any Section other than Sections 231 or 232 and is not designed primarily for occupancy by elderly persons, Owners shall not in selecting tenants discriminate against any person or persons by reason of the fact that there are children in the family. (b) If the mortgage is originally endorsed for insurance under Section 221, Owners shall in selecting tenants give to displaced persons or families an absolute preference or priority of occupancy which shall be accomplished as follows: (1) For a period of sixty (60) days from the date of original offering, unless a shorter period of time is approved in writing by the Secretary, all units shall be held for such preferred applicants, 4 -4- after which time any remaining unrented units may be rented to non-preferred applicants; (2) Thereafter, and on a continuing basis, such preferred applicants shall be given preference over non-preferred applicants in their placement on a waiting list to be maintained by the Owners; and (3) Through such further provisions agreed to in writing by the parties. (c) Without the prior written approval of the Secretary not more than 25% of the number of units in a project insured under Section 231 shall be occupied by persons other than elderly persons. (d) All advertising or efforts to rent a project insured under Section 231 shall reflect a bona fide effort of the Owners to obtain occupancy by elderly persons. 6. Owners shall not without the prior written approval of the Secretary: (a) Convey, transfer, or encumber any of the mortgaged property, or permit the conveyance, transfer or encumbrance of such property. (b) Assign, transfer, dispose of, or encumber any personal property of the project, including rents, or pay out any funds except from surplus cash, except for reasonable operating expenses and necessary repairs. (c) Convey, assign, or transfer any beneficial interest in any trust holding title to the property, or the interest of any general partner in a partnership owning the property, or any right to manage or receive the rents and profits from the mortgaged property. (d) Remodel, add to, reconstruct, or demolish any part of the mortgaged property or subtract from any real or personal property of the project. (e) Make, or receive and retain, any distribution of assets or any income of any kind of the project except surplus cash and except on the following conditions: (1) All distributions shall be made only as of and after the end of a semiannual or annual fiscal period, and only as permitted by the law of the applicable jurisdiction; 5 -5- (2) No distribution shall be made from borrowed funds, prior to the completion of the project or when there is any default under this Agreement or under the note or mortgage; (3) Any distribution of any funds of the project, which the party receiving such funds is not entitled to retain hereunder, shall be held in trust separate and apart from any other funds; and (4) There shall have been compliance with all outstanding notices of requirements for proper maintenance of the project. (f) Engage, except for natural persons, in any other business or activity, including the operation of any other rental project, or incur any liability or obligation not in connection with the project. (g) Require, as a condition of the occupancy or leasing of any unit in the project, any consideration or deposit other than the prepayment of the first month's rent plus a security deposit in an amount not in excess of one month's rent to guarantee the performance of the covenants of the lease. Any funds collected as security deposits shall be kept separate and apart from all other funds of the project in a trust account the amount of which shall at all times equal or exceed the aggregate of all outstanding obligations under said account. (h) Permit the use of the dwelling accommodations or nursing facilities of the project for any purpose except the use which was originally intended, or permit commercial use greater than that originally approved by the Secretary. 7. Owners shall maintain the mortgaged premises, accommodations and the grounds and equipment appurtenant thereto, in good repair and condition. In the event all or any of the buildings covered by the mortgage shall be destroyed or damaged by fire or other casualty, the money derived from any insurance on the property shall be applied in accordance with the terms of the mortgage. 8. Owners shall not file any petition in bankruptcy or for a receiver or in insolvency or for reorganization or composition, or make any assignment for the benefit of creditors or to a trustee for creditors, or permit an adjudication in bankruptcy or the taking possession of the mortgaged property or any part thereof by a receiver or the seizure and sale of the mortgaged property or any part hereof under judicial process or pursuant to any power of sale, and fail to have such adverse actions set aside within forty-five (45) days. 6 -6- 9. (a) Any management contract entered into by Owners or any of them involving the project shall contain a provision that, in the event of default hereunder, it shall be subject to termination without penalty upon written request by the Secretary. Upon such request Owners shall immediately arrange to terminate the contract within a period of not more than thirty (30) days and shall make arrangements satisfactory to the Secretary for continuing proper management of the project. (b) Payment for services, supplies, or materials shall not exceed the amount ordinarily paid for such services, supplies, or materials in the area where the services are rendered or the supplies or materials furnished. (c) 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 Secretary or his duly authorized agents. Owners 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 Secretary or his duly authorized agents. (d) The books and accounts of the operations of the mortgaged property and of the project shall be kept in accordance with the requirements of the Secretary. (e) Within sixty (60) days following the end of each fiscal year the Secretary shall be furnished with a complete annual financial report based upon an examination of the books and records of mortgagor prepared in accordance with the requirements of the Secretary, prepared and certified to by an officer or responsible Owner and, when required by the Secretary, prepared and certified by a Certified Public Accountant, or other person acceptable to the Secretary. (f) At the request of the Secretary, his agents, employees, or attorneys, the Owners shall furnish monthly occupancy reports and shall give specific answers to questions upon which information is desired from time to time relative to income, assets, liabilities, contracts, operation, and condition of the property and the status of the insured mortgage. (g) All rents and other receipts of the project shall be deposited in the name of the project in a financial institution, whose deposits are insured by an agency of the Federal Government. Such funds shall be withdrawn only in accordance with the provisions of this Agreement for expenses of the project or for distributions of 7 -7- surplus cash as permitted by paragraph 6(e) above. Any Owner receiving funds of the project other than by such distribution of surplus cash shall immediately deposit such funds in the project bank account and failing so to do in violation of this Agreement shall hold such funds in trust. Any Owner receiving property of the project in violation of this Agreement shall hold such funds in trust. At such time as the Owners shall have lost control and/or possession of the project, all funds held in trust shall be delivered to the mortgagee to the extent that the mortgage indebtedness has not been satisfied. (h) If the mortgage is insured under Section 232: 1. The Owners or lessees shall at all times maintain in full force and effect from the state or other licensing authority such license as may be required to operate the project as a nursing home and shall not lease all or part of the project except on terms approved by the Secretary. 2. The Owners shall suitably equip the project for nursing home operations. 3. The Owners shall execute a Security Agreement and Financing Statement (or other form of chattel lien) upon all items of equipment, except as the Secretary may exempt, which are not incorporated as security for the insured mortgage. The Security Agreement and Financing Statement shall constitute a first lien upon such equipment and shall run in favor of the mortgagee as additional security for the insured mortgage. (i) If the mortgage is insured under Section 231, Owners or lessees shall at all times maintain in full force and effect from the state or other licensing authority such license as may be required to operate the project as housing for the elderly. 10. Owners will comply with the provisions of any Federal, State, or local law prohibiting discrimination in housing on the grounds of race, color, religion or creed, sex, or national origin, including Title VIII of the Civil Rights Act of 1968 (Public Law 90-284; 82 Stat. 73), as amended, Executive Order 11063, and all requirements imposed by or pursuant to the regulations of the Department of Housing and Urban Development implementing these authorities (including 24 CFR Parts 100, 107 and 110, and Subparts I and M of Part 200). 11. Upon a violation of any of the above provisions of this Agreement by Owners, the Secretary may give written notice thereof, to Owners, by registered or certified mail, addressed to the addresses stated in this Agreement, or such other addresses 8 -8- as may subsequently, upon appropriate written notice thereof to the Secretary, be designated by the Owners as their legal business address. If such violation is not corrected to the satisfaction of the Secretary within thirty (30) days after the date such notice is mailed or within such further time as the Secretary determines is necessary to correct the violation, without further notice the Secretary may declare a default under this Agreement effective on the date of such declaration of default and upon such default the Secretary may: (a) (i) If the Secretary holds the note - declare the whole of said indebtedness immediately due and payable and then proceed with the foreclosure of the mortgage; (ii) If said note is not held by the Secretary - notify the holder of the note of such default and request holder to declare a default under the note and mortgage, and holder after receiving such notice and request, but not otherwise, at its option, may declare the whole indebtedness due, and thereupon proceed with foreclosure of the mortgage, or assign the note and mortgage to the Secretary as provided in the Regulations; (b) Collect all rents and charges in connection with the operation of the project and use such collections to pay the Owners' obligations under this Agreement and under the note and mortgage and the necessary expenses of preserving the property and operating the project. (c) Take possession of the project, bring any action necessary to enforce any rights of the Owners growing out of the project operation, and operate the project in accordance with the terms of this Agreement until such time as the Secretary in his discretion determines that the Owners are again in a position to operate the project in accordance with the terms of this Agreement and in compliance with the requirements of the note and mortgage. (d) Apply to any court, state or Federal, for specific performance of this Agreement, for an injunction against any violation of the Agreement, for the appointment of a receiver to take over and operate the project in accordance with the terms of the Agreement, or for such other relief as may be appropriate, since the injury to the Secretary arising from a default under any of the terms of this Agreement would be irreparable and the amount of damage would be difficult to ascertain. 9 -9- 12. As security for the payment due under this Agreement to the reserve fund for replacements, and to secure the Secretary because of his liability under the endorsement of the note for insurance, and as security for the other obligations under this Agreement, the Owners respectively assign, pledge and mortgage to the Secretary their rights to the rents, profits, income and charges of whatsoever sort which they may receive or be entitled to receive from the operation of the mortgaged property, subject, however, to any assignment of rents in the insured mortgage referred to herein. Until a default is declared under this Agreement, however, permission is granted to Owners to collect and retain under the provisions of this Agreement such rents, profits, income, and charges, but upon default this permission is terminated as to all rents due or collected thereafter. 13. As used in this Agreement the term: (a) "Mortgage" includes "Deed of Trust", "Chattel Mortgage", "Security Instrument", and any other security for the note identified herein, and endorsed for insurance or held by the Secretary; (b) "Mortgagee" refers to the holder of the mortgage identified herein, its successors and assigns; (c) "Owners" refers to the persons named in the first paragraph hereof and designated as Owners, their successors, heirs and assigns; (d) "Mortgaged Property" includes all property, real, personal or mixed, covered by the mortgage or mortgages securing the note endorsed for insurance or held by the Secretary; (e) "Project" includes the mortgaged property and all its other assets of whatsoever nature or wheresoever situate, used in or owned by the business conducted on said mortgaged property, which business is providing housing and other activities as are incidental thereto; (f) "Surplus Cash" means any cash remaining after: (1) the payment of: (i) All sums due or currently required to be paid under the terms of any mortgage or note insured or held by the Secretary; 10 -10- (ii) All amounts required to be deposited in the reserve fund for replacements; (iii) All obligations of the project other than the insured mortgage unless funds for payment are set aside or deferment of payment has been approved by the Secretary; and (2) the segregation of: (i) An amount equal to the aggregate of all special funds required to be maintained by the project; and (ii) All tenant security deposits held. (g) "Distribution" means any withdrawal or taking of cash or any assets of the project, including the segregation of cash or assets for subsequent withdrawal within the limitations of Paragraph 6(e) hereof, and excluding payment for reasonable expenses incident to the operation and maintenance of the project. (h) "Default" means a default declared by the Secretary when a violation of this Agreement is not corrected to his satisfaction within the time allowed by this Agreement or such further time as may be allowed by the Secretary after written notice; (i) "Section" refers to a Section of the National Housing Act, as amended. (j) "Displaced persons or families" shall mean a family or families, or a person, displaced from an urban renewal area, or as the result of government action, or as a result of a major disaster as determined by the President pursuant to the Disaster Relief Act of 1970. (k) "Elderly person" means any person, married or single, who is sixty-two years of age or over. 14. This instrument shall bind, and the benefits shall inure to, the respective Owners, their heirs, legal representatives, executors, administrators, successors in office or interest, and assigns, and to the Secretary and his successors so long as the contract of mortgage insurance continues in effect, and during such further time as the Secretary shall be the owner, holder, or reinsurer of the mortgage, or obligated to reinsure the mortgage. 11 -11- 15. Owners warrant that they have not, and will not, execute any other agreement with provisions contradictory of, or in opposition to, the provisions hereof, and that, in any event, the requirements of this Agreement are paramount and controlling as to the rights and obligations set forth and supersede any other requirements in conflict therewith. 16. The invalidity of any clause, part or provision of this Agreement shall not affect the validity or the remaining portions thereof. 17. The following Owners: ARV Fremont, L.P., a California limited partnership, and all present and future limited and general partners thereof, do not assume personal liability for payments due under the note and mortgage, or for the payments to the reserve for replacements, or for matters not under their control, provided that said Owners shall remain liable under this Agreement only with respect to the matters hereinafter stated; namely: (a) for funds or property of the project coming into their hands which, by the provisions hereof, they are not entitled to retain; and (b) for their own acts and deeds or acts and deeds of others which they have authorized in violation of the provisions hereof. (To be executed with formalities for recording a deed to real estate) 12 -12- All references herein to the terms "nursing home" or nursing homes" shall mean and include the terms "assisted living facility" and "assisted living facilities." See Rider I attached hereto and made a part hereof. IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date first hereinabove written. ARV FREMONT, L.P. a California limited partnership By: American Retirement Villas Properties II a California limited partnership General Partner By: ARV Assisted Living, Inc. a Delaware corporation General Partner By: ------------------------------- Douglas Armstrong 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 EX-10.103 11 a72807ex10-103.txt EXHIBIT 10.103 1 EXHIBIT 10.103 REGULATORY AGREEMENT U.S. DEPARTMENT OF HOUSING NURSING HOMES AND URBAN DEVELOPMENT Office of Housing Federal Housing Commissioner - ------------------------------------------------------------------------------------------ Project Number Mortgagee 121-22031-PM-ALF/REF Red Capital Mortgage, Inc., an Ohio corporation - ------------------------------------------------------------------------------------------ Amount of Mortgage Note Date $2,985,800.00 February 1, 2001 - ------------------------------------------------------------------------------------------ Mortgage Recorded (State) County Date California Alameda 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 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626 (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 FREMONT, 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: --------------------------- Douglas Armstrong 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 -----END PRIVACY-ENHANCED MESSAGE-----