Document:

Deed of Trust between ARV Las Posas, L.P. and Fidelity National Title Ins. Co.

 Exhibit 10.25 
  
 DEED OF TRUST 
  
 With Assignment of Rents 
  
 THIS DEED OF TRUST, entered into as of this 1st day of April, 2003, by and
between ARV LAS POSAS, L.P., a California limited partnership, with offices at 245 Fischer Avenue, Suite D-1, Costa Mesa, California 92626, herein called Trustor, and FIRST AMERICAN 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 43215, 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 Ventura 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 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 TWELVE MILLION TWO HUNDRED FORTY THOUSAND AND NO/100THS DOLLARS ($12,240,000.00), evidenced by its Note of even date herewith,
bearing interest from date on outstanding balances at Six and five one-hundredths percent (6.05 %) per annum, said principal and interest being payable in monthly installments as provided in said Note with a final maturity of May 1, 2038, 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, 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 
  

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 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 
  
 (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. 
  

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 (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; 
  
 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, 
  

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 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. That the funds to be advanced hereunder are to be used in the construction of certain improvements on the lands herein described in accordance with a certain building loan agreement made by and between the
Trustor and the Beneficiary dated _______________, which said building loan agreement (except such part or parts thereof as may be inconsistent herewith) is incorporated herein by reference to the same extent and effect as if fully set forth herein,
and made a part of this Deed of Trust; and on the failure of the Trustor to keep and perform all the covenants, conditions, and agreements of said building loan agreement, thereupon, the principal sum and all arrears of interest, and other charges
provided for herein shall at the option of the Beneficiary of this Deed of Trust become due and payable, anything contained herein to the contrary notwithstanding. This covenant shall be terminated upon the completion of the building or buildings to
the satisfaction of the Beneficiary and the making of the final advance as provided in said building loan agreement; 
  
 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 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 about to be made 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 upon completion 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. 
  

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 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. That if the construction of the improvements herein referred to
shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than strikes or lockouts, the Beneficiary, after due notice to the Trustor or any subsequent owner, is hereby invested with full and
complete authority to enter upon the said premises, employ watchmen to protect such improvements from depredation or injury and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection
and completion of said building or buildings, to make and enter into any contracts and obligations wherever necessary, either in its own name or in the name of the Trustor, and to pay and discharge all debts, obligations and liabilities incurred
thereby. All such sums so advanced by the Beneficiary (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this Deed of Trust and shall
be due and payable on demand with interest at the rate specified in said Note, but no such advances shall be insured unless same are specifically approved by the Secretary of Housing and Urban Development, acting by and through the Federal Housing
Commissioner prior to the making thereof; 
  
 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 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. 
  

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 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. 
  
 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 
  

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 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 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. 
  
 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 LAS POSAS, L.P.
 a California limited partnership

		
	 By:
	 	 AMERICAN RETIREMENT VILLAS
 PROPERTIES III, L.P.
 a California limited partnership
 General Partner

			
	 	 	 By:
	 	 ARV ASSISTED LIVING, INC.
 a Delaware corporation
 General Partner

  
  
  
  

 8 

	 	 	 	 	 By:
	 	  

	 	 	 	 	 	 	 Douglas Armstrong
 Senior Vice President

  
 Attachment: 
  
 Exhibit
“A” – Legal Description 
  

 9 

 LEGAL DESCRIPTION 
 EXHIBIT “A” 
  
 THAT PORTION OF
LOT 2, SECTION 27, TOWNSHIP 2 NORTH, RANGE 21 WEST, SAN BERNARDINO MERIDIAN, IN THE CITY OF CAMARILLO, COUNTY OF VENTURA, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT OF SAID LAND FILED JULY 10, 1873 IN THE DISTRICT LAND OFFICE, DESCRIBED AS
FOLLOWS: 
  
 BEGINNING AT A POINT IN THE EASTERLY LINE OF LAS POSAS ROAD, 60 FEET
WIDE, DISTANT ALONG SAID EASTERLY LINE NORTH 0° 13’ 35” WEST 666.12 FEET FROM THE NORTHWESTERLY CORNER OF LAS POSAS PARK, ACCORDING TO THE MAP RECORDED IN BOOK 24 PAGE 10 OF MAPS, AT THE NORTHWESTERLY CORNER OF THE LAND DESCRIBED IN
THE DEED TO PLEASANT VALLEY SCHOOL DISTRICT RECORDED AUGUST 29, 1958 IN BOOK 1649 PAGE 522, OFFICIAL RECORDS, THENCE, CONTINUING ALONG SAID EASTERLY LINE, 
  
 1ST: NORTH 0° 13’ 35”
WEST 364.30 FEET TO THE SOUTHWESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO VILLAGE WATER COMPANY, RECORDED DECEMBER 18, 1961 IN BOOK 2085 PAGE 172, OFFICIAL RECORDS, THENCE ALONG THE BOUNDARY OF SAID LAST MENTIONED LAND BY THE FOLLOWING TWO
COURSES, 
  
 2ND: NORTH 89° 46’ 25” EAST 50 FEET TO THE SOUTHEASTERLY CORNER THEREOF THENCE, 
  
 3RD:
NORTH 0° 13’ 35” WEST 64.25 FEET TO THE NORTHERLY LINE OF SAID LOT 2; THENCE, ALONG SAID NORTHERLY LINE, 
  
 4TH: NORTH 73° 52’ EAST
532.39 FEET, MORE OR LESS TO A POINT ON THE NORTH LINE OF SAID LOT 2, WHICH IS NORTH 73° 52’ EAST 584.38 FEET MEASURED ALONG SAID NORTH LINE FROM THE EAST LINE OF LAS POSAS ROAD, ALSO BEING THE NORTHWEST CORNER OF SAID LAND DESCRIBED IN
DEED TO UNITED STATES OF AMERICA, RECORDED APRIL 30, 1958 IN BOOK 1612 PAGE 22 OF OFFICIAL RECORDS, THENCE, ALONG THE WESTERLY LINE OF LAND DESCRIBED IN SAID DEED, 
  
 5TH:
SOUTH 0° 13’ 35” EAST 271.12 FEET, MORE OR LESS, TO THE NORTHEASTERLY CORNER OF SAID LAND OF PLEASANT VALLEY SCHOOL DISTRICT, THENCE, 
  
 6TH: SOUTH 89° 46’ 25”
WEST 241.50 FEET TO AN ANGLE POINT; THENCE, 
  
 7TH: SOUTH 46° 20’ 57” WEST 441.26 FEET TO THE POINT OF BEGINNING. 
  
 EXCEPT ALL THE OIL, GAS, INERALS AND OTHER HYDROCARBON SUBSTANCES IN, ON, OR UNDER SAID LAND
BUT WITHOUT THE RIGHT, HOWEVER, OF SURFACE ENTRY AND WITHOUT THE RIGHT OF ENTRY IN AND TO THE SUBSURFACE THEREOF AT A DEPTH OF LESS THAN 500 FEET BENEATH THE SURFACE. 

 CALIFORNIA 
  

  
 Deed of Trust 
  

  
 Between 
  
 ARV LAS POSAS, L.P. 
  
 Trustor 
  
 and 
  
 FIRST AMERICAN TITLE INSURANCE 
 COMPANY 
  
 Trustee, 
  
 and 
  
 RED MORTGAGE CAPITAL, INC. 
  
 Beneficiary. 
  

  
 Dated:            as of April 1, 2003

  
 Recorded:      April     , 2003 
  
 at             minutes past 
  
 in
Liber             at page 
  
 records of Ventura County, California 
  
 RECORDER’S INSTRUCTIONS 
  
 Index this document as 
 a Deed of Trust and as 
 an Assignment of Rents. 
  
 Escrow No. 
 Order No. 
  

 11Regulatory Agreement Nursing Homes for U.S. Department

  Exhibit 10.26

	  Regulatory Agreement
 Nursing Homes
 	  U.S. Department of Housing
 and Urban Development
Office of Housing
 Federal Housing Commissioner
 

   

	  Project Number
 122-22056-PM-ALF-REF
 	  Mortgagee
 Red Mortgage Capital, Inc., an Ohio corporation
 
	  Amount of Mortgage Note
 $12,240,000.00
 	  Date
 As of April 1, 2003
 
	  Mortgage Recorded (State)
 California
 	  County
 Ventura
 	  Date
 April __, 2003
 
	 Book
 	  Page
 
				

            This Agreement entered into as of this 1st day of April, 2003, between RETIREMENT INNS III, 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 LAS POSAS,
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 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,
 

  Page 1 of 7

	  
 	   
 	  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 an assisted living facility;
 
	   
 	   
 	   
 
	   
 	  (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 as of the
1st day of April, 2003, 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 the Commissioner. Any
change in the bed capacity shall violate this Regulatory Agreement.
 

 Page 2 of 7

	   
 	  (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.
 
	   
 	   
 	   
 
	   
 	  (16)
 	  The lease is evidenced by a Memorandum of Lease attached hereto and made a part hereof.
 

 Page 3 of
7

	   
 	  (17)
 	  All references herein to the terms “nursing home” or nursing homes” shall mean and include the terms “assisted living facility” and “assisted
living facilities.”
 

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

	   
 	  RETIREMENT INNS III, LLC
 	   
 
	   
 	  a Delaware limited liability company
 	   
 
	  
 	   
 	   
 	   
 
	   
 	  By:
 	   
 	   
 
	   
 	   
 	 
 	   
 
	   
 	   
 	  Abdo H. Khoury
 Manager
 	   
 
	   
 	   
 	  
 	   
 
	   
 	   
 	   
 	   
 
	  
 	  As of April 1, 2003
 	   
 
	   
 	   
 	   
 	   
 
	   
 	   
 	   
 	   
 
	   
 	  SECRETARY OF HOUSING AND URBAN DEVELOPMENT ACTING BY AND THROUGH THE FEDERAL HOUSING COMMISSIONER
 	   
 
	   
 	   
 	   
 	   
 
	   
 	  By:
 	   
 	   
 
	  
 	   
 	 
 	   
 
	   
 	   
 	  Authorized Agent
 	   
 
	   
 	   
 	   
 	   
 
	   
 	  As of April 1, 2003
 	   
 

  Attachment:
Exhibit “A” – Legal Description
 Exhibit “B” –
Memorandum of Lease
  Page 4 of 7

   LEGAL DESCRIPTION 
 EXHIBIT “A”
  THAT PORTION OF LOT 2, SECTION 27, TOWNSHIP 2 NORTH,
RANGE 21 WEST, SAN BERNARDINO MERIDIAN, IN THE CITY OF  CAMARILLO, COUNTY OF VENTURA, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT OF SAID LAND FILED JULY 10, 1873 IN THE DISTRICT LAND OFFICE, DESCRIBED AS FOLLOWS:
 BEGINNING AT A POINT IN THE EASTERLY LINE OF LAS POSAS ROAD, 60 FEET WIDE, DISTANT ALONG SAID EASTERLY LINE NORTH 0° 13’ 35” WEST 666.12 FEET FROM THE NORTHWESTERLY CORNER OF LAS POSAS PARK, ACCORDING
TO THE MAP RECORDED IN BOOK 24 PAGE 10 OF MAPS, AT THE NORTHWESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO PLEASANT VALLEY SCHOOL DISTRICT RECORDED AUGUST 29, 1958 IN BOOK  1649 PAGE 522,  OFFICIAL RECORDS, THENCE, CONTINUING ALONG
SAID EASTERLY LINE,
  1ST: NORTH 0° 13’ 35” WEST 364.30 FEET TO THE SOUTHWESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO VILLAGE WATER COMPANY, RECORDED DECEMBER 18,
1961 IN BOOK 2085 PAGE 172,  OFFICIAL RECORDS, THENCE  ALONG THE BOUNDARY OF SAID LAST MENTIONED LAND BY THE FOLLOWING TWO COURSES,
  2ND: NORTH 89° 46’ 25” EAST
50 FEET TO THE SOUTHEASTERLY CORNER THEREOF THENCE,
  3RD: NORTH 0° 13’ 35” WEST 64.25 FEET TO THE NORTHERLY LINE OF SAID LOT 2; THENCE, ALONG SAID NORTHERLY
LINE,
  4TH: NORTH 73° 52’ EAST 532.39 FEET, MORE OR LESS TO A POINT ON THE NORTH LINE OF SAID LOT 2, WHICH IS NORTH 73° 52’ EAST 584.38 FEET MEASURED ALONG SAID NORTH
LINE FROM THE EAST LINE OF LAS POSAS ROAD, ALSO BEING THE NORTHWEST CORNER OF SAID LAND DESCRIBED IN DEED TO UNITED STATES OF AMERICA, RECORDED APRIL 30, 1958 IN BOOK  1612 PAGE 22 OF OFFICIAL RECORDS, THENCE, ALONG THE WESTERLY LINE OF LAND
DESCRIBED IN SAID DEED,
  5TH: SOUTH 0° 13’ 35” EAST 271.12 FEET, MORE OR LESS, TO THE NORTHEASTERLY CORNER OF SAID LAND OF PLEASANT VALLEY SCHOOL DISTRICT,
THENCE,
  6TH: SOUTH 89° 46’ 25” WEST 241.50 FEET TO AN ANGLE POINT; THENCE, 
  7TH: SOUTH 46°
20’  57” WEST 441.26 FEET TO THE POINT OF BEGINNING.
  EXCEPT ALL THE OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES IN, ON, OR UNDER SAID LAND BUT WITHOUT THE RIGHT, HOWEVER, OF
SURFACE ENTRY AND WITHOUT THE RIGHT OF ENTRY IN AND TO THE SUBSURFACE THEREOF AT A DEPTH OF LESS THAN 500 FEET BENEATH THE SURFACE.
 Page 5 of 7

   MEMORANDUM OF LEASE
            THIS MEMORANDUM OF
LEASE (the “Memorandum”) dated as of April ___, 2003 is entered into between ARV Las Posas, L.P., a California limited partnership (“Lessor”) and Retirement Inns III, LLC, a Delaware limited liability company
(“Lessee”).
  RECITALS
            A.          On or about April ___, 2003, Lessor and Lessee entered into an Agreement of Lease (the
“Lease”), pursuant to which Lessor leased to Lessee and Lessee leased from Lessor real property, more particularly described in attached Exhibit “A” and incorporated by reference (“Premises”).
            B.          Lessor and Lessee desire to execute this Memorandum to provide constructive notice of
Lessee’s rights under the Lease to all third parties.
            For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
            1.          Term. 
Lessor leases the Premises to Lessee for a term of ten (10) years commencing on the date of Endorsement (as defined in the Lease) and ending on the last day of the month during which falls the tenth anniversary of the date of Endorsement.

           2.          Lease Terms.  This lease of the Premises to Lessee is pursuant to the
Lease, which is incorporated in this Memorandum by reference.
           3.          Assignment.  Lessee’s rights and obligations under the Lease shall not be assigned
without Lessor’s prior written consent, and any assignment without this consent shall be void.
            4.          Successors and Assigns.  This Memorandum and the Lease shall bind and inure to the benefit
of the parties and their respective successors and assigns, subject, however, to the provisions of the Lease on assignment.
            5.          Governing Law.  This Memorandum and the Lease are governed by California law.
  (Signature Page to Follow)
  Page 6 of 7

             Executed as of the date first above written.
  LESSOR:
   ARV Las Posas, L.P.,
 a California limited partnership

	  By:
 	  AMERICAN RETIREMENT VILLAS PROPERTIES III, L.P.,
 a California limited
partnership, General Partner
 	   
 
	  
 	   
 	   
 
	   
 	  By:
 	  ARV ASSISTED LIVING, INC.,
 a Delaware corporation, General Partner
 	   
 
	   
 	   
 	   
 	   
 	   
 
	   
 	   
 	  By:
 	   
 	   
 	   
 
	   
 	   
 	   
 	 
 	   
 	   
 
	  
 	   
 	   
 	  Douglas Armstrong
 Senior Vice President
 	   
 	   
 

  LESSEE:

	  RETIREMENT INNS III, LLC,
 	   
 
	  a Delaware limited liability company
 	   
 
	   
 	   
 	   
 
	  By:
 	   
 	   
 
	   
 	 
 	   
 
	  
 	 Abdo H. Khoury
 Authorized Manager
 	  
 

 Page 7 of 7

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