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Resolution Number CRA 07-03-20-01RESOLUTION NO. CRA 07-03-2040 1 ' A RESOLUTION OF THE SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY APPROVING AMENDMENTS TO AGENCY LOAN AND RESTRICTIVE COVENANTS, AND MAKING FINDINGS RELATED TO SUBORDINATION OF COVENANTS, IN CONNECTION WITH A REFINANCING OF SEASONS I AT SAN JUAN CAPISTRANO APARTMENTS WHEREAS, the San Juan Capistrano Redevelopment Agency ("Agency") under the provisions of the California Community Redevelopment Law (Health & Safety Code Sections 33000 et seq.) (the "Law"), is engaged in activities necessary for the implementation of the Redevelopment Plan for the San Juan Capistrano Central Redevelopment Project Area (hereinafter referred to as the "Project Area"); and WHEREAS, San Juan Capistrano Housing Investors, L.P., a California limited partnership ("Developer") has heretofore acquired certain unimproved real property located in the Project Area (the "Property"); and WHEREAS, the Developer obtained varied sources of public and private financing, including without limitation the Agency Loan (defined below), in connection ' with the acquisition and development of the Property by the Developer, including without limitation certain senior obligations comprised of the California Statewide Communities Development Authority Multifamily Housing Revenue Bonds 1995 Series E in the original principal amount of $5,936,000 (the 'Bonds"), a Developer Note in the amount of $419,000, a seller (Romer) Note in the amount of $500,000 and advances to the Developer by its partners (collectively, the "Senior Obligations"); and WHEREAS, in connection with the acquisition and development of the Property by the Developer, the Agency made a loan to the Developer in the amount of $1,550,000, evidenced by that certain Agency Note dated as of November 30, 1995 (the "Agency Note") and secured by, among other things, a mortgage lien against the Property which is subordinate to the Senior Obligations (the "Agency Loan"); and WHEREAS, the Developer has improved the Property with a multifamily senior housing project known as Seasons I at San Juan Capistrano Apartments (the "Project') and, pursuant to that certain Agreement of Restrictive Covenants Affecting Real Property (the "Restrictive Covenants Agreement') by and between the Agency and the Developer, dated as of November 30, 1995, and recorded in the Official Records of Orange County, California on December 21, 1995 as Document No. 19950568793, certain units of the senior housing project have been, and will be, maintained available at affordable rent to Very Low Income and Qualified Lower Income Households for a period of fifty-seven (57) years, as more fully set forth in the Restrictive Covenants ' Agreement and that certain Owner Participation Agreement (the "OPA") dated September 19, 1995 by and between the Agency and the Developer; and Page 1 of 4 03-20-07 WHEREAS, the Agency has heretofore subordinated the long-term affordability covenants set forth in the OPA, pursuant to its Resolution No. 95-9-19-2, approved by the governing board of the Agency on September 19, 2995, based upon findings made pursuant to Section 33334.14 of the Law; and WHEREAS, the Developer desires to (i) refinance the Bonds in a new principal amount equal to the currently outstanding principal amount of the Bonds (the "Refinancing"), (ii) pay in full the Developer Note, the Romer Note and advances to the Developer by its partners (collectively, the "Repayments'), and (iii) enter into a new conventional loan in an aggregate principal amount not to exceed $2,600,000 (the "Conventional Loan" and, together with the Refinancing and the Repayments, the "New Financing"), thereby increasing the principal amount of indebtedness senior to the Agency Loan and to the long-term affordability covenants in the amounts set forth in the Estimated Use of Refinance Proceeds attached hereto as Exhibit "A" and incorporated herein by this reference; and WHEREAS, the Refinancing is permitted under Section 3.7 of the OPA, without consent of the Agency, however, pursuant to Section 18.9(a) of the OPA, the Developer may not encumber the Property to secure the Conventional Loan without the prior written approval of the Agency; and WHEREAS, while the Developer has attempted to obtain private financing for the purpose of the New Financing the applicable Prior Obligations on favorable terms which would not require the renewed subordination of long-term affordability covenants, all of those lenders who have expressed an interest in providing financing for the proposed acquisition and development have indicated that they will require that the lien securing repayment of their loan must be superior to any long-term affordability covenants in favor of the Agency; and WHEREAS, based upon the foregoing, as well as the past experience of the Developer in connection with obtaining permanent financing, it is anticipated that it will be necessary as a condition to obtaining private funding for the New Financing that the Agency subordinate its affordability covenants; and WHEREAS, Section 33334.14 of the Law provides, in part, that affordability covenants of an Agency may be subordinated "where the agency makes a finding that an economically feasible alternative method of financing, refinancing, or assisting the units or parcels on substantially comparable terms and conditions, but without subordination, is not reasonably available, and where the agency obtains written commitments reasonably designed to protect the agency's investment in the event of default..."; and WHEREAS, based upon representations to the Agency, there is not an economically feasible alternative method of financing available on substantially comparable terms; and Page 2 of 4 03-20-07 WHEREAS, in the event the Agency subordinates its affordability covenants, the ' Agency shall have certain rights to notice and cure in the event of default under such loan as to which the Agency subordinates its affordability covenants; and WHEREAS, the governing board of the Agency has duly considered all terms and conditions of the OPA and believes that the activities described in the OPA are in accord with the public purposes and provisions of applicable State and local law requirements, and that such activities promote the affordable housing objectives of the Community Redevelopment Law as well as the Redevelopment Plan for the San Juan Capistrano Central Redevelopment Project; and WHEREAS, the Developer and Fannie Mae have requested that the Agency (i) extend the term of the Agency Loan to the date which is thirty (30) years and ninety (90) days from the closing of the New Financing, provided that the closing of the New Financing is no later than June 30, 2007, and (ii) provide written approval of the encumbrance of the Property to secure the Conventional Loan, in consideration of and conditioned upon the Developer's payment of interest on the Agency Loan in a minimum amount of $650,000; and WHEREAS, the Agency and the Developer additionally desire to modify the OPA and the Restrictive Covenants Agreement with respect to the age restrictions applicable to the residents of the Project included therein by reducing the age restriction to 55 years of age; and ' WHEREAS, the Agency has determined that it is necessary and desirable to (i) provide written approval of the conventional loan, (ii) enter into a Subordination Agreement by and among Fannie Mae, The Bank of New York, the Agency and San Juan Capistrano Housing Investors, L.P., in substantially the form attached hereto as Exhibit "B" (the "Fannie Mae Agreement"), (iii) enter into a Subordination Agreement by and among ARCS Commercial Mortgage Co., L.P., the Agency and San Juan Capistrano Housing Investors, L.P., in substantially the form attached hereto as Exhibit "C" (the "ARCS Agreement"), (iv) enter into a First Amendment of the OPA (the "Amendment to OPA") and a First Amendment of the Agency Note (the "Amendment to Agency Note") to extend the term of the Agency Loan as provided herein, in substantially the form attached hereto as Exhibits "D" and "E", respectively, and (v) enter into a First Amendment to Agreement of Restrictive Covenants Affecting Real Property (the "Amendment to Restrictive Covenants") in substantially the form set forth in Exhibit "F" hereto (each of Exhibits "B", "C", "D", "E" and "F" being incorporated herein by this reference) to accomplish the purposes set forth above; NOW, THEREFORE, the San Juan Capistrano Redevelopment Agency does hereby find, determine, order and resolve as follows: Section 1. The Agency finds and determines that an economically feasible alternative method of financing, refinancing, or assisting the units or parcels on ' substantially comparable terms and conditions, but without subordination, is not Page 3 of 4 03-20-07 reasonably available, and the Agency shall obtain written commitments reasonably designed to protect the Agency's investment in the event of default. Section 2. The Agency hereby approves the encumbrance of the Property to secure the Conventional Loan pursuant to Section 18.9(a) of the OPA upon the terms provided in the Recitals above. Section 3. The Agency hereby agrees to amend the OPA and the Agency Note to extend the term of the Agency Loan to such date as is thirty years and ninety days following the closing of the New Financing, provided that the closing of the New Financing has occurred on or before June 30, 2007. Section 4. The forms of the Amendment to OPA, the Amendment to Agency Note, the Fannie Mae Agreement, the ARCS Agreement, the Amendment to Restrictive Covenants (collectively, the "Agreements') are each hereby approved in substantially the form attached hereto, together with such changes as are approved by Agency Counsel and the Executive Director, and the Chairman of the Agency, the Executive Director and the written designee of either is hereby authorized, acting singly, to execute the Agreements. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Agreements by such officer. Section 5. The Agency further authorizes and directs the Executive Director, and any designee of the Executive Director, acting singly, to take all steps and sign all documents and instruments including, but not limited to, agreements and escrow instructions to carry out the purposes of this Resolution on behalf of the Agency, and agreements or other instruments as may be necessary or convenient to effectuate the subordination of affordability covenants unless it is hereafter determined by the Executive Director or the Agency that such subordination is not necessary. PASSED, APPROVED AND ADOPTED this 20th day of March, 2007. SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a public body, corporate and politic By: �L MaYk Nielsen, Cliairman Page 4 of 4 03-20-07 r STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF SAN JUAN CAPISTRANO ) I, MARGARET R. MONAHAN, appointed Agency Secretary of the Community Redevelopment Agency of the City of San Juan Capistrano, do hereby certify that the foregoing Resolution No. CRA 07-03-20-01 was duly adopted by the Board of Directors of the Community Redevelopment Agency at a regular meeting thereof, held the 20th day of March 2007 by the following vote: AYES: DIRECTORS: Soto, Hribar, Uso, Allevato and Chairman Nielsen n EXHIBIT "A" ESTIMATED USE OF REFINANCE PROCEEDS Seasons at San Juan Capistrano Estimated Use of Refinance Proceeds Original Projections Feb -07 Total proceeds from refinancing $ 2,600,000 Estimated cost of refinancing (600,000) Proceeds from refinancing, net of costs 2,000,000 Distribution of Proceeds: Accrued Partnership Fees (71,000) Repayment of LP Advance and interest (230,000) Remaining proceeds after feesfadvance 1,699 000 Payment of Romer Note and Interest (50% of CF) (274,000) Payment of Developer Note Interest (25% of CF) (137,000) Payment of RDA Loan interest (25% of CF) (137,000) Remaining proceeds after repayment of Romer Note and Interest 1,151,000 Payment of Developer Note and Interest (50% of CF) (575,500) Payment of RDA Loan Interest (50% of CF) (575,500) Remaining proceeds after repayment of Developer Note and Interest Payment of RDA Loan Interest (50% of CF) Distribution to Partners (50% of CF) Remaining proceeds $ (Cost of Refinance $ 600,000 (Partnership fees 71,000 Repayment of LP Advance and Interest 230,000 Repayment of Romer Note and Interest 274,000 Repayment of Developer Note and Interest 712,500 Repayment of RDA Note Interest 712,500 Distributions - Use of Refinance Procceds Page 1 of 2 EXHIBIT "A" ESTIMATED USE OF REFINANCE PROCEEDS San Juan Capistrano Proiected Costs of Refinancing Project (1) Partnership should receive approximately $258,000 from CharterMac which is the refunding of the reserves that they held for insurance, taxes and replacements. (2) Amount may be refunded to partnership once FNMA and ARCS legal fees are finally resolved. (C) Any unused contingency funds will be refunded to partnership. (D) Old bonds will be redeemed on February 1 so interest will be paid on old bonds from January 1 to February 1. Need to confirm figures with trustee. (F) Unable to exactly determine what this amount will be so used the figure from the Torrance closing. (G) Per note, payment is 1.0093% of the outstanding balance. Page 2 of 2 SJC Projected Closing Memorandum Bond Counsel Jones Hall 37,500.00 Issuer Counsel Orrick 7,500.00 Issuer Closing Fee CSCDA 10,000.00 Issuer Annual Fee CSCDA 4,943.25 Limited Partner's Counsel Chernove 25,000.00 General Partners Counsel 0.00 FNMA Counsel O'Melveny 36,000.00 ARCS Costs ARCS 82,868.89 (E) ARCS Counsel Nevers 28,000.00 Underwriter's Fee Hutchinson 33,781.00 Co -Underwriters Fee Capmark 6,756.00 Disclosure Counsel Eichner 25,000.00 Preference Opinion Eichner 5,D00.00 Escrow Analysis Eichner 3,000.00 Trustee and Counsel 7,789.17 Rating S&P 7,500.00 Interest Rate Cap (10 year) 72,000.00 State Bond Reporting CDIAC 1,057.50 Title Insurance First American 11,942.00 Printing Bowne of Phoenix 5,000.00 Miscellaneous 41,696.88 CharterMac Legal fees 6,500.00 Prepayment Premium 0.00 Interest owed on old issuance from 111 to 2/1 32,562.31 (F) Premium Portion of Prior Loan Payment 54,553.00 (G) Premium Portion of Prior Bond Redemption (1%) 54,050.00 600,000.00 (A) Schedule 2 - Cost of Issuance in Closing Memorandum (B) Figures are from ARCS Settlement Statement. Breakdown of $188,523.60 for ARCS Costs: Origination Fee 62,440.00 Appraisal Report 5,500.00 Architectual/Engineer Report 2,300.00 Environmental Report 2,200.00 Underwriting/ProcessinglOther 6,000.00 Short Term Interest (5 days x 667.78/day) 3,338.89 Tax Service Contract 840.00 UCC Searches 250.00 Tax Impounds 0.00 Insurance Impounds 0.00 Legal Holdback 0.00 82, 868.89 (1) Partnership should receive approximately $258,000 from CharterMac which is the refunding of the reserves that they held for insurance, taxes and replacements. (2) Amount may be refunded to partnership once FNMA and ARCS legal fees are finally resolved. (C) Any unused contingency funds will be refunded to partnership. (D) Old bonds will be redeemed on February 1 so interest will be paid on old bonds from January 1 to February 1. Need to confirm figures with trustee. (F) Unable to exactly determine what this amount will be so used the figure from the Torrance closing. (G) Per note, payment is 1.0093% of the outstanding balance. Page 2 of 2 EXHIBIT °B" ' [Fannie Mae Subordination Agreement] RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: ARCS Commercial Mortgage Co., L.P. 26901 Agoura Road, Suite 200 Calabasas Hills, California 91301-5109 Attention: Loan Administration Manager ARCS Loan # 400794 SUBORDINATION AGREEMENT (Fannie Mae/San Juan Capistrano Redevelopment Agency) EXHIBIT B DOCS00 1207245v5/022658-0022 SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of [ ] 1, 2007 by and among (i) FANNIE MAE, a federally chartered and stockholder owned corporation ("Fannie Mae"), and THE BANK OF NEW YORK TRUST COMPANY, N.A., as trustee ("Trustee"), as their interests may appear (collectively "Senior Lender"); (ii) SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a public body, corporate and politic (the "Subordinate Lender"); and (iii) SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership (the "Borrower"). RECITALS A. California Statewide Communities Development Authority ("Issuer"), is issuing its $[5,405,000] Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Seasons at San Juan Capistrano Apartments) 2007 Series [TBD] (the "Bonds") pursuant to a Trust Indenture dated as of [ 1 1, 2007, the proceeds of which are being used to fund a loan to the Borrower in the original principal amount of $[5,405,000] (the "First Mortgage Loan"). The First Mortgage Loan is or will be secured by a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (California) executed by Borrower (the "First Mortgage") on a multifamily housing project known as Seasons I at San Juan Capistrano Apartments and located in San Juan Capistrano, California (the "Property"). The Property is more fully described in Exhibit A attached hereto. The Borrower's obligation to repay the First Mortgage Loan is evidenced by a Multifamily Note dated as of 1, 2007 together with all addenda (the "First Mortgage Note"), and is due in full on [ 20_]. The First Mortgage Loan will be held by Fannie Mae and, in connection therewith, the First Mortgage and the First Mortgage Note will be assigned by the Issuer to Senior Lender. B. Subordinate Lender previously made a loan to Borrower in the amount of $1,550,000 (the "Subordinate Loan") which is secured by, among other things, a mortgage lien against the Property. C. The Senior Lender has agreed to permit the Subordinate Lender to maintain the Subordinate Loan and to hold a subordinate mortgage lien against the Property subject to all of the conditions contained in this Agreement. NOW, THEREFORE, in order to induce the Senior Lender to permit the Subordinate Lender to maintain the Subordinate Loan and subordinate mortgage lien against the Property, and in consideration thereof, the Senior Lender, the Subordinate Lender and the Borrower agree as follows: 1. Definitions. In addition to the terms defined in the Recitals to this Agreement, for purposes of this Agreement the following terms have the respective meanings set forth below: — "Affiliate" means, when used with respect to a Person, any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, C under common control with, or which controls such Person (the term "control" for these ' purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests). "Borrower" means the Person named as such in the first paragraph of this Agreement and any other Person (other than the Senior Lender) who acquires title to the Property after the date of this Agreement. "Business Day" means any day other than Saturday, Sunday or a day on which Fannie Mae is not open for business. "Default Notice" means: (a) a copy of the written notice from the Senior Lender to the Borrower stating that a First Mortgage Loan Default has occurred under the First Mortgage Loan; or (b) a copy of the written notice from the Subordinate Lender to the Borrower stating that a Subordinate Loan Default has occurred under the Subordinate Loan. Each Default Notice shall specify the default upon which such Default Notice is based. "First Mortgage Loan Default" means the occurrence of a default by the Borrower in performing or observing any of the terms, covenants or conditions in the First Mortgage Loan ' Documents to be performed or observed by it, which continues beyond any applicable period provided in the First Mortgage Loan Documents for curing the default. "First Mortgage Loan Documents" means the First Mortgage Note, the First Mortgage and all other documents evidencing, securing or otherwise executed and delivered in connection with the First Mortgage Loan. "Person" means an individual, estate, trust, partnership, corporation, limited liability company, limited liability partnership, governmental department or agency or any other entity which has the legal capacity to own property. "Senior Lender" means the Person named as such in the first paragraph on page 1 of this Agreement and any other Person who becomes the legal holder of the First Mortgage Note after the date of this Agreement. "Servicer" means ARCS Commercial Mortgage Co., L.P., a California limited partnership, or any successor entity designated by Fannie Mae to service the First Mortgage Loan. "Subordinate Lender" means the Person named as such in the first paragraph on page 1 of this Agreement and any other Person who becomes the legal holder of the Subordinate Note after the date of this Agreement. "Subordinate Loan Defauh'means a default by the Borrower in performing or observing any of the terms, covenants or conditions in the Subordinate Loan Documents to be performed or EM observed by it, which continues beyond any applicable period provided in the Subordinate Loan Documents for curing the default. "Subordinate Loan Documents" means the Subordinate Note, the Subordinate Mortgage, the Subordinate Owner Participation Agreement, the Subordinate Restrictive Covenants and all other documents evidencing, securing or otherwise executed and delivered in connection with the Subordinate Loan. "Subordinate Mortgage" collectively means the (a) Subordinated Deed of Trust with Assignment of Rents encumbering the Property as security for the Subordinate Loan recorded on December 21, 1995 as Instrument No. 19950568794 in the Official Records of Orange County, California and (b) Subordinated Assignment of Leases, Rents and Profits encumbering the Property as security for the Subordinate Loan recorded on December 21, 1995 as Instrument No. 19950568795 in the Official Records of Orange County, California. "Subordinate Note" means the Promissory Note Secured by Subordinated Deed of Trust dated November 30, 1995 issued by the Borrower to the Subordinate Lender, or order, evidencing the Subordinate Loan. "Subordinate Owner Participation Agreement" means the Owner Participation Agreement dated September 19, 1995 by and between Borrower and Subordinate Lender, evidencing the Subordinate Loan. "Subordinate Restrictive Covenants" means the Agreement of Restrictive Covenants Affecting Real Property encumbering the Property in connection with the Subordinate Loan recorded on December 21, 1995 as Instrument No. 19950568793 in the Official Records of Orange County, California. 2. Permission to Maintain Mortgage Lien Against Property. The Senior Lender agrees, notwithstanding the prohibition against inferior liens on the Property contained in the First Mortgage Loan Documents and subject to the provisions of this Agreement, to permit the Subordinate Lender to maintain the Subordinate Mortgage, the Subordinate Restrictive Covenants and other recorded Subordinate Loan Documents against the Property (which are subordinate in all respects to the lien of the First Mortgage) to secure the Borrower's obligation to repay the Subordinate Note and all other obligations, indebtedness and liabilities of the Borrower to the Subordinate Lender under and in connection with the Subordinate Loan. Such permission is subject to the condition that each of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is true and correct on the date of this Agreement and on the date on which any proceeds of the Subordinate Loan are disbursed to the Borrower. If any of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is not true and correct on such dates, the provisions of the First Mortgage Loan Documents applicable to unpermitted liens on the Property shall apply. Lem 3. Borrower's and Subordinate Lender's Representations and Warranties. ' The Borrower and the Subordinate Lender each makes the following representations and warranties to the Senior Lender: (a) Relationship of Borrower to Subordinate Lender and Senior Lender. The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower. (b) Term. The term of the Subordinate Note does not end before the term of the First Mortgage Note. (c) Subordinate Loan Documents. The executed Subordinate Loan Documents are substantially in the same forms as those submitted to, and approved by, Fannie Mae prior to the date of this Agreement. Borrower has delivered to Senior Lender an executed copy of each of the Subordinate Loan Documents, certified to be true, correct and complete. (d) First Mortgage Loan Documents. Borrower (but not Subordinate Lender) represents and warrants to Senior Lender that the executed First Mortgage Loan Documents are substantially in the same forms as, when applicable, those submitted to, and approved by, Fannie Mae prior to the date of this Agreement. Upon execution and delivery of the First Mortgage Loan Documents, Borrower shall deliver to Subordinate Lender an executed copy of each of the First Mortgage Loan Documents, certified to be true, correct and complete. ' 4. Terms of Subordination. (a) Agreement to Subordinate. The Senior Lender and the Subordinate Lender agree that: (i) the indebtedness evidenced by the Subordinate Loan Documents is and shall be subordinated in right of payment, to the extent and in the manner provided in this Agreement to the prior payment in full of the indebtedness evidenced by the First Mortgage Loan Documents, and (ii) the Subordinate Mortgage and the other Subordinate Loan Documents are and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the First Mortgage and the other First Mortgage Loan Documents and to all advances heretofore made or which may hereafter be made pursuant to the First Mortgage and the other First Mortgage Loan Documents (including but not limited to, all sums advanced for the purposes of (1) protecting or further securing the lien of the First Mortgage, curing defaults by the Borrower under the First Mortgage Loan Documents or for any other purpose expressly permitted by the First Mortgage, or (2) constructing, renovating, repairing, furnishing, fixturing or equipping the Property). (b) Subordination of Subrogation Rights. The Subordinate Lender agrees that if, by reason of its payment of real estate taxes or other monetary obligations of the Borrower, or by reason of its exercise of any other right or remedy under the Subordinate Loan Documents, it acquires by right of subrogation or otherwise a lien on the Property which (but for this subsection) would be senior to the lien of the First Mortgage, then, in that event, such lien ' shall be subject and subordinate to the lien of the First Mortgage. LMI (e) Payments Before First Mortgage Loan Default. Until the Subordinate — Lender receives a Default Notice of a First Mortgage Loan Default from the Senior Lender, the Subordinate Lender shall be entitled to retain for its own account all payments made under or pursuant to the Subordinate Loan Documents. (d) Payments After First Mortgage Loan Default. The Borrower agrees that, after it receives notice (or otherwise acquires knowledge) of a First Mortgage Loan Default, it will not make any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. The Subordinate Lender agrees that, after it receives a Default Notice from the Senior Lender with written instructions directing the Subordinate Lender not to accept payments from the Borrower on account of the Subordinate Loan, it will not accept any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. If the Subordinate Lender receives written notice from the Senior Lender that the First Mortgage Loan Default which gave rise to the Subordinate Lender's obligation not to accept payments has been cured, waived, or otherwise suspended by the Senior Lender, the restrictions on payment to the Subordinate Lender in this Section 4 shall terminate, and the Senior Lender shall have no right to any subsequent payments made to the Subordinate Lender by the Borrower prior to the Subordinate Lender's receipt of a new Default Notice from the Senior Lender in accordance with the provisions of this Section 4(d). (e) Remitting Subordinate Loan Payments to Senior Lender. If, after the Subordinate Lender receives a Default Notice from the Senior Lender in accordance with subsection (d) above, the Subordinate Lender receives any payments under the Subordinate Loan Documents, the Subordinate Lender agrees that such payment or other distribution will be received and held in trust for the Senior Lender and unless the Senior Lender otherwise notifies the Subordinate Lender in writing, will be promptly remitted, in kind to the Senior Lender, properly endorsed to the Senior Lender, to be applied to the principal of, interest on and other amounts due under the First Mortgage Loan Documents in accordance with the provisions of the First Mortgage Loan Documents. By executing this Agreement, the Borrower specifically authorizes the Subordinate Lender to endorse and remit any such payments to the Senior Lender, and specifically waives any and all rights to have such payments returned to the Borrower or credited against the Subordinate Loan. Borrower and Senior Lender acknowledge and agree that payments received by the Subordinate Lender, and remitted to the Senior Lender under this Section 4, shall not be applied or otherwise credited against the Subordinate Loan, nor shall the tender of such payment to the Senior Lender waive any Subordinate Loan Default which may arise from the inability of the Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan. (f) Agreement Not to Commence Bankruptcy Proceeding. The Subordinate Lender agrees that during the term of this Agreement it will not commence, or join with any _ other creditor in commencing any bankruptcy reorganization, arrangement, insolvency or liquidation proceedings with respect to the Borrower, without the Senior Lender's prior written consent. 5. Default Under Subordinate Loan Documents. (a) Notice of Default and Cure Rights. The Subordinate Lender shall deliver to the Senior Lender a Default Notice within five Business Days in each case where the Subordinate Lender has given a Default Notice to the Borrower. Failure of the Subordinate Lender to send a Default Notice to the Senior Lender shall not prevent the exercise of the Subordinate Lender's rights and remedies under the Subordinate Loan Documents, subject to the provisions of this Agreement. The Senior Lender shall have the right, but not the obligation, to cure any Subordinate Loan Default within 60 days following the date of such notice; provided, however that the Subordinate Lender shall be entitled, during such 60 -day period, to continue to pursue its rights and remedies under the Subordinate Loan Documents. All amounts paid by the Senior Lender in accordance with the First Mortgage Loan Documents to cure a Subordinate Loan Default shall be deemed to have been advanced by the Senior Lender pursuant to, and shall be secured by the lien of, the First Mortgage. (b) Subordinate Lender's Exercise of Remedies After Notice to Senior Lender. If a Subordinate Loan Default occurs and is continuing, the Subordinate Lender agrees that, without the Senior Lender's prior written consent, it will not commence foreclosure proceedings with respect to the Property under the Subordinate Loan Documents or exercise any other rights or remedies it may have under the Subordinate Loan Documents, including, but not limited to accelerating the Subordinate Loan, collecting rents, appointing (or seeking the appointment of) a receiver or exercising any other rights or remedies thereunder unless and until it has given the Senior Lender at least 60 days' prior written notice; provided, however, that ' during such 60 day period, Subordinate Lender shall be entitled to seek specific performance of Borrower's obligations under the Subordinate Owner Participation Agreement and the Subordinate Restrictive Covenants. (c) Cross Default. The Borrower and the Subordinate Lender agree that a Subordinate Loan Default shall constitute a First Mortgage Loan Default under the First Mortgage Loan Documents and the Senior Lender shall have the right to exercise all rights or remedies under the First Mortgage Loan Documents in the same manner as in the case of any other First Mortgage Loan Default. If the Subordinate Lender notifies the Senior Lender in writing that any Subordinate Loan Default of which the Senior Lender has received a Default Notice has been cured or waived, as determined by the Subordinate Lender in its sole discretion, then provided that Senior Lender has not conducted a sale of the Property pursuant to its rights under the First Mortgage Loan Documents, any First Mortgage Loan Default under the First Mortgage Loan Documents arising solely from such Subordinate Loan Default shall be deemed cured, and the First Mortgage Loan shall be reinstated, provided, however, that the Senior Lender shall not be required to return or otherwise credit for the benefit of the Borrower any default rate interest or other default related charges or payments received by the Senior Lender during such First Mortgage Loan Default. 6. Default Under First Mortgage Loan Documents. ' (a) Notice of Default and Cure Rights. The Senior Lender shall deliver to the Subordinate Lender a Default Notice within five Business Days in each case where the Senior Lender has given a Default Notice to the Borrower. Failure of the Senior Lender to send :, a Default Notice to the Subordinate Lender shall not prevent the exercise of the Senior Lender's rights and remedies under the First Mortgage Loan Documents, subject to the provisions of this Agreement. The Subordinate Lender shall have the right, but not the obligation, to cure any such First Mortgage Loan Default within 60 days following the date of such notice; provided, however, that the Senior Lender shall be entitled during such 60 -day period to continue to pursue its remedies under the First Mortgage Loan Documents. Subordinate Lender may have up to 90 days from the date of the Default Notice to cure a non -monetary default if during such 90 -day period Subordinate Lender keeps current all payments required by the First Mortgage Loan Documents. In the event that such a non -monetary default creates an unacceptable level of risk relative to the Property, or Senior Lender's secured position relative to the Property, as determined by Senior Lender in its sole discretion, then Senior Lender may exercise during such 90 -day period all available rights and remedies to protect and preserve the Property and the rents, revenues and other proceeds from the Property. All amounts paid by the Subordinate Lender to the Senior Lender to cure a First Mortgage Loan Default shall be deemed to have been advanced by the Subordinate Lender pursuant to, and shall be secured by the lien of, the Subordinate Mortgage. (b) Cross Default. The Subordinate Lender agrees that, notwithstanding any contrary provision contained in the Subordinate Loan Documents, a First Mortgage Loan Default shall not constitute a default under the Subordinate Loan Documents if no other default occurred under the Subordinate Loan Documents until either (i) the Senior Lender has accelerated the maturity of the First Mortgage Loan, or (ii) the Senior Lender has taken affirmative action to exercise its rights under the First Mortgage to collect rent, to appoint (or seek the appointment of) a receiver or to foreclose on (or to exercise a power of sale contained in) the First Mortgage. At any time after a First Mortgage Loan Default is determined to constitute a default under the Subordinate Loan Documents, the Subordinate Lender shall be permitted to pursue its remedies for default under the Subordinate Loan Documents, subject to the restrictions and limitations of this Agreement. If at any time the Borrower cures any First Mortgage Loan Default to the satisfaction of the Senior Lender, as evidenced by written notice from the Senior Lender to the Subordinate Lender, any default under the Subordinate Loan Documents arising from such First Mortgage Loan Default shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as if such First Mortgage Loan Default had never occurred. 7. Conflict. The Borrower, the Senior Lender and the Subordinate Lender each agrees that, in the event of any conflict or inconsistency between the terms of the First Mortgage Loan Documents, the Subordinate Loan Documents and the terms of this Agreement, the terms of this Agreement shall govern and control solely as to the following: (a) the relative priority of the security interests of the Senior Lender and the Subordinate Lender in the Property; (b) the timing of the exercise of remedies by the Senior Lender and the Subordinate Lender under the First Mortgage and the Subordinate Mortgage, respectively; and (c) solely as between the Senior Lender and the Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which the Senior Lender and the Subordinate Lender have agreed to as expressly provided in this Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and shall not be deemed to: extend Borrower's time to cure any First Mortgage Loan Default or Subordinate Loan Default, as the case may be; give the Borrower the right to notice of any First IN Mortgage Loan Default or Subordinate Loan Default, as the case may be other than that, if any, ' provided, respectively under the First Mortgage Loan Documents or the Subordinate Loan Documents; or create any other right or benefit for Borrower as against Senior Lender or Subordinate Lender. 8. Rights and Obligations of the Subordinate Lender Under the Subordinate Loan Documents and of the Senior Lender under the First Mortgage Loan Documents. Subject to each of the other terms of this Agreement, all of the following provisions shall supersede any provisions of the Subordinate Loan Documents covering the same subject matter: (a) Protection of Security Interest. The Subordinate Lender shall not, without the prior written consent of the Senior Lender in each instance, take any action which has the effect of increasing the indebtedness outstanding under, or secured by, the Subordinate Loan Documents, except that the Subordinate Lender shall have the right to advance funds to cure First Mortgage Loan Defaults pursuant to Section 6(a) above and advance funds pursuant to the Subordinate Mortgage for the purpose of paying real estate taxes and insurance premiums, making necessary repairs to the Property and curing other defaults by the Borrower under the Subordinate Loan Documents. (b) Condemnation or Casualty. In the event of a taking or threatened taking by condemnation or other exercise of eminent domain of all or a portion of the Property (collectively, a "Taking") or the occurrence of a fire or other casualty resulting in damage to all ' or a portion of the Property (collectively, a "Casualty"), at any time or times when the First Mortgage remains a lien on the Property the following provisions shall apply: (1) The Subordinate Lender hereby agrees that its rights (under the Subordinate Loan Documents or otherwise) to participate in any proceeding or action relating to a Taking and/or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be and remain subordinate in all respects to the Senior Lender's rights under the First Mortgage Loan Documents with respect thereto, and the Subordinate Lender shall be bound by any settlement or adjustment of a claim resulting from a Taking or a Casualty made by the Senior Lender; provided, however, this subsection and/or anything contained in this Agreement shall not limit the rights of the Subordinate Lender to file any pleadings, documents, claims or notices with the appropriate court with jurisdiction over the proposed Taking and/or Casualty; and (2) all proceeds received or to be received on account of a Taking or a Casualty, or both, shall be applied (either to payment of the costs and expenses of repair and restoration or to payment of the First Mortgage Loan) in the manner determined by the Senior Lender in its sole discretion; provided, however, that if the Senior Lender elects to apply such proceeds to payment of the principal of, interest on and other amounts payable under the First Mortgage Loan, any proceeds remaining after the satisfaction in full of the principal of, interest on and other amounts payable under the ' First Mortgage Loan shall be paid to, and may be applied by, the Subordinate Lender in accordance with the applicable provisions of the Subordinate Loan Documents, provided L�3 however, the Senior Lender agrees to consult with the Subordinate Lender in determining the application of Casualty proceeds, provided further however that in the event of any disagreement between the Senior Lender and the Subordinate Lender over the application of Casualty proceeds, the decision of the Senior Lender, in its sole discretion, shall prevail. (c) No Modification of Subordinate Loan Documents. The Borrower and the Subordinate Lender each agrees that, until the principal of, interest on and all other amounts payable under the First Mortgage Loan Documents have been paid in full, it will not, without the prior written consent of the Senior Lender in each instance, increase the amount of the Subordinate Loan, increase the required payments due under the Subordinate Loan, decrease the tern of the Subordinate Loan, increase the interest rate on the Subordinate Loan, or otherwise amend the Subordinate Loan terms in a manner that creates a material adverse effect upon the Senior Lender under the First Mortgage Loan Documents. Any unauthorized amendment of the Subordinate Loan Documents or assignment of the Subordinate Lender's interest in the Subordinate Loan without the Senior Lender's consent shall be void ab initio and of no effect whatsoever. 9. Modification or Refinancing of First Mortgage Loan. The Subordinate Lender consents to any agreement or arrangement in which the Senior Lender waives, postpones, extends, reduces or modifies any provisions of the First Mortgage Loan Documents, including any provision requiring the payment of money. 10. Default by the Subordinate Lender or Senior Lender. If the Subordinate Lender or Senior Lender defaults in performing or observing any of the terms, covenants or conditions to be performed or observed by it under this Agreement, the other, non -defaulting lender shall have the right to all available legal and equitable relief. 11. Notices. Each notice, request, demand, consent, approval or other communication (hereinafter in this Section referred to collectively as "notices" and referred to singly as a "notice") which the Senior Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a) personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to have been received at the time so delivered); or (b) sent by Federal Express (or other similar national overnight courier) designating early morning delivery (any notice so delivered shall be deemed to have been received on the next Business Day following receipt by the courier); or (c) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any notice so sent shall be deemed to have been received two days after mailing in the United States), addressed to the respective parties as follows: SENIOR LENDER: ' Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM and to: Washington, DC 20016 2899 Attention: Director, Multifamily Asset Management Re: $[5,405,000] Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Seasons at San Juan Capistrano Apartments) 2007 Series [TBD] The Bank of New York Trust Company, N.A. 550 Kearny Street, Suite 600 San Francisco, CA 94108 Attention: Patrick J. Mantanane Re: $[5,405,000] Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Seasons at San Juan Capistrano Apartments) 2007 Series [TBD] with a copy to: ' ARCS Commercial Mortgage Co., L.P. 10731 Treena Street, Suite 101 San Diego, CA 92131 Attention: Ms. Kelli Tyler Re: Seasons I at San Juan Capistrano Apartments; Loan No. 400794 SUBORDINATE LENDER: San Juan Capistrano Redevelopment Agency 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attention: Executive Director Re: San Juan Capistrano Housing Investors, L.P. IZ�77:z ir.+fes San Juan Capistrano Housing Investors, L.P. c/o Simpson Housing Solutions 320 Golden Shore, Suite 200 Long Beach, California 90802 Attention: Michael Costa Re: Seasons I at San Juan Capistrano Apartments no Any party may, by notice given pursuant to this Section, change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses for its notices, but notice of a change of address shall only be effective upon receipt. 13. General. (a) Assignment/Successors. This Agreement shall be binding upon the Borrower, the Senior Lender and the Subordinate Lender and shall inure to the benefit of the respective legal successors and assigns of the Senior Lender and the Subordinate Lender. (b) No Partnership or Joint Venture. The Senior Lender's permission for the placement of the Subordinate Loan Documents does not constitute the Senior Lender as a joint venturer or partner of the Subordinate Lender. No party hereto shall hold itself out as a partner, agent or Affiliate of any other party hereto. (c) Senior Lender's and Subordinate Lender's Consent. Wherever the Senior Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Senior Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. Wherever the Subordinate Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Subordinate Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. (d) Further Assurances. The Subordinate Lender, the Senior Lender and the Borrower each agree, at the Borrower's expense, to execute and deliver all additional instruments and/or documents reasonably required by any other party to this Agreement in order to evidence that the Subordinate Mortgage and the other Subordinate Loan Documents are subordinate to the lien, covenants and conditions of the First Mortgage, or to further evidence the intent of this Agreement. (e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties hereto. (f) Governing Law. This Agreement shall be governed by the laws of the State in which the Property is located. (g) Severable Provisions. If any provision of this Agreement shall be invalid or unenforceable to any extent, then the other provisions of this Agreement, shall not be affected thereby and shall be enforced to the greatest extent permitted by law. (h) Term. The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (i) the payment of all of the principal of, interest on and other amounts payable under the First Mortgage Loan Documents; (ii) the payment of all of the principal of, interest on and other amounts payable under the Subordinate Loan Documents, other than by reason of payments which the Subordinate Lender is obligated to remit to the Senior Lender pursuant to Section 4 hereof; (iii) the acquisition by the Senior Lender of title to the Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the First Mortgage; or (iv) the acquisition by the B-11 Subordinate Lender of title to the Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the Subordinate Mortgage, but only if such acquisition of title does not violate any of the terms of this Agreement. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument. 6) Rights of Fannie Mae, Trustee and Servicer. Notwithstanding any provision of this Agreement to the contrary, the parties acknowledge and agree that, as among Fannie Mae, Trustee and Servicer, the relative rights of the parties constituting Senior Lender under this Agreement shall be governed by the terms of the Assignment and Intercreditor Agreement, dated as of the date hereof, by and among the Issuer, Trustee and Fannie Mae, a copy of which has been reviewed and acknowledged by Borrower. The foregoing shall in no event relieve Borrower of or modify the obligations of Borrower and Subordinate Lender to the Senior Lender under this Agreement. [Continued on next page] le i IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. SENIOR LENDER: FANNIE MAE By: Name: Its: THE BANK OF NEW YORK TRUST COMPANY, N.A., as trustee By: Name: Its: [Signatures continue on next page] B-13 SUBORDINATE LENDER: SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a public body, corporate and politic By: Name: Its: ATTEST: 0 [Title] APPROVED AS TO FORM: By: ' [Title] [Signatures continue on next page] B-14 BORROWER: SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership By: LINC Housing Corporation, a California nonprofit public benefit corporation Its: General Partner Un Hunter L. Johnson, President MR ACKNOWLEDGMENT ' STATE OF CALIFORNIA ) SS. COUNTY OF ) On 2007, before me, , a Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [Seal] WITNESS my hand and official seal. on Notary Public ACKNOWLEDGMENT STATE OF CALIFORNIA SS. COUNTY OF On 2007, before me, , a Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. [Seal] B-17 Notary Public ACKNOWLEDGMENT ISTATE OF CALIFORNIA SS. COUNTY OF On 2007, before me, , a Notary Public, personally appeared personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (Seal] Notary Public ACKNOWLEDGMENT STATE OF CALIFORNIA SS. COUNTY OF On 2007, before me, , a Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. [Seal] Part Notary Public EXHIBIT A ' LEGAL DESCRIPTION OF THE PROPERTY REAL PROPERTY SITUATED IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AND DESCRIBED AS FOLLOWS: THAT PORTION OF THE SOUTHWEST QUARTER OF SECTION 6, TOWNSHIP 8 SOUTH, RANGE 7 WEST, SAN BERNARDINO BASE AND MERIDIAN, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTER LINES OF GANADO ROAD AND THE OLD ORTEGA HIGHWAY, AS SHOWN A ON MAP FILED IN BOOK 27 PAGE 8 OF RECORD OF SURVEYS IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA, SAID POINT BEING THE MOST NORTHERLY CORNER OF LAND DESCRIBED IN THE DEED TO ARLEY H. LECK AND WIFE, RECORDED DECEMBER 24, 1954 IN BOOK 2905 PAGE 363 OF OFFICIAL RECORDS; THENCE SOUTH 420 02' 00" EAST 104.10 FEET ALONG THE CENTER LINE OF SAID GANADO ROAD TO AN ANGLE POINT IN SAID LAND OF LECK; THENCE SOUTH 03° 20' 10" WEST 169.97 FEET; THENCE SOUTH 63° 23' 00" WEST 7.24 FEET ALONG THE SOUTHERLY LINE OF SAID LAND OF LECK TO THE TRUE POINT OF BEGINNING, SAID POINT LIES ON THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ' ROAD; THENCE SOUTH 21° 00' 15" EAST ALONG THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ROAD 15.27 FEET; THENCE LEAVING SAID RIGHT OF WAY LINE, SOUTH 030 20' 10" WEST 294.00 FEET; THENCE SOUTH 740 29' 00" WEST 255.73 FEET; THENCE NORTH 15° 28' 37" WEST 12.93 FEET; THENCE NORTH 59° 36' 20" WEST 20.50 FEET TO A POINT ON A NON -TANGENT CURVE CONCAVE NORTHWESTERLY HAVING A RADIUS OF 25.00 FEET; THENCE SOUTHERLY AND WESTERLY ALONG SAID CURVE ON ARC DISTANCE OF 19.25 FEET, THROUGH A CENTRAL ANGLE OF 440 07' 43" TO A TANGENT LINE; THENCE SOUTH 740 31' 23" WEST 51.29 FEET TO A TANGENT CURVE CONCAVE NORTHEASTERLY, HAVING A RADIUS OF 25.00 FEET; THENCE WESTERLY AND NORTHERLY ALONG SAID CURVE AN ARC DISTANCE OF 46.89 FEET, THROUGH A CENTRAL ANGLE OF 107° 27' 18" TO A TANGENT LINE; THENCE NORTH 01° 58'40" EAST 87.43 FEET; THENCE NORTH 400 17' 45" EAST 36.81 FEET; THENCE NORTH 03° 24' 18" EAST 65.51 FEET TO THE SOUTHERLY LINE OF PARCEL 2 OF PARCEL MAP NO. 85-328 AS FILED IN BOOK 241, PAGES 12 AND 13 OF PARCEL MAPS, RECORDS OF THE COUNTY OF ORANGE; THENCE NORTH 63° 23' 00" EAST ALONG THE SOUTHERLY LINE OF SAID PARCEL MAP 218.99 FEET TO THE SOUTHEASTERLY CORNER OF SAID PARCEL MAP NO. 85-328; THENCE NORTH 16° 33' 40" WEST ALONG THE EASTERLY LINE OF SAID PARCEL MAP 202.59 FEET TO THE SOUTHERLY RIGHT OF WAY LINE OF ORTEGA HIGHWAY; THENCE NORTH 680 59' 45" EAST ALONG THE SOUTHERLY RIGHT OF WAY LINE OF ORTEGA HIGHWAY 124.81 FEET TO A TANGENT CURVE ' CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 25.00 FEET; THENCE EASTERLY AND SOUTHERLY ALONG SAID CURVE AN ARC DISTANCE OF 39.27 FEET, THROUGH A CENTRAL ANGLE OF 90° 00' 00" TO A TANGENT LINE, SAID B-20 POINT LYING ON THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ROAD; THENCE SOUTH 210 00' 15" EAST ALONG THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ROAD 160.67 FEET TO THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS LOT 2 OF LOT LINE ADJUSTMENT NO. 95 -PM 85- 328-1, RECORDED OCTOBER 30, 1995, AS INSTRUMENT NO. 95-480794, OFFICIAL RECORDS. APN: 666-241-10 B-21 EXHIBIT "C" [ARCS Subordination Agreement] RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: ARCS Commercial Mortgage Co., L.P. 10731 Treena Street, Suite 101 San Diego, CA 92131 Attention: Ms. Kelli A. Tyler ARCS Loan No. 400795 SUBORDINATION AGREEMENT (ARCS/San Juan Capistrano Redevelopment Agency) SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of [ 1> 2007 by and among (i) ARCS COMMERCIAL MORTGAGE CO., L.P., a California limited partnership (the "Senior Lender"), (ii) SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a public body, corporate and politic (the "Subordinate Lender"), and (iii) SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership (the "Borrower"). RECITALS A. The Senior Lender is making a loan to the Borrower in the original principal amount of $[2,400,000] (the "First Mortgage Loan"). The First Mortgage Loan is or will be secured by a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (California) executed by Borrower (the "First Mortgage") on a multifamily housing project known as Seasons I at San Juan Capistrano Apartments and located in San Juan Capistrano, California (the "Property"). The Property is more fully described in Exhibit A attached hereto. The Borrower's obligation to repay the First Mortgage Loan is evidenced by a Multifamily Note dated [ 1, 2007 together with all addenda (the "First Mortgage Note"), and is due in full on [ 20_]. B. Subordinate Lender previously made a loan to Borrower in the amount of $1,550,000 (the "Subordinate Loan") which is secured by, among other things, a mortgage lien against the Property. C. The Senior Lender has agreed to permit the Subordinate Lender to maintain the Subordinate Loan and to hold a subordinate mortgage lien against the Property subject to all of the conditions contained in this Agreement. D. The Senior Lender intends to sell, transfer and deliver the First Mortgage Note and assign the First Mortgage to Fannie Mae. NOW, THEREFORE, in order to induce the Senior Lender to permit the Subordinate Lender to maintain the Subordinate Loan and subordinate mortgage lien against the Property, and in consideration thereof, the Senior Lender, the Subordinate Lender and the Borrower agree as follows: 1. Definitions. In addition to the terms defined in the Recitals to this Agreement, for purposes of this Agreement the following terms have the respective meanings set forth below: "Affiliate" means, when used with respect to a Person, any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls such Person (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to C-1 make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests). "Borrower" means the Person named as such in the first paragraph of this Agreement and any other Person (other than the Senior Lender) who acquires title to the Property after the date of this Agreement. "Business Day" means any day other than Saturday, Sunday or a day on which the Senior Lender is not open for business. "Default Notice" means: (a) a copy of the written notice from the Senior Lender to the Borrower stating that a First Mortgage Loan Default has occurred under the First Mortgage Loan; or (b) a copy of the written notice from the Subordinate Lender to the Borrower stating that a Subordinate Loan Default has occurred under the Subordinate Loan. Each Default Notice shall specify the default upon which such Default Notice is based. "First Mortgage Loan Default" means the occurrence of a default by the Borrower in performing or observing any of the terms, covenants or conditions in the First Mortgage Loan Documents to be performed or observed by it, which continues beyond any applicable period provided in the First Mortgage Loan Documents for curing the default. ' "First Mortgage Loan Documents" means the First Mortgage Note, the First Mortgage and all other documents evidencing, securing or otherwise executed and delivered in connection with the First Mortgage Loan. "Person" means an individual, estate, trust, partnership, corporation, limited liability company, limited liability partnership, governmental department or agency or any other entity which has the legal capacity to own property. "Senior Lender" means the Person named as such in the first paragraph on page 1 of this Agreement. When Fannie Mae or any other Person becomes the legal holder of the First Mortgage Note, Fannie Mae or such other Person shall automatically become the Senior Lender. "Subordinate Lender" means the Person named as such in the first paragraph on page 1 of this Agreement and any other Person who becomes the legal holder of the Subordinate Note after the date of this Agreement. "Subordinate Loan Default" means a default by the Borrower in performing or observing any of the terms, covenants or conditions in the Subordinate Loan Documents to be performed or observed by it, which continues beyond any applicable period provided in the Subordinate Loan Documents for curing the default. "Subordinate Loan Documents" means the Subordinate Note, the Subordinate ' Mortgage, the Subordinate Owner Participation Agreement, the Subordinate Restrictive Covenants and all other documents evidencing, securing or otherwise executed and delivered in connection with the Subordinate Loan C-2 "Subordinate Mortgage" collectively means the (a) Subordinated Deed of Trust with Assignment of Rents encumbering the Property as security for the Subordinate Loan recorded on December 21, 1995 as Instrument No. 19950568794 in the Official Records of Orange County, California and (b) Subordinated Assignment of Leases, Rents and Profits encumbering the Property as security for the Subordinate Loan recorded on December 21, 1995 as Instrument No. 19950568795 in the Official Records of Orange County, California. "Subordinate Note" means the Promissory Note Secured by Subordinated Deed of Trust dated November 30, 1995 issued by the Borrower to the Subordinate Lender, or order, evidencing the Subordinate Loan. "Subordinate Owner Participation Agreement" means the Owner Participation Agreement dated September 19, 1995 by and between Borrower and Subordinate Lender, evidencing the Subordinate Loan. "Subordinate Restrictive Covenants" means the Agreement of Restrictive Covenants Affecting Real Property encumbering the Property in connection with the Subordinate Loan recorded on December 21, 1995 as Instrument No. 19950568793 in the Official Records of Orange County, California. 2. Permission to Maintain Mortgage Lien Against Property. The Senior Lender agrees, notwithstanding the prohibition against inferior liens on the Property contained in the First Mortgage Loan Documents and subject to the provisions of this Agreement, to permit the Subordinate Lender to maintain the Subordinate Mortgage, the Subordinate Restrictive Covenants and other recorded Subordinate Loan Documents against the Property (which are subordinate in all respects to the lien of the First Mortgage) to secure the Borrower's obligation to repay the Subordinate Note and all other obligations, indebtedness and liabilities of the Borrower to the Subordinate Lender under and in connection with the Subordinate Loan. Such permission is subject to the condition that each of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is true and correct on the date of this Agreement and on the date on which any proceeds of the Subordinate Loan are disbursed to the Borrower. If any of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is not true and correct on such dates, the provisions of the First Mortgage Loan Documents applicable to unpermitted liens on the Property shall apply. 3. Borrower's and Subordinate Lender's Representations and Warranties. The Borrower and the Subordinate Lender each makes the following representations and warranties to the Senior Lender: (a) Relationship of Borrower to Subordinate Lender and Senior Lender. The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower. — (b) Term. The term of the Subordinate Note does not end before the term of the First Mortgage Note. C-3 (c) Subordinate Loan Documents. The executed Subordinate Loan ' Documents are substantially in the same forms as those submitted to, and approved by, Fannie Mae prior to the date of this Agreement. Borrower has delivered to Senior Lender an executed copy of each of the Subordinate Loan Documents, certified to be true, correct and complete. (d) First Mortgage Loan Documents. Borrower (but not Subordinate Lender) represents and warrants to Senior Lender that the executed First Mortgage Loan Documents are substantially in the same forms as, when applicable, those submitted to, and approved by, Fannie Mae prior to the date of this Agreement. Upon execution and delivery of the First Mortgage Loan Documents, Borrower shall deliver to Subordinate Lender an executed copy of each of the First Mortgage Loan Documents, certified to be true, correct and complete. 4. Terms of Subordination. (a) Agreement to Subordinate. The Senior Lender and the Subordinate Lender agree that: (i) the indebtedness evidenced by the Subordinate Loan Documents is and shall be subordinated in right of payment, to the extent and in the manner provided in this Agreement to the prior payment in full of the indebtedness evidenced by the First Mortgage Loan Documents, and (ii) the Subordinate Mortgage and the other Subordinate Loan Documents are and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the First Mortgage and the other First Mortgage Loan Documents and to all advances heretofore made or which may hereafter be made pursuant to the First Mortgage and the other First Mortgage Loan Documents (including but not limited to, all sums advanced for ' the purposes of (1) protecting or further securing the lien of the First Mortgage, curing defaults by the Borrower under the First Mortgage Loan Documents or for any other purpose expressly permitted by the First Mortgage, or (2) constructing, renovating, repairing, furnishing, fixturing or equipping the Property). (b) Subordination of Subrogation Rights. The Subordinate Lender agrees that if, by reason of its payment of real estate taxes or other monetary obligations of the Borrower, or by reason of its exercise of any other right or remedy under the Subordinate Loan Documents, it acquires by right of subrogation or otherwise a lien on the Property which (but for this subsection) would be senior to the lien of the First Mortgage, then, in that event, such lien shall be subject and subordinate to the lien of the First Mortgage. (c) Payments Before First Mortgage Loan Default. Until the Subordinate Lender receives a Default Notice of a First Mortgage Loan Default from the Senior Lender, the Subordinate Lender shall be entitled to retain for its own account all payments made under or pursuant to the Subordinate Loan Documents. (d) Payments After First Mortgage Loan Default. The Borrower agrees that, after it receives notice (or otherwise acquires knowledge) of a First Mortgage Loan Default, it will not make any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. The Subordinate Lender agrees that, after it receives a Default Notice from the Senior Lender with written instructions directing the Subordinate Lender not to C-4 accept payments from the Borrower on account of the Subordinate Loan, it will not accept any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. If the Subordinate Lender receives written notice from the Senior Lender that the First Mortgage Loan Default which gave rise to the Subordinate Lender's obligation not to accept payments has been cured, waived, or otherwise suspended by the Senior Lender, the restrictions on payment to the Subordinate Lender in this Section 4 shall terminate, and the Senior Lender shall have no right to any subsequent payments made to the Subordinate Lender by the Borrower prior to the Subordinate Lender's receipt of a new Default Notice from the Senior Lender in accordance with the provisions of this Section 4(d). (e) Remitting Subordinate Loan Payments to Senior Lender. If, after the Subordinate Lender receives a Default Notice from the Senior Lender in accordance with subsection (d) above, the Subordinate Lender receives any payments under the Subordinate Loan Documents, the Subordinate Lender agrees that such payment or other distribution will be received and held in trust for the Senior Lender and unless the Senior Lender otherwise notifies the Subordinate Lender in writing, will be promptly remitted, in kind to the Senior Lender, properly endorsed to the Senior Lender, to be applied to the principal of, interest on and other amounts due under the First Mortgage Loan Documents in accordance with the provisions of the First Mortgage Loan Documents. By executing this Agreement, the Borrower specifically authorizes the Subordinate Lender to endorse and remit any such payments to the Senior Lender, and specifically waives any and all rights to have such payments returned to the Borrower or -- credited against the Subordinate Loan. Borrower and Senior Lender acknowledge and agree that payments received by the Subordinate Lender, and remitted to the Senior Lender under this Section 4, shall not be applied or otherwise credited against the Subordinate Loan, nor shall the tender of such payment to the Senior Lender waive any Subordinate Loan Default which may arise from the inability of the Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan. (f) Agreement Not to Commence Bankruptcy Proceeding. The Subordinate Lender agrees that during the term of this Agreement it will not commence, or join with any other creditor in commencing any bankruptcy reorganization, arrangement, insolvency or liquidation proceedings with respect to the Borrower, without the Senior Lender's prior written consent. 5. Default Under Subordinate Loan Documents. (a) Notice of Default and Cure Rights. The Subordinate Lender shall deliver to the Senior Lender a Default Notice within five Business Days in each case where the Subordinate Lender has given a Default Notice to the Borrower. Failure of the Subordinate Lender to send a Default Notice to the Senior Lender shall not prevent the exercise of the Subordinate Lender's rights and remedies under the Subordinate Loan Documents, subject to the provisions of this Agreement. The Senior Lender shall have the right, but not the obligation, to cure any Subordinate Loan Default within 60 days following the date of such notice; provided, however that the Subordinate Lender shall be entitled, during such 60 -day period, to continue to pursue its rights and remedies under the Subordinate Loan Documents. All amounts paid by the C-5 Senior Lender in accordance with the First Mortgage Loan Documents to cure a Subordinate Loan Default shall be deemed to have been advanced by the Senior Lender pursuant to, and shall be secured by the lien of, the First Mortgage. (b) Subordinate Lender's Exercise of Remedies After Notice to Senior Lender. If a Subordinate Loan Default occurs and is continuing, the Subordinate Lender agrees that, without the Senior Lender's prior written consent, it will not commence foreclosure proceedings with respect to the Property under the Subordinate Loan Documents or exercise any other rights or remedies it may have under the Subordinate Loan Documents, including, but not limited to accelerating the Subordinate Loan, collecting rents, appointing (or seeking the appointment of) a receiver or exercising any other rights or remedies thereunder unless and until it has given the Senior Lender at least 60 days' prior written notice; provided, however, that during such 60 day period, Subordinate Lender shall be entitled to seek specific performance of Borrower's obligations under the Subordinate Owner Participation Agreement and the Subordinate Restrictive Covenants. (c) Cross Default. The Borrower and the Subordinate Lender agree that a Subordinate Loan Default shall constitute a First Mortgage Loan Default under the First Mortgage Loan Documents and the Senior Lender shall have the right to exercise all rights or remedies under the First Mortgage Loan Documents in the same manner as in the case of any other First Mortgage Loan Default. If the Subordinate Lender notifies the Senior Lender in writing that any Subordinate Loan Default of which the Senior Lender has received a Default Notice has been cured or waived, as determined by the Subordinate Lender in its sole discretion, ' then provided that Senior Lender has not conducted a sale of the Property pursuant to its rights under the First Mortgage Loan Documents, any First Mortgage Loan Default under the First Mortgage Loan Documents arising solely from such Subordinate Loan Default shall be deemed cured, and the First Mortgage Loan shall be reinstated, provided, however, that the Senior Lender shall not be required to return or otherwise credit for the benefit of the Borrower any default rate interest or other default related charges or payments received by the Senior Lender during such First Mortgage Loan Default. 6. Default Under First Mortgage Loan Documents. (a) Notice of Default and Cure Rights, The Senior Lender shall deliver to the Subordinate Lender a Default Notice within five Business Days in each case where the Senior Lender has given a Default Notice to the Borrower. Failure of the Senior Lender to send a Default Notice to the Subordinate Lender shall not prevent the exercise of the Senior Lender's rights and remedies under the First Mortgage Loan Documents, subject to the provisions of this Agreement. The Subordinate Lender shall have the right, but not the obligation, to cure any such First Mortgage Loan Default within 60 days following the date of such notice; provided, however, that the Senior Lender shall be entitled during such 60 -day period to continue to pursue its remedies under the First Mortgage Loan Documents. Subordinate Lender may have up to 90 days from the date of the Default Notice to cure a non -monetary default if during such 90 -day period Subordinate Lender keeps current all payments required by the First Mortgage Loan ' Documents. In the event that such a non -monetary default creates an unacceptable level of risk relative to the Property, or Senior Lender's secured position relative to the Property, as determined by Senior Lender in its sole discretion, then Senior Lender may exercise during such C-6 90 -day period all available rights and remedies to protect and preserve the Property and the rents, — revenues and other proceeds from the Property. All amounts paid by the Subordinate Lender to the Senior Lender to cure a First Mortgage Loan Default shall be deemed to have been advanced by the Subordinate Lender pursuant to, and shall be secured by the lien of, the Subordinate Mortgage. (b) Cross Default. The Subordinate Lender agrees that, notwithstanding any contrary provision contained in the Subordinate Loan Documents, a First Mortgage Loan Default shall not constitute a default under the Subordinate Loan Documents if no other default occurred under the Subordinate Loan Documents until either (i) the Senior Lender has accelerated the maturity of the First Mortgage Loan, or (ii) the Senior Lender has taken affirmative action to exercise its rights under the First Mortgage to collect rent, to appoint (or seek the appointment of) a receiver or to foreclose on (or to exercise a power of sale contained in) the First Mortgage. At any time after a First Mortgage Loan Default is determined to constitute a default under the Subordinate Loan Documents, the Subordinate Lender shall be permitted to pursue its remedies for default under the Subordinate Loan Documents, subject to the restrictions and limitations of this Agreement. If at any time the Borrower cures any First Mortgage Loan Default to the satisfaction of the Senior Lender, as evidenced by written notice from the Senior Lender to the Subordinate Lender, any default under the Subordinate Loan Documents arising from such First Mortgage Loan Default shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as if such First Mortgage Loan Default had never occurred. 7. Conflict. The Borrower, the Senior Lender and the Subordinate Lender each agrees that, in the event of any conflict or inconsistency between the terms of the First Mortgage Loan Documents, the Subordinate Loan Documents and the terms of this Agreement, the terms of this Agreement shall govern and control solely as to the following: (a) the relative priority of the security interests of the Senior Lender and the Subordinate Lender in the Property; (b) the timing of the exercise of remedies by the Senior Lender and the Subordinate Lender under the First Mortgage and the Subordinate Mortgage, respectively; and (c) solely as between the Senior Lender and the Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which the Senior Lender and the Subordinate Lender have agreed to as expressly provided in this Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and shall not be deemed to: extend Borrower's time to cure any First Mortgage Loan Default or Subordinate Loan Default, as the case may be; give the Borrower the right to notice of any First Mortgage Loan Default or Subordinate Loan Default, as the case may be other than that, if any, provided, respectively under the First Mortgage Loan Documents or the Subordinate Loan Documents; or create any other right or benefit for Borrower as against Senior Lender or Subordinate Lender. 8. Rights and Obligations of the Subordinate Lender Under the Subordinate Loan Documents and of the Senior Lender under the First Mortgage Loan Documents. Subject to each of the other terms of this Agreement, all of the following provisions shall supersede any provisions of the Subordinate Loan Documents covering the same subject matter: C-7 (a) Protection of Security Interest. The Subordinate Lender shall not, without the prior written consent of the Senior Lender in each instance, take any action which has the effect of increasing the indebtedness outstanding under, or secured by, the Subordinate Loan Documents, except that the Subordinate Lender shall have the right to advance funds to cure First Mortgage Loan Defaults pursuant to Section 6(a) above and advance funds pursuant to the Subordinate Mortgage for the purpose of paying real estate taxes and insurance premiums, making necessary repairs to the Property and curing other defaults by the Borrower under the Subordinate Loan Documents. (b) Condemnation or Casualty. In the event of a taking or threatened taking by condemnation or other exercise of eminent domain of all or a portion of the Property (collectively, a "Taking") or the occurrence of a fire or other casualty resulting in damage to all or a portion of the Property (collectively, a "Casualty"), at any time or times when the First Mortgage remains a lien on the Property the following provisions shall apply: (1) The Subordinate Lender hereby agrees that its rights (under the Subordinate Loan Documents or otherwise) to participate in any proceeding or action relating to a Taking and/or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be and remain subordinate in all respects to the Senior Lender's rights under the First Mortgage Loan Documents with respect thereto, and the Subordinate Lender shall be bound by any settlement or adjustment of a claim resulting from a Taking or a Casualty made by the Senior Lender; provided, however, this subsection and/or anything contained in this Agreement shall not limit the rights of the Subordinate Lender to file ' any pleadings, documents, claims or notices with the appropriate court with jurisdiction over the proposed Taking and/or Casualty; and (2) all proceeds received or to be received on account of a Taking or a Casualty, or both, shall be applied (either to payment of the costs and expenses of repair and restoration or to payment of the First Mortgage Loan) in the manner determined by the Senior Lender in its sole discretion; provided, however, that if the Senior Lender elects to apply such proceeds to payment of the principal of, interest on and other amounts payable under the First Mortgage Loan, any proceeds remaining after the satisfaction in full of the principal of, interest on and other amounts payable under the First Mortgage Loan shall be paid to, and may be applied by, the Subordinate Lender in accordance with the applicable provisions of the Subordinate Loan Documents, provided however, the Senior Lender agrees to consult with the Subordinate Lender in determining the application of Casualty proceeds, provided further however that in the event of any disagreement between the Senior Lender and the Subordinate Lender over the application of Casualty proceeds, the decision of the Senior Lender, in its sole discretion, shall prevail. (c) No Modification of Subordinate Loan Documents. The Borrower and the Subordinate Lender each agrees that, until the principal of, interest on and all other amounts payable under the First Mortgage Loan Documents have been paid in full, it will not, without the prior written consent of the Senior Lender in each instance, increase the amount of the Subordinate Loan, increase the required payments due under the Subordinate Loan, decrease the term of the Subordinate Loan, increase the interest rate on the Subordinate Loan, or otherwise amend the Subordinate Loan terms in a manner that creates a material adverse effect upon the C-8 Senior Lender under the First Mortgage Loan Documents. Any unauthorized amendment of the Subordinate Loan Documents or assignment of the Subordinate Lender's interest in the Subordinate Loan without the Senior Lender's consent shall be void ab initio and of no effect whatsoever. 9. Modification or Refinancing of First Mortgage Loan. The Subordinate Lender consents to any agreement or arrangement in which the Senior Lender waives, postpones, extends, reduces or modifies any provisions of the First Mortgage Loan Documents, including any provision requiring the payment of money. 10. Default by the Subordinate Lender or Senior Lender. If the Subordinate Lender or Senior Lender defaults in performing or observing any of the terms, covenants or conditions to be performed or observed by it under this Agreement, the other, non -defaulting lender shall have the right to all available legal and equitable relief. 11. Notices. Each notice, request, demand, consent, approval or other communication (hereinafter in this Section referred to collectively as "notices" and referred to singly as a "notice") which the Senior Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a) personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to have been received at the time so delivered); or (b) sent by Federal Express (or other similar national overnight courier) designating early morning delivery (any notice so delivered shall be deemed to have been received on the next Business Day following receipt by the courier); or (c) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any notice so sent shall be deemed to have been received two days after mailing in the United States), addressed to the respective parties as follows: SENIOR LENDER: ARCS Commercial Mortgage Co., L.P. 26901 Agoura Road, Suite 200 Calabasas, CA 91301 Attn.: Loan Administration Department Re: ARCS Loan # 400795 With a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016 2899 Attention: Director, Multifamily Asset Management C-9 SUBORDINATE LENDER: ' San Juan Capistrano Redevelopment Agency 32400 Paseo Adelanto San Juan Capistrano. CA 92675 Attention: Executive Director an Juan Capistrano Housing Investors, L.P. San Juan Capistrano Housing Investors, L.P. c/o Simpson Housing Solutions 320 Golden Shore, Suite 200 Long Beach, California 90802 Attention: Michael Costa Re: Seasons I at San Juan Capistrano Apartments Any party may, by notice given pursuant to this Section, change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses for its notices, but notice of a change of address shall only be effective upon receipt. 13. General. ' (a) Assignment/Successors. This Agreement shall be binding upon the Borrower, the Senior Lender and the Subordinate Lender and shall inure to the benefit of the respective legal successors and assigns of the Senior Lender and the Subordinate Lender. (b) No Partnership or Joint Venture. The Senior Lender's permission for the placement of the Subordinate Loan Documents does not constitute the Senior Lender as a joint venturer or partner of the Subordinate Lender. No party hereto shall hold itself out as a partner, agent or Affiliate of any other party hereto. (c) Senior Lender's and Subordinate Lender's Consent. Wherever the Senior Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Senior Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. Wherever the Subordinate Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Subordinate Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. (d) Further Assurances. The Subordinate Lender, the Senior Lender and the Borrower each agree, at the Borrower's expense, to execute and deliver all additional instruments and/or documents reasonably required by any other party to this Agreement in order to evidence that the Subordinate Mortgage and the other Subordinate Loan Documents are subordinate to the lien, covenants and conditions of the First Mortgage, or to further evidence the ' intent of this Agreement. C-10 (e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties hereto. (t) Governing Law. This Agreement shall be governed by the laws of the State in which the Property is located. (g) Severable Provisions. If any provision of this Agreement shall be invalid or unenforceable to any extent, then the other provisions of this Agreement, shall not be affected thereby and shall be enforced to the greatest extent permitted by law. (h) Term. The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (i) the payment of all of the principal of, interest on and other amounts payable under the First Mortgage Loan Documents; (ii) the payment of all of the principal of, interest on and other amounts payable under the Subordinate Loan Documents, other than by reason of payments which the Subordinate Lender is obligated to remit to the Senior Lender pursuant to Section 4 hereof; (iii) the acquisition by the Senior Lender of title to the Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the First Mortgage; or (iv) the acquisition by the Subordinate Lender of title to the Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the Subordinate Mortgage, but only if such acquisition of title does not violate any of the terms of this Agreement. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument. [Continued on next page] C-11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day ' and year first written above. SENIOR LENDER: ARCS COMMERCIAL MORTGAGE CO., L.P., California limited partnership By: ACMC Realty, Inc., a California corporation Its: General Partner By: Kelli A. Tyler Its: Vice President [Signatures continue on next page] C-12 SUBORDINATE LENDER: SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a public body, corporate and politic By:_ Name Its: ATTEST: By: [Title] APPROVED AS TO FORM: .0 [Title] [Signatures continue on next page] C-13 BORROWER: SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership By: LINC Housing Corporation, a California nonprofit public benefit corporation Its: General Partner 0 Hunter L. Johnson, President C-14 ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) SS. COUNTY OF On 2007, before me, , a Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. [Seal] Notary Public C-15 ACKNOWLEDGMENT STATE OF CALIFORNIA ) SS. COUNTY OF On 2007, before me, , a Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. [Seal] J WITNESS my hand and official seal. Notary Public C-16 ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) SS. COUNTY OF On 2007, before me, , a Notary Public, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument, and acknowledged to me that (he/she) executed the same in (his/her) authorized capacity, and that by (his/her) signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. [Seal] Notary Public C-17 EXHIBIT A ' LEGAL DESCRIPTION OF THE PROPERTY REAL PROPERTY SITUATED IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AND DESCRIBED AS FOLLOWS: THAT PORTION OF THE SOUTHWEST QUARTER OF SECTION 6, TOWNSHIP 8 SOUTH, RANGE 7 WEST, SAN BERNARDINO BASE AND MERIDIAN, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE CENTER LINES OF GANADO ROAD AND THE OLD ORTEGA HIGHWAY, AS SHOWN A ON MAP FILED IN BOOK 27 PAGE 8 OF RECORD OF SURVEYS IN THE OFFICE OF THE COUNTY RECORDER OF ORANGE COUNTY, CALIFORNIA, SAID POINT BEING THE MOST NORTHERLY CORNER OF LAND DESCRIBED IN THE DEED TO ARLEY H. LECK AND WIFE, RECORDED DECEMBER 24, 1954 IN BOOK 2905 PAGE 363 OF OFFICIAL RECORDS; THENCE SOUTH 42° 02' 00" EAST 104.10 FEET ALONG THE CENTER LINE OF SAID GANADO ROAD TO AN ANGLE POINT IN SAID LAND OF LECK; THENCE SOUTH 03'20' 10" WEST 169.97 FEET; THENCE SOUTH 63'23' 00" WEST 7.24 FEET ALONG THE SOUTHERLY LINE OF SAID LAND OF LECK TO THE TRUE POINT OF BEGINNING, SAID POINT LIES ON THE WESTERLY ' RIGHT OF WAY LINE OF RANCHO VIEJO ROAD; THENCE SOUTH 21° 00' 15" EAST ALONG THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ROAD 15.27 FEET; THENCE LEAVING SAID RIGHT OF WAY LINE, SOUTH 03° 20' 10" WEST 294.00 FEET; THENCE SOUTH 74° 29' 00" WEST 255.73 FEET; THENCE NORTH 150 28' 37" WEST 12.93 FEET; THENCE NORTH 59° 36' 20" WEST 20.50 FEET TO A POINT ON A NON -TANGENT CURVE CONCAVE NORTHWESTERLY HAVING A RADIUS OF 25.00 FEET; THENCE SOUTHERLY AND WESTERLY ALONG SAID CURVE ON ARC DISTANCE OF 19.25 FEET, THROUGH A CENTRAL ANGLE OF 440 07'43" TO A TANGENT LINE; THENCE SOUTH 74'31' 23" WEST 51.29 FEET TO A TANGENT CURVE CONCAVE NORTHEASTERLY, HAVING A RADIUS OF 25.00 FEET; THENCE WESTERLY AND NORTHERLY ALONG SAID CURVE AN ARC DISTANCE OF 46.89 FEET, THROUGH A CENTRAL ANGLE OF 1070 27' 18" TO A TANGENT LINE; THENCE NORTH 01 ° 58' 40" EAST 87.43 FEET; THENCE NORTH 40° 17' 45" EAST 36.81 FEET; THENCE NORTH 030 24' 18" EAST 65.51 FEET TO THE SOUTHERLY LINE OF PARCEL 2 OF PARCEL MAP NO. 85-328 AS FILED IN BOOK 241, PAGES 12 AND 13 OF PARCEL MAPS, RECORDS OF THE COUNTY OF ORANGE; THENCE NORTH 63'23'00" EAST ALONG THE SOUTHERLY LINE OF SAID PARCEL MAP 218.99 FEET TO THE SOUTHEASTERLY CORNER OF SAID PARCEL MAP NO. 85-328; THENCE NORTH 160 33'40" WEST ALONG THE EASTERLY LINE OF SAID PARCEL MAP 202.59 FEET TO THE SOUTHERLY RIGHT OF WAY LINE OF ORTEGA HIGHWAY; THENCE NORTH 680 59'45" EAST ALONG THE SOUTHERLY RIGHT OF WAY ' LINE OF ORTEGA HIGHWAY 124.81 FEET TO A TANGENT CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 25.00 FEET; THENCE EASTERLY AND SOUTHERLY ALONG SAID CURVE AN ARC DISTANCE OF 39.27 FEET, C-1 THROUGH A CENTRAL ANGLE OF 900 00'00" TO A TANGENT LINE, SAID - POINT LYING ON THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ROAD; THENCE SOUTH 21' 00' 15" EAST ALONG THE WESTERLY RIGHT OF WAY LINE OF RANCHO VIEJO ROAD 160.67 FEET TO THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS LOT 2 OF LOT LINE ADJUSTMENT NO. 95 -PM 85- 328-1, RECORDED OCTOBER 30, 1995, AS INSTRUMENT NO. 95-480794, OFFICIAL RECORDS. APN: 666-241-10 C-2 EXHIBIT "D" ' FIRST AMENDMENT TO OWNER PARTICIPATION AGREEMENT This First Amendment to Owner Participation Agreement (this "Amendment") dated as of 2007 by and among the San Juan Capistrano Redevelopment Agency, a public body, corporate and politic existing under the Constitution and laws of the State of California (the "Agency") and San Juan Capistrano Housing Investors, L.P., a California limited partnership (the "Developer") (all such entities referred to herein collectively as the "Parties") amends the Owner Participation Agreement dated as of September 19, 1995 by and between the Agency and the Developer (the "OPA"), as it pertains to the Agency Loan to the Developer made on November 30, 1995 in the amount of $1,550,000, evidenced by that certain Promissory Note made by the Developer dated November 30, 1995 (the "Agency Note"), secured by that certain Deed of Trust With Assignment of Rents encumbering the Property as security for the Agency Loan recorded on December 21, 1995 as Instrument Number 19950568794 in the Official Records of the County of Orange, California and that certain Assignment of Leases, Rents, and Profits encumbering the Property as security for the Agency Loan recorded on December 21, 1995 as Instrument Number 19950568795 in the Official Records of the County of Orange, California (collectively, the "Agency Loan"). WITNESSETH: ' Certain of the terms and words used in these Recitals, and in the following provisions of this Amendment, are defined in Article 1 of the OPA. WHEREAS, in accordance with the Law, the Agency provided funds for the making of the Agency Loan to the Developer pursuant to the OPA, which funds were used, together with proceeds of various other public and private financial instruments for the purpose of financing the costs of acquisition by the Developer of the Property and construction of the improvements to the Property (the "Development"), including without limitation certain senior obligations comprised of the California Statewide Communities Development Authority Multifamily Housing Revenue Bonds 1995 Series E in the original principal amount of $5,936,000 (the "Bonds"), a Developer Note in the amount of $419,000, and a seller (Romer) Note in the amount of $500,000 (collectively, the "Senior Obligations"); and WHEREAS, the Developer has improved the Property with a multifamily senior housing project known as Seasons I at San Juan Capistrano Apartments (the "Project") and, pursuant to that certain Agreement of Restrictive Covenants Affecting Real Property (the "Restrictive Covenants Agreement") by and between the Agency and the Developer, dated as of November 30, 1995, and recorded in the Official Records of Orange County, California on December 21, 1995 as Document No. 19950568793, certain units of the senior housing project have been, and will be, maintained available at affordable rent to Very Low Income and Qualified Lower Income Households for a period of fifty seven (57) years, as more fully set forth in the ' Restrictive Covenants Agreement; and D-1 WHEREAS, the Developer desires to (i) refinance the Bonds in a new principal amount equal to the currently outstanding principal amount of the Bonds (the "Refinancing"), (ii) pay in full the Developer Note, the Romer Note and advances to the Developer by its Partners (the "Repayments"), and (iii) enter into a new conventional loan in the principal amount of $2,600,000 (the "Conventional Loan" and, together with the Refinancing and the Repayments, the "New Financing"), thereby increasing the principal amount of indebtedness senior to the Agency Loan and to the long-term affordability covenants in the amounts set forth in the Finalized Use of Refinance Proceeds attached hereto as Exhibit "A" and incorporated herein by this reference; and WHEREAS, the Refinancing is permitted under Section 3.7 of the OPA, without consent of the Agency, however, pursuant to Section 18.9(a) of the OPA, the Developer may not encumber the Property to secure the Conventional Loan without the prior written approval of the Agency; and WHEREAS, the Developer and Fannie Mae, as the Bank, have requested that the Agency (i) extend the term of the Agency Loan to the date which is thirty (30) years and ninety (90) days from the closing of the New Financing (the "Closing Date"), provided that the Agency Loan shall not be extended if the Closing Date occurs on or after July 1, 2007, and (ii) provide written approval of the encumbrance of the Property to secure the Conventional Loan in an amount not to exceed $2,600,000, in consideration of and conditioned upon the Developer's payment of interest on the Agency Loan in a minimum amount of $650,000 (collectively, the "Agency Accommodations"); and WHEREAS, prior to, or concurrently with, the execution and delivery of this Amendment, the Conventional Loan has been funded in the amount $ and the Agency has received the amount of $ in prepaid interest on the Agency Loan; and WHEREAS, by its Resolution No. adopted on March 6, 2007, the governing board of the Agency authorized the Agency Accommodations, upon the terms set forth in such Resolution; and WHEREAS, the Agency and the Developer additionally desire to modify the OPA and the Restrictive Covenants Agreement with respect to the age restrictions applicable to the residents of the Project included therein by reducing the age restriction to 55 years of age; and WHEREAS, in Resolution No. , the Agency additionally determined that it is necessary and desirable to (i) enter into a Subordination Agreement by and among Fannie Mae, The Bank of New York, the Agency and San Juan Capistrano Housing Investors, L.P., in the form attached hereto as Exhibit `B" (the "Fannie Mae Agreement"), (i) enter into a Subordination Agreement by and among ARCS Commercial Mortgage Co., L.P., the Agency and San Juan Capistrano Housing Investors, L.P., in the form attached hereto as Exhibit "C" (the "ARCS Agreement"), (iii) enter into a First Amendment of the Agency Note (the "Amendment to Agency Note") to extend the term of the Agency Loan as provided herein, in the form attached hereto as Exhibits "D", and (iv) enter into a First Amendment to Agreement of Restrictive Covenants Affecting Real Property (the "Amendment to Restrictive Covenants") in the form set D-2 forth in Exhibit "E" hereto (each of Exhibits `B", "C", "D" and "E" being incorporated herein by ' this reference) to accomplish the purposes set forth above; NOW, THEREFORE, in consideration of the mutual promises contained herein and in the OPA, the Parties agree that: 1 Section 1. The penultimate sentence in Section 3.8(c) of the OPA is hereby amended in its entirety to read as follows: "If not sooner paid, the unpaid principal balance of this Note plus any accrued and unpaid interest thereon shall be due and payable on " Section 2. Section 1.41 of the Owner Participation Agreement is hereby amended to read as follows: "'Senior Citizen' means a person who is 55 years of age or older, as defined in California Civil Code Section 51.3." Except as expressly amended hereby, the OPA shall remain in full force and effect; and the OPA, as amended hereby, is ratified and confirmed. This Amendment may be executed in several counterparts, each of which shall be original and all of which shall constitute but one and the same instrument. D-3 IN WITNESS WHEREOF, the Parties have caused this First Amendment to Owner Participation Agreement to be duly executed as of the day and year first above written. SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, CALIFORNIA By: Its: Mark Nielsen, Chairperson [SEAL] ATTEST: Margaret R. Monahan, Agency Secretary SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership By: LINC Housing Corporation, a California nonprofit public benefit corporation Its: General Partner f� DOCSOC/ 1207245v5/022658-0022 Hunter L. Johnson, President EXHIBIT "E" ' FIRST AMENDMENT TO PROMISSORY NOTE SECURED BY SUBORDINATE DEED OF TRUST This First Amendment to Promissory Note (this "Amendment") dated as of , 2007 made by San Juan Capistrano Housing Investors, L.P., a California limited partnership (the "Maker" or "Developer") amends the Promissory Note Secured by Subordinated Deed of Trust dated as of November 30, 1995 evidencing the Maker's promise to pay to San Juan Capistrano Redevelopment Agency, a public body, corporate and politic existing under the Constitution and laws of the State of California (the "Agency") the sum of One Million Five Hundred Fifty Thousand and no/100 Dollars ($1,550,000), together with interest thereon, all as provided in such note (the "Agency Note"). The Agency Note was, and continues to be as of the date hereof, secured by that certain Deed of Trust With Assignment of Rents encumbering the Property as security for the Agency Loan recorded on December 21, 1995 as Instrument Number 19950568794 in the Official Records of the County of Orange, California and that certain Assignment of Leases, Rents, and Profits encumbering the Property as security for the Agency Loan recorded on December 21, 1995 as Instrument Number 19950568795 in the Official Records of the County of Orange, California (collectively, the "Agency Loan"). WITNESSETH: Certain of the terms and words used in these Recitals, and in the following provisions of this Amendment, are defined in Agency Note. WHEREAS, in accordance with the Law, the Agency provided funds for the making of the Agency Loan to the Developer pursuant to the Agency Note, which funds were used, together with proceeds of various other public and private financial instruments for the purpose of financing the costs of acquisition by the Developer of the Property and construction of the improvements to the Property (the "Development"), including without limitation certain senior obligations comprised of the California Statewide Communities Development Authority Multifamily Housing Revenue Bonds 1995 Series E in the original principal amount of $5,936,000 (the "Bonds"), a Developer Note in the amount of $419,000, and a seller (Romer) Note in the amount of $500,000 (collectively, the "Senior Obligations"); and WHEREAS, the Developer has improved the Property with a multifamily senior housing project known as Seasons I at San Juan Capistrano Apartments (the "Project") and, pursuant to that certain Agreement of Restrictive Covenants Affecting Real Property (the "Restrictive Covenants Agreement") by and between the Agency and the Developer, dated as of November 30, 1995, and recorded in the Official Records of Orange County, California on December 21, 1995 as Document No. 19950568793, certain units of the senior housing project have been, and will be, maintained available at affordable rent to Very Low Income and Qualified Lower ' Income Households for a period of fifty seven (57) years, as more fully set forth in the Restrictive Covenants Agreement; and DOC SOC/ I207245v5/022658-0022 WHEREAS, the Developer desires to (i) refinance the Bonds in a new principal amount equal to the currently outstanding principal amount of the Bonds (the "Refinancing"), (ii) pay in full the Developer Note, the Romer Note and advances to the Developer by its Partners (the "Repayments"), and (iii) enter into a new conventional loan in the principal amount of $2,600,000 (the "Conventional Loan" and, together with the Refinancing and the Repayments, the "New Financing"), thereby increasing the principal amount of indebtedness senior to the Agency Loan and to the long-term affordability covenants in the amounts set forth in Exhibit "A" to the First Amendment to Owner Participation Agreement of even date herewith and incorporated herein by this reference; and WHEREAS, the Developer and Fannie Mae have requested that the Agency (i) extend the term of the Agency Loan to the date which is thirty (30) years and ninety (90) days from the closing of the New Financing (the "Closing Date"), provided that the Agency Loan shall not be extended if the Closing Date occurs on or after July 1, 2007, and (ii) provide written approval of the encumbrance of the Property to secure the Conventional Loan in an amount not to exceed $2,600,000, in consideration of and conditioned upon the Developer's payment of interest on the Agency Loan in a minimum amount of $650,000 (collectively, the "Agency Accommodations'); and WHEREAS, prior to, or concurrently with, the execution and delivery of this Amendment, the Conventional Loan has been funded in the amount $ and the Agency has received the amount of $ in prepaid interest on the Agency Loan; and WHEREAS, by its Resolution No. adopted on March 6, 2007, the governing board of the Agency authorized the Agency Accommodations, upon the terms set forth in such Resolution; and NOW, THEREFORE, in consideration of the mutual promises contained herein and in the OPA, the Parties agree that: Section 1. Section 5 of the Agency Note is hereby amended in its entirety to read as follows: "If not sooner paid, the unpaid principal balance of this Note plus any accrued and unpaid interest thereon shall be due and payable on " Except as expressly amended hereby, the Agency Note shall remain in full force and effect; and the Agency Note, as amended hereby, is ratified and confirmed. DOCSOC/ 1207245v5/022658-0022 I MAKER: San Juan Capistrano Housing Investors, L.P., a California limited partnership By: LINC Housing Corporation General Partner By: Hunter L. Johnson, President DOC SOC/ 1207245v 5/022658-0022 EXHIBIT "F" RECORDING REQUESTED BY: ) AND WHEN RECORDED RETURN TO: ) San Juan Capistrano Redevelopment Agency) 32400 Paseo Adelanto ) San Juan Capistrano, California 92675 ) Attention: Executive Director ) This document is exempt from payment of a recording fee pursuant to Government Code Section 27383 FIRST AMENDMENT TO AGREEMENT OF RESTRICTIVE COVENANTS AFFECTING REAL PROPERTY THIS FIRST AMENDMENT TO AGREEMENT OF RESTRICTIVE COVENANTS AFFECTING REAL PROPERTY (the "Amendment") is made as of , 2007, by and between the SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a public body, corporate and politic, of the State of California ("Agency"), and SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership ("Developer"). ' RECITALS A. The Agency and the Developer have entered into an Agreement of Restrictive Covenants Affecting Real Property (the "Agreement"), dated as of November 30, 1995, and recorded in the Official Records of Orange County, California on December 21, 1995 as Document No. 19950568793. The Agreement restricts the use of certain real property located in the City of San Juan Capistrano, California, which is improved with a 112 unit residential housing project for senior citizens (the "Property"), and imposes certain requirements with respect to the income of tenants, maximum rent to be charged, and the maintenance and operation of the Property. B. The Property is a "senior citizen housing development" within the meaning of California Civil Code Section 51.3. C. The Agency and the Developer now desire to modify the Agreement with respect to the age restrictions applicable to the residents of the Property. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Agency and the Developer hereby amend the Agreement as follows: I. Definition of Senior Citizen. Section 1.21 of the Agreement is hereby amended I to read as follows: "'Senior Citizen' means a person who is 55 years of age or older, as defined F-1 in California Civil Code Section 51.3 and as more particularly provided in Section 4.3 of this Agreement." 2. Senior Citizen Occupancy Restrictions. Section 4.3 of the Agreement is hereby revised to read as follows: "During the term of this Agreement, and subject to the requirements of applicable law, Owner shall restrict occupancy of all completed residential units in the Project (exclusive of units for on-site management and maintenance personnel) to `Senior Citizens' and `Qualified Permanent Residents' (as those terms are or may be defined in California Civil Code Section 51.3). Should the foregoing restrictions be declared unlawful or unenforceable by the decision of any court of competent jurisdiction or other applicable law, then in such event, Developer shall limit the use of any such units to such class of persons as may be required by said court decision or law, and in so doing, Developer shall be deemed to be in compliance with the provisions of this Agreement." 3. No Other Modifications. Except as provided in this Amendment, no other provision of the Agreement shall be modified or amended by this instrument. IN WITNESS WHEREOF, Agency and Developer have executed this Amendment as of the date set forth above. ATTEST: Margaret R. Monahan, Agency Secretary APPROVED AS TO FORM: Jon Goetz, Agency Counsel SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY By: Its: F-2 Mark Nielsen, Chairperson SAN JUAN CAPISTRANO HOUSING INVESTORS, L.P., a California limited partnership By: LINC Housing Corporation, a California nonprofit public benefit corporation, its General Partner F-3 M Hunter L. Johnson, President STATE OF CALIFORNIA COUNTY OF On personally appeared , before me, ss. (Print Name of Notary Notary Public, ❑ personally known to me -or- proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature Of Notary OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer ❑ Partner(s) ❑ Limited ❑ General Attomey-In-Fact Trustee(s) Guardian/Conservator Other: Signer is representing: Name Of Person(s) Or Entity(ies) DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Number Of Pages Date Of Documents Signer(s) Other Than Named Above STATE OF CALIFORNIA ' COUNTY OF On personally appeared ❑ personally known to me -or- , before me, ss. (Print Name of Notary Public) Notary Public, ❑ proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer Title(s) ❑ Parmer(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Persons) Or Entity(ies) DOCSOC/1207245 v5/022658-0022 DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Number Of Pages Date Of Documents Signer(s) Other Than Named Above