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                                                                   EXHIBIT 10.98
REGULATORY AGREEMENT                     U.S. DEPARTMENT OF HOUSING
NURSING HOMES                            AND URBAN DEVELOPMENT
                                         Office of Housing
                                         Federal Housing Commissioner


<TABLE>
<S>                           <C>       <C>      <C>
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Project Number                          Mortgagee
143-22015 PM/ALF/REF                    Red Mortgage Capital, Inc., an Ohio corporation
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Amount of Mortgage Note                 Date
$2,207,400.00                           December 1, 2001
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Mortgage Recorded (State)     County             Date
California                    Orange             December ___, 2001
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Book                                    Page
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</TABLE>


    This Agreement entered into this 1st day of December, 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 FULLERTON, L.P., a California limited partnership,
Mortgagor, and in order to comply with the requirements of the National Housing
Act and the Regulations adopted by the Commissioner pursuant thereto, Lessees
agree for themselves, their successors, heirs and assigns, that in connection
with the mortgaged property and the project operated thereon and so long as the
Contract of Mortgage Insurance continues in effect, and during such further
period of time as the Commissioner shall be the owner, holder or reinsurer of
the mortgage, or during any time the Commissioner is obligated to insure a
mortgage on the mortgaged property:

    (1) The lease shall be subject and subordinate to the mortgage securing the
        note or other obligation endorsed for insurance by the commissioner;

    (2) Lessee shall make payments under lease when due;

    (3) Payments by the lessee to the lessor shall be sufficient to pay all
        mortgage payments including payments to reserves for taxes, insurance,
        etc., payments to the Reserve for Replacements, and to take care of
        necessary maintenance. If at the end of any calendar year, or any fiscal
        year if the project operates on the basis of a fiscal year, payments
        under the lease have not been sufficient to take care of the above


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        items, the lessor and lessee upon request in writing from the
        Commissioner shall renegotiate the amounts due under the lease so that
        such amounts shall be sufficient to take care of such items; the
        Commissioner shall be furnished by the lessee, within thirty days after
        being called upon to do so, with a financial report in form satisfactory
        to the Commissioner covering the operations of the mortgaged property
        and of the project;

    (4) The lessee shall not sublease the project or any part thereof without
        the consent of the Commissioner;

    (5) The lessee shall at all times maintain in full force and effect a
        license from the State or other licensing authority to operate the
        project as a nursing home, but the owner shall not be required to
        maintain such a license;

    (6) Lessee shall maintain in good repair and condition any parts of the
        project for the maintenance of which lessee is responsible under the
        terms of the lease;

    (7) Lessee shall not remodel, reconstruct, add to, or demolish any part of
        the mortgaged property or subtract from any real or personal property of
        the project;

    (8) Lessee shall not use the project for any purpose except the operation of
        a nursing home;

    (9) If a default is declared by the Commissioner under the provisions of
        Paragraph 10 of the Regulatory Agreement entered into by the
        lessor-mortgagor and the Commissioner on the 1st day of December, 2001,
        a copy of notice of default having been given to the lessee, the lessee
        will thereafter make all future payments under the lease to the
        Commissioner;

   (10) The lease may be cancelled upon thirty days written notice by the
        Commissioner given to the lessor and the lessee for a violation of any
        of the above provisions unless the violation is corrected to the
        satisfaction of the Commissioner within said thirty day period.

   (11) The Commissioner must approve any change in or transfer of ownership of
        the lessee entity, and any change in or transfer of the management
        operation, or control of the project.

   (12) The lessee shall not reduce or expand, allow to be reduced or expanded,
        or cause the expansion or reduction of the bed capacity of the project
        without the consent of

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        the Commissioner. Any change in the bed capacity shall violate this
        Regulatory Agreement.

   (13) The lessee shall not enter into any management contract involving the
        project, unless such shall contain a provision that, in the event of
        default under the Regulatory Agreement as recited in paragraph 9 (above)
        of this Agreement, the management agreement shall be subject to
        termination without penalty upon written request of the Commissioner.
        Upon such request the lessee shall immediately arrange to terminate the
        contract within a period of not more than thirty (30) days and shall
        make arrangements satisfactory to the Commissioner for continuing proper
        management of the project.

   (14) The mortgaged property, equipment, buildings, plans, offices,
        apparatus, devices, books, contracts, records, documents, and other
        papers relating thereto shall at all times be maintained in reasonable
        condition for proper audit and subject to examination and inspection at
        any reasonable time by the Commissioner or his duly authorized agents.
        Lessee shall keep copies of all written contracts or other instruments
        which affect the mortgaged property, all or any of which may be subject
        to inspection and examination by the Commissioner or his/her duly
        authorized agents.

   (15) There shall be full compliance with the provisions of (1) any State or
        local laws prohibiting discrimination in housing on the basis of race,
        color, creed, or national origin; and (2) with the Regulations of the
        Federal Housing Administration providing for non-discrimination and
        equal opportunity in housing. It is understood and agreed that failure
        or refusal to comply with any such provisions shall be a proper basis
        for the Commissioner to take any corrective action he may deem necessary
        including, but not limited to, the refusal to consent to a further
        renewal of the lease between the mortgagor-lessor and the lessee, the
        rejection of applications for FHA mortgage insurance and the refusal to
        enter into future contracts of any kind with which the lessee is
        identified; and further, if the lessee is a corporation or any other
        type of business association or organization which may fail or refuse to
        comply with the aforementioned provisions, the Commissioner shall have a
        similar right of corrective action (1) with respect to any individuals
        who are officers, directors, trustees, managers, partners, associates or
        principal stockholders of the lessee; and (2) with respect to any other
        type of business association, or organization with which the officers,
        directors, trustees, managers, partners, associates or principal
        stockholders of the lessee may be identified.


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    IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the
date first hereinabove written.

                            RETIREMENT INNS II, LLC
                            a Delaware limited liability company



                            By:
                                ------------------------------------
                                Abdo H. Khoury
                                Manager

                            December 1, 2001





                            SECRETARY OF HOUSING AND URBAN
                            DEVELOPMENT ACTING BY AND
                            THROUGH THE FEDERAL HOUSING
                            COMMISSIONER

                            By:
                                ------------------------------------
                                Authorized Agent


                            December 1, 2001






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