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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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                                                                   Exhibit 10.99

                               DEED OF TRUST NOTE

$2,386,100.00                                            Los Angeles, California
                                                           as of January 1, 2002

     FOR VALUE RECEIVED, the undersigned, ARV ACACIA VILLA, 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 THREE
HUNDRED EIGHTY-SIX THOUSAND ONE HUNDRED AND NO/100THS DOLLARS ($2,386,100.00),
with interest thereon from the date hereof at the rate of Seven and fifty-six
hundredths per centum (7.56 %) per annum on the unpaid balance until paid. The
principal and interest of this Note are to be paid in monthly installments as
follows:

               Interest alone shall be due and payable on the first day of
          February, 2002. Thereafter, commencing on March 1, 2002, monthly
          installments of principal and interest at the rate of Seven and
          fifty-six hundredths per centum (7.56 %) per annum shall be due
          and payable in the sum of SIXTEEN THOUSAND ONE HUNDRED NINETY AND
          46/100THS DOLLARS ($16,190.46) 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 February 1, 2037.
          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. Commencing
on March 1, 2007, privilege is reserved to pay the debt in whole or in an amount
equal to one or more monthly payments of principal next due, on the last day of
any month prior to maturity upon at least thirty (30) days' prior written notice
to holder upon the terms and conditions set forth in Paragraph 1 of said Allonge
#1.

     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 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 Fullerton, County of Orange,
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

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                                     --2--

property is located, the amount of any such late charge is considered to be
additional interest, this 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.

     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 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 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.

     Should this Note be signed by more than one person and/or firm and/or
corporation, all of the obligations herein contained shall be considered joint
and several obligations of each signer.

     Signed and sealed as of this 1st day of January, 2002.

                                     ARV ACACIA VILLA, L.P.
                                     a California limited partnership

                                     By: CASA BONITA FULLERTON, LTD.
                                         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 Fullerton, Orange County, California.

     Dated this ____ day of January, 2002.

[SEAL]                                  ----------------------------------------
                                                       Notary Public

My Commission Expires:
                       --------------------------------
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                                     -- 3 --

                               STATE OF CALIFORNIA

                          LOAN NO. 143-22014 PM/ALF/REF

                          _____________________________

                               Deed of Trust Note
                          _____________________________

                             ARV ACACIA VILLA, L.P.
                                       TO
                           RED MORTGAGE CAPITAL, INC.

                            No. 143-22014 PM/ALF/REF

      Insured under ss.232 pursuant to 223 (f) of the National Housing Act
                      and Regulations published thereunder

                    In effect on November 7, 2001, as amended

             A total sum of $________________ has been approved for
           insurance hereunder by the Secretary of Housing and Urban
             Development acting by and through the Federal Housing
                                  Commissioner

                      By __________________________________
                                 (Authorized Agent)

                              Date January   , 2002
                              ---------------------

Reference is made to the Act and to the Regulations thereunder covering
assignments of the insurance protections on this note.

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