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Home My WebLink AboutR35-Economic Development Agency ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO FROM: Maggie Pacheco Deputy Director SUBJECT: ORIGiNAL TUSCANY APARTMENTS LOCATED AT 2225 E. PUMALO - CONSENT TO SALE OF THE PROPERTY (MULTI- FAMILY HOUSING REVENUE BOND PROGRAM) DATE: April 14, 2003 ______u___________________________________________________________________________._____________________ ______________. ---------------------- _u_________________._________________________ SvnoDsis of Previous Commission/Council/Committee Action(s): On April 10, 2003, Redevelopment Committee Members Anderson, Suarez and Estrada unanimously voted to recommend that the Community Development Commission consider this action for approval. _________________________________________n______________n_ __________________________________________________________---------.-- ------------------. -------------------- -----------------------.------ Recommended Motion(s): (Communitv Develooment Commission) MOTION: RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO (I) APPROVING THE SALE OF TUSCANY APARTMENTS ("PROJECT") TO MG TUSCANY APARTMENTS, L.P,; (2) APPROVING EXECUTION OF CERTAIN AMENDMENTS TO THE INDENTURE AND LOAN AGREEMENT RELATING TO $7,000,000 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 1996 MULTI-FAMILY HOUSING REVENUE BONDS; (3) APPROVING EXECUTION OF AN ASSUMPTION AGREEMENT RELATED TO THE SALE OF THE PROJECT; (4) APPOINTING BOND COUNSEL IN CONNECTION WITH THE SALE OF THE PROJECT; AND (5) AUTHORIZING DISTRIBUTION OF A SUPPLEMENT TO THE PLACEMENT MEMORANDUM RELATING TO THE BONDS, _________u_________________________________________ ____________n___________________ ______________n _+_________n___n+___________n_n__________________n______________________n___n________________ Contact Person(s): Project Area(s) Maggie Pacheco Phone: (909) 663-1044 All N/A Ward(s): Supporting Data Attached: iii Staff Report iii Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) iii Letters/Misc. FUNDING REQUIREMENTS Amount: $ -0- Source: N/A . V Budget Authority: A 1/A . ~.~ ,~ Gary Van Osdel, Executive Director Clv) MaggIe Pacheco, Deputy Directo ___________________________n_+____________n___________n_n__---+----------------------------------+-------------------- __________n_n__ ______________n_______+_______________n________~_______________ Commission/Council Notes: SIGNATURE: ~,-J! cae (2 CO~-<'-t '2 __________________________________________________++______________+_____________________________________________________________________-*_______________n__________________n_______________________________ P:IClerical Services DeplIMargarell'arkcMgenda\CDC 2003\03-04-21 Tuscany Apls CDC Item.doc COMMISSION MEETING AGENDA Meeting Date: 04/21/2003 Agenda Item Number: f< 3 ::: ECONOMIC DEVELOPMENT AGENCY STAFF REPORT ------------------------------------------------------------------------------------------------------------------------------------+---------------------. Tuscany Apartments Located at 2225 E. Pumalo - Consent to Sale of the Property (Multi-Family Housinl! Revenue Bond Prol!ram) BACKGROUND: On April I, 1996, the Community Development Commission authorized the Agency to issue approximately $7 million in multi-family housing revenue bonds (the "Bonds") on behalf of Magellan Silverwood Partners ("Magellan") to purchase and rehabilitate the Silverwood Park Apartments located at 2225 East Pumalo, San Bernardino (the "Project"). The Project consists of 328 housing units of which 66 of the housing units are set-aside for households whose incomes do not exceed 50% of the median income (the "Affordable Housing Units") pursuant to an Agency Regulatory Agreement. In August 200], the Community Deve]opment Commission authorized and approved Magellan Silverwood Partners' sale of the Project to San Bernardino 328/AF XXX, LLC, an affiliate of Van Daele Communities, LLC, who assumed the bonds (approximately $7 million) and obtained secondary financing (approximately $4.2 million) to perform multiple improvements and repairs to the Proj ect. CURRENT ISSUE: San Bernardino 328/ AF XXX, LLC, is proposing to sell the property to MG Tuscany Apartments, L.P. (the "Buyer"). The Buyer plans to assume the $7 million bond and replace the present Wells Fargo Bank Letter of Credit with a Letter of Credit from FANNIE MAE. The Buyer will also contribute in excess of $]] million in cash to purchase the Project. Since ]989, the Buyer has been actively involved in the acquisition, development and rehabilitation of apartments and with management oversight provided by MG Properties. MG Properties manages over 3,200 multi-family units in San Diego County and the Inland Empire, with a total market value of over $300 million. Over 2,800 of the apartments are wholly owned by MG Properties or partnerships established by MG Properties. Currently, the Project is in good condition with minor repairs needed because in 200] the present owner invested over $] million in improvements to the property. The Buyer proposes to spend approximately $270,000 on these minor repairs in order to bring the property to a level consistent with their higher management standards. The Buyer also has extensive experience in dealing with bond-financed housing projects; thereby, affording them the opportunity to administer the on-going monitoring requirements associated with the Affordable Housing Units (Attachment I). Because the Agency issued the Bonds for the Project, the Agency must consent to the sale of the Project from San Bernardino 328/ AF XXX, LLC, to the Buyer and approve the required changes to the Bond documents such as: the Indenture of Trust, Loan Agreement and First Trust Deed. All changes to the documents are principally requested by the substitute letter of credit by FANNIE MAE --------------.-.------------_.---------------------------------.---------------------------------------.------------------------- -------------------------------------------------------------------------. P:\Clcricnl Services Dcpl\Margarcl ParkeMgcnda\CDC 2003\03-04-21 Tuscany Apls CDC Item.doc COMMISSION MEETING AGENDA Meeting Date: 04/21/2003 Agenda Item Number: I<. 35" Economic Development Agency Staff Report Creation of the San Bernardino Housing Authority Page 2 and subject to the approval of the Buyer and Agency's Counsel (Attachment II). As part of the Bond assumption, the Buyer will assume the responsibility of San Bernardino 328/AF XXX, LLC, related to the Affordable Housing Units. The Agency is required by the Regulatory Agreement to monitor the compliance of the Owner to insure that the Affordable Housing Units are made available to low income tenants at affordable rents. ENVIRONMENTAL IMPACT: Not applicable. FISCAL IMPACT: None. The Bonds are not a liability or debt of the Agency or the City because the Bonds are secured by the Project revenue and a letter of credit provided on behalf of the Buyer by FANNIE MAE. The Buyer will be required to pay all the Agency's legal expenses, of approximately $12,000 and $5,000 for Agency's administration expenses, for associated bond work and sale of the Project. RECOMMENDATION: That the Community Development Commission adopt the attached Resolution. f))~ Maggie Pacheco, Deputy Director ---~~-------------~-----------------~------------------------------------------------------------------------------------------~~..---------------------~...-------------------------------------------------. P:\Clerical Services Depl\Margarcl ParkcMgcmJa\CDC 2003\03-04-21 Tuscany Apls CDC Item. doc COMMISSION MEETING AGENDA Meeting Date: 04/21/2003 Agenda Item Number: if<:;$:;- r.rT(ilPROPERTIES ~ INVESTMENT REAL ESTATE ATTACHMENT I March 11, 2003 Ms. Maggie Pacheco Deputy Director of Community Development City of San Bernardino 201 North "E" Street, Suite 301 Sail Bernardino, CA 92401-1507 Re: The Tuscany Apartments fIkIa Silverwood Apartments San Bernardino, CA 328 units Assumption of$7,000,000 in tax exempt debt issued by the City of San Bernadino Dear Ms. Pacheco: Weare under contract to purchase the above referenced property for $18,600,000. We have engaged Berkshire Mortgage Finance to provide a AAA rated Fannie Mae Credit Enhancement on the $7,000,000 in Bonds originally issued by the City of San Bernadino. We anticipate that this Credit Enhancement will substitute the lower rated Wells Fargo Credit Enhancement that currently enhances the Bonds. We will comply with Section 7 of the Regulatory Agreement relating to the transfer restrictions. We fully anticipate providing The City with a fully executed Assumption Agreement and an Opinion of Bond Counsel, amongst other things. Your office has requested that we provide you with background information relating to Mark Gleiberman and MG Properties. Mr. Gleiberman will be the Key Principal of the acquiring entity, while MG Properties will be the Managing Agent for the property. As mentioned, MG Properties will take over the day to day management of the subject property concurrent with the close ofthis transaction. Mr. Gleiberman, who founded MG Properties over 10 years ago, is its acting President. Subsequent to the closing of this transaction, MG Properties will man,age 42 different properties throughout Southern California consisting of 3,703 multifamily units. A company profile ofMG Properties is attached. . 11300 SorrentoValley Road, Suite 220 ".San Diego, California 92121-1328 Ph (858) 658-0500 " Fax (858)526-0800 "www.mgptoperties.com Ms. Maggie Pacheco March 11,2003 Page 2 MG Properties currently manages 29 properties that are encumbered with Regulatory Use Agreements. These Agreements require special screening processes to be conducted at the site level, including but not limited to tenant income qualifications and special reporting requirements. MG Properties' Regional Managers, as well as the impacted Community Managers, are trained to adhere to and comply with the terms outlined in the various Regulatory Agreements. A Mark Gleiberman related entity purchased the 304 unit Creekside Apartment property located at 495 East Third Street in San Bernadino in September of2002. The assumption of Tax Exempt Bonds Credit Enhanced by Freddie Mac and issued by the County of San Bernadino facilitated this property acquisition. The closing of the property went very smoothly. Since our acquisition of the Creekside property, we have increased occupancy at the property from about 88%, to in excess of97%. The San Bernadino Police Department has thanked MG Properties for improving the conditions at what had been a problem property for them. The property is in the process of attaining its "Crime Free" certification from the County. Finally, we will be opening a Learning Center at the property in April of 2003. The main function of the Learning center will be to provide after school activities for the children of the property's residents. We are very pleased to work with the Community Development Department to facilitate our assumption of the existing bond financing and to further develop and enhance the Tuscany Apartment Community. May we arrange a meeting to introduce ourselves, or a conference call to expedite any information the Department will require to accommodate the transfer? Weare looking forward to adding another fine asset in your City to our portfolio. I look forward to speaking with you. I can be reached at (858)-658-0500, extension 126. Cc: R. Gary Wright, Esq. Robert Brown, Esq. Randy Babbush, Esq. Mark Gleiberman Masood Sohaili, Esq. Diane Holman, Esq. Alexis Crump. Esq. Marty Meagher / / MG PROPERTIES . PROFILE . MG Properties has been actively involved in the acquisition, development, rehabilitation and management of apartment properties since 1989. MG Properties manages over 3,200 apartment homes in San Diego County, and the Inland Empire, with a total market value of over $300 million. The properties range in size from 25 to 304 apartments. Over 2,800 of the apartments are wholly owned by MG Properties or partnerships established by MG Properties. By specializing in San Diego County and Inland Empire apartments, MG Properties has developed a unique understanding and knowledge of these markets. . Mark Gleiberman is the President, owner and founder of MG Properties. Mark graduated with a business degree from Drexel University in 1979 and was licensed as a Certified Public Accountant in 1981 and a Real Estate Broker in 1990. Prior to forming MG Properties, Mark was a tax specialist for five years with the international accounting firms of Ernst & Whinney and Touche Ross, and worked for six years in various financial management positions with Hybritech Incorporated and Solar Turbines Corporation. · Melise Balastrieri is Director of Property Management. She joined MG Properties in June 1998. Melise has over 15 years of multi-farnily operational experience and condominium conversion experience. She has managed over 2,500 apartment homes throughout the Southwest, including properties of up to 700 units. Additionally she has successfully completed all courses required for the Certified Property Manager, (CPM@) designation and is currently fulfilling the terms of candidacy. She is an active member and instructor with the San Diego County Apartment Association and was awarded the 2001 Property Supervisor of the year award. · Bob Von Hoene joined MG Properties as Chief Financial Officer in 2002. Bob has over 15 years of multifamily financial management experience including seven years as Vice President with one of the nations' largest apartment lenders. He also has five years experience with a San Diego based apartment investment firm with a portfolio of over 40,000 units throughout the country. Bob has a MBA degree from San Diego State University. .Marla Eggert has been Manager of Accounting and Administration since April 1999. Marla has over twenty years of real estate accounting experience, including Senior Account positions with two public REITS. · Dana Zini joined MG Properties in 2001, as the Director of Acquisitions. She has over 19 years of multi-family acquisition and operational experience. Previously she served as Vice President of Operations, where she managed portfolios in excess of 10,000 apartment homes and in her previous position as an Investment Analyst, she was responsible for investing over $250,000,000 for a privately held REIT. In addition Dana is a Certified Property Manager, (CPM@) and has served as President of the San Diego Chapter of the Institute of Real Estate Management, (IREM). .During the past seven years, the main focus of MG Properties has been the acquisition of bargain properties through newly established partnerships. These properties have typically been distress properties in need of substantial rehabilitation and improved management. By finding the best priced properties with the most upside potential and providing highly effective management to these properties, all the partnerships held at least one year, provide an annual cash flow ranging from eight to fifty percent. Additionally, with the rehabilitation and management improvements fully implemented, and the recent market value increases, these partnerships have experienced an increase in their equity ranging from 100 to 600 percent. .In establishing partnerships, it is the philosophy of MG Properties to structure the investment so that the return to MG Properties is completely linked to the success of the partnership. Accordingly, any fee earned by MG Properties at the partnership's establishment is invested in the partnership. Additionally, MG Properties invests additional funds to capitalize the partnership. MG Properties may earn an additional return only after all partners have received back their entire initial investment, plus an additional ten percent annual retum. · With expert qualifications, highly skilled personnel, years of experience and commitment to integrity, MG Properties has provided a high degree of success for both its organization and its investors and continues to strive to do so. ATTACHMENT II SECOND SUPPLEMENTAL INDENTURE THIS SECOND SUPPLEMENTAL INDENTURE datcd as of May I, 2003 (this "Sl'l'()Jl(! Supplemental Indenture") is between the Redevelopment Agency oC the City of San Ckmal'dino, a pub he body corporate and politic organized under and pursuant to the laws of the State oC Calitornia (the "Issuer"), and US Bank NatJL)nal Association, a national banking ol'g;llllzation organized and existing under the laws oC the United States oC America, as trustee (the "Trustee"), W I 'I' N E SSE 'I' H: WHEREAS, the Issuer and U,S, Bank National Association, successor by merger to U,S, Bank Trust National Association fonnerIy known as First Trust of California, National Association (the "Trnstee") entered into that cC11ain Indcnturc of Trust, dated as of May I, 1996 (the "Indenture"), in connection with the issuance of the Issller's $7,000,000 Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996 (the "Bonds"); and WHEREAS, the Issuer loaned the proceeds of the Bonds to Magellan Silverwood Partnership, an Arizona general partnership (the "Original Borrower"), pursuant to a Loan Agreement, dated as of May I, 1996 (the "Loan Agreement"), among the Issuer, the Trustee and the Original Borrower; and WHEREAS, proceeds of the Bonds were used, in part, to construct and pay other costs associated with the construction and development of a multiCamily residential rental housing project originally known as Silvcrwood Apartments and now known as Tuscany Apartments (the "Project") located in San Bernardino, California; and WHEREAS, the Project was sold to San Bemardino 328/AF XXX, LLC, a Califomia limited liability company in 2001, and San Bernardino 328/AF XXX, LLC caused the delivery to the Trustee of a letter of credit providing .credit support for the Bonds issued by Wells Fargo Bank, National Association, to replace the existing letter of credit issued by Bank One, Arizona, NA; and WIIEREAS, at that time the Indenture was amended by that certain First Supplemental Indenture dated as of September 1,2001; and WHEREAS, the Project has now been acquired by MG Tuscany Apartments LP, a Cali Cornia limited partnership (the "Bon-ower") and the Borrower has caused the delivery to the Trustee of a direct pay irrevocable transferable credit enhancement instrument (the "Credit hlcility") issued by FANNIE MAE, a corporation organized and existing under the Federal National Mortgage Association Charter Act (12 USC Section 1716 et seq,) (the "Credit Facility Provider") to replace the existing letter of credit issued by Bank One, Arizona, NA; and WHEREAS, in connection with the delivery of the Credit Facility, the Bon-ower and the Credit Facility Provider have requested certain amendments to the Indenture as set forth herein, and approval of such amendments requires the consent of not less than sixty percent (60%) of the owners of all of the Bonds Outstanding; and S\3211113 111990 t -1- vyl~IEREAS, the requisite owners of the Bonds Outstanding have consented to and approved the execution ofthis Second Supplemental Indenture. NOW, THEREFORE, in consideration of the above premises and the mutual covenants contained herein and tor other good and valuable consideration, the parties hereto agree as follows: Section 1. "Section 1.01 Definitions" shall he amended as follows: (a) The definition of "l3usiness Day" shall be deleted and replaced as follows: any ,by other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Principal Ot1lce of the Trustee or the Remarketing Agent is located are required or authorized by law or executive order to close, (iv) prior to the Fixed Rate Conversion Date, a day on which the New York Stock Exchange is closed or (v) so long as a Credit Facility is in effect, any day on which the Credit Facility Provider is closed. (b) The definition of Wrongful Dishonor shall be added as follows: "Wrongful Dishonor" shall mean an uncured failure by the Credit Facility Provider to make a payment to the Trustee as required under the Reimbursement Agreement upon proper presentation ofdocumcnts which conform to the terms and conditions of the Credit Facility. (c) Unless defined in subsections (a) and (b) of this Section 1 or elsewhere in this Second Supplemental Indenture, initially~capitalized tcnns shall have the respective meanings assigned to such terms in the Indenture. Section 2. The second to last paragraph of Section 7.0 I shall be amended b) deleting the last sentence thereof and adding in its place: "Notwithstanding the above, so long as a Wrongful Dishonor has not occurred and is continuing, no action taken by the Bondholders or the Tmstee to accelerate the bonds upon the OCCllrrence of an Event of Default shall be effective unless the written consent of such Credit Facility Provider shall first have been obtained." Section 3. Section 7.01 shall he amended by deleting the last sentence thereof and adding in its place: "Notwithstanding the above, so long as a Wrongful Dishonor has not occurred and is continuing, no action taken by the Bondholders or the Trustee pursuant to this Section 7.02 shall be takcn without the prior written consent of such Credit Facility Provider except for an action by the Trustee to enforce its rights pursuant to Sections 4.2(b), 7.3 and 9.3 of the Loan Agreemcnt." Section 4. Section 8.08(c) shall be amended in the first sentence thereof to delete "for good cause and." Section 5. Section 8.13(c) shall be amended to add after the first sentence thereof the following: "If (A) an Event of Default has occurred and is continuing under the Reimbursement Agreement or (B) the Remarketing Agent has failed to fulfill any of its duties S820031099iJ I ~ 2 ~ and ohligations under this Indenture or the Remarketing Agreement, the Credit Facility Provider mav remove the Remarketing Agent by written notice to the Issuer and thc B01TO\\Cr and appomt a SUCc('ssor Rcmarketing Agent." Section 5, Section 9,02 shall be amended to delete in the lirst sentence thercof "(which consent shall not be unreasonably withhe]d)." Section 6. Section 11.]6 shall be deleted in its entirety and shall bc rcp]aced '1S follows: "Notwithstanding anything contained in this Inclcnture to the contrary, all provisions in this Indenture regarding consents, approvals, directions, waivers appointments, requests or other actions hy the Credit Facility Provider shall be deemcd not to require or permit such consents, approvals, directions, waivers appointments, requests or other actions and shall be read as if the Credit Facility Provider were not mentioned in such provisions (i) if a Wrongful Dishonor has occtmed and is continuing or (ii) after the Crcdit Facility ceases to he valid and binding on the Credit Facility Provider for any reason, or is declared to be null and void by linal judgment of a court of competent jurisdiction; provided, however, that the Credit Facility Provider's right to notices, and the payment of amount due to the Credit Facility Provider, if any, shall continue in full force and effect. The foregoing shall not affect any other rights of the Credit Facility Provider." =========cc====notices MG Properties CA 92121 Attn Mark Gleibennan Tel ] l300 Sonento Valley Road, Suite 220 San Diego Fax(858)526~0800 cc to Robert J. Brown Esq. Procopio, Cory, Hargreaves & Savitch, LLP 530 B Street Suite 2]00 San Diego CA 92121 tel ~_~~_ Fax (ol'l) 2,5-0398 Section 7. This Supp]emental Indenture may be executed in several counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Section 8. This Supplemental Indenture shal] be governed by and construed in accordance with the laws of the State ofCalifomia. Indenture, hereby. Section 9. the terms and Except as specillcally set forth provisions of the Indenture are not in this Second Supp]emental altered, amended or' modilled St3200J 10990.1 - 3 - IN WrTNESS WHEREOF, the Issuer and the Trustee have caused this Second Supplementallndcnturc to be executed as of the date first wlittcn abovc. REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO By: Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Name: Title: SB21illJ 11i'i'i1i I ~ 4 ~ Pursuant to Section 9.02 of the Indenture, the Credit Facility Provider and the Borrower hercb\ consent to the terms and the making of this Second Supplelllcntallmlcnture. FANNIE MAE, a eotlJoration organized under the Federal National Mortgage Charter Act (12 use Section 1716 et scq.) and eXisting Association By: Name: Title: MG Tuscany Apmtments L.P., a California limited partnership By: Gleibenmm Investments, Inc., a California corporation, its Administrative General Partner By: Mark Glcibcnnan, President S11200310990.1 - 5- \ RESOLUTION NO. -=---- ,~ r ! r-- .; 2 3 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO (1) APPROVING THE SALE OF TUSCANY APARTMENTS ("PROJECT") TO MG TUSCANY APARTMENTS, L.P.; (2) APPROVING EXECUTION OF CERTAIN AMENDMENTS TO THE INDENTURE AND LOAN AGREEMENT RELATING TO $7,000,000 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 1996 MULTI-FAMILY HOUSING REVENUE BONDS; (3) APPROVING EXECUTION OF AN ASSUMPTION AGREEMENT RELATED TO THE SALE OF THE PROJECT; (4) APPOINTING BOND COUNSEL IN CONNECTION WITH THE SALE OF THE PROJECT; AND (5) AUTHORIZING DISTRIBUTION OF A SUPPLEMENT TO THE PLACEMENT MEMORANDUM RELATING TO THE BONDS 4 5 6 7 8 9 10 11 WHEREAS, the Redevelopment Agency of the City of San Bernardino (the "Agency") is 12 authorized under Health and Safety Code Section 33000 et seq. to issue bonds to be used to make loans 13 to finance certain activities within tire City of San Bernardino; and 14 WHEREAS, the Agency and U.S. Bank National Association, successor by merger to U.S. 15 Bank Trust National Association formerly known as First Trust ofCalifomia, National Association (the 16 "Trustee") entered into that certain Indenture of Trust, dated as of May I, 1996 (the "Indenture"), in connection with the issuance of the Agency's $7,000,000 Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996 (the "Bonds"); and WHEREAS, the Agency loaned the proceeds of the Bonds to Magellan Silverwood Partnership, 17 18 19 20 an Arizona general partnership (the "Original Borrower"), pursuant to a Loan Agreement, dated as of 21 May I, 1996 (the "Loan Agreement"), among the Agency, the Trustee and the Original Borrower; and 22 WHEREAS, proceeds of the Bonds were used, in part, to construct and pay other costs associated with the construction and development of a multifamily residential rental housing project originally known as Silverwood Apartments and now known as Tuscany Apartments (the "Project") 23 24 located in San Bernardino, California; and 2S -1- P:IClerical Senice~ Dl'pt\:\hrgaret Parker\Ke~olutiom\2003\.03-(l4-21 Tu~rany Apanmenh CDC Re~o.doc WHEREAS, the Project was sold to San Bernardino 328/AF XXX, LLC, a California limited 2 liability company in 2001, and San Bernardino 328/AF XXX, LLC caused the delivery to the Trustee of 3 a letter of credit providing credit support for the Bonds issued by Wells Fargo Bank, National 4 Association, to replace the existing letter of credit issued by Bank One, Arizona, NA; and 5 WHEREAS, at that time the Indenture was amended by that certain First Supplemental Indenture dated as of September I, 2001; and WHEREAS, the Project will now be acquired by MG Tuscany Apartments L.P., a California 6 7 8 limited partnership (the "Borrower") and the Borrower will cause the delivery to the Trustee of a direct pay irrevocable transferable credit enhancement instrument (the "Credit Facility") issued by FANNIE 9 10 MAE (the "Fannie Mae") to replace the existing letter of credit issued by Wells Fargo, NA; and WHEREAS, in connection with the delivery of the Credit Facility, the Borrower and Fannie II 12 Mae have requested certain amendments to the Indenture, Loan Agreement and Regulatory Agreement and Declaration of Restrictive Covenants dated as of May I, 1996 the forms of which amendments are 13 on file with the Secretary of the Agency; and 14 WHEREAS, Newman & Associates, as prospective remarketing agent (the "Remarketing 15 Agent") has informed the Agency that it intends to remarket the Bonds and shall cause to be prepared a Second Supplement dated May I, 2003 To Placement Memorandum dated May 20, 1996 (the 16 17 "Placement Memorandum") relating to such Bonds, as may be necessary in the sale and marketing of 18 the Bonds, the form of which Placement Memorandum is presently on file with the Secretary of the 19 Agency; and 20 WHEREAS, the Agency has considered the terms of the transaction as contemplated herein and desires at this time to approve the terms of said transaction in the public interests of the Agency. 21 22 III 23 III 24 III 25 III -2- P;IClerical Ser.'ices Depll.\lar;:aret Pll.rhr\R"solutions\2003\OJ.04.21 Tuscany Apartments eDe Resu.doc NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF 2 THE CITY OF SAN BERNARDINO DOES HEREBY RESOLVE, DETERMINE AND 3 ORDER, AS FOLLOWS: 4 Section I. Approval of Second Supplemental Indenture. The Agency hereby 5 approves the form of Second Supplemental Indenture dated as of May I, 2003 (the "Second 6 Supplemental Indenture") presently on file with the Secretary together with any non substantive 7 changes therein or nonsubstantive additions thereto as may be approved by the Chairman or 8 Executive Director, with the concurrence of the City Attorney, as necessary to incorporate 9 certain terms and conditions when such terms and conditions have been ascertained. The 10 Agency hereby further authorizes and directs that the form of Second Supplemental Indenture presently on file with the Secretary be prepared in final form thereof, together with such 11 nonsubstantive changes or nonsubstantive modifications as so deemed necessary by the 12 Chairman or Executive Director of the Agency, with the concurrence of City Attorney. The 13 14 Chairman, Vice-Chairman, Executive Director or such other authorized officer of the Agency is hereby authorized and directed to execute and deliver, and the Secretary or Assistant Secretary 15 is hereby authorized and directed to attest to, the final form of the Second Supplemental 16 Indenture when the same has been prepared and such execution and delivery shall be deemed to 17 be conclusive evidence of the approval thereof. 18 Section 2. Approval of Second Supplemental Loan Agreement. The Agency hereby 19 approves the form of Second Supplemental Loan Agreement dated as of May I, 2003 (the 20 "Second Supplemental Loan Agreement") presently on file with the Secretary together with any 21 nonsubstantial changes therein or nonsubstantial additions thereto as may be approved by the 22 Chairman or Executive Director, with the concurrence of City Attorney, as necessary to 23 incorporate certain terms and conditions when such terms and conditions have been ascertained. 24 The Agency hereby further authorizes and directs that the form of Second Supplemental Loan 25 Agreement presently on file with the Secretary be prepared in the final form thereof, together -3- P:\CI~rical S~rYice~ Dept\:\largaret Parker\Rnolutiun~\20U3\03-04-21 Tu~can~ Apartmenl' CDC RUo.dllC with such nonsubstantive changes or nonsubstantive modifications as so deemed necessary by 2 the Chairman or Executive Director of the Agency, with the concurrence of City Attorney. The 3 Chairman, Vice-Chairman, Executive Director or such other authorized officer of the Agencyis 4 hereby authorized and directed to execute and deliver, and the Secretary or Assistant Secretary is hereby authorized and directed to attest to, the final form of the Second Supplemental Loan Agreement when the same has been prepared and such execution and delivery shall be deemed 5 6 7 to be conclusive evidence of the approval thereof. 8 Section 3. Approval of First Amendment to Regulatory Agreement. The Agency 9 hereby approves the form of First Amendment to Regulatory Agreement and Declaration of 10 Restrictive Covenants dated as of May I, 2003 (the "Regulatory Amendment") presently on file II with the Secretary together with any nonsubstantive changes therein or nonsubstantive additions thereto as may be approved by the Chairman or Executive Director, with the concurrence of the 12 City Attorney, as necessary to incorporate certain terms and conditions when such terms and 13 conditions have been ascertained. The Agency hereby further authorizes and directs that the 14 form of Regulatory Amendment presently on file with the Secretary be prepared into the final 15 form thereof, together with such nonsubstantive changes or nonsubstantive modifications as so 16 deemed necessary by the Chairman or Executive Director of the Agency, with the concurrence of City Attorney. The Chairman, Vice-Chairman, Executive Director or such other authorized 17 18 officer of the Agency is hereby authorized and directed to execute and deliver, and the Secretary or Assistant Secretary is hereby authorized and directed to attest to, the final form of the Regulatory Amendment when the same has been prepared and such execution and delivery shall 19 20 21 be deemed to be conclusive evidence of the approval thereof. 22 Section 4. Approval of Intercreditor Agreement and Assumption Agreement, 23 Amended and Restated Note. The Agency hereby approves the form of Intercreditor 24 Agreement between the Agency, Trustee, Fannie Mae, and the Borrower, Assumption 25 Agreement between the Borrower and the Agency, Amended and Restated Multifamily Note -4- P;\CJerical S~r.icn Dept\:\hrgaret Parker\Re",Jutiuns\2003\03-04-11 Tuscany Apartrnenh CDC Reso.doc executed by Borrower to the Agency each dated as of May 1, 2003 (the "Credit and Assumption 2 Documents") presently on file with the Secretary together with any nonsubstantive changes 3 therein or nonsubstantive additions thereto as may be approved by the Chairman or Executive 4 Director, with the concurrence of the City Attorney, as necessary to incorporate certain terms 5 and conditions when such terms and conditions have been ascertained. The Agency hereby 6 further authorizes and directs that the form of Credit and Assumption Documents presently on file with the Secretary be prepared into the final form thereof, together with such nonsubstantive 7 8 changes or nonsubstantive modifications as so deemed necessary by the Chairman or Executive 9 Director of the Agency, with the concurrence of City Attorney. The Chairman, Vice-Chairman, Executive Director or such other authorized officer of the Agency is hereby authorized and 10 11 directed to execute and deliver, and the Secretary or Assistant Secretary is hereby authorized and directed to attest to, the final form of the Credit and Assumption Documents when the same 12 has been prepared and such execution and delivery shall be deemed to be conclusive evidence 13 of the approval thereof. 14 Sale of the Project and Remarketing of the Bonds. The Agency hereby Section 5. 15 approves the sale of the Project to MG Tuscany Apartments L.P., a California limited 16 partnership. The Agency hereby approves the remarketing of the Bonds by the Remarketing 17 Agent, pursuant to that certain Second Supplement to Placement Memorandum dated as of May 18 1, 2003 on file with the Agency. 19 Section 6. Official Action. The Chairman, Executive Director, Secretary, City 20 Attorney and any and all other officers of the Agency are hereby authorized and directed, for and in the name and on behalf of the Agency, to do any and all things and take any and all 21 22 actions, including execution and delivery of any and all assignments, certificates, requisitions, 23 agreements, notices, consents, instruments of conveyance, warrants and other documents, which 24 they, or any of them, may deem necessary or advisable in order to consummate the transaction 25 contemplated herein. Whenever in this Resolution any officer of the Agency is authorized to -5- P:\CI~rical Senices Deptl_\largaret PnkcrIRcsolulhms\2003\03-04-21 Tu~callY Apartments CDC Reso.duc execute or countersign any document or take any action, such execution, countersigning or 2 action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable. The Agency hereby 3 4 appoints its Chairman and Executive Director as agents of the Agency for purposes of executing 5 any and all documents and instruments which any officer of the Agency is authorized to execute 6 hereunder. 7 In September 200 I, in order to facilitate the sale of the Project to the present Owner, 328/ AF XXX, LLC, Lewis Brisbois Bisgaard & Smith LLP was retained by the Section 7. 8 9 Agency to act in the capacity of bond counsel. Due to this prior experience, familiarity and background in the Project, the Agency hereby appoints Lewis Brisbois Bisgaard & Smith LLP as bond counsel for the Agency. ' 10 II Section 8. 12 //1 13 /1/ 14 /1/ 15 //1 16 /1/ 17 /1/ 18 //1 19 //1 20 /1/ 21 /1/ 22 /1/ 23 1// 24 /1/ 25 IIi The Resolution shall become effective immediately upon its adoption. -6- P:\ClericaJ Ser\'ices Depl\.\targarel Parker\ResoI1lIions\2003\03-04-21 TlIscan)' Apartmcllh CI>C Re!iill.dllc 2 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO (I) APPROVING THE SALE OF TUSCANY APARTMENTS ("PROJECT") TO MG TUSCANY APARTMENTS, L.P.; (2) APPROVING EXECUTION OF CERTAIN AMENDMENTS TO THE INDENTURE AND LOAN AGREEMENT RELATING TO $7,000,000 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 1996 MULTI-FAMILY HOUSING REVENUE BONDS; (3) APPROVING EXECUTION OF AN ASSUMPTION AGREEMENT RELATED TO THE SALE OF THE PROJECT; (4) APPOINTING BOND COUNSEL IN CONNECTION WITH THE SALE OF THE PROJECT; AND (5) AUTHORIZING DISTRIBUTION OF A SUPPLEMENT TO THE PLACEMENT MEMORANDUM RELATING TO THE BONDS 3 4 5 6 7 ~ 9 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the 10 Community Development Commission of the City of San Bernardino at a meeting 11 thereof, held on the day of , 2003, by the following vote to wit: ] 2 Commission Members: ESTRADA LONGVILLE MCGINNIS DERRY SUAREZ ANDERSON MC CAMMACK Navs Abstain Absent Aves 13 14 15 16 17 Secretary 1 ~ 19 The foregoing resolution is hereby approved this day of ,2003. 20 21 Judith Valles, Chairperson Community Development Commission of the City of San Bernardino 22 23 Approved as By: 24 25 -7- P:\C1erical Sen'ices Dept\.\lal1;:ard Pnker\ResolutiulIs\200JI03-04-21 Tuscany Apartments cue Ruo.doc RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Fannie Mae c/o O'Melveny & Myers LLP 400 South Hope Street Los Angeles, CA 90071 Attention: Debbie J. Gezon (258,938-649) (Space Above for Recorder's Use Only) INTERCREDITOR AGREEMENT by and among U.S. BANK NATIONAL ASSOCIATION, as Trustee and FANNIE MAE, and acknowledged, accepted and agreed to by MG TUSCANY APARTMENTS L.P. and REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, Relating to $7,000,000 Redevelopment Agency of the City of San Bernardino Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996 Dated as of May 1,2003 LAI:I000296.] T ABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION .................................................... 2 SECTION 1.1 Incorporation of Recitals.................................................... .................. 2 SECTION 1.2 Defined Terms .....................................................................................2 SECTION 1.3 Rules of Construction ..........................................................................2 SECTION 1.4 Interpretation......... ......... ....................... ... ......... .............. ... .................. 3 SECTION 1.5 Effective Date ......................................................................................3 ARTICLE II TRANSFER OF ASSIGNED RIGHTS........................................................... 3 SECTION 2.1 Assignment of Assigned Rights to Trustee and Fannie Mae ...............3 SECTION 2.2 Reserved............................................................................................... 3 SECTION 2.3 Limitations on Issuer............................................................................3 SECTION 2.4 Power of Attorney................................................................................4 SECTION 2.5 Disclaimer of Asswnption of Obligations ........................................... 4 SECTION 2.6 Confirmation of Assignment and Transfer .......................................... 4 SECTION 2.7 Further Assurances............ ............................. .............. ..................... ...4 ARTICLE III LOAN SERVICING ........................................................................................4 SECTION 3.1 Servicing ..... ........................ ... ... .......................... ... .............................. 4 SECTI ON 3.2 Monitoring........................................................................................... 5 ARTICLE IV CONTROL OF ASSIGNED RIGHTS ............................................................ 5 SECTION 4.1 Possession of Note and Security Instrument........................................ 5 SECTION 4.2 Exclusive Exercise of Assigned Rights by Fannie Mae ...................... 5 SECTION 4.3 Disposition of Loan...... ....................... ... .............................................. 5 SECTION 4.4 Assignment of Loan Without Payment or Redemption of Bonds................................................................................................... 5 SECTION 4.5 Assignment of Assigned Rights Upon Payment or Redemption of Bonds in Whole ................................................. ... ...........................6 SECTION 4.6 Consequences of Foreclosure .............................................................. 6 SECTION 4.7 Amendments to Loan Documents........................................................ 7 SECTION 4.8 New Borrower.......................... ......... .......................... ......................... 8 SECTION 4.9 Fannie Mae Assignment ...................................................................... 8 ARTICLE V TRANSFER OF ASSIGNED RIGHTS TO TRUSTEE.................................. 8 SECTION 5.1 Transfer of Assigned Rights to Trustee ............................................... 8 SECTION 5.2 Exercise of Assigned Rights after Transfer to Trustee ........................ 9 Assignment and Intercreditor Agreement -i- Tuscany Apartments LAI 1000296.3 TABLE OF CONTENTS (continued) Page ARTICLE VI TRUSTEE ................... ...... ......... ................................... ... .............. ... ... ... ......... 9 SECTION 6.1 Certain Notices to Fannie Mae and Loan Servicer .............................. 9 SECTION 6.2 Power of Attorney .................. ............................................................ 10 SECTION 6.3 Enforcement ................................ .......................... ............................. 10 SECTION 6.4 Bailee ...... ........................... ...... ..................................... ... .................. 10 SECTION 6.5 Records and Books of Account..........................................................10 SECTION 6.6 Examination of Records and Books of Account................................ 10 ARTICLE VII INSURANCE AND CONDEMNATION .....................................................11 SECTION 7.1 Insurance ............................................................................................ 11 SECTION 7.2 Condemnation ............... ......... ... ............................. ............................ 11 ARTICLE VIII REGULATORY AGREEMENT...................................................................12 SECTION 8.1 Monitoring of Regulatory Agreement ............................................... 12 SECTION 8.2 Termination of Regulatory Agreement.............................................. 12 SECTION 8.3 Right To Enforce Compliance ...........................................................12 SECTION 8.4 Notices of Violations of the Regulatory Agreement.......................... 12 SECTION 8.5 Cure Rights ........................................................................................12 ARTICLE IX ISSUER'S COVENANTS ............................................................................. 12 SECTION 9.1 Limitations on Issuer..........................................................................12 SECTION 9.2 Enforcement....................................................................................... 13 SECTION 9.3 Specific Performance .........................................................................14 SECTION 9.4 Control on Right of Redemption..................................................... ... 14 SECTION 9.5 Consents to Maturity and Sinking Fund Schedules ...........................14 SECTION 9.6 Remarketing Agreement; Tender Agent Agreement......................... 14 SECTION 9.7 Further Assurances............................................................................. 15 ARTICLE X MISCELLANEOUS ...................................................................................... 15 SECTION 10.1 Exculpation ........................................................................................ 15 SECTION 10.2 Disclaimers; Acknowledgments ........................................................ 15 SECTION 10.3 Liability of Borrower ......................................................................... 15 SECTION 10.4 Notices ................. ... ... ................................ ... ... .................................. 16 SECTION 1 0.5 Waivers. ... ... ... ....................... ...... ... ... ........... ...... ................. ......... ...... 17 SECTION 10.6 Amendments .............................. ... ... .......................... ... ..................... 18 Assignment and Intercreditor Agreement LAII000296.3 -ll- Tuscany Apartments SECTION 10.7 SECTION 10.8 SECTION 10.9 SECTION 10.10 SECTION 10.11 SECTION 10.12 SECTION 10.13 SECTION 10.14 T ABLE OF CONTENTS (continued) Page Severability........................................................................................ 18 Execution in Counterparts................. ... ... ....................... .................... 18 Governing Law.................................... ... ....................... ... ... ... ........... 18 WAIVER OF JURY TRIAL............................................................18 Termination........................................................................................ 18 References.......................................................................................... 18 Additional Assignment ............ ....................... ... ... ................. ... ...... ... 18 No Merger of Interests ....................................................................... 19 Assignment and Intercreditor Agreement LAI 10002963 -lll- Tuscany Apartments INTERCREDITOR AGREEMENT THIS INTERCREDITOR AGREEMENT ("Agreement") dated as of May 1,2003 is between U.S. BANK NATIONAL ASSOCIATION ("Trustee"), a national banking association, successor to U.S. Bank Trust National Association, not in its individual or corporate capacity, but solely as Trustee under the Indenture, and FANNIE MAE ("Fannie Mae"), a corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 9 1716, et ~, as amended and is acknowledged, accepted and agreed to by MG TUSCANY APARTMENTS L.P., ("Borrower"), a California limited partnership and REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO ("Issuer"), a public body corporate and politic organized and existing under and pursuant to the laws of the State of California. RECITALS A. In 1996, Megallan Silverwood & Cross Creek General Partnership ("Original Borrower"), as the original borrower, requested Issuer to issue its Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996 ("Bonds") and lend the proceeds to the Original Borrower in the form of a mortgage loan ("Loan") in the amount of $7,000,000 to provide permanent financing for the acquisition, rehabilitation and equipping of a certain multifamily housing apartment building within San Bernardino, California as more particularly described on Exhibit A attached hereto and incorporated herein by reference ("Mortgaged Property"). B. The Bonds were issued pursuant to an Indenture of Trust dated as of May I, 1996, between the Issuer and Trustee, as amended by the First Supplemental Indenture dated as of September 1,2001, and as amended by Second Supplemental Indenture dated as of May 1,2003 (as it may be further amended, modified, supplemented or restated from time to time, "Indenture"). The Bonds are currently outstanding in the amount of$7,000,000. C. The Loan is (a) evidenced by a Loan Agreement dated as of May I, 1996, among the Issuer, the Trustee and Original Borrower, as amended by the First Amendment to Loan Agreement dated as of September I, 2001, among the Issuer, the Trustee and San Bernardino 328/AF XXX, LLC, as assignee of the Original Borrower, and as amended by the Second Amendment to Loan Agreement dated as of May 1, 2003 among the Issuer, the Trustee and Borrower (as it may be further amended, modified, supplemented or restated from time to time, "Financing Agreement") (b) evidenced by a Promissory Note dated May 1, 1996 ("Existing Note") executed by Original Borrower in favor of the Issuer, which Promissory Note was endorsed to the order of Trustee and (c) secured by that certain First Deed of Trust, Assignment or Rents, Security Agreement and Financing Statement dated as of May I, 1996 ("Existing Deed of Trust") by Original Borrower to the Issuer, which Deed of Trust was assigned to Trustee. D. In 2001, San Bernardino 328/AF XXX, LLC acquired the Mortgaged Property from the Original Borrower and assumed the obligations under the Loan including the Existing Note and Existing Deed of Trust. I.A] ]000296.3 E. Borrower has now acquired the Mortgaged Property and assumed the obligations under the Loan including the Existing Note and Existing Deed of Trust. F. Borrower has requested Fannie Mae to provide credit enhancement and liquidity support for the Bonds ("Credit Enhancement") and Fannie Mae has agreed to provide the Credit Enhancement pursuant to the Credit Enhancement Instrument ("Credit Enhancement Instrument") subject to, among other things, the parties hereto entering into this Agreement and the Borrower entering into the Reimbursement Agreement with Fannie Mae ("Reimbursement Agreement"). G. As of the date hereof, the Existing Deed of Trust is being amended and restated in its entirety as of the date hereof pursuant to that certain Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Instrument and Fixture Filing by Borrower to Fannie Mae and Trustee ("Security Instrument"). The Existing Note is also being amended and restated in its entirety as of the date hereof pursuant to that certain Amended and Restated Multifamily Note ("Note"). ARTICLE I DEFINITIONS AND INTERPRET A nON SECTION 1.1 Incorporation of Recitals. In addition to the recitals set out above, the Recitals to the Indenture are incorporated into and made a part of this Agreement. SECTION 1.2 Defined Terms. All capitalized terms used in this Agreement have the meanings given to those terms in the Indenture or Reimbursement Agreement or elsewhere in this Agreement unless the context or use clearly indicates a different meaning. SECTION 1.3 Rules of Construction. The rules of construction set forth in this Section 1.3 apply to this Agreement. (a) The singular form of any word includes the plural, and vice versa, unless the context otherwise requires. The use of a pronoun of any gender includes correlative words of the other genders. (b) All references to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or other subdivisions of this Agreement; and the words "in this Agreement," "of this Agreement," "under this Agreement" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision. (c) Any captions, headings or titles of the several Articles, Sections and other subdivisions, and the table of contents are solely for convenience of reference and do not limit or otherwise affect the meaning, construction or effect of this Agreement or describe the scope or intent of any provision. (d) All accounting terms not otherwise defined have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time. Intercreditor Agreement LA 1 1000296.3 2 Tuscany Apartments (e) Every "request," "order," ""demand," ""application," "appointment," "notice," "statement," "certificate," "consent," or similar action under this Agreement by any party must be in writing and signed by a duly authorized representative of such party with a duly authorized signature. (1) All references in this Agreement to "counsel fees," "attorneys fees" or the like mean and include fees and disbursements allocable to in-house or outside counsel, whether or not suit is instituted, and including fees and disbursements preparatory to and during trial and appeal and in any bankruptcy or arbitration proceedings. (g) Whenever the word "includes" or "including" is used, such word means "includes or including by way of example and not limitation." SECTION 1.4 Interpretation. Each of the parties acknowledges that it and its counsel participated in the drafting and revision of this Agreement. Accordingly, the parties agree that any rule of construction, which disfavors the drafting party shall not apply in the interpretation of this Agreement. SECTION 1.5 Effective Date. This Agreement shall be effective on the date Fannie Mae executes and delivers to the Trustee its Credit Enhancement Instrument. ARTICLE II TRANSFER OF ASSIGNED RIGHTS SECTION 2.1 Assignment of Assigned Rights to Trustee and Fannie Mae. The Issuer hereby affirms its assignment to the Trustee of all of the Issuer's right, title and interest in and to (i) the Loan, the Note, each of the other Loan Documents and the Financing Agreement (collectively, "Assigned Documents"), (ii) all the real and personal property described in the Assigned Documents and (iii) all proceeds, products, substitutions, additions and replacements of any collateral now or hereafter mortgaged, assigned or pledged under any of the Assigned Documents; in all cases whether now existing or arising in the future; provided, however, that the Issuer's rights retained under any of said documents (including but not limited to fees, indemnifications, notice and provisions regarding transfer of the Mortgaged Property) ("Reserved Rights") are excepted from such assignment and transfer (collectively, "Assigned Rights"). The Trustee hereby agrees that Assigned Rights shall be held jointly by Trustee and Fannie Mae, as credit enhancer, pursuant to the terms of this Agreement. Trustee and Fannie Mae (the "Assignees") each acknowledge receipt of, and accepts, and shall hold, the Assigned Rights, as its interest may appear. SECTION 2.2 Reserved SECTION 2.3 Limitations on Issuer. From and after the effective date of this Agreement, the Issuer shall not have, except with respect to the Reserved Rights, any right, power or authority to exercise any of the Assigned Rights or take any other action with respect to the Assigned Documents or the Assigned Rights, including waiving or releasing the Borrower from any default under any of the Assigned Documents, consenting to any amendment, Intercreditor Agreement LAI 1000296.3 3 Tuscany Apartments supplement to, or restatement of any Loan Document and accelerating or otherwise enforcing payment or seeking other remedies with respect to the Loan. SECTION 2.4 Assil!:nment of Ril!:hts. Subject to the Reserved Rights of the Issuer, the Issuer agrees that Fannie Mae and the Trustee, each acting alone, in its own name or in the name of the Issuer, may enforce all of the Assigned Rights and all obligations of the Borrower under the Assigned Documents, without regard to whether the Issuer is in default under the Loan Documents or under this Agreement. SECTION 2.5 Disclaimer of Assumption of Oblil!:ations. Neither Fannie Mae nor thc Trustee shall be obligated by reason of this Agreement or otherwise to perform or be responsible for the performance of any of the obligations of the Issuer under the Loan Documents. SECTION 2.6 Confirmation of Assil!:nment and Transfer. In order to confirm and evidence the assigrunent set out in Section 2.1, the Issuer or Trustee, as applicable, has delivered to Fannie Mae and the Trustee, if applicable, and Fannie Mae and the Trustee acknowledge receipt of, a signed counterpart of each of the Assigned Documents (other than the Note, which is a single original delivered to the custody of Trustee as provided in Section 4.1) and has executed and delivered to Fannie Mae and the Trustee, if applicable, Uniform Commercial Code financing statements covering the Issuer's and the Trustee's, if applicable, intcrest in the Assigned Rights in form sufficient for filing with the California Secretary of State's Office and the Recorder's Office for San Bernardino County, naming Fannie Mae and the Trustee as secured parties. SECTION 2.7 Further Assurances. The Issuer agrees to cooperate with the Borrower, Fannie Mae and the Trustee in their defenses of Fannie Mae's and the Trustee's interests in the Assigned Rights against the claims and demands of all Persons. The Issuer will execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such additional and supplemental agreements, financing statements, continuation statements and other instruments and documents, do such further acts, and make such further transfers as the Trustee or Fannie Mae may reasonably request to effectuate the purpose and intent of this Agreement. ARTICLE III LOAN SERVICING SECTION 3.1 Servicinl!:. So long as the Assigned Rights have not transferred to the Trustee pursuant to Section 5.1, Fannie Mae shall have the sole and exclusive right, without the consent of the Issuer, the Trustee or the Borrower, to (i) arrange for the servicing of the Assigned Rights, but excluding all other Reserved Rights (ii) appoint and reappoint the Loan Servicer and (iii) terminate thc Loan Servicer (with or without cause), all on such terms and conditions as Fannie Mae may determine from time to time. Loan servicing shall include, but not be limited to, the power and authority to (a) take any action, make any decision, exercise any power or authority to act with respect to the Assigned Rights, (b) establish and maintain custodial and other accounts for the deposit of funds payable by the Borrower and (c) collect, apply and disburse payments of principal of, interest on and premium on the Loan and all othcr sums payable from time to time by the Borrower under any of the Loan Documents or the Financing Agreement, all in accordance with the applicable documents. None of the Issuer, the Trustee or Intercreditor Agreement LA II 0002963 4 Tuscany Apartments the Borrower shall have any right under, or be a third party beneficiary of, the Servicing Agreement. Neither Fannie Mae, the Issuer nor the Trustee shall have any obligation to pay a servicing fee to the Loan Servicer. SECTION 3.2 Monitorine. The Borrower shall furnish to the Loan Servicer copies of all reports regarding the Mortgaged Property required to be filed by the Borrower pursuant to the Financing Agreement or the Regulatory Agreement. Neither the Trustee nor the Loan Servicer shall have any duty or obligation to analyze or review any such reports for determining whether or not the Borrower or the Mortgaged Property is in compliance with the requirements of the Code for maintaining the excludability from gross income, for federal income tax purposes, of the interest payable on the Bonds. ARTICLE IV CONTROL OF ASSIGNED RIGHTS SECTION 4.1 Possession of Note and Seenritv Instrument. The Trustee shall hold the original Note and the recorded Security Instrument. The originals (or, where recorded, executed copies) of all other Loan Documents, shall also be delivered to and held by Fannie Mae. Trustee acknowledges receipt of the original executed Note, endorsed to the order of Trustee. SECTION 4.2 Exclusive Exercise of Assiened Riehts bvFannie Mae. Except only as provided in Section 5.1, Fannie Mae shall have and may exercise all of the Assigned Rights to the exclusion of the Trustee and in the same manner and with the same right, power and authority to act as Fannie Mae would have if Fannie Mae were the sole owner of the Loan and were the sole holder ofthe Note and the Security Instrument. In exercising the Assigned Rights, Fannie Mae shall not be an agent of the Issuer or the Trustee. Neither the Issuer nor the Trustee shall be liable for any action taken or not taken by Fannie Mae in the exercise of the Assigned Rights or the Loan Servicer in the servicing of the Assigned Rights. SECTION 4.3 Disposition of Loan. Unless the Assigned Rights are transferred to the Trustee pursuant to Section 5.1, the Trustee shall not, without the prior written consent of Fannie Mae, dispose of the Loan, transfer the Note or any other Loan Document or any interest in the Note or any Loan Document, other than to Fannie Mae as provided in Sections 4.4 and 4.5, a successor Trustee pursuant to the Indenture or to the Issuer pursuant to Section 10.11 of this Agreement. SECTION 4.4 Assienment of Loan Without Payment or Redemption of Bonds. Fannie Mae shall have the right, with respect to the Loan, without making an Advance under the Credit Enhancement Instrument, but only upon filing with the Trustee a certification reaffirming Fannie Mae's obligations under the Credit Enhancement Instrument, to instruct the Trustee in writing to assign the Note, the Security Instrument and the other Loan Documents to Fannie Mae, in which event the Trustee shall (i) endorse the Note to Fannie Mae and assign (in recordable form) the Security Instrument, (ii) assign (in recordable form) all other Loan Documents to Fannie Mae and (iii) execute all such documents as are necessary to legally and validly effectuate the assignments provided for in the preceding clauses (i) and (ii). The Trustee's assignments to Fannie Mae pursuant to this Section 4.4 shall be without recourse or warranty except that the Trustee shall represent and warrant in connection therewith (A) that the Intercreditor Agreement LAl 10002963 5 Tuscany Apartments Trustee has not previously endorsed or assigned any such documents or instruments and (B) that the Trustee has authority to endorse and assign such documents and instruments and such endorsements and assignment have been duly authorized. Fannie Mae shall hold the Note and the Security Instrument for the benefit of the Bondholders. If, following such assignments, the Assigned Rights are transferred to the Trustee pursuant to Section 5.1, all rights and interests assigned by the Trustee to Fannie Mae pursuant to this Section shall automatically without any further action on the part of the Trustee or Fannie Mae revert to the Trustee. Notwithstanding the foregoing, Fannie Mae agrees to take such action and to execute and deliver and to facilitate the recordation of such documents provided to Fannie Mae as may be reasonably necessary to evidence the reversion of all rights and interests originally assigned by the Trustee to Fannie Mae pursuant to this Section. No assignment pursuant to this Section shall affect Fannie Mae's obligations under the Credit Enhancement Instrument. SECTION 4.5 Assilmment of Assil!.ned Ril!.hts Upon Payment or Redemption of Bonds in Whole. In the event Fannie Mae makes an Advance under the Credit Enhancement Instrument with respect to the payment or redemption of the Bonds Outstanding in whole, unless otherwise determined by Fannie Mae: (a) all of the Trustee's right, title and interest in and to the Assigned Rights shall transfer to Fannie Mae automatically, without any further action on the part of the Trustee or Fannie Mae; and (b) the Trustee shall (i) endorse the Note to Fannie Mae and assign (in recordable form) and deliver the Security Instrument to Fannie Mae, (ii) assign (in recordable form) all other Loan Documents and the Financing Agreement to Fannie Mae and (iii) execute and deliver all such other documents as are necessary to legally and validly effectuate the assignments provided for in the preceding clauses (i) and (ii). The Trustee's assignments to Fannie Mae pursuant to this Section shall be without recourse or warranty except that thc Trustee shall represent and warrant in connection therewith (A) that the Trustee has not previously endorsed or assigned any such documents or instruments and (B) that the Trustee has authority to endorse and assign such documents and instruments. SECTION 4.6 ConseQuences of Foreclosure. In the event that, following a default under the Loan, the (a) Mortgaged Property is acquired by either or both of the Assignees, or their nominees, as a result of a foreclosure or the acceptance of a deed in lieu of foreclosure or comparable conversion of the Loan or other enforcement provisions of the Security Instrument, (b) the Bonds are not redeemed with funds provided under the Credit Enhancement Instrument and (c) Fannie Mae has any obligation under the Credit Enhancement Instrument and no Wrongful Dishonor exists, the Mortgaged Property shall be conveyed to Fannie Mae or its nominee, and all decisions thereafter with respect to the Mortgaged Property (including, without limitation, all decisions with respect to the management, opcration, maintenance and sale of the Mortgaged Property - and the price and terms of such sale - the payment or contesting of real estate taxes, rebuilding or restoration after damage, destruction or taking, alterations, improvements, insurance coverage, litigation and conversion to a cooperative or condominium), shall be made solely by Fannie Mae. "Wrongful Dishonor" as used herein shall mean any Intercreditor Agreement LAII000296.3 6 Tuscany Apartments uncured failure by Fannie Mae to make an Advance to the Trustee upon proper presentation of documents which conform to the terms and conditions of the Credit Enhancement Instrument. SECTION 4.7 Amendments to Loan Documents. Unless the Assigned Rights arc transferred to the Trustee pursuant to Section 5.1, the provisions of this Section shall apply to any amendment, supplement to or restatement of the Loan Documents. (a) Right to Amend, Supplement or Restate Loan Documents. Fannie Mae shall have the right to amend, supplement or restate the Loan Documents with the Borrower and to exchange any of the Loan Documents for new Loan Documents relating to the Mortgaged Property (collectively, "Amended Loan Documents"). If the execution of any Amended Loan Documents would: (I) result in an amendment of the Credit Facility, Fannie Mae may not proceed with such execution unless Fannie Mae provides to the Trustee an Opinion of Counsel to Fannie Mae, who may be an employee of Fannie Mae, to the effect that the modified Credit Facility is a valid and binding obligation of Fannie Mae, subject to any applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and general equitable principles and other customary exceptions; (2) change the payment terms of the Loan, Fannie Mae must provide the Trustee a written confirmation from the Rating Agency that the rating to be in effect with respect to the Bonds from and after the execution of such Amended Loan Documents will not be lower than the rating then in effect for the Bonds; (3) change the outstanding principal amount, the interest rate, the maturity date, the due date for the payment of interest, the terms of mandatory prepayment or governing law or jurisdiction provisions of the Note, Fannie Mae must obtain the Trustee's prior written consent to such change. (b) Trustee's Consent. Unless the Assigned Rights are transferred to the Trustee pursuant to Section 5.1: (I) unless directed to do so in writing by Fannie Mae, the Trustee shall not consent to any proposed amendment, supplement to or restatement of, any of the Loan Documents or waive any default by the Borrower under any of the Loan Documents; and (2) if directed to do so in writing by Fannie Mae, the Trustee shall amend, supplement or restate the Loan Documents, or waive any default by the Borrower under any of the Loan Documents; provided, however, that no such amendment, supplement or restatement shall (i) change, without the Trustee's prior written consent, the outstanding principal amount, the interest rate, the maturity date, the due date for the payment of interest, the terms of mandatory prepayment or governing law or jurisdiction provisions of the Note; or (ii) change, without the Issuer's prior written consent, the timing or amount of the Issuer's Fee. Intercreditor Agreement LA 1:] 0002963 7 Tuscany Apartments SECTION 4.8 New Borrower. In the event Fannie Mae forecloses the Security Instrument, or accepts a deed in lieu of foreclosure or comparable conversion of the Mortgaged Property, Fannie Mae shall have the right to enter into, or cause to be executed, Amended Loan Documents or exchange the Loan Documents for Amended Loan Documents by a person other than the Borrower ("New Borrower"). Except in the event of a transfer of the Mortgaged Property to Fannie Mae, Fannie Mae shall not execute any Amended Loan Documents having the effect of substituting a New Borrower as the Borrower, unless Fannie Mae first provides each of the following to the Trustee: (a) written evidence that the New Borrower has executed and recorded, as applicable, documents, acceptable to the Issuer and Fannie Mae, substantially in the forms of the Financing Agreement and the Regulatory Agreement (or executed and recorded an assumption, acceptable to the Issuer and Fannie Mae, of all of the applicable Borrower's obligations under the Financing Agreement and the Regulatory Agreement) and that the Credit Facility Documents and the Credit Facility, if required, have been modified to be applicable to the new mortgage loan; (b) from the Rating Agency written confirmation that the rating to be in effect with respect to the Bonds from and after delivery to the Trustee of the new mortgage note and mortgage and the modified Credit Facility Documents and modified Credit Facility will not be lower than the rating then in effect for the Bonds; (c) an opinion of Bond Counsel to the effect that such exchange and modification, in and of itself, will not affect the excludability of the interest payable on the Bonds from gross income for federal income tax purposes; and (d) from the Issuer, the consent (if any) required by the Regulatory Agreement. SECTION 4.9 Fannie Mae Assi2nment. Fannie Mae shall have the right, in its sole discretion, to assign, sell or transfer its right, title and interest in, to and under the Assigned Documents, the Assigned Rights and this Agreement to any Person. ARTICLE V TRANSFER OF ASSIGNED RIGHTS TO TRUSTEE SECTION 5.1 Transfer of Assi2ned Ri2hts to Trustee. If either (1) Fannie Mae has no further obligation under the Credit Enhancement Instrument and all obligations of the Borrower to Fannie Mae under the Credit Facility Documents and the other Borrower Documents have been satisfied in full; or (ii) a Wrongful Dishonor occurs and continues for more than five Business Days after the Issuer or the Trustee gives written notice of such Wrongful Dishonor specifying such failure and requesting that it be remedied, the Assigned Rights shall transfer automatically to the Trustee, without any further action on the part of the Trustee or Fannie Mae. Fannie Mae shall also take such action and execute and deliver and facilitate the filing and recordation of such documents provided to Fannie Mae as may be reasonably necessary to evidence the transfer of the Assigned Rights to the Trustee and the assignment of the Assigned Documents to the Trustee. Fannie Mae's assignments to the Trustee pursuant to this Section shall be without recourse or warranty except that Fannie Mae shall represent and warrant in connection therewith (i) that Fannie Mae has not previously endorsed or assigned any such Intercreditor Agreement LAI"I000296.3 8 Tuscany Apartments documents or instruments and (ii) that Fannie Mae has authority to endorse and assign such documents and instrument,. SECTION 5.2 Exercise of Assigned Rights after Transfer to Trustee. If the Assigned Rights transfer to the Trustee pursuant to Section 5.1: (a) the Trustee (alone or, at its election, with the Issuer) may exercise the Assigned Rights and all other rights, powers, options, privileges and remedies provided to the Trustee under this Agreement, to the exclusion of Fannie Mae; (b) all obligations of the Borrower under the Credit Facility Documents shall continuc to bc secured by the Security Instrument on an equal and ratable basis with the obligations of the Borrower under the Loan Documents; and (c) if, at such time, Fannie Mae has a lien on any Bonds pursuant to the Pledge Agreement, the Trustee shall have, in its exercise of any of the rights, powers, options, privileges and remedies provided for in this Agreement pursuant to Section 5.1, the same fiduciary obligations to Fannie Mae, as secured party, as the Trustee has to the Bondholders. Notwithstanding the foregoing, nothing in this Agreement or in any Loan Document shall limit or control the exercise by Fannie Mae of the rights granted by the Borrower to Fannie Mae as "Lender" under the Se(;urity Instrument. Each of the Issuer. the Trustee and the Borrower recognizes and confirms the rights granted by the Borrower to Fannie Mae as "Lender" under the Security Instrument. If and for so long as Fannie Mae continues to have any further obligation under the Credit Enhancement Instrument. Fannie Mae shall be entitled to receive all notices pursuant to this Agreement, the Indenture and thc Loan Documents. ARTICLE VI TRUSTEE SECTION 6.1 Certain Notices to Fannie Mae and Loan Servicer. The Trustee shall give the following notices in writing: (a) The Trustee shall give prompt written notice to Fannie Mae and the Loan Servicer of the occurrence of any Event of Default known to it under the Indenture, the Credit Enhancement Instrument, the Financing Agreement, the Note, the Security Instrument or any other Transaction Document, and of any event known to it which would become such an Event of Default upon the giving of notice, the lapse of time or both, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such events. (b) During an) Weekly Variable Rate Period, the Trustee shall give written notice to the Loan Servicer of the amount of each interest payment due on the Bonds. The Trustee shall give such notice as soon as practicable but not later than the last Wednesday before the Interest Payment Date of each month, or in the event such Wednesday is not a Business Day, the next Business Day. Intercreditor Agreement I.All000296J 9 Tuscany Apartments SECTION 6.2 Power of Attornev. The Trustee, for itself and for any successor or replacement Trustee, irrevocably and unconditionally constitutes and appoints Fannie Mae as the Trustee's true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any notice, document, certificate, paper, instrument or pleading and to do in the Trustee's name, place and stead, all such acts, things and deeds for and on behalf of the Trustee under this Agreement and/or any of the Assigned Documents which the Trustee could or might do or which may be necessary, desirable or convenient in Fannie Mae's sole discretion to effectuate the purposes of this Agreement and/or any Assigned Document. The power of attorney and the rights, remedies, power and authority granted by the Trustee to Fannie Mae in this Agreement are hereby declared by the Trustee to be coupled with an interest and irrevocable until the Reimbursement Agreement is no longer in full force and effect or until the Assigned Rights are transferred to the Trustee pursuant to Section 5.1, and may be exercised by Fannie Mae in the name of Fannie Mae, in the name of the Trustee or in the names of Fannie Mae and the Trustee, as Fannie Mae may at any time or from time to time determine, and the Trustee hereby confirms and ratifies all acts and deeds taken or to be taken by Fannie Mae as altorney-in- fact. SECTION 6.3 Enforcement. Notwithstanding any other provision in this Agreement to the contrary, so long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, the Trustee shall not exercise any remedy or direct any proceeding under the Indenture, the Loan Documents or the Financing Agreement other than (i) to enforce rights under the Credit Enhancement Instrument and (ii) to enforce the tax covenants in the Indenture and the Financing Agreement provided that the Trustee does not enforce any right it may have for monetary damages. The Trustee shall provide written notice to Fannie Mae, the Issuer and the Loan Servicer immediately upon taking any action at law or in equity to exercise any remedy or direct any proceeding under the Indenture or the Financing Agreement. SECTION 6.4 Bailee. The Trustee agrees to act as bailee and agent on behalf of Fannie Mae in relation to the Borrower's pledge and grant of a security interest pursuant to Section 2.6 of the Reimbursement Agreement to the extent, if any, the Borrower retains an interest in all Funds, Accounts and Investments held by the Trustee under the Indenture. SECTION 6.5 Records and Books of Account. The Trustee shall keep, or cause to be kept, proper records and books of account in which complete and accurate entries shall be made of all of its transactions relating to the Loan and the Assigned Documents, including without limitation, payments made under the Loan and all funds and accounts established by or held pursuant to the Indenture with respect to the Loan. SECTION 6.6 Examination of Records and Books of Account. The Trustee agrees that all records and books of account in its possession relating to the Loan, the Assigned Documents and all records and books of account regarding the receipt and distribution of payments on the Loan and the Borrower's compliance with the terms and conditions of the Loan and the Assigned Documents, shall be open to inspection, examination and audit at any reasonable time by the Issuer, the Borrower, the Loan Servicer and Fannie Mae or by such accountants or. other agents as the Issuer, the Borrower, the Loan Servicer or Fannie Mae may from time to time designate. In addition, the Issuer, the Borrower, the Loan Servicer and Fannie Mae shall have the right, at any time and from time to time, to rcquire the Trustee to furnish such Intercreditor Agreement LA I] 000296] 10 Tuscany Apartments documents to the Issuer, the Borrower, the Loan Servicer and Fannie Mae, at the Borrower's expense, as the Issuer, the Borrower, the Loan Servicer or Fannie Mae, as the case may be, from time to time, deems reasonably necessary in order to determine that the provisions of the Loan have been complied with. ARTICLE VII INSURANCE AND CONDEMNATION SECTION 7.1 Insurance. So long as no transfer of the Assigned Rights pursuant to Section 5. I has occurred, (i) Fannie Mae shall be named as the sole mortgagee on all fire, extended coverage and other hazard insurance policies required under the Loan Documents ("Insurance Policies"), (ii) all such proceeds shall be held and applied by Fannie Mae in accordance with the Security Instrument and the other Loan Documents, and (iii) the Borrower, as mortgagor, shall deal solely with Fannie Mae or the Loan Servicer, as Fannie Mae shall direct, under the Loan Documents with respect to all matters related to the Insurance Policies. If the Assigned Rights transfer to the Trustee pursuant to Section 5. I, (I) the Trustee shall be named as the sole mortgagee on all Insurance Policies, (2) all such proceeds shall be held and applied by the Trustee in accordance with the Security Instrument and the other Loan Documents, and (3) the Borrower, as mortgagor, shall deal solely with the Trustee under the Loan Documents with respect to all matters related to the Insurance Policies. The Borrower agrees that Fannie Mae, the Trustee and the Issuer shall each be a named insured on all liability insurance policies required under the Loan Documents. Fannie Mae and the Trustee shall execute, acknowledge and deliver all such documents as shall be necessary to evidence or confirm the provisions of this Section. Neither Fannie Mae, the Loan Servicer, the Issuer nor the Trustee shall have any liability under this Agreement or otherwise for any application of insurance proceeds. SECTION 7.2 Condemnation. So long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, (i) Fannie Mae shall be the sole payee with respect to all condemnation awards, (ii) all proceeds of any condemnation award shall be applied in any manner permitted by the Security Instrument, as directed by Fannie Mae, in its discretion, and (iii) the Borrower, as mortgagor, shall deal solely with Fannie Mae or the Loan Servicer, as Fannie Mae shall direct, under the Loan Documents. If the Assigned Rights transfer to the Trustee pursuant to Section 5.1, (1) the Trustee shall be the sole payee with respect to all condemnation awards, (2) all proceeds of any condemnation award shall be applied in any manner permitted by the Security Instrument, as directed by the Trustee, in its discretion, and (3) the Borrower, as mortgagor, shall deal solely with the Trustee under the Loan Documents. Fannie Mae and the Trustee shall execute, acknowledge and deliver all such documents as shall be necessary to evidence or confirm the provisions ofthis Section. Neither Fannie Mae, the Loan Servicer, the Issuer nor the Trustee shall have any liability under this Agreement or otherwise for any application of condemnation award proceeds. ARTICLE VIII REGULATORY AGREEMENT SECTION 8.1 Monitorinl! of Rel!ulatorv Al!reement. The Issuer shall have the sole obligation to monitor compliance with the Regulatory Agreement. Intercreditor Agreement LA1l0002963 11 Tuscany Apartments SECTION 8.2 Termination of Rel!ulatorv Al!reement. Upon expiration or termination of the Regulatory Agreement pursuant to its terms, the Issuer, in its capacity as the Issuer, shall promptly notify Fannie Mae and the Trustee of the termination of the Regulatory Agreement. SECTION 8.3 Ril!ht To Enforce Compliance. The Issuer, the Trustee, the Loan Servicer and Fannie Mae shall each have the right, but not the obligation, to enforce compliance by the Borrower and its successors as subsequent owners of the Mortgaged Property with the Regulatory Agreement. Notwithstanding the foregoing, the Trustee agrees that it will, subject to the provisions of the Indenture and Article IX, at the direction of the Issuer, take such action as may be required to achieve compliance by the Borrower with the Regulatory Agreement. SECTION 8.4 Notices of Violations of the Rel!ulatorv Al!reement. Promptly upon determining that a violation of the Regulatory Agreement has occurred, the Issuer shall send written notiee of such violation to Fannie Mae, the Loan Servieer and the Trustee. The Issuer's notice shall set out the nature of the violation and state whether the violation has been cured or has not been eured but is curable within a reasonable period of time, or is incurable and contain a copy of the Issuer's notice of violation to the Borrower. If the Borrower fails to cure the violation to the reasonable satisfaction of the Issuer within the time period set forth in the Issuer's notice of the violation to the Borrower (which period shall not be shorter than any applicable period set out in the Regulatory Agreement for the cure of such violation) and if, as a consequence of such failure, the Issuer declares an Event of Default under the Regulatory Agreement, the Issuer shall provide prompt written notice to Fannie Mae, the Loan Servicer and the Trustee of the Event of Default (together with a copy of any notice of the Event of Default provided to the Borrower). SECTION 8.5 Cure Ril!hts. Each of Fannie Mae, the Loan Servicer and the Trustee shall have the right, but not the obligation, to cure any default by the Borrower under the Regulatory Agreement. Such cure may be made even after the Issuer's notice of declaration of an Event of Default under the Regulatory Agreement, provided however, such cure right shall not affect any requirements of the Code and the Act. Fannie Mae shall have the additional right, but not the obligation, to cure any violation of the Regulatory Agreement by assumption of the management and operation of the Mortgaged Property, directly or through any Fannie Mae approved seller-servicer or a receiver under the Security Instrument. Any operation of the Mortgaged Property by Fannie Mae or its successors or assigns shall be in accordance with the Regulatory Agreement, but only so long as the Regulatory Agreement remains in effect. ARTICLE IX ISSUER'S COVENANTS SECTION 9.1 Limitations on Issuer. The Issuer shall not consent to any amendment, supplement to, or restatement of any Bond Document or the Regulatory Agreement, or any other document executed or delivered in connection with the Bonds without the prior written consent of Fannie Mae. SECTION 9.2 Enforcement. Notwithstanding any other provision in this Agreement to the contrary, so long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, neither the Issuer nor any person under its control shall exercise any remedy or direct any Intercreditor Agreement LA 1: 1000296.3 12 Tuscany Apartments proceeding under the Indenture, the Financing Agreement or the Regulatory Agreement other than as set out in this Section. (a) Enforcement of Certain Rights and Obligations. Subject to subsection (b), the Issuer may: (I) Tax Covenants. Seek specific performance of the tax covenants of the Indenture and the Financing Agreement, injunctive relief against acts which may be in violation of any of the tax covenants, and enforce the Borrower's obligation to pay amounts for credit to the Rebate Fund; (2) Regulatorv Agreement. Seek specific performance of the obligations of the Borrower or any other owner of the Property under the Regulatory Agreement and injunctive relief against acts which may be in violation of the Regulatory Agreement or otherwise unlawful; provided, however, that the Issuer may enforce any right it may have under the Regulatory Agreement for monetary damages only against Excess Revenues, if any, of the Borrower, unless Fannie Mae otherwise specifically consents in writing to the use of other funds; and (3) Reserved Rights. Take whatever action at law or in equity which appears necessary or desirable to enforce the Reserved Rights; provided, however, that the Issuer or any person under its control may only enforce any right it may have for monetary damages against Excess Revenues, if any, of the Borrower, unless Fannie Mae otherwise specifically consents in writing to the enforcement against other funds of the Borrower. (b) Overriding Limitations. In no event shall the Issuer: (I) prosecute its action to a lien on the Mortgaged Property; (2) take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal of, interest on, or other amounts due under, the Loan or of causing the Borrower to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applicable liquidation, insolvency. bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future; or (3) interfere with the exercise by Fannie Mae of any of its rights under the Loan Documents or the Credit Facility Documents upon the occurrence of an event of default by the Borrower under the Loan Documents or the Credit Facility Documents; or (4) take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Loan or the Bonds. (c) Notice of Action. The Issuer shall provide written notice to Fannie Mae, the Trustee and the Loan Servicer immediately upon taking any action at law or in equity to exercise any remedy or direct any proceeding under the Indenture, the Financing Agreement or the Regulatory Agreement. Intercreditor Agreement LA! 10002963 13 Tuscany Apartments (d) Definition of "Excess Revenues". As used in this Section, the term "Excess Revenues" means, for any period, the net cash flow of the Borrower available for distribution to shareholders, members or partners (as the case may be) for such period, after the payment of all interest expense, the amortization of all principal of all indebtedness coming due during such period (whether by maturity, mandatory sinking fund payment, acceleration or otherwise), the payment of all fees, costs and expenses on an occasional or recurring basis in connection with the Loan or the Bonds, the payment of all operating, overhead, ownership and other expenditures of the Borrower directly or indirectly in connection with the Mortgaged Property (whether any such expenditures are current, capital or extraordinary expenditures), and the setting aside of all reserves for taxes, insurance, water and sewer charges or other similar impositions, capital expenditures, repairs and replacements and all other amounts which the Borrower is required to set aside pursuant to agreement, but excluding depreciation and amortization of intangibles. SECTION 9.3 Specific Performance. The Borrower acknowledges and agrees that were money damages a remedy under the Regulatory Agreement or in connection with any of the tax covenants of the Indenture and the Financing Agreement, money damages alone would not be an adequate remedy at law for a default by the Borrower arising from a failure to comply with the Regulatory Agreement or the tax covenants and therefore the Borrower agrees that the remedy of specific performance shall be available to the Issuer and/or the Trustee in any case. SECTION 9.4 Control on Ri2ht of Redemption. Notwithstanding any inconsistent provision of the Indenture or any of the Loan Documents and so long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, the Issuer shall not exercise any right pursuant to Section 4.01 (h) of the Indenture to cause a redemption of any or all of the Bonds without the prior written consent of Fannie Mae in each case and the Trustee shall not, without the prior written consent of Fannie Mae, use the proceeds of any Advance under the Credit Enhancement Instrument to make any such redemption. SECTION 9.5 Consents to Maturity and Sinkin2 Fund Schedules. The Issuer will not establish any schedule of principal amounts of Bonds to mature or be subject to redemption through the application of sinking fund payments without the prior written direction of the Borrower and, for so long as Fannie Mae has any obligation under the Credit Enhancement Instrument and no Wrongful Dishonor exists, without the prior written consent of Fannie Mae. SECTION 9.6 Remarketin2 A2reement; Tender A2ent A2reement. The Issuer and the Borrower agree that they will not enter into any amendment, modification, supplement or other document effecting a change in the Remarketing Agreement or any agreement relating to the responsibilities of the Tender Agent which are applicable to the Bonds or enter into any new or replacement remarketing agreement or tender agent agreement with respect to the Bonds without the prior written consent of Fannie Mae. SECTION 9.7 Further Assurances. The Issuer, to the extent permitted by law, shall execute, acknowledge and deliver such supplemental indentures and other instruments and documents, and perform such further acts, as the Trustee or the Credit Provider may reasonably require to perfect, and maintain perfected, the security interest in the Trust Estate or to better assure, transfer, convey, pledge, assign and confirm to the Trustee or the Credit Provider all of its respective interest in the property described in the Indenture and the revenues, receipts and other Intercreditor Agreement LA 1.1 000296.3 14 Tuscany Apartments amounts pledged by the Indenture. The Issuer, at the sole expense of the Borrower, shall cooperate to the extent necessary with the Borrower, the Trustee and the Credit Provider in their defenses of the Assigned Rights and the Credit Facility against the claims and demands of all Persons. ARTICLE X MISCELLANEOUS SECTION 10.1 Exculpation. Notwithstanding any other provision of this Agreement, any of the Assigned Documents or any of the Issuer Documents to the contrary, Fannie Mae shall not be liable under this Agreement, any of the Assigned Documents, or any of the Issuer Documents to any party hereto or thereto or any Bondholder for any action taken or omitted by Fannie Mae in good faith in connection with the Loan, the Assigned Documents, the Issuer Documents or this Agreement. Fannie Mae shall be protected and shall incur no liability in relying upon the accuracy, acting in reliance upon the contents, and assuming the genuineness, of any notice, demand, certificate, signature, instrument or other document believed by Fannie Mae to be genuine and to have been duly executed by the appropriate signatory. In addition, Fannie Mae shall be protected and shall incur no liability in relying upon an opinion of counsel with respect to any action taken or not taken in good faith by Fannie Mae under this Agreement or any of the Assigned Documents. Fannie Mae shall be free, at all times, to establish independently to its satisfaction and in its discretion the existence or non-existence, as the case may be, of any fact the existence or non-existence of which shall be a condition to any term or provision of this Agreement or of any of the Assigned Documents. Fannie Mae's immunities and exemptions from liability shall extend to its directors, officers, employees and agents. SECTION 10.2 Disclaimers; Acknowledgments. Approval by Fannie Mae of the Borrower, the Loan, the Bonds or otherwise shall not constitute a warranty or representation by Fannie Mae as to any matter. Nothing set forth in this Agreement or in the subsequent conduct of the parties shall be deemed to constitute Fannie Mae as the partner of any person for any purpose whatsoever. SECTION 10.3 Liability of Borrower. Notwithstanding anything to the contrary contained in this Agreement, the personal liability of the Borrower, any general partner of the Borrower (if the Borrower is a partnership), and any Key Principal (as defined in the Security Instrument) to pay amounts due in connection with the obligations of the Borrower under this Agreement shall be limited as and to the extent provided in the Note. The foregoing limitation shall not limit or impair any right to proceed against any collateral that may be pledged to the payment of the Borrower's obligations or that may otherwise be available under any Loan Document. SECTION 10.4 Notices. All notices, certificates, demands and other communications provided for in this Agreement shall be in writing and mailed (registered or certified mail, return receipt requested, and postage prepaid), hand-delivered, with signed receipt, or sent by nationally-recognized overnight courier: To the Issuer: Redevelopment Agency of the City of San Bernardino 201 North E Street, Third Floor Intercreditor Agreement LAlt0002963 15 Tuscany Apartments To the Trustee: To the Borrower: with a copy to: lntercreditor Agreement LAII000296.J San Bernardino, CA 92401-1507 Attention: Director Telephone: (909) 663-1044 Facsimile: (909) 888-9413 u.S. Bank National Association 550 South Hope Street, Suite 500 Los Angeles, CA 90071 Attention: Corporate Trust Department Telephone: (213) 533-8712 Facsimile: (213) 533-8729 MG Tuscany Apartments L.P. c/o MG Properties 11300 Sorrento Valley Road, Suite 220 San Diego, CA 92121 Attention: Mark Gleiberman Telephone: 858-658-0500, xlO6 Facsimile: (858) 526-0800 Robert J. Brown, Esq. Procopio, Cory, Hargreaves & Savitch LLP 530 B Street, Suite 2100 San Diego, CA 92121 Telephone: (619) 515-3268 Facsimile: (619) 235-0398 16 Tuscany Apartments To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $7,000,000 Redevelopment Agency of the City of San Bernardino Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996; Berkshire Mortgage Finance Limited Partnership with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $7,000,000 Redevelopment Agency of the City of San Bernardino Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996; Berkshire Mortgage Finance Limited Partnership [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] To the Loan Servicer: Berkshire Mortgage Finance Limited Partnership 7575 Irvine Center Drive, Suite 200 Irvine, CA 92618 Attention: Vice President - Asset Management Dept. Telephone: (949) 754-6300 Facsimile: (949) 754-6301 Each party named above may designate a change of address by written notice to all of the other parties 15 days prior to the date of such change of address is to become effective. All such notices, certificates, demands and other communications shall be effective when received at the address specified as aforesaid. SECTION 10.5 Waivers. By any act, delay, omission or otherwise, Fannie Mae shall not be deemed to have waived any of their rights or remedies under this Agreement. No waiver whatever shall be valid, unless in writing signed by Fannie Mae and then only to the extent set forth in the waiver. A waiver by Fannie Mae of any default, right or remedy under this Agreement on anyone occasion shall not be construed as a waiver of any other default or be a bar to any right or remedy Fannie Mae would otherwise have on any future occasion. Intercreditor Agreement I Al 1000?QA" 17 Tuscany Apartments SECTION 10.6 Amendments. No amendment to this Agreement shall be binding upon the parties to this Agreement until such amendment is reduced to writing and executed by Fannie Mae, the Issuer and the Trustee and acknowledged by the Borrower. SECTION 10.7 Severability. Should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be severable trom the remainder as to such jurisdiction and the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired in any jurisdiction. SECTION 10.8 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 10.9 Governinl! Law. This Agreement shall be construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with the laws of the State of California without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 10.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO (A) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS AGREEMENT TRIABLE BY A JURY AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST, PROVIDED THAT SUCH ELECTION TO WAIVE THE RIGHT TO A JURY TRIAL SHALL HAVE NO FORCE AND EFFECT WITH RESPECT TO ANY ISSUE INVOLVING THE ISSUER'S RESERVED RIGHTS. THIS WAIVER OF RIGHT TO TRIAL BY JURY, TO THE EXTENT PROVIDED HEREIN, IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL BY THE PARTIES, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. SECTION 10.11 Termination. This Agreement (a) shall terminate and be of no further force or effect as to Fannie Mae at such time as the Reimbursement Agreement is no longer in full force and effect and (b) shall terminate and be of no further force and effect as to the Trustee at the earlier of (i) such time as the Bonds have been paid in full or deemed paid in full as provided in Article XII of the Indenture or (ii) by mutual written agreement of the Issuer and the Trustee after this Agreement has so terminated as to Fannie Mae, in which event the Assigned Documents shall automatically revert to the Issuer without any further action on the part of the Trustee. SECTION 10.12 References. Whenever any party is referred to in this Agreement, such reference shall be deemed to include the successors and assigns of such party. If an Alternate Security is issued in accordance with the provisions of the Indenture, and if Fannie Mae shall have assigned to the issuer of the Alternate Security all of its rights under this Agreement, all references in this Agreement to the "Credit Enhancement Instrument" shall mean the Alternate Security and all references in this Agreement to "Fannie Mae" shall mean the person, firm or entity which has issued the Alternate Security. Intercreditor Agreement LA L] 000296.3 18 Tuscany Apartments SECTION 10.13 Additional Assignment. In the event that the Borrower is no longer the owner of the Mortgaged Property and a new mortgagor is substituted in its place, or if the Security Instrument is replaced by a new mortgage on the Mortgaged Property, the Issuer shall execute and deliver to Fannie Mae, and shall record, a new assignment, substantially the same as this Agreement, which shall refer to this Agreement. SECTION 10.14 No Merger of Interests. There shall be no merger of the interests of any of the Bondholders and of the holder of the Assigned Rights by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, such interests, unless and until such person, firm or entity and all others having an interest therein shall effect such merger in a written, duly recorded instrument. The remainder of this page is intentionally blank. Intercreditor Agreement LAI 10002963 19 Tuscany Apartments The parties have duly executed this Agreement as of the day and year first above written. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Name: Title: Intercreditor Agreement LAI 10002963 S-l Tuscany Apartments FANNIE MAE By: Name: Title: Intercreditor Agreement LA 11 0002963 S-2 Tuscany Apartments ACKNOWLEDGED, ACCEPTED, AND AGREED: MG TUSCANY APARTMENTS L.P., a California limited partnership By: Gleiberman Investments, Inc., a California corporation, its Administrative General Partner By: Mark Gleiberman, President lntcrcreditor Agreement LAIl000296J 8-3 Tuscany Apartments ACKNOWLEDGED, ACCEPTED, AND AGREED: REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO By: , its Executive Director Intercreditor Agreement LA 1 10002963 S-4 Tuscany Apartments [TRUSTEE'S ACKNOWLEDGMENT] STATE OF COUNTY OF ) ) ss. ) On , 20 , before me, a Notary Public in and for said State, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be thc 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 (Seal) Intercreditor Agreement LAI 10002903 N-I Tuscany Apartments [FANNIE MAE'S ACKNOWLEDGMENT] STA TE OF COUNTY OF ) ) ss. ) On , 20~, before me, a Notary Public in and for said State, 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. Signature (Seal) lntercreditor Agreement 1.A 1:] 000296.3 N-2 Tuscany Apartments [BORROWER'S ACKNOWLEDGMENT] STATE OF ) ) ss. ) COUNTY OF On , 20 , before me, a Notary Public in and for said State, personally appeared 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/herltheir 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 (Seal) Intercreditor Agreement 1 A ]-IOO(l)(if; 1 N-3 Tuscany Apartments [ISSUER'S ACKNOWLEDGMENT] STATE OF COUNTY OF ) ) ss. ) On , 20 , before me, a Notary Public in and for said State, personally appeared 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 (Seal) Intercreditor Agreement LA 1 .1 000296.3 N-4 Tuscany Apartments EXHIBIT A Legal Description Parcel(s) I and 2 of Parcel Map No. 8414, in the City of San Bernardino, as shown by map on file in Book 95, Page(s) 68 and 69 of Parcel Maps, in the Office of the County Recorder of San Bernardino County, California. Intercreditor Agreement ].A 1.] 000296.3 A-I Tuscany Apartments SECOND AMENDMENT TO LOAN AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is dated as of May I, 2003, among the Redevelopment Agency of the City of San Bernardino, a public body corporate and politic organized under and pursuant to the laws of the State of California (the "Issuer"), U.S. Bank National Association, a national banking organization organized and existing under the laws of the United States of America, as trustee (the "Trustee"), and M G Tuscany Apartments, L.P., a California limited partnership (the "Borrower"). WIT N E SSE T H: WHEREAS, the Issuer and U.S. Bank National Association, successor by merger to U.S. Bank Trust National Association formerly known as First Trust of California, National Association (the "Trustee") entered into that certain Indenture of Trust, dated as of May 1,1996 (the "Indenture"), in connection with the issuance of the Issuer's $7,000,000 Variable Rate Demand Multifamily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996 (the "Bonds"); and WHEREAS, the Issuer loaned the proceeds of the Bonds to Magellan Silverwood Partnership, an Arizona general partnership (the "Original Borrower"), pursuant to the original Loan Agreement, dated as of May I, 1996 (the "Loan Agreement"), among the Issuer, the Trustee and the Original Borrower; and WHEREAS, proceeds of the Bonds were used, in part, to construct and pay other costs associated with the construction and development of a multifamily residential rental housing project originally known as Silverwood Apartments and now known as Tuscany Apartments (the "Project") located in San Bernardino, California; and WHEREAS, the Project was sold to San Bernardino 328/AF XXX, LLC, a California limited liability company in 2001, and San Bernardino 328/AF XXX, LLC caused the delivery to the Trustee of a letter of credit providing credit support for the Bonds issued by Wells Fargo Bank, National Association, to replace the existing letter of credit issued by Bank One, Arizona, NA; and WHEREAS, at that time the Loan Agreement was amended by that certain First Loan Agreement dated as of September I, 200 I; and WHEREAS, the Project has now been acquired by MG Tuscany Apartments L.P., a California limited partnership (the "Borrower") and the Borrower has caused the delivery to the Trustee of a direct pay irrevocable transferable credit enhancement instrument (the "Credit Facility") issued by FANNIE MAE, a corporation organized and existing under the Federal National Mortgage Association Charter Act (12 USC Section 1716 et seq.) (the "Credit Facility Provider") to replace the existing letter of credit issued by Wells Fargo Bank, National Association; and COLEMAJL\IRV\242368. I WHEREAS, in connection with the delivery of the Credit Facility, the Borrower and the Credit Facility Provider have requested certain amendments to the Loan Agreement requiring the consent of not less than sixty percent (60%) of the owners of all of the Bonds Outstanding; and WHEREAS, the requisite owners of the Bonds Outstanding have consented to and approved the execution of this Amendment. NOW, THEREFORE, in consideration of the above premises and the mutual covenants contained herein and for other good and valuable consideration, the parties hereto agree as follows Section I. Unless defined elsewhere in this Amendment, initially-capitalized terms shall have the respective meanings assigned to such terms in the Loan Agreement. Section 2. Section 5.8 B (5)(C) shall be deleted. Section 3. shall be deemed instrument. This Amendment may be executed in several counterparts, each of which an original and all of which together shall constitute one and the same Section 4. This Amendment shall be governed by and construed in accordance with the laws of the State of California. Section 5. Except as specifically set forth in this Amendment, the terms and provisions of the Loan Agreement are not altered, amended or modified hereby. [Remainder of page intentionally left blank. Signatures appear on following page.] COLEMAJL\1RV\242368,1 2 IN WITNESS WHEREOF, the Issuer, the Trustee and the Borrower have caused this Amendment to be executed as of the date first written above. REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO By: Name: ! Title: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Name: Title: MG Tuscany Apartments L.P. a California limited partnership By: Gleiberman Investments, Inc., a California corporation, its administrative General Partner By: Mark Gleiberman, President COLEMAJL\IRV\242368. ] 3 Pursuant to Section 6.03 of the Indenture and Section lOA of the Loan Agreement, the Credit Facility Provider hereby consents to the terms and the making of this Amendment. FANNIE MAE. a corporation organized and existing under the Federal National Mortgage Association Charter Act (12 USC Section 1716 et seq.) , I Bv: Name: Title: COLEMA1L\JRVI242368.1 4 "' RECORDING REQUESTED BY A"1D WHEN RECORDED RLTLRI\ TO es B.'\NK N.UIO:\AL ASSOClATIO:\ C/O LEWIS BRISBOIS BISGAARD & S~lI" [ 650 EAST HOSPITALITY LAN~, SUI [e 600 SIN l3FR:\ARDINO, CA 92408 A TIN: CAROL TUC:IlFARlJ~R/ ALEXIS CRUMP (Space Above for Recorder's Use) FIRST AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF RESTIUCTIVE COVENANTS S8200JI221S.1 FIRST AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS FIRST MvIENDl\IENT TO REGULATORY AGREEMENT ""01) UECL\RXlION OF RESTRICTIVE COVENANTS (this "Amendment") is dated as of \"') I. 2iJD3, ;1I11ong the Redevelopment Agency of the City of San Bernardino, a Pllblie body corporate and politic ()rganl/ed IInder and pllrsuant to the laws of the State of California (the "Issuer"), U.S. Bank National Association, a national banking organization organized and eXisting under the laws of the United States of America, as trustee (the "Trustee"), and MG Tuscany Apartments l.P., a California limited partnership (the "Borrower"). W [ T N E SSE 'I H: WHEREAS, the Issuer and U.S. Bank National Association,. successor by merger to U.S. Bank Trust National Association fornlcrly known as First Trust of California, National Association (the "Trustee") entered into that certain Indenture of Trust, dated as of May I, 1996 (the "Indenturc"), in COlUleetion with the issuance of the Issuer's $7,iJiJO,iJOO Variable Rate Demand Multibmily Housing Revenue Bonds (Silverwood Apartments Project) Series 1996 (the "Bonds"); and WHEREAS, the Issucr loaned the proceeds of the Bonds to Magellan Silverwood Partnership, an Arizona general pal1nership (the "Original Borrower"), pursuant to the originzd Loan !\grcctl1cnt, dated as of May I, 1996 (the "Loan Agreement"), among the fssuer, the Trustee and the Original Borrower; and WHEREAS, proceeds of the Bonds were used, in part, to construct and pay other costs aSSOCiated with the construction and development of a multit~lmily residential rental housing project originally known as Silverwood Apartments and now known as Tuscany Apartments (the "ProJect") located in San Bernardino, California; and WHEREAS, the Issuer, Original Borrower and Trustee entered into that certain Regulatory Agreement and Declatation of Restrictive Covenants (the "Regulatory Agreement") which was recorded against the Project in the records of the office of the San Bernardino County Recorder as Instrument Number 19960251735 as a requirement to the issuance of the Bonds; and WHEREAS, the Project was sold to San Bernardino 3281AF XXX, LLC, a CalifiJrnia limited liability company in 2001, and San Bernardino 3281M XXX, LLC causeeIthe delivery to tltc Trustee of a letter of credit providing credit support lor the Bonds issued by Wells Fargo Bank, National Association, to replace the existing letter of credit issued by Bank One, Arizona, NA; and WHEREAS, at that time the Indenture was amended by that certain First Supplemental Indenture dated as of Septemher 1,200 I; and SB2()03: 12215.1 2 WHEREAS, the Projeet has been acquired by I'vIG Tuscany Apartments L.P., a California limited partnership (tbe "Borrower") and the Borrower has caused the delivery to the Trustee of a direct pay irrevokable transferable credit enhancement instrument (the "Credit Facility") issued hy FANNIE MAE, a corporation organized and existing under the Federal National Mortgage Association Charter Act (12 USC Section 1716 d seq.) (the "Credit Facility Provider") to replace the existing letter of credit issued by Bank One, Arizona, NA; and WHEREAS, in connection with the delivery of the Credit Faeility, the Borrower and the Credit Faeility Providcr have requested certain amendments to the Regulatory Agreement be made as follows. NOW, THEREFORE, in consideration of the above premises and the mutual covenants contained herein and for other good and valuable consideration, the parties hereto agree as follows: Section 1. Unless defined elsewhere in this Amendment, initially-capitalized terms shall have the respective meanings assigned to such terms in the Regulatory Agreement. The following definitions shall be added to the Regulatory Agreement: "Fannie Mae" shall mean a corporation duly organized and existing under the Federal National M0l1gage Association Charter Act (12 USC Section 17 f 6 et seq.) and its successors and assigns. "Loan Servicer" shall mean Berkshire Mortgage finance Limited Partnership, or a successor Servicer selected by Fannie Mae. Section 2. The tirst sentence of Section 2 (e) shall be amended to delete the first word, "This" and add in its place: "In the event that the Issuer receives an opinion ot Bond COllnsel stating that the Bonds must be redeemed in order to prevent interest on the Bonds from bcing includable in the gross income of the holders thereot for Federal income tax purposes, this...ll Section 3. The "Fmmie Mae Rider to Regulatory Agreement" attached hereto as Exhibit B is hereby added to the Regulatory Agreement and incorporated therem by this reference. Section 4. shall be deemed instrument. This Amendment may be executed in several counterparts, each of which an original and all of which together shall constitute one and the same Section 5. This Amendmcnt shall be governed by and construed in aecordance with the laws of the State of California. Section 6. Except as specifically set forth in this Amendment, the terms and provisions of the Regulatory Agreement are not altered, amended or modified hereby. S!321ilJJ:12215,] 3 IN WITNESS WHEREOF, the Issuer, the Trustee and the Borrowcr havc caused tillS Amcndment to be exceuted as of the date first written above. REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO By__ Narne: Title: u.S. BANK. NATIONAL ASSOCIATION, as Trustee By: Name: Title: MG Tuscany Apartments 1.P., a California limited partnership By: Gleibennan Investments, Inc., a California corporation, its Administrati\.c General Partner By: Mark Gleibcnnan, President SB2U(J3:12215! 4 The Credit Facility Provider hereby consents to the terms and the making of this Amendment. FANNIE MAE, a corporation organized and existing under the Federal National Mortgage Association Charter Act (12 USC Section 1716 et seq) By: Name: Title: SB20UJ:122151 5 . ASSU\IPTlON AGREEMENT $7,OOO,O()O RLDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO Variablc Rate Demand Multifamily Housing Revenue Bonds (Silvcrwood Apartments Project) Series i 996 This Assumption Agreement is entered into this I" day of May, 2003, by and between the Redevelopment Agency of the City of San Bernardino (the "Issuer"), U.S. Bank National Association, succcssor by merger to U.S. Bank Trust National Association, fOITnerly first Trust of Cahfornia, National Association, as trustee (the "Tmstee") under that certain Indenture dated as 01' May I, 1996, as amended by that ccrtain First Supplemental Indenture dated as of September I, 2001, and that certain Second Supplemental Indenture dated as of May 1,2003 (the "Indenture") and MG Tuscany Apartments L.P., a Califomia limited partnership (the "BolTower") pursuant to Section 7 ofthe Regulatory Agreemcnt and Declaration of Restrictive Covenants dated as of May I, 1996 and recorded in thc Ofllcial Records of the County of San Bernardino, as Document No. 19960251735 on July 16, 1996 as amended by that certain Amendment to Regulatory Agreement and Declaration of Restrictive Covenants dated as of May I, 2003 (the "Regulatory Agreement"). Capitalized terms used herein \\'hich arc not delined herein shall have the meanings assigned thereto in the Regulatory Agreement. RECITALS WIIEREAS, the Issuer has previously issued the above-captioned bonds (the "Bonds") the proceeds of which were loaned by the Issuer to Magellan Silverwood & Cross Creek General Partnership, an Arizona general partnership (the "Original BOlTower") pursuant to a Loan Agreement dated as of May 1, I 996 (the "Original Loan Agreement") by and among the Issuer, the Trustee and the Original Borrower to finance the acquisition, rehabilitation and equipping of a multiCamily residential housing project facility located in San Bernardino, Califomia (the "Project"); and WHEREAS, in connection with the issuance of the Bonds, the Original Borrower, the Trustee and the Issuer entered into the Regulatory Agreement; and WHEREAS, in 2001, the Original Borrower sold the Project to San Bemardino 328/AF XXX, LLC, a California limited liability company ("San Bemardino 328/AF XXX") and San Bernardino 328/Af XXX, has now sold the Project to the Borrower; and vvl-[EREAS, Section 7 ofthe Regulatory Agreement provides that a transferee oCthe Original Borrower who aeljuires the Project prior to the tennination of the Rental Restrictions and Occupancy Restrictions provided in the Regulatory Agreement shall assume all duties and obligations of the Original Borrower under the Regulatory Agreement and the Original Loan Agreement, as amended by the First Amendment to Loan Agreement as of September 1, 2003 and Second Supplemental Loan Agreement dated as of May 1,2003 (the "Loan Agreement"). Snl003:10817.1 NOW, THEREFORE, for good and valuable consideration, tbc receipt of wbich is hereby ,lcknowlcdged, the Borrower, Issuer and Trustee hereby agree as follows: Section 1. Borrower's Assumption of Dutles and Obligations undcr the Regulator) AgreclncIlt and Loan Agreen1cnt. Tbe Borrower hereby fully accepts and assumes all 01' tbe duties and obligations of San Bernardino 328/ AFXXX under tbe Regulatory Agreement and under thc Loan. Agreement (collectively, the "Assumed Obligations") and agrees to pcrlcmll all Assumed Obligations in accordance with the ternlS orthe Regulatory Agreement and the Loan Agreement Notwithstanding anything herein or in the Regulatory Agreement or the Loan Agreement, the Borrower shall not be beld responsible for or be subject to duties or obligations arising undcr the Regulatory Agreement and tbe Loan Agreement before the date of this Assumption Agreemcnt From and after recording of the Grant Deed transferring ownership from SB 328/ AFXXX to BOlTower, SB 328/ AF XXX shall have no further liability under the Regulatory Agreement and Loan Agreement, and shall be relieved of all of its obligations thereunder. Section 2. Miscellaneous Provisions. (a) Notices to be provided to the Borrower sball be provided to the following address: MG Tuscany Apartments Lt'. c/o MG Properties 11300 Sorrento Valley Road, Suite 200 San Diego, Califomia 92121-1328 Attention: Bob Van Hoene Telephone: (858) 658-0500 x 126 Facsimile: (858) 526-0800 (b) The BOlTower represents and wan-ants to the Issuer and the Tmstee that, to the best of its knowledge, as of the date hereof, there exists no event of default under the Regulatory Agreement, the Loan Agreement and the other documents assumed by the Bon-ower in cOllnection with the Bonds (the "BolTower Documents") and there is no event that, with the giving of notice, the passage of time, or both, would constitute an event of dehlUlt under the Borrower Documents. (c) This Assumption Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instnllllcnt. (d) This Assumption Agreement shall be govemed exclustvcly by and COilS trued tn accordance with the laws of the State of California. S!J~OO]: 1 OS )7, 1 2 IN WITNESS WHEREOF, this Assumption Agreement has been executed by the parties hereto as or thc day and year first hereinabove written. BORROWER MG Tuscany Apartments L.P., a California limited partnership By: GIeibennan Investments, Inc., a Caliromia corporation, its Administrative General Partner By: Mark Gleiberman, President ISSUER Redevelopment Agency of the City of San Bernardino By:_ Gary Van Osdel, Executive Director TRUSTEE U.S. Bank National Association, as Trustee By: lts Vice President SB2003:IOS17.1 3 AMENDED AND RESTATED MULTIFAMILY NOTE US SH)OO,OOO As of May I, 2003 FOR VALUI~ RECEIVED, undersigned, MG TUSCANY APARTMENTS LPo, ("Borrower"), a California limited partnership, jointly and se\-erally (if more than one), promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, as Trustee, (together \vith its successors and assigns, "Lender"), the principal sum of Se\'cn l\:lillion Dollars and No!! OOs (US $7,000,000), with interest as set forth below, This Amended and Restated 'vIultifamily Note ("Note") amends and restates in its entirety the Promissory Note dated May I, I 'J'J6 executed by Mcgallan Silverwood & Cross Creek General Partnership in lillOI' DC the Redc\'c1opment Agency of the City of San Bernardino, which Promisso['y Note was endorsed to the order of U,S, Bank National Association (formerly known as First Trust of Calill)rnia, National Association) and the obligations thereunder assumed by BOITower. I. Detined Terms, AlI capitalized terms used in this Note have the meanings given to those tenns in Schedule A of this Note or as elsewhere defIned in this Note, unless the context or use clearly indicates a different meaning, 2. Payment AlI payments due under this Note shall be made in law Cui money of the United States of America by wire transfer of immediately available funds to such bank ami account as may be designated from time to time by written notice to the BOITower from or on behalf of the Lender. 3. Note Interest. Except as provided in Paragraphs 'J and 15, interest ("Note Interest") shall accrue on the unpaid principal of this Note from, and including, the Closing Date until paid in full at an annual rate as follows: (a) Variable Rate, if the interest rate on the Bonds is a Variable Rate, a variable rate of interest which floats and changes with, and is equal to, the Variable Rate; or (b) Fixed Rate, ifthe interest rate on the Bonds [s a Fixed Rate, the Fixed Rate adjusted to include additional interest, if any, necessary to ensure that monthly payments of Note Interest arc suCflcient to provide for payment of regularly scheduled interest on the Bonds, Note Interest shall automatically amI simultaneously change with each corresponding change in the interest rate on the Bonds under the Indenture, Notwithstanding any other provision 01' this Note to the contrary, Note Interest shall not exceed the Maximum Rate, as the Maximum Rate may change in accordance with the Indenture, During the Variable Period, Note Interest shall be computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable, Dming any other period, Note Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months, Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement Form; Tuscany Apartments l'~\I()r-..1S',\VP\Ttlscany' Note,Joc Page 1 4. Paymcnt of Principal and Intcrcst. The Borrowcr agrees to pay the principal of and interest on this Note as follows: (a) Primary Paymcnt Obligation. The primary obligation of the BCllTower under this Note is to pay principal of, premium, If any, and interest on this Note at the times and in the amounts necessary to pay all principal of, premium, if any, and interest on, the Bonds as they become due, whether at maturity. by acceleration, by optional, mandatory or mandatory sinking fund redemption or otherwise. The Borrower shall make its payments under this Note in Available Amounts if and to the extent that the Indenture, the Financing Agreement or this Note requires such amount to be available to the Trustee in A vailab1e Amounts. In the event of any deficiency in the funds availablc under the lndenture for payment of the principal of, premium, if any, or interest on the Bonds when due, the Borrower shall immediately pay the amount of the deficiency to the Tmstee upon notice of the deficiency from the Lender, the Loan Servicer or the Trustee. The Borrower shall be obligated to pay the deficiency regardless of the reason fllr the deficiency, including any deficiency resulting from any shortfall in payments made or to be made by the Bon'ower under this Note, any loss due to a default under any Investment, a change 111 value of any Investment or otherwise. (b) Notc Interest. Subject to subparagraph (a) the Borrower shall pay Note Interest in ancars, beginning with the tirst t\ote Interest Paymcnt Date. (c) Paymcnt at Matnrity Date. Subject to subparagraph (a), the Borrower shall pay all unpaid principal of and interest on this Note on the earlier of May I, 2026 or the date on which the unpaid principal balance of this Note becomes due, whether by acceleration or otherwise ("I\Iaturity Date"). Any principal of this Note not paid on the Maturity Date shall continue to bear interest ti'om and including the Maturity Date to, but excluding, the date on which such amounts are paid in full. (d) Amcndment of Note After Adjnstmcnt to Fixed Rate Mode. Upon the adjustment of the Bonds to a Fixed Rate, this Note shall be amended to provide for monthly payments of principal to provide sufficient funds to pay the eonesponding principal maturities of the Bonds, including any sinking fund payments. (c) Receipt Date. For the purpose of calculating the amount of Note Interest due under this Note, any regularly scheduled installment of principal of or Note Interest on this Note that is rcceived by the Lender before the date it is due shall be deemed to have been received on the due date. Nothing in this subparagraph shall apply to a prepayment of this Note pursuant to Paragraph 11. (I) Payments by Credit Provider nnder Credit Facility. No Advance by the Credit Provider under the Credit Pacility shall be treated as a credit against, or otherwise relieve the Borrower from its obligation to pay, the principal of and interest on this Note when due. (g) Obligations of the Borrower Unconditional. The obligations of the Borrower to make the payments required by and perform its other obligations under this Notc shall be Fannie Mae Multifamily Note - California; Variahle Rate; Credit Enhancemeljt Form; Tuscany Apartments L\I\lO~vlS",\VP\lllscany Note_uoc Page 2 absolute and unconditional and shall not be subject to diminution by set-oft~ recoupment, couIlterclaim. abatement or othcnvisc. (h) Insurance Casualty or Condemnation. If prior to full payment of thc Bonds (or plovlslon for the full payment of the Bonds in accordance with the provisions of the Indenture) lhe :\ lortgagcd Properly or any portion thereof is destroyed (in whole or In part) or Is damaged by lire or other casualty, or title to, or the temporal'y use oC all or any ponlon of the Mortgaged Property shall be taken under the exercise of the power of eminent domain by any go\ernmental body or by any person, finn or corporation acting under governmental authority, the Borrower shall nevertheless be obligated to continue to pay the amounts specified in Ihis Note to the extent thl' principal of this Note is not prepaid. 5, Escrow Fund. The Reimbursement Agreement requires the Borrower to make monthly payments for deposit into the Escrow Fund, to be applied by the Escrow Agent in any manner directed by the Credit Provider pursuant to the Escrow Agreement. The Loan shall not be, and shall not be deemed to be, paid or prepaid by reason of any deposit into the Escrow Fund and the amount on deposit in the Escrow Fund shall not be a credit against the principal amount of this Note. However, if any amount in the Escrow Fund is withdrawn from the Escrow Fund and applied to the payment of the principal of any of the Bonds, the principal component of the redemption price of any of the Bonds or the principal component of the defeasance of any of the Bonds, all as provided in the Indenture, the amount so applied shall be simultaneously credited to the principal amount of this Note. To the extent that any amount is withdrawn from the Escrow Fund to make a payment of interest due on the Bonds (excluding the interest component of the purchase price of any Pledged Bond unless such purchase occurs on an Interest Payment Date for the Bonds), the amount so withdrawn shall be a payment of interest on the Loan. No application 01' any amount in the Escrow Fund for any other purpose (including any withdrawal relating to the principal component of the purchase price of any Pledged Bonds) shall be credited against the unpaid principal of or interest on this Note. 6. Application of Payments. If at any time the Lender receives, from the Borrower or otherwise, any amount applicable to this Note which is less than all amounts due and payable at such time, the Lemler may apply that payment to amounts then due and payable in any manner and in any order detennined by the Lender, in the Lender's discretion. The Borrower agrees that neither the Lender's acceptance ofa payment ti'om the Borrower in an amount that is less than all amounts then due and payable nor the Lender's application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. If the holder of this Note accepts a guaranty of only a portion of the amounts due under this Notc, Borrower hereby waives its right under Califomia Civil Code Section 2822(a) to designate the portion of the amount due under this Note which shall be satistied by any guarantor's partial payment 7, Security. This Note is secured, among other things, by the Security Instntment, and reference is made to the Security Instntment for other rights of the Lendcr conceming the collateral for this Note. Fannie lVlae J\ilultifamily Note - California; Variable Rate; Credit Enhancement Form; Tuscany Apartments I _,~t()r\'IS\\VI'\TlIscaIlY Nute,dllC Page 3 8. Acceleration. [I' an Event of Default under the Security Instrument has occurred and IS continuing, the cntire unpaid principal balance, all accrued Note Interest, the prepayment premium payable under Paragraph I!, if any. and all other amounts payable under this Note or under any other Loan Document shall at once hecome due and payable, at the option of the Lender, without any prior notice to the Borrower. The Lender may exercise this option to accelerate regardless of any prior forbearance. 9. Default Rate. The tcrm "Debult Rate" is defined in the attached Schedule A. 10. Limits on Personal Liabilitv. . (a) Except as otlwrwise provided in this Paragraph 10 or in any of the other Loan Documents, the Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of this Note or for the performance of any other obligations of the BOlTower under the Loan Documents, and the Lender's only recourse for the satisfaction of this Note and the performance of such obligations shall be the Lender's cxercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by the Lender as security for this Note. This limitation on the Borrower's liability shall not limit or impair the Lender's enforcement of its rights against any guarantor of this Note or any guarantor of any other obligations of the Borrower. (b) The Borrower shall be personally liable to the Lender for the repaymcnt of a portion of this Note equal to any loss or damage suffered by the Lender as a result of (I) Llilure of the Borrower to pay to the Lender upon demand after an Evcnt of Default under the Security Instrument, all Rents to which the Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by the BOlTower from tenants then in residence; (2) failure of the Borrower to apply all insurance proceeds and condemnation proceeds as rcquired by the Security Instrument; (3) failure of the Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by the BOlTower, Key Principal or any officer, dircctor, partner, membcr or employee of the BOlTower in cOlUlection with the application for or crcation of the Loan or any request for any action or consent by the Lender; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that arc not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with the Lender executed in connection with the Loan) and then to amounts ("Debt Service Amounts") payable under this Note, the Security Instrument or any other Loan Document (except that the Borrower wil] not be personally liable (i) to the extent that the Borrower lacks the legal right to direct the disbursement of such SllIns because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if the Borrower has paid all operating expenses and Debt Service Amounts for that calendar year). (c) The Borrower shall become personally liable to the Lender for the repayment of all of the principal of and interest on this Note and for the payment, performance and observation of all obligations, covenants and agreements of the Borrower contained in the Security Instrument, Fannie Mae MultiFamily Note - CaliFornia; Variable Rate; Credit Enhancement Form; Tuscany Apartments I '\f\10i\'lS\\VP\Tllscany Notedt1C P~ge 4 including the payment of all sums advanced by or on behalf of Lender to protect the security of the Security Instrument under Section 12 of the Security Instrument, upon the occurrence of any uf the l(l[llOwing: (I) the BlOlTower's acquisitiun of any prlOperty lOr lOperation lOf am' business not permitted by Section 33 of the Security Instrument: or (2) a TranslCr (as that term is dciined in the Securitv Instrument) that is an Event lOf Dci~llIlt under SectilOn 21 of'the Security Instrument; , , or (3) a Bankruptcy Event. As used in this subparagraph, the term "Bankruptcy Event" means an\' one lOr more of the following events which occurs dunng any time that a Hedging Arrangcment (other than a Hedge) is outstanding: (I) The Borrower (i) commences a voluntary case (or, if applicable, a joint case) under any Chapter of the Bankntptcy Code, (ii) institutes (by petition, application, answer, consent or otherwise) any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, (iii) makes a general assignment for the benefit of creditors, (iv) applies for, consents to or acquiesces in the appointment of any receiver, liquidator, custodian, sequestrator, trustee or similar officer for it or for all or any substantial part of the Mortgaged Property or (v) admits in writing its inability to pay its debts generally as they mature. (2) Any Key Principal or any Affiliate of a Key Principal tiles an involuntary petition against the Borrower under any Chapter of the Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement. rcadjItstment of debt, dissolution, liquidation or similar proceeding relating to the Borrower under the laws of any jlllisdiction, (3) Both (i) an involuntary petition under any Chapter of the Bankruptcy Code is illed against the Borrower or the Borrower directly or indirectly becomes the subject of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt. dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or in equity, and (ii) the Borrower or any Affiliate of the Borrower has acted in concert or conspired with such creditors of the Borrower (other than the Lender) to cause the filing thereof with the intent to interfere with enforcement rights of the Lender after the occurrence of an Event of Default (d) To the extent that the Borrower has personal liability under this Paragraph 10, the Lender may exercise its rights against the BlOrrower personally without regard to whether the Lendcr has exercised any rights against the MlOrtgaged Property or any other security, lOr pursued any rights against any guarantor, or pursucd any other rights available to the Lender under this Note, the Security lnstrument, any other Loan Document or applicable law, If Borrower is a married person, then Borrower agrees that the holder of this Note may look to all of Borrower's community property and separate property to satisfy Borrower's recourse obligations under this Paragraph 10, For purposes of this Paragraph 10, the term "Mortgaged Property" shall not include any funds that (I) have been applied by the Borrower as required or pelmitted by the Security Instrument prior to the occurrence of an Event of Default under the Security Instrument, Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement Form; Tuscany Apartments L:\t\lOl'vIS\I,VP\Tuscany Note_doc Page 5 or (2) the Borrower was unable to apply as required or pennitted by the Sccurity Instrumcnt because of a bankruptcy, receivership, or similarjudicial proceeding. 11. Voluntary and Mandatory Prepayments. ALTHOUGH THI' BORROWER MAY HAVE THE RIGHT TO PREPAY THE LOAN IJ'i ACCORDANCE WITH TillS NOTE, THE REIMBURSEMENT AGREEMENT MA Y LIMIT THE BORROWER'S EXERCISE OF THESE RIGHTS WITHOUT THE WRITTEN CONSENT OF THE CREDIT PROVlDER OR DURING CERTAIN PERIODS. THE BORROWER MAYBE REQUIRED TO PAY A TERMINATION FEE TO THE CREDll PROVlDER. PREPA YivlENTS ARE SUBJECT TO LOAN SERVICING UNDER THE REIMBURSEMENT AGREEMENT SEE THE REIMBURSEMENT AGREEMENT FOR ALL DETAILS. (a) Prepayment Premium. Any prcpayment of the principal of this Note will result in a redemption of a corresponding amount of the Bonds. A redemption premium may be payablc to Bondholders in connection with such redemption of Bonds. In order to provide funds to pay any redcmption premium due on the Bonds, the Borrower shall pay such amount as a prepayment premium under this Note. Such redcmption premium shall be paid in addition to any other amounts due under this Note. The BOITower shall pay any such prepayment premium with Available Amounts. The Borrowcr acknowledges that the Credit Provider is not credit enhancing thc payment l)f any prepayment premium under this Note or redemption premiulll payable to Bondholdcrs. The Borrower also understands that the prepayment premium provided for in this subsection is separate and apart from any Termination Fee payable to the Credit Prm'idcr under the Reimbursement Agreement. (b) Timing of Credit of Payments as Prepayments. No payment to be applied as a prepayment (wliether voluntary or mandatory) of principal of this Note shall be credited against the unpaid principal of this Note until the date on which Bonds in a like amount are redeemed or defeased pursuant to the Indenture, Until the BOITower's payment is credited as a prepayment, the amount of the intended prepayment shall continue to be unpaid principal of this Note and shall continue to hear interest to the date of prepayment. (c) Voluntary Prepayments, The Borrower may voluntarily prepay this Note only during the periods or on the dates, as appropriate, as provided in the following clauses of this subparagraph (c): (I) During Variable Period. On any Interest Payment Date for the Bonds within a Variable Period, the Borrower may voluntarily prepay the principal balance of this Note, in whole or in part. (2) During Fixed Periods. On any date within a Fixed Period when the Bonds may be optionally redeemed, the Borrower may voluntarily prepay the principal balance of this Note, in whole or in pati. Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement ~'ormj Tuscany Apartments L\r-.HlIvlS\\VP\Tuscany NOledoc Page 6 AllY partial voluntary prepayment must be m all amount corresponding to thc thcn applicable Aulhorl/ed Denomination of the Bonds. Id) Conditions Precedent to Voluntary Prepayments. The right of Borrower to \olulllarilv prepay the principal of this Note, in whole or in part, as permitted by subparagraph (e) is subject to the satisf'letion of the following conditions precedent: (I) the Borrower has given writtcn notice of such prepayment to the Lender, the Trustee, the Credit Provider, the Loan Servicer and the Remarketing Agent at least 30 days prior to the effective date of prepayment in accordance with subparagraph (b), which notice shall state the date of such prepayment and the amount of principal to be prepaid; (2) the Borrower has paid the amounts specified in subparagraph (0 not later than one Business Day prior to the date under the Indenture the Trustee must have received such funds for such redemption; and (3) the Lender, the Credit Provider, the Loan Servicer and the Remarketing Agent are provided a certificate of the Trustee to the effect that the Trustee holds on deposit 1\ vailable Amounts which are both sufficient and ,wailable under the tenns of the Indenture for a payment of any bond redemption premium, and the Trustee holds on deposit moneys which are both sumcient and available under the terms of the Indenture to pay the costs and expenses required to be paid in connection with the redemption of the Bonds 10 be redeemed as a result ofthe prepayment under this Note. (c) Mandatory Prepayments. Each of the Jollowing shall be or requIre a mandatory prepayment of the principal of this Note: (I) /\JlY reduction and, therefore, amortization of the Loan by reason of the withdrawal of any amount from the Escrow Fund and the application of such amount to the payment of, or the reimbursement to the Credit Provider for an Advance made for, the principal of any of the Bonds, the principal component of the redemption price of any of the Bonds or the principal component of the defeasance of any of the Bonds, all as provided in the Indenture, except for the payment of the principal of any Rand as such principal is scheduled to be paid. (2) Any application by the Lender of any collateral or other security to the repayment of any principal of this Note to the extent of the principal alllollnt of such repayment. (3) The Lender's exercise of the right of acceleration of this Note to the extent of the outstanding principal amount of this Note. (4) Any acceleration or mandatory redemption of the Bonds to the extent of the prrncipal amount of such Bonds. Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement Form; Tuscany Apartments I "'.:\lnr'>'lS\\VP\lusc:lJlY Note_doc Page 7 (5) Any reduction and, therefore, am0l1ization of the Loan by reason of the withdrawal of any amount ii'om any Fund or Account undcr the Indenture, not descnbed in clauses (I), (2), (3) or (4), resulting in a payment, redemption or defeasance 01' allY of the Bonds, except to the extent that such funds arc applied to: (i) a sinking fund payment required by the Indenture I,)r tbe redemption of any of the Bonds; (ii) tbe payment of the principal of any Bond as such principal is scheduled to be paid; or (iii) a voluntal'y prepayment of this Note which causes a voluntary redemption of Bonds, ([) Borrower's Payment Obligation in Connection with a Prepayment. The Borrower shall pay, or cause to he paid, all of the following amounts in connection with any prepayment of this Note (whether voluntary or mandatory): (I) the principal of the Loan being prepaid; (2) interest on the principal of the Loan being prepaid to the effective date of prepayment as provided in subparagraph (b); (3) to the extent not covercd by the amount required in clause (2), interest payable on the Bonds to the Redemption Date; (4) the prepayment premium, if any, payable with respect to the prepayment of the Loan (the premium to be paid with Available Amounts); and (5) to the extent not covered by the amount required in clause (4), the redemption premium, ifany, payable with respect to the redemption of the Bonds (the premium to be paid with Available Amounts), (g) Application of Partial Prepayment. Any partial prepayment of the principal of this Note shall not extend or postpone the due date of any subsequent monthly installments, if any, or change the amount of such installments, except as provided in this subparagraph, The amount of subsequent monthly installments, if any, shall be reamortized with the consent of Lender as necessary to correspond to the rcmaining payments due on the Bonds; provided, however, that the unpaid principal of and interest on this Note, all other obligations of thc Borrowcr for the payment of money under this Note and all obligations of the Borrower for the payment of money under the Security Instrument shall be duc and payable on the Maturity Date, ifnot sooner paid, 12. Costs and Expcnses. The Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses amI costs of investigation, incurred by the Lender as a result of any default under this Note or in connection Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement Form; Tuscany Apartments )\r-.rOi\lS'\VP\Tuscany Note,doc Page, 8 with errorts to collect any amount due under this Note, or to enf()rce the provisions or any of the other Loan Documents, including those incurred in post-judgment collection ertilrts and in an) bankruptcy proceeding (including any action for relief ii'om the automatic stay of any b'lIlkruptcy proceeding) or judicial or non-judicial foreclosure proceeding. 13, Forbearance, Any forbcarance by thc Lender in exercising any right or rcmedy under this Note, the Security fnstrument, or any other Loan Document or otherwise artimled by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance by the Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver oC the Lender's right to . require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by the Lender of any secunty tor the Borrower's obligations under this Note shall not constitute an election by the Lender of remedies so as to preclude the exercise of any other right or remedy available to the Lender. 14. Waivers. Presentment, demand, notice of dishonor, protest, notice oC acceleration, notice of intent to demand or accelerate payment or maturity, presentment tor payment, notice oC nonpaymcnt, grace, and diligence in collecting this Note are waived by the Bon'owcr, Key Principal, and all endorsers and guarantors of this Note and all othcr third party obligors. 15. Loan Charges. If any applicable law limiting the amount of interest or other charges permitted to be collected from the Borrower in connection with the Loan is interpreted so that any interest or other charge provided tor in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates thai law, and the Borrower is entitled to the benefit of that law, that interest or charge is hcreby reduccd to the extent necessary to eliminate that violation. The amounts, if any, prcviously paid to the Lender in excess of the permitted amounts shall be applied by the Lender to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from the Borrower has been violated, all interest, as well as all other charges made in cOlmection with the Loan that constitute interest, shall be deemed to be allocated and spread ratabfy over the stated term of this Note. lInless otherwise required by applicable law, such allocation and spreading shall be effected in such a manncr that the rate of interest so computcd is unifonn throughout the stated term of this Note 16. Commercial Purpose. The BorHJ\ver represents that the Loan is being incurred by the Borrower sofcly for the purposc of carrying on a business or commercial entcrprise, and not for personal, family or household purposes. 17. Counting of Days. Except where otherwise specifically provided, any reference in this Note to a period of "days" means calendar days, not Business Days. 18. Governing Law, This Note shall be governed by the law of the jurisdiction in which thc Land is located. Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement Form; Tuscany Apartments [ ".\10t\lS\WP\TLlscany Note,doc Page 9 19. Captions. The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note. 20. Notices. All notices, demands and other communications required or permitted to be gi\Tll by the Lender to the 130rrowcr pursuant to this Note shall be given in accordance \\llh Section 31 of the Sccurity Inslrumcul. 21. Consent to Jurisdiction and Venue. The Borrower and Key Princlpal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the jurisdiction in which the Land is located (the "Property Jurisdiction"). The state and federal couris and authorities with jurisdiction in the Property Jurisdiction shall have exelusive jurisdiction over all controversies which shall arise under or in relation to this Note. The Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any othcr venue to which it might be entitled by virtuc of domicile, habitual residence or otherwise. 22. WAln:R OF TRIAL BY JURY. THE BORROWER, KEY PRINCIPAL AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES, AS LENDER, KEY PRINCIPAL AND THE BORROWER, THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMP~:TENT LEGAL COUNSEL. ATTACHED SCIIEDULES. The following Schedules are attached to this Note: I ~ I Schedule A Definitions [The Remainder of This Page Has Intentionally Been Left Blank.} Fannie Mae Multifamily Note - California; Variable Rate; Credit Enhancement Fon;n; Tuscany Apartments L.'.\IOr-,IS\WP',Tuscany NOle,doc Page 10 IN WITNESS WHEREOF, the Borrower has signed and delivercd this Note or has c'Hlscd this Notc to be signed and delivered by its duly authorized representativ'C. BORROWER MG TUSCANY APARTMENTS L.P" a California limited partnership By: Gleibennan Investments, Inc., a California corporation, its Administrative General Partner By: Mark Gleiberman, President Borrower's Employer lD Number: 33-0888437 Fannie Mae Multifamily Note - California; Variable Rate; Credit 'Enhancement Form; Tuscany Apartments l\rYIOi'vlS\\VI-"TlIscany' Note.due Page S-l SCHEDULE A DEFINITIONS Thc following terms when used in this Note shall have the respective meanings indicated belcl\\. "Advance" has the meaning given to that term in the Credit Enhanccment Instrument. "Alternate Secnrity" bas the meaning given to that teml in the Indenture. "Authorized Denomination" means, (i) during any Variable Period, $100,000 or any integralmultiplc of $25,000 in excess of $100,000, and (ii) during any Fixed Period, $5,000 or any integral multiple of $5,000. "A vailable Amounts" has the meaning given to that teml in the Indenture. "Bond Counsel" has the meaning given to that term in the Indenture. "Bond" or "Bonds" means the Issuer's Variable Rate Demand Multifamily \lousing Revenue Bonds (Silvcrwood Apartments Project) Series 1996 in the original aggregate principal amount of$7,000,000, currently outstanding in the amount of$7,O()0,000. "Busiuess Day" means any day otber than (i) a Saturday or a Sunday, (ii) any day on which banking institutions locatcd in the City of New York, New York are required or authorized by taw or executive order to close, (iii) any day on whieh banking institutions located in the city or cities in which the Principal Office of thc Trustee, the Remarketing Agcnt or tbe Loan Scrvicer is locatcd arc required or authorized by law or executive ordcr to close, (iv) prior to the Fixed Rate Conversion Date, a day on which the New York Stock Exchange is elosed or (v) so long as a Credit Facility is in effect, any day on which the Credit Provider is closed. "Credit Enhancement Instrument" means the Credit Enhancement Instrument dated the Closing Date issued and delivered by Fannie Mae to the Trustee, as it may be amended, supplemcntcd or restaled from timc to time. "Credit Facility" means the Credit Enhancement Instrument, or any Altcmate Security in effect at the time, as any such facility may be amended, supplemented or restated from time to time. "Credit Facility Documcuts" means the Reimbursement Agreement, the Certificate of Borrower, all Collateral Agreemcnts, thc Hedge Documents, the Hedge Reserve Escrow Account Security Agreement, thc Hedge Security Agreement, the Pledge Agreement, the EscrO\\ Agreement and all othcr agreements and documents securing the Credit Provider or otherwise relating to thc provision of the Credit Facility, as any such agreement may be amended, supplemented or restated from time to time. Each of the capitalized tenns not defined in this Note and used in this definition is used as defined in the Reimbursement Agrcemcnt. I \l()j\'lS',WP\TuscanyNotc,duc "Credit Provider" means, so long as the Credit Enhancement Instrument is in errect, Fannie Mac, or so long as any Alternate Security is in effect, the Alternate Security provider then obligated under the Alternate Security. "Default Rate" means an annual rate equal to the sum of (a) the prime rate of' interest as reported Ir'mn day to day in The Wall Street Journal (uotwithstanding that sueb pubhcation shows the prime rate of interest for the preceding Business Day) as the base rate on corporate 10'"1S postcd by at least 75 percent of the nation's 30 largest banks, or, if such rate IS no longer 'Ivailable, then the base rate or prime rate of interest of any "Money Center" bank designated limn time to time by the Credit Provider, in its discretion; and (b) two percentage points. "Escrow Fund" means the Escrow Fund created pursuant to the Escrow Agrecmcnt, deposits to which arc required by the Reimbursement Agreement. "Fannie Mae" means Fannie Mae, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.c. 99 1716 et seq. and its successors and assigns. "Financing Agreement" means the Loan Agreement dated as of May 1, 1996, among the Issuer, the Trustee and Megallan Silverwood & Cross Creek General Partnership, as the original borrower, as amended by the First Amendment to Loan Agreement dated as of September I, 2001, among the Issuer, the Tmstee and San Bernardino 328/AF XXX, LLC, as assignee of the original bOlTower, and as amended by the Second Amendment to Loan Agreement dated as of April I, 2003 among the Issuer, the Trustee and Borrower, as further amended, supplemented or restated ii'om time to time. "Fixed Rate" means the rate of interest borne by the Bonds during the Fixed Period as determined in accordance with the Indenture. "Fixed Period" has the meaning given to that term in the Indenture. "Hedge" has the meaning given to that term in the Reimbursement Agreement. "Hedging Arrangement" means any interest rate swap, interest rate cap or otber arrangement, contractual or otherwise, which has the effect of an interest rate swap or interest rate cap or which otherwise (directly or indirectly, derivatively or synthetically) hedges interest rate risk associated with being a debtor of variable rate debt or any agreement or other arrangement to enter into any of the above on a future date or after the occurrence of one or more events in the future. "Indenture" means the Indenture of Trust dated as of May I, 1996, between the IssLler and Trustee, as amended by the First Supplemental Indenture dated as of September 1,2001, and as amended by Second Supplemental Indenture dated as of April 1, 2003, as it may be further amended, modified, supplemented or restated from time to time. I r.l()J\IS\\'P'luscan)' Noteuoc "Issuer" means Redevelopment Agencv uf the City of San Bernardino, a public bodv cOlvorate and pohtic organized and existing under and pursuant to the la\Vs of the State of CalIfornia, and its Sllccessors and assigns. "Key Principal" has the meaning givcn to that teml in the Security Instrument. "Land" has the meaning givcn to th~lt term in the Security Instrument. "Loan" means the loan made by the Issuer to the Borro\Ver pursuant to the Financing Agreement for the purpose of providing funds to the BOlTo\Ver to finance the acquisition, rehabilitation and equipping of the Mortgaged Property. "Loan Documents" means, collectively, the Note, the Security Instrument and all other documents, agreements and instruments evidencing, securing or other\Vise relating to the Loan, as each such document, agreement or instrument may be amended, supplemented or restated from time to time. Neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by the Security Instrument. "Loan ServiceI''' means the multifamily mortgage luan servicer designated ii'um time to time hy the Credit Provider "Maturity Date" means May I, 202C" "Maximum Rate" means 12 percent per annum. "Mode" meaus the Variable Rate Mode or the Fixed Rate. "Mortgaged Property" has the meaning given to that term in the Security Instrument. "Note Interest" has the meaning given to that tenn in Paragraph 3 of this Note. "Note Interest Payment Date" shall have the meaning given to the teml "Interest Payment Date" in the Indenture. "Note Interest Period" means, \Vith respect to the Loan, the period from, and including, the Substitution Date, or as the case may be, a Note Interest Payment Date to, but excluding, the next Note Interest Payment Date, or, as the case may be, the Maturity Date. "Pledged Bonds" has the meaning given to that term in the Indenture. "Reimhursement Agreement" means the Reimbursement Agreement, dated as of April I, 2003, between the Credit Provider and the BOITower, as amended, supplemented or restated hom time to time. "Remarketing Agent" has the meaning given to that teml in the Indenture. "Security Instrument" means the Amended and Restated Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of April I, 2003, together L..\jI.'lOtvlS\WP\Tuscan},' Note.Joe II Ith all riders and exhibits, securing this Note, executed by the Borrower with respect to the i\lortgaged Property, as may be amended, supplemented or restatedli'Olll time to time. "Substitution Date" shall mean the date upon which the Credit Enhancement Instrument IS executcd and deli\'ered by Fannie Mae. "Trustee" has the meaning given to that term in the Indcmure "Variable Rate" means the variable rate of interest per annum f(lr the Bonds determined. for each Variable Period. in accordance with the Indenture. "Variable Period" has the meaning given to that tcnn in the Indenture. L. ',~IU\I S'.WP",TUSCZlIlY \'oledClc SF:('O:\'D SUPPLEMENT DATED MAY 1, 2003 TO PLACEMENT MEMOR<\NDUM DATED MAY 20, 1996 KL1TAK ROCK LLP OR:\FT 1J32120\J.\ :'<0'1' A NEIl ISSUE $7,000,000 REIJE\ELOP~IENT ,IGENCY OF THE CITY OF SAN BERNARlJINO Yariahlc Rilte Demand J\lultifamily Housing H.cnllue Bonds tSihcrwood Apartments Project) Series ]9% TIllS sCCfllld supplement (lhe "Secul1d Supplement") IS a second supplement tu the Placement i\1cIl1ClI"Clndul11 d<ltcd r\l,l)' 2(). J Si'J(i (the "OI-i:Slnal Placell1ent i\lclllorandllll1"), CIS supplemented by ,1 Supplement (bled us of September 19, 2ufJj (the "First Suppklllenl" ami, together \\llh the Original Placement l\1crnorandul11, the "Existing PIJcement Mernorandulll"i relating [u the .lbo\c-captlollcd bonds (the "Bonds") IsslIed by,' the Redevelopment Agency' of the City of San BCrlHlrdlllo (the "Issuer",) rhlS Second Supplement presents ccrtllllll1formatton that has become ~l\ililable II-om r-.'lay 20,19% to the date hereof and should bc rctld togcther \vlth the Placement \lelllllr<lndulll (a copY' of which is attached hereto and Incorporated herelll by' reference), Tu the e\tent the InfUnllalH)]] III thiS Second Supplement conflicts \\Ith thc Infornwtion III the Placemenl rvlemor~l11dLllll, thiS SccollCi SUppll'l11cnt sh~ll] gO\(Tll Unless othel"\\lse defil1l'd III thIS Second Supplernent, al] terllls used herein shall havc the S~llllC IllCJlllngs ~lS those [crlllS havc In the Placelllellt \lemorandu1l1 TIlE ISSUER HAS NOT PARTICIPATElJ IN TilE PREPARATION OF, OR REVIEWED OR APPROVED, THIS SECONlJ SUPPLEMENT, TIlE BONDS, THE PREMIUM, IF ANY, AND TilE INTEREST THEREON ARE LlVIITElJ OBLIGATIONS OF TIlE ISSUER, PAYABLE SOLELY FROM THE REYENUES, WIIIOI REVE:'<UES I1AVE BHN PLElJGED AND ASSIGNElJ TO TIlE TRUSTEE TO SECURE PAYMENT THEREOF, THE BONlJS AND TIlE INTEREST TIlER EON SIIALL NEVER CONSTITUTE THE DEBT OR INDEBTEDNESS OF TIlE ISSUER WITlIIN THE MEANING OF ANY PROVISION OR LIMITATION OF THE CONSTITUTION OR STATUTES OF TilE STATE OF CALIFORNIA, AND SIIALL NOT CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF THE ISSlJER, NEITIIER TIlE FAITII AND CREDIT NOR TIlE TAXING POWER OF TIlE CITY OF SAN BERNARlJINO, TilE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION TIIEREOF IS PLEDGElJ TO THE PA Y~IENT OF THE PRINCIPAL OF OR INTEREST ON TIlE BONlJS, NOR IS TIlE ISSUER, TIlE CITY OF SAN BERNARDINO, TilE STATE OF CALIFORNIA OR ANY POLITICAL SUBDI\ISION TIIEREOF IN A:'<Y :"ANNER OBLlGATElJ TO ~IAKE ANY APPROPRIATION FOR PA Y"ENT, TIlE ISSUER lIAS \0 TAXI\G POWERS, '\5 of \lay I, 2(HU (the "Dcll\uy Date') (al ownership of the lTlultifamily! residential housing project facility located In San BernJldlJlO, CallfurllIa, previollsly known as Sllverwood Apartments, and now known as Tuscany Apartments (the "PI-oje>.:t"), has bcen transfclTl?d to ~'1(; Tuscany :\pJrll11cnts LP, a California Ilmited purtnership and (b) credit enhancement ~md IIQUlll1ty SUPPOIl for the Bonds \\11] be pro\'ldcd by ~ HmuidVlae, pursuant to and subJc...-:t to the Illllltatlons of. a Direct P;lY Irrevocable Transferable Creclit Enhancement Instl'ulllcnt dated the Dcll\er\ Dale (thc "Cretin Fucility"), The Credll Facility will terImnate 011 l\!ay 6, 2026, unless earlier terminated as provided [hCI-ClI1 FANNIE M.\E'S OBLlGXIIONS \VITII RESPECT TO TilE nmms ARE SOLELY AS PROVIDED IN TilE CREDlI FACILITY THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDIT FACILITY \VILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FFDERALLY CIIARTIeReD STOCKHOLDER O\VNED CORPORATION, AND \VILL NOT BIe BACKED BY TilE FULL 1'.'11'1'1 I AND CRieD IT OF THE UNITED STATES TilE 1l0NDS ARE NOT A DeBT OF THE UNITED STATES OF ,AMERICA OR ANY OTHER AGENCY OR INSTRUMENTALITY OF TilE UNITED SlATES m ,\~IERIc.A OR OF FAN\IE MAE, TilE BONDS ARE "0'1' GCARAC:TEED IlY THE FCLL FAITII AND CREDIT OF THE UNITED S rATES OF ,AMERICA ]n connectIon \\Ith lhe tr<lIlsfer of the Project and the delivery of the Credit Facility, VJflOUS documents relating to Ihc Bonds and the Credit Facility have been modified as described herein NEWMAN _ _c .~."'_ ~_"'__'"=".,.-~_~ & ASSOCIAI~S _. 1 ....., "".0 1',1 ; ;',.' '.! .. r """'''''''' ...' J 1,.,"',",\. ( .J,.""; ,'.I", ~"" i .c",' OI..P::'Sj(j1 INTRODl!CTIO~ The Bonds were issued 011 [\..18.)" 21, 1996, pursu;\Il1 to al1 Jndenture of Trust dated as of f\..'la)' 1. 1')% (Ihe "Orlgmal Indenture") between the Redevelopment Agency 01' the CI1y of San Bernardino (the "Issuer") and First Trust or Cahfomia, National AssOi..:lation (no\v kl1o\\"n as U.S. Bank NatIOnal AssocIation. the "Trustee''). The Bonds are currently outstanding III the aggregate principal amoLlnt or ),7.111111.111)1) The proceeds of the Bonds were loaned (the "Loan") to Magellan Si]vcnvood & Cross Creek Cicl1cral PartllLTship, an ArIzona general partnership (the "Original Borrower") pursuant to a Loan '\grecment daled as of May], ] 996 (the "Original Loan Agreement") by and among the Issuer, First Trust of Califomla, National AssociatIOn and the Origll1a] Borrower, to tlnance the acquisition, rdlabIlltatlOn and equippmg of a multifamily residential housing project facility located 111 San Gernardmo. Cali forma (the "ProJect"). The Bonds were originally secured by an irrevocable direct-pay lellcr of credit Issucd by Bank One, Arizona, NA (the "Bank One Letter of Credit"). On September 25, 2001, the Origll1al Borrower sold the Project to San Bernardino 328/AF XXX, LLC'. a CalifoTI1la ]imitedliability company (the "Prior Borrower"). On such date, the Bank One Letter of Crcdlt was replaced by an irrevocable direct-pay letter of credit (the "Wells Letter of Credit") Issued by Wells Forgo Bank, NatlOna] Association ("Wells"). In connection With the delivery of the Wells Letter of Credit, (a) the Issuer and the Trustee executed a FIrst Supplemental Indenture dated as of September I, 200 I (the "First Supplemental Indenture" and, together with the Origlllal Indenture, the "EXlstlllg Indenture") and (b) the Issuer, the Tnlstce and the Prior Borrower executed a First Amendment to Loan Agleement dated as of September I, 200 I (the "First Supplemental Loan Agreement" and, together With the Clnglllal Loan Agreement, the "Existing Loan Agreement"). See "CERTAIN AMENDMENTS TO THE INDENTURE" and "CERTAIN AMENDMENTS TO THE LOAN AGREEMENT" 111 the First Supplement. On May I, 2003 (the "Delivery Date"), the Prior Borrower sold the Project to MG Tuscany Apartments L.P., a California limited partnership (the "BolTower"). See the "BORROWER AND THE PROJECT' herein. Also on the Delivery Date, the Wells Lcttcr of Credit was replaced by the Direct Pay Irrevocable Transferable Credit Enhancement Instrument dated the Delivery Date (the "Credit Facility") Issued by Fannie Mac (the "Credit Provider"). See "THE CREDIT FACILITY" herein, Exhibit B hereto and "FANNIE MAE" herein. In connection with the delivery of the Credit Facility, Ua) the Issuer and the Trustee executed a Second Supplemcntal Indenture dated as of May I, 2003 (the "Second Supplemental Indenture" and, together With the Existlllg Indenture, the "Indenture"), (b) the Issuer, tlie Trustee and the BOITo\\'er executed a Second Amendment to Loan Agreement dated as of May 1,2003 (the "Second Supp]emental Lnan Agreement" and, together with the Existing Loan Agreement, the "Loan Agreement")], (c) the IssLleL the Trustee and the Borrower executed a Fannie r./lae Rider to Regulatory Agreement dated as of May I. 2003 (the "Regulatory Agreement Rider"), (d) the Borrower executed an Amended and Restaled cdultil;lI1nly Note dated as of May I, 2003 (the "Note"), and (c) the Borrower and the Credit J'[,(lVIder execllted a Rcnnburscment Agreement dated as 01' lvlay I, 2003 (the "Rennbursement Agreement''). See 'Sl!!\Ii'vIARY OF CERTAIN PROVISIONS Of THE SECOND SUPPLEMENTAL INDENTURE", "SUMMARY OF CERTAIN PROVISIONS OF TilE SECOND SUPPLEMENTAL LOAN AGREEMENT". "SUMMARY OF CERTAIN PROVSIONS OF THE REGULATORY AGREEMENT RIDER", "SUMMARY OF CERTAIN PROVISIONS OF THE NOTE", "SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT" herem. (11-472810 I The Note IS a nO!lrCCl)urse obligation of the Borrower, subject to certain limited e.\ceptlons P;l.y'meIHs on the LOClIl will be made by' the Borrower to Berkshiref\,lortgage hnance Limited Partlll'rshllJ, C1 ivlass3chusclts hmltcd partnership (the "Loan Servlcer"). as the senlcer "fthe [.01111. See "TIIL UL\N SI:l\\'lCER" herem TIll' pnnclpClI amount and payment prOVisions of the' Note have been establishcd ~ll1d structured so that (;1) the aggregate prinCipal amount of the Note w1l1 equal the aggregate pnnclp;ll ;lll10unt of Outstandl1lg Bnnds and (b) the mterest payable on the Note \vill not be less than the IJlten:sl payable on the OUisUndll1g 8onds. The payments reqlllred to he made by the BOlTO\\Tr under the Note, 11 tll11ely' Jl1,-ljC hy the Borrower, are 1111endcd to he sufTicll'nt 111 amount to pay, \vhen due, the pnnClpal (}j and mterest on the Outstandll1g Bonds. The obhgations of the Borrower under the Note arc secured by a first hen pnonty Amended 3nd Restated MultIfamily Dced of Trust, ASSignment of Rcnts, Sccurlty Agreement and Fixtun: Filing encumbering the Borrmver's fee interest and leasehold interest in the Project (the "Secunty Instrument"). On the DelIvery Date, the Issuer will, pursuant to an Assignment and Intercredltor Agreemenl. dated as of May I, 2003 (the "Assignment"), among the Issuer, thc Trustee and Fannie Mae, and acknowledged, accepted and agreed to by the Borrower, assign the Loan, the Note and thc Security Instrument, without recourse, to the Trustee and Fannie Mac, as their mterests may appear. Upon such assignment, the Loan \Y11l be part of thc Trust Estate. EffectIve as of the DelIvery Date, Newman & ASSOCiates, a DiVIsion of GMAC CommerCial Holdmg Capital Markets Corp. (the "Remarketing Agent") will serve as remarkctmg agcnt for the Bonds under a Remarkctmg Agreement dated as of May 1.2003, by and between thc Remarketmg Agent and the Borrower LeWIS, BnsbOls, Blsgaard & Smith, Ll.P, Los Angeles, t'alIforma, Bond Counsel. has rendered the opmlon attached hereto as Exhibit A [m connection With the execution and delivery of the Credit Llelhty and the Second Supplemental Indenture]. Sec "T~,( MATTERS" herem and Exhibit A hereto. The summaries of documcnts contamed herein do not purport to be complete and are qualifledm thcir cntirety by reference to such documents. Copies of the documents described herein are available l'or inspection at the prinCipal corporate trust oflice of the Trustee, U.S. Bank National Association, 550 South Hopc Street, Suitc 500, Los Angeles, CalIfol11ia 90071, Attcntion: Corporate Trust Departmenl. THE CREDIT FACILITY In addition to the other security provided under the Indenture, the Credit Facility' provides credll enhancement and IiqUlclity suppori for the Bonds. The proposed form of the Cred1l Facility is attached to this Sccond Supplement as Exhibit B. FANNIE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY. THE OBLIGATIONS OF EANNIE MAE UNDER THE CRI'DIT EACILITY WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALlY CHARTERED STOCKHOLDER OWNED CORPORATION, AND WILL NOT BE BACKED BY TIlL FULL FAITH AND CREDIT OF TIlE UNITED STATES. THE BONDS ARE NOT A DEBT OF TIlE UNITED STATES OF AMERICA OR ANY OTHER AGENCY OR INSTRUMENTALITY OJ THE UNITED STATES OF AMERICA OR OF FANNIE MAE THE BONDS ARE NOT GUARANTELD BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OE AMERICA. Infol111atlon rcgardmg the Credit Provider is contamed under the caption "FANNIE MAE" herein. 0)-472810_1 2 FANNIE :VIAE The ill/ormotioll presented IInder rhis hcoding flU.)' hecn slIppliud hy Fal/llie 1'\10(' l'v'onc uj'rhe Issuer, the 7hlslee, [he Borruwer, the Loan Serricer or the RelllurkeriJlg ,'!genr /I1IS Indepclu/cntl"l 1"!!r{/ied slIch ir{forlJlOtioJ/. ([lid !I(Jlle aSSllI/U.!S rcspoJlsihilirypn' rhe i1C('II/"WY (~r)'lIch ilUIHIIIC!lioll Fannie :-vIac is a federally chartncd and stockholder-owned coq1oration orgLlIllzed and l'xlsting uJ1der the i'edcral NatIOnal I\'lortgagc Association Charkr Act. 12 L.S.c'. 171() et seq. It lS the largest lIlvcstor III home mortgage loans in the United States with J net portfol1o or S797 bill1ntl or mortgage loans as of December 31,2002. Fanmt' .rv1ae was originally established 111 1938 as a United States government agency' to proVide supplemental liquidity to the mortgage market and became a stockl1ll1der-owned and privately managed corporation by. legislation enacted In 196's. femllle Mac purchases, sells, and otherWise deals in mortgages III the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans ongm<lted by others. 1n addition, Fannie Mae issues mortgage-backed securities CivIBS"), primarily III exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees f(,r its guarantee of timely payment of principal of and Illterest on MBS certificates. fannie Mae is subject to regulation by the Secretary of Housing and Urban Development CHUD") and the Director of the mdcpendent Office of federallJousing Enterprise Oversight within HUD. Approval of the Secretary of Treasury IS reqUired for Fannie Mac's Issuance of Its debt obligations and MBS. five of the eighteen members of fannle Mac's Board of Directors arc appointed by the President of the United States. and the other thirteen are elected by the holders of Fanllle i\lae's common stock. The securities of FannIl.: l\1ac arc not gl13rantccu by the United States and do not constitute a ckbt or obligal1on of the United States or any' agency or instru!11cntal1ty thereof other than Lllll1lC f\ilac. As of December 31, 2002, Felllme Mae's core capital] was S21\ billion. Information on Fanme Mae and its financial condition is contained II1 Fannie l\1ae '5 InformatIOn Statement ("lnformation Statement") dated AprIll, 2002, and Supplements thereto dated May 15,2002, August 9, 2002, November 13,2002, and Febnmy 4, 2003, (and any later supplement to or update of such Information Statement). Copies of the most recent InformatIon Statement, any Supplements to the Information Statement and FJnnie Tvlac's most recent annual report to stockholders and proxy statement arc available without charge li.om the Office of Investor RelatlllnS, Fannie Mae, 3900 WISCOnSll1 Avenue, NW, Washington, DC 20016 (telephone: 202/752-7000) ~lI1d are also <\\'ailable by accessll1g Fannie i'vlac's \vorlcl \V)(Jc web sIte at http://\V\vw.f:mniemae .com/ir/infostatements. fannie Mae makes no representation as to the contents of thiS Second Supplement, the SUitability of the bonds for any investor, the feasibility of performance of any project, or compliance \Vlth any securities, tax or other laws or regulations. Fannie l'vIae's role \vith respect to the Hands IS limited to Issuing and discharging its obligations under the Credit Facility and exercising the rights reserved to it in the Indenture and the Reimbursement Agreement. THE BORROWER AND THE PROJECT The following m[ormalion has been provided by the Borrlmer None o/fhe Issuer, the Trustee, the Credit Provider, the Loan ,S'er\:icer or the Relllarketing Agent has fIIude (l}1)' independent illvestigorioll ICore Capital ]s the sum of (a) the stdted value of outstanding common ::;(ock. (b) the stated value of l!lItstalldln~ IHlIlclllllUlall\e perpetual preferred stock, (c) paid-lIl capital, and (d) retained earnings (1!--P2R10,1 3 regarding the il!lf)r/lwrioll !)rcsented ill this sectiorl, nor has sl/ch parties vcrified the (feeL/nIC') or C01!l!J/crencss rhereof (//ut /lO/lC of the issuer, the Trllsrcc, the Credit Provider, the Loun SerrieD' or the RCl/larketillg Agel/t OSSlfIlll'S ({II)' respoJ1.\;ihility or /iahili(l' then/f)r. The Borrower The Burrower, i\'1G 'fuscany Apartments L.P., a California limited partnershIp, acquIred the Project on the Ucli\ery Date. Gklberman Illyestments, [nc., a CalIfoll1ia corporation. IS the ad1ll1l11stratlve general partner of the Borrower (the "Administratlve General Partner"), 'The Ac!I1lIT11strati\'e CiL'neral Partner and its alllllatcs have been involved 111 the O\VI1CrShlp and/or operation uf multifamily housll1g facilities SlllCC ___ and currently 0\\/11 and/or operate other multih.ltlllly housing L1Cllillt'S contall1mg approxImately __M units located in The Project Based on unaudited 111fon11ation provided by the BOITower, occupancy at the Project averaged ___'X, Ii)!' the calendar year 2001, and _% for the calendar year 2002, Based on unaudited 111formatlOn provided by the Borrower, as of April _' 2003, the most recent date for which occupancy results arc available, the Project \vas __~__(% occupied. Based on unaudited rn!ilr1nation provided by the Borrower, the following is a summary of the operatrng history for the Project tor each of the calendar years set forth below: 2001 2002 Revenues Operating Expensesl Net Cash Flow i\ vailable lor Deht Sernce IBefol'C ckprccialloll and other non-cash expense items THE PROJECT WAS NOT OWNED OR OPERATED BY THE BORROWER PillOR TO THE DELIVERY DATE. ACCORDINGLY, THE INFORMATION PROVIDED FOR THE PROJECT PRIOR TO THE DELIVERY DATE HAS BEEN BASED SOLELY UPON INFORMATION PROVIDED TO TilE BORROWER BY THE PRIOR BORROWER AND/OR A PROPERTY MANAGEMENT FIRM. WHILE THE BORROWER BELIEVES THE I"IFORJ\lATION SET FORTH ABOVE IS RELIABLE, THE BORROWER HAS NOT INDEPENDENTLY CONFIRMED TilE ACCURACY OF THE INFORMATION SET FORTH ABOVE AND DOES NOT GIIAlUNn:E TilE ACCURACY OF SUCH INFORMATION. TilE LOAN S~=RVlCER Bcgl11nrng on the Dellwry Date, Berkshire rvIortgage finance Limited Partnership, a i\1assachusctts limited partnership (the "Loan Serviccr"), \vill provide certalll servicing functions 011 behalf of Fanme Mae With respect to the Loan pursuant to applicable Fannie Mae requirements and will be paid a fee for Its services. The se!eclion of the Loan Servicer IS rn the sole and absolute discretion of fanme Mae. The serviclI1g arrangements bet\-veen the Loan Servicer and fannie Mae can be amended or terminated \vithout the consent of the Issucr. the Trustee or the Borrower. and none of the Trustee, the Issuer or the Borrower Ol-r'lRII)I 4 has any rights under, and none IS a third party benerlcwry or, the sLT\'icing arrangements bct\\TC'n the ] ,naIl Sel"\'lcer and Fannie 1\.'1ae. The Loan ServiceI' has its headquarters in Doston, f\/[assachusetts. The Loan Ser\"lcer IS an approved Dr,S Lender under Fannie Mac's Delegated Underwrittng and Scr\'lelllg product IlIle. The Loan Servlcer makes no representation as to the contents of thIs Second Supplement, the su]tablllty of the Bonds for any tnvestor, the fcas]bllity of performance of the Project or compliance wltli any securities, tax or other laws or regulations. The Loan Servicer's role IS limited to underwriting and SCI"\'IClIlg the Loan. Sl''II.\IARY OF CERTAIN PROVISIONS OF TilE SI<:COND SlIPPLEMENTAL IDENTURE The .fi,lIo\l'illg is a brief sUlI1mary of certaill provisiolls of the Secolld SlIpplemelllal IlIdellture The Sl/IJl/IIW)' does not pWl)()rt to be complete or definitive and is qualified in its entiret)' hy rejE-'rcnce to lhe Secolld SlIpplemelltalIlldelllUre, a copy of which is on .fae \l'ilh the Ii'llstee [TO COME] SUMMARY OF CERTAIN PROVISIONS OF THE SECOND SUPPLEMENTAL LOAN AGREEMENT flie jol101villg is a brief Sll!JWUUY of certain pruvisions of the ,)'ecoJ/d Supplemental Loan Agreemellt. Tht' .'lUll/nUll)' does nut purport to be complete or definitive and is qualified ill its entirely by reference to rhe Second Supplementall"oulI Agreement, a copy (~lH11ich is on file with the Trustee [TO COME] SlI!\I~IARY OF CERTAIN PROVSrONS OF THE REGULA TORY AGREEMENT IliDER The jiJllOlvillg is a briefsulI1mw)' of certain provisions of the Regulatory Agreement Rider. Tlte S1I11I1IWlJ' docs l/ot purport to be complete or definitive and is qualified ill its entirety hy reference to the RegulalolT Agreement Rider, a copy of which is onftle with the Tl'IIstee. On the Delivery Date, the Issuer, the Trustee and the Borrower executed and delivered the Regulatory ,\greement Rider. The Regulatory Ab'Teement Rider ]s attached to and forms a part of the Regulator)' Agreement, as amended. Definitions All capitalizcJ terms used in the Regulatory Agreement Rider have the meanings given to those terms III the Regulatory.' Agreement or the lndenture, as applicable. Applicahility Ihe Regulatory Ab'TCCment Rider amends and supplements the Regulatory Agreement. In the event any prOVlS]OI1 of the Regulatory Agreement Rider conn]cts with the Regulatory Agreement, the Regulatory Agreement Rider supersedes the connicting provision of the Regulatory Agreement. The Regulatory Agreement Rider applies in spite of the fact that the covenants, reservations and restrictIOns of the Regulatory Agreement run with the land and may be deem cd applicablc to any successor in interest to the Borrower. ("I.-InSI!I] 5 Obligations not Sernred by the Property The Regulatory At-.'1TCIl1t:'l1t sh;.1l1 not constitute a mortgage, equitable mortgage, deed of trllSt. deed to secure debt or other lIen or security interest in the Project. None of the obligations or tllL' 130ITO\\'('I" or allY subsequent O\\'11er of the Project under the Regulatory Agreement shall be secllrl'd by ~l lll'll 011, ur sl'Curity lI1tL'rest I!L the PruJc(t. All sLlch obligatIOns are expressl:!, intended to be and sh,ill rcmalll unsecured obligations. The occurrence of an event or dcLllllt under the Regulatory .'\~ITl'Illl'll\ shall not impair. defeat or render 1l1\-ahd the lIen of the Security' Instrument. Snbordination The terms, rovenants and restrictions of the Regulatory Agreement, other than those set forth 111 the Sections of the Regulatory Agreement directly relating to comphance With the Code (the "Excluded ProviSIOns"), are and shall at all tnTIes remain subject and subordl11ate, in all respects, to the liens, rights and mterests created under the Loan Documents, Upon a conveyance or other transfer of title to the Project by foreclosure, deed 10 lieu of foreclosure or comparable conversion of the Loan, the Person wlio acquires title to the Project pursuant to such foreclosure, deed in lieu of foreclosure or comparahle conversion of the Loan (unless such Person is the Borrower or a Person related to the Borrower within the meaning of SectIOn I, I 03-1 O( e) of the Regulations, in which event the Regulatory Agreement shall remum m full force und effect in Its entirety) shall acquire such title tree and clear of the terms, cm'mants and restnctlons of the Regulatory Agreement, other than those set forth in the Excluded Provisions and, f1'om and ,-ltter the date on \VhlCh slIch Person acquires title to the ProJect, the terrns. covcn:.mts and restnctwns of the Regulatory Agreement, other than those set forth 10 the Excluded pJ()\ISIOnS, shall automatically terminate and be of no {()rce and eftect; provided that the Excluded PrOVisions shall also terminate and be uf no force or effect under the cIrcumstances set forth in the Regulatory Agreement Obligations Personal The Issuer has agreed that no owner or the Project (including Fannie I'vIae) subsequent to the Borrower will be liable for, assume or take title to the Project subject to: (a) any failure of any prior owner of thc Project to perform or observe any representation or warranty, affirmative or negative covenant or other agreement or undertaking under the Regulatory Agreement; and (b) the payment of any compensation or any accrued unpaid fees, costs, expenses or penalties otherWise owed by any prior owner of the Project under the Regulatory Agreement. The Borrower and each subsequent owner of the Project shall be responSible under the Regulatory Agreement for its 0\\/11 acts and omissions occurring during the penod of its U\vnership of the Project. All such liability and obligations shall be and remain personal to such person even after such person ceases to be the owner of the Project. Sale or Transfer Restrictiolls Not Applicable to Certaill Trallsfers, All prOVISIOns of the Regulatory Agreement regarding the sale or transfer of the Project or of any interest 111 the Borrower, 111cluding any reqLllrement, limitation or condition precedent for any 01'(1) the consent of the Issuer or the Trustee to such transfer, (II) an agreement by any transferee to abide by the requirements and restnctIons of the Regulatory Agreement (ili) transferee criteria or other similar requirements, (iv) an npinion of legal counsel and (v) (ll-..t72Xl(J, I 6 the payment or an}' assumption fee, transfer fee. penalty or other charges, shall not apply to any or the followln(2: (I) any transfer of title to the Project to Fannlc Moe or to a tlmd party bl foreclosure. deed 111 lIeu of foreclosure or comparable CDlln.'rSl011 of any lIen on the Project or tu :lI1Y subsequent transfer by Fannie T'vlae (or a third party') follO\\'ll1g such l'oreclosLlrc. deed 111 heu of foreclosure or comparable conversion; (2) any execution and delivery of a mong;q;e. deed of trust, deed to senlrc llebt or other hen by the Borrower to secure any additional indebtedness or the BorrO\\'er \vhlch IS ongmated by a lender for sale to Fannie f\ilac or guaranteed or otherwise credlt enhanced by' canme Mae; and (3) prOVided that no Bonds arc then Outstandmg or all Bonds arc to be Simultaneously fully paid, redeemed or defeased, any execution and dehvery of a mortgage, deed of trust, deed to secure debt or other lien by the Bortower to secure any indebtedness meun-ed by the Borrower which effectively refinances the Loan_ Fallllie Mae Rights to COllsellt Not Impaired. Nothing con tamed II1 the Regulatory Agreement shall affect any provision of the Security Instrument or any of the other Credit Enhancement Documents or Loan Documents which requires the Borrower to obtain the consent or Fannie lv'Iae as a precondition to sale. transfer or other disposition of, or any direct or indirect mteres! in, the Project or of any direct or indirect interest in the Borro\ver, excluding transfers permitted by. the SL'cllrity lnstrument. Cunclusive h~vide/lce. Any written consent to a sale or transfer obtallled tJ.OI11 the Issuer shall constitute conclUSIve evidence that the sale or transfer is not a nolatioll of the transfCr pro\'isions or the Regulatory Agreement. Damage, Uestructioll or Condemnation of the Project In the event that the Project IS damaged or destroyed or tItle to the Project or allY. part thereof, IS taken through the exercise or the threat of the exercise of the power of eminent domain, the BOlTO\Ver shall comply with all applicable reqUIrements of the Secunty Instrument and the other Loan Documents. Regulatory Agreement Default Not\vithstanding anything contained in the Regulatory Agreement to the contrary: (a) The occllrrence of an event of default under the Regulatory Agreement shall not Impair, defeat or render invalid the lien of the Secunty Instrument. (b) The occurrence of an event of default under the Regulatory Agreement shaJll1o[ be or be deemed to be a detault under the Loan Documents, except as may be otherWise speCified ltl the Loan Documents. (e) Upon any default by the Borrower under the Regulatory Agreement, the ASSignment shall govern the remedies and other actions which the Issuer may take on account of slleh default. (Jl--I72S10,j 7 Amendments Unless the /\:-:;slgned R..lghts (as that term IS defined in the Assignment) are transferred to the J'rustec pursuant tn the Assignment, the Issuer shall not consent to any amendment, supplement to, or restatement orthe Regulatnry Agreement without the pnor wntten consent of Fcll1l11C T\'lac. Termination rhl' Regulate)!")! Agreement nla:' bc terminated upon agreement by the Issuer, the Trustee, the (.rcc!lt P\"ll\,lder and the BOnO\\'LT upon receIpt or an opil1lon of a nationally recognized bond cOLlnsel acceptable to the Trustee that sLlch termination will not adversely affect the exclusion of the II1terest on the Bonds tt-O!l1 gross income for kderal income purposes. So long as the Bonds have been redeemed or <Ire redeemed withll1 a reasonahle period thereafter, the Regulatory Agreement shall termlTlate and be of 110 further fllrce or effect ti'om and alier the date of any transfer of litle to the Project by foreclosure, deed in hell of foreclosure or cornparable conversion of any lien on the Project; provided, hmvc\'er, that the precedlllg provIsions of this sentence shall cease to apply and the restnctions contained III the Regulatory Agreement shall be reinstated if at any time subsequent to the tennmatlOn of such proviSIOns as the result of thc !<Jreclosure or the delivery of a deed in IIco of foreclosure or a similar event, the Borrower or any rclated person (within the meaning of SectIOn 1.1 03- I O( e) of the Regulations) obtains an ownership mterest in the Project for fedcrallllcome tax purposes_ Third-Party Beneficiary The parties to the Regulatury Agreement have recognized and agreed that the terms of the Regulatory Agreement and the c-nforcement of those terms arc essential to the security of Fannie f\ilae and are entered I11to for the benefit of vanous parties, including Fannie tvlae. rannie h1ae shall accordl11g1).' have contractual rights III the Regulatory Agreement and shall be entitled (but not obligated) to enforce, sepanltel)/ or jOll1tly with the Issuer and/or the Trustee, or to cause the Issuer or the Trustee to enforce, the terms of the Regulatory Agreement. In addition, the Borrower and the Issuer intend that Pannie fv'lae be a third-party beneficiary of the Regulatory Agreement. SUMMARY OF CERTAIN PROVISIONS OF THE NOTE The jo//mving is a hrief .)'wnmwy of certain provi..'lions of the Note. 171C surnmw)' does no! purport to h(! CO!l/f)lele or defillilive and is qualified in its. ell tire!).} hy reference !o the Note, a copy ql ll'hic/I is oll/i!l.:' 1\'i/h [he Trus[ce Delined Terms Capitalized terms used under tl11S headIng and not defmed hereunder or elsewhere 111 thiS Second Suppleml'nt shall have the meanings assigned thereto In the Note. Eyidences Loan The Note eVidences the Loan. Note Interest Except as provided 111 the Note, interest ("Note Interest") will accrue on the unpaid principal of the Note from, and Including, tbe Effective Date untIl paid in full at an annual rate effective for so long as 1J1--lnBi(),1 , c the Interest rate on the Bonds is a Variable Rate, a varIable rate or interest which floats and changes with. and IS ,'qLlal tll, the Vanable Rate, Note Interest will automatically and simultaneously' change \vith each corresponding change in the interest rate on the Bonds under the Indenture. Notwithstanding any other provision of the Note to the l'lllltrary, Nute lntcrest \vill 110t exceed the I\hlXllllLlIll Rate, as the IvlaxiIllLlIll Rate may change III accurdance with the Indenture. DUrIng the Variable Period, Note lnterest \vill be computed on the baSIS \)1' the ~lctLl(l1 number of days elapsed over a year of 365 or l6() day"s, as applIcable. Panllell! of l'rilldpal alld IlIterest The Borrower agrees to pay the principal of and interest on the Note as follows: (a) The primary obligation of the Bonower Linder the Notc IS to pay pnnclpal oC prellllum, if any, and mtcrest on the Note at the tlllleS and III the amounts necessary to pay' all pnncljJal of, premium, Ifany, and mterest on, the Bonds as they become due, whether at matLlnty, by acceleration, by optional, mandatory or mandatory smkmg fLlnd redemptIOn or otherwise, The Bonower shall make Its payments under the Note in Available AmoLlnts if and to the extent that the IndentLlre, the Loan Agreement or the Note reqUlrcs sLlch amount to be available to the TrLlstee III A "ailable Amounts, In the event of any deticiency in the funds available under the Indenture for payment of the prinCipal of, premlUm, If any, or interest on the Bonds when due, the Borrower shall immediately pay the amount of the deficiency to the Trustee upon notice of the ddiclency li'om the Issuer, the Loan ServiceI' or the Trustee, The BOITOwer shall be obligated to pay the ddieieney regardless of the reason for the deliclency, mcluding any deficiency rcsultmg 110m any shortfall in payments made or to be made by the BOITower under the Note, any loss due to a default under any Investment, a change in value of any Investment or otherWIse. (b) Subject to subparagraph (a), the Bonower shall pay Note Interest m arrears, begmmng on the first Note Interest Payment Date, (c) Subject to subparagraph (a), the Rorrower shall pay all unpaid prmclpal 01' and interest on the Note on the earlier of the Matunty Date of the Ronds or the date on which the unp'llLI prmelpal balance of the Note becomes due, whether by acceleration or otherWise ("Matunty Date''), Any prinCipal of the Note not paid on the Matunty Date shall continue to bear mterest from the Maturity Date, at the Default Rate, from and including the Matunty Date to. but t',xcludltlg, the date 011 \vhlch such amounts are paid in full. (d) For tbe purpose of ealculatmg the amoLlnt of Note Interest due under the Note, any regularly schedoled mstallment of pnnclpal of or Note Interest on the Note that IS received by the Issuer before the date it is due shall be deemed to have been received on the due date Nothing III thiS subparagraph shall apply to a prepayment of the Note pLlrsLlant to the Nole, (e) No Advance by the Credit I'ro\'Jder under the Crecht Facility shall be n'eated as a credit "gams!' or otherwise relieve the BOlTower Irom its obligation to pay, the pnncipal of and Interest on the Note when due. (I) The obligations of the BOITower to make the payments reqmred by and perform its other obligations under the Note shall be absolute and unconditional and shall not be subject to dimlllutlOn by set-off, recoupment, counterclaim, abatement or otherwise, til .f72XIOI 9 (gl If pnor to filii payment of the Bonds (or provision for the full payment of the Bonds III accordance \""lth the prOViSlO!1S of the Indenture) the Project or any portion thereuf lS destroy'ccl (1I1 whole or 111 part) or is damaged by fire or other casualty', or title to, or the temporary' LIse of all or any portion of the Project shall be taken under the exercise of the po\\cr of e1ll1l1cnt domain by any governmental body or by any person, firm or cOll)oration acting Lllllk'l governmental authorlt}" thl' BOlTo\vcr shall nevertheless be ohligated to continue to pay the 31110unts specifIed 111 the Note to the extent the principal of the Note is not prepaid. Escrow Flllld The Reimbursement Agreement reqUIres the Borrower to make monthly payments for dep()SJt mto the Escrow Fund, to be applied by the Escrow Agent in any manner directed by the Credit Provider pursuant to the Escrow Agrecment. The Loan shall not be, and shall not be deemed to be, paid ur prepaid by reason of any deposit mto the Escrow Fund and the amount on deposit in the Escrow fund shall not be a credit against the pnnclpal amount of the Note, provided that If any amount 111 the Escrow Fund IS Withdrawn from the Escrow fund and applied to the payment of the prinCIpal of any of the Bonds, thc pnnclpal component of the redemption price of any of the Bonds or the pnncipal component of the amount set aside to defease any of the Bonds, all as provided 111 the Indenture, the amount so applied shall be simultaneously credited to the pnnclpal amount of the Note. To the extent that any amount IS mthdrawn fi.om the Escrow fund to make a payment ofmterest due on the Bonds (excludmg the mterest component of the purchase price of any Pledged Bond unless such purchase occurs on an Interest Payment Date for the Bonds), the amount so wIthdrawn shall be a paymentof mtcrest on the Loan. No applIcation of any amount m thc Escrow fund I,)r any other purpose (includmg any withdrawal relating to the prll1cipal component of the purchase pnce of any Pledged Bonds) shall be credited agall1st the unpaid principal or or interest on the Note. Application of Payments If at any time the Issuer receives, from the BOlTower or otherwise, any amount applicable to the' Note which IS less than all amounts due and payable at sueh time, the Issuer may apply that payment to amounts then due and payable in any manner and in any order determined by the Issuer, in the Issuer's discretion. The Borrower has agreed that neither the Issuer's acceptance of a paymcnt from the Borrower m an amount that IS less than all amounts then due and payable nor the Issuer's applicatIOn of such payment shall constitute or bc deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Security The Note IS secured, among other thmgs, by the Seeunty Instrument, and reference IS made to the Seeunty Instrument I,,, other nghts of the Issuer conceming the collateral I,,, the Note. Acceleration If an Event of Default under the Security Instrument has occurred and IS contmumg, the entire unpaid principal balance, all accrued Note Interest, the prepayment premium payable under the Note, If any, and all other amounts payable under the Note or under any other Loan Document shall at once become due and payable, at the option of the Issuer, without any pnor notice to the HOlTower The Issuer may exercise this option to accelerate regardless of any prior forbearance. ()]-cl72810_1 10 Limits 011 Personal Liability (a) Except as otherv.rise descrihed under this headll1g or JI1 ~l11Y' of the other Loan Documents, the Borrower shall have no personal liability under the Note, the Security Instrument or any' other I,oan Document for the repa}'ment of the Note or for the performance of an,y other obligations of the Borro\ver under the Loan Documents. and the Issuer's only recourse for the satIsfaction of the Note llno the performance of such obligatlulls shall be the Issuer's exercIse or its rights and remedies \vith respect to the Project and allY (lthn eol13teral held by the IssLln as secunty for the Note. This limitation on the Borrower's liability' shall not 11mlt or impair tile Issllcr's enforccment of its rights agamst any guarantor of the Note or any gLl~lralltur or an) (Jthel obligations of the BOtTOwer. (b) The Borrower shall be personally liable to the Issuer jor the repayment o( a portion o( thc Note equal to any loss or damage sutTered by the Issuer as a result o( (I) (ailure u( the Borrower to pay to the Issuer upon demand after an EI'ent o( De1cnilt under the Secullty InsD'ument, all Rents to which the Issuer IS entitled under the Security Instrument and the amount of all security deposits collected by the BotTOWer from tenants then m reSidence; (Ii) failure of the BOJT(nver to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (Iii) failure of the Borrower to comply with the provisions of the SecurIty Instrument relating to delivery of books, records, statements, schedules and reports; (IV) fraud or written material ITIlsreprcsentation by the Borrower, Key Principal or any ollleer, director, partner, member or employee of the Borrower in connection with the application for or creation of the Loan or any request for any action or consent by the Issuer: or (v) faJiure to apply Rents, first, 10 the payment of reasonable operating expenses (other than Property management fees that are not cUlTcntl:>, paJ'able pursuant to the terms of an Assignment of lvlanJgement Agreement or an)' other agreement with the Issuer executed in connection with the Loan) and then to amounts ("Debt Service Amounts") payable under the Note, the SecurIty Instrument or any other Loan Document (except that the Borrower will not be personally liable (A) to the extent that the Borrower lacks the legal right tn direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (B) with respect to Rents that arc distrIbutcd 111 anv calendar y'ear if the Borro\ver has paid all operating expCIlSl'S and Debt Service Amounts for that calendar year), (c) The Borrowcr shall become personally liable to the Issuer I(l[ the repayment of all of the principal of and interest on the Note and j()r the payment, perfonmll1ce and observation of all obligations, covenants and agreements of the BUITO\\lT cUllt~\ll1l'J III the SI..'CLll'lt) Instrument, mcludmg the payment of all sums advanced by or on behal!, of IssLler to protect the security of the Security Instrument, upon the occulTence of any of the iollO\\lng: (I) the Borrower's acqUisitIOn of any property or operatIOn of any busll1css not perI11ltted by the SecurIty Instrument; (Ii) a Transfer (as that term is defll1ed in the Security Instrument) that is an Event of Default under the Security Instrument; or (Iii) a Bankruptcy Event. As used m thiS subparagraph, the term "Bankruptcy Event" means anyone or more of the following events \vhleh occurs during any time that a Hedging Arrangement (other than a Hedge) IS outstanding: (I) The Borrower (I) commences a voluntary case (or, If applicable, a JOll1t case) under any Chapter of the Bankruptey Code, (ii) institutes (hy petition, appllcallon, answer, consent or otherWise) any other bankruptcy, insolvency, reorganizatIOn, arrangement, readjustment of debt, dlssolullon, liqUidatIOn or similar proceedll1g relatll1g to it under the laws of any JUrIsdiction, (iii) makes a general assignment ft)r the benefit of creditors, (tv) applies for, consents to or acqUIesces in the appointment of any reeelvcr. liquidator, custodJan, sequestrator, trustee or snnilar ofilcer for It or for all or any (1]-472S]01 11 substantial part of the Project or (y) admIts in writing its lI1ability to pay' lts debb generally' as the): mature (2) Any KeY Pnnclpal or any AffillOte of a Key Pnnclpal f1ks an inyoluntary' petItion against the BorrO\ver under any Chapter of the Bankruptcy,' Code ur under any other bankruptcy', IIlsolycncy, reorganization, arrangement, readjustment or debt. dissolutlon, lIqUldation or similar proceeding rdating to the Borrower under the laws of any .Jurisdiction. (3) Both (1) an IIlvoluntary petition under any Chapter of the Bankruptcy Code is filed agalllst the Borrower or the BOlTower directly or indirectly becomes thc subject of any bankruptcy, insolvency', reorganization, arrangement, readjustment of debt, dissolutIOn, liqUidation or Similar proceedmg relating to it under the laws of any Junsdlctlon, or In equity, and (11) the Borrower or any Affiliate of thc Borrower has acted m concert or conspired With such creditors of the Bon-ower (other than the Issuer) to cause the lillllg thereof With the mtent to interfere With enforcement nghts of the Issuer after the occurrence of an Event of Default. (d) To the extent that the Borrower has personal liability described under this heading, the Issuer may exercise Its "ghts agalllst the BOlTower personally without regard to whether the Issuer has exercised any rights against the Project or any other security, or pursued any fights agamst any guarantor. or pursued any other rights available to the Issuer under the Note, the Security' Instrulllcnt, any other Loan Document or applicable law. For pUIvoses of the description under thiS heading, the term '.Prolect" shall not lIleludc any hlllds that (1) have been applied by the BorrowCf as required or pellnitted by the Security Instrument prior to the occunence of an Event of Default under the Security Instrument, or (ii) the Borrowcr was unabll~ to apply as required or permitted by the Security Instrument because or a bankruptcy, receivership, or Similar Judicial proceeding. V oluntary and Maudatory Prepayments (a) Any prepayment or the pnncipal of the Note must result III a redemption or a conesponding principal amount of the Bonds. (b) No payment to he applied as a prepayment (whether voluntary or mandatory) or principal of the Note shall be credited ngainst the unpaid principal of the Note until the date on which Bonds in a like amount are redeemed or defe.%cd pursuant to the Indenture. Until the Borrower's payment IS credited as a prepayment, the amount of the mtended prepayment shall contmuc to be unpaid principal of the Note and shall continue to bear interest to the date of prepayme11l. (c) The Borrower may voluntarily prepay the Note on any Interest Payment Date lor the Bonds \vithlll a \'arlable Period in whole or in part. Any partial voluntary prepay'ment lllllst be m an amount corrcspondmg to the then applicable Authorized Denomination of the Bonds. (d) The nght or the Bonower to voluntanly prepay the pnncipal of the Note, III whole or 111 part, as descrlbcd in subparagraph (c) IS subject to the satisfaction of the following comlitlOns precedent: (i) the BOlTowcr has given written notice of such prepayment to the Issuer, the Trustee, the Credit PrOVider, the Loan Servlcer and the Rernarketing Agent at least 30 ()].-li2S10.1 12 days pnor to the effective date of prepayment as desCrIbed m subparagraph (b), which notIce shall state the date of slIch prepa:yment and the amount of pnncipal to be prepaid: (11) the Borrower has pal<J the amounts described III subparagraph (t) nut later than one Busmess Day prior to the (bte under the Indcnture the Trustee mllst h'-l\-c rcccl\-ed slIch funds for such redemption; and (Ill) the Issuer, the Credit Prunder, the J.uan SerViceI' and the Remarkctll1g Agent arc provided a eerufteate of the Trustee to the c1'ket that the Trustee holds on deposit A valiable Amounts which are both sullie lent ,md avaliable under the terms of the Indenture for a payment of any bond redemptIOn pren1llun, and the Trustee holds on depOSit moneys which are both sufllcient and avaliable under the terms of the Indenture to pay the costs and expenses reqUired to be paid m connection with the redemption of the Bonds to be redeemed as a result of the prepayment under the Note, (e) Each of the following shall be or require a mandatory prepayment of the principal of the Note: (i) Any reduction and, therefore, amortization of the Loan by reason of the withdrawal of any amount lrom the Escrow Fund and the applicatIOn of such amount to the payment of, or the reimbursement to the Credit PrOVider for an Advance made to pay, the pnncipal of any of the Bonds, the principal component of the redemption pllee of any of the Bonds or the principal component of the amount paid to defease any of the Bonds, all as provided in the Indenture, except I,)!' the payment of the pnncipal of any Bond as such prinCipal is scheduled to be paid, (ii) repa Y'lllcn t 0 f repa)-'ment. Any application by the Issuer of any collateral or other secunty to the any pnncipal of the Note to the extent of the pnncipal amount of such (iii) The Issuer's exerCise of the nght of acceleration of the Note to the extent of the outstanding prinCipal amount of the Note, (iV) Any acceleration or mandatory redemption of the Bonds to the extent of the pnncipal amount of such Bonds, (v) Any reduction and, therefore, amortization of the Loan by reason of the withdrawal of any amount from any Fund or Account under the Indenture, not descnbed in clause (i), (ii), (iii) or (iv) above, resulting in a payment, redemption ur defeasance of any of the Bonds, except to the extcnt that such funds are applied to: (A) the payment of the pnncipaI of any Bond as such pnnclpal is scheduled to bc paid; or (B) a voluntary prepaymcnt of the Note which causes a v(Jluntary redemption of Bonds, (tJ The BOITower shall pay, or cause to be paid, all of the I'olIowll1g amounts In connection With any prepayment of the Note (whether voluntary or mandatory): (i) the principal of the Loan bell1g prepaid; \l1--I:.:'S]111 13 (11) mterest on the princIpal of the Loan bemg prepaId to the encclivc date of prepayment as provIded m subparagraph (b); (Iii) to the extent not covered by the amOllnt required in clause (ii), mtcrc-st payable on the Bonds to the RedemptIon Date: (iv) the prcpZlymcnt premium, if any.', payable with respect to the prepayment of the Loan (the premIum to be paId \vith Available Amounts): and (v) to the extent not covered by the amount reqlllred m clause (4), thc redemption premium, If any, payable with respect to the redemption of the Bonds (the premium to be pclld with i\vadable Amounts). (g) Any partial prcpayment of the pnnclJ)al of the Note shallnol extend or postpone the due date of any subsequent monthly installments, 11' any, or change the amount of such mstallments, except as descnbed m this subparagraph. The amount of subsequent monthl) mstallments, If any, shall be reamortized WIth the consent ofIssuer as necessary to cOrJ'Cspond to the remainmg payments due on the Bonds; provided, however, that the unpaid pnnclpal of and mterest on the Note, all other obligatIOns of the Bonower for the payment of money under the Note and all obligations of the 1300Tower for the payment of money under the Security lnstnnnent shall be due and payable on the Maturity Date, if not sooner paid. SUMMARY 01<' CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT the j()/lowing is a brief sUn/mary (~r certain provisio}/s of the ReimbuI',)'emenl Agreement, flie Sllllll/J(l}:r docs 11O! purport fO be complete or dejlnitil'e and is qualijied in its entirety hJ' rc~/i.:rcnce to the Reimhursement /lgreement, (l Cop)-' (~r~\'hich is on Jile with the Trll.,,'tee rhe Credit J<aedlty is Issued pursuant to the Reimbursement Agreement which obl1gates the Borrc)\vcr, among other things, to reimburse Fannie Mae for funds advanced by Fannie Mac under the Creult Facrlity and to pay various fees and expenses, m each case as provided 111 the Rellnbursement Agn.:cment. The RCimbursement Agreement sets forth various affirmative and negatIve covenants 01' the BOlTower, some of which are morc restrictive with respect to the Borro\ver than similar covenants 1I1 the Luan :\greemcnl. Denned Terms Capltal1zed terms used in rim ExhIbit and not defll1ed herein or elsewhere 111 tl1lS Second Supplement shall have the meanll1gs assigned thereto in the Reimbursement Agreement. Events of Defanlt The occurrence of anyone or more of the followll1g events constitutes an event of default under the Reimbursement Agreement: (a) the BOITower fails to pay when due any amount payable by the Borrower under the Reimbursement Agreement, the Note, the Loan Agreement, the Secunty Instrument or any other Transaction Document; or ill--l72SI(lj 14 (hi the occuncnce of any Event of Default under any Transaction Document other than the Reimbursement Agreement bey'ond any cure period set 1'orth 111 that TnlllsactJon Ducuml:nL or (c) fraud or material mlsreprcscntltion or material omiSSIon by BOfn)\Ver. or any of rts officers, directors, trustees, general partners or managers, Key Pnnclpal or any guarantor: (i) contamcd in the Reimbursement Agreement. the CertifIcate of Borrower or any other BOlTowcr Document or any certificate delivered by the Borrower to Fanl1lc 1'viae or to the Loan ServiceI' pursuant to the Reimbursement Agreement or any other Bon"o\ver Document; or (11) in connection with (1) the apphcalion for or creation of the Loan or the credit enhancement or liquidity for the Bonds provided by the Credit Facility, (11) any financial statement, rent roll, or other report or 1I1fofmatlOtl provided to Fannie r-.,/lae or the Loan Servlcer during the term of the Reimbursement Agreement or the Loan, or (ill) any request for Fannie NIae's consent to any proposed action, mcluding a request for disbursement of funds under any Collateral Ah'Teement: or (d) a DeterminatIOn of Taxability (as that term IS defllled III the Indenture) occurs; or (e) any failure by the Borrower to perform or observe any of Its obligations under the Rennbursement Agreement (other than as set forth III suhsectlons (a) through (dl abo\O), as and when required, which eontmues for a penod of 30 days after notice of suelr tatlure by Fanllle ~'lac or tire Loan SerVlccr to the Borrower, but no such notIce or grace penod shall apply m tire case of any such 1~lilurc \vhlch could, in Fannie f'vlae's or the Loan Serviccr's judgment, absent Immediate exercise by Fannie Mae of a right or remedy under the Reimbursement Agreement, result in harm to Fannie Mae, Impairment of the Note, the Reimbursement Agreement, the Security Instrulllent or any' other security given under any other Transaction Document; or (f) the Bon'ower tails to pay when duc or wlthm any applicable graee penod any amount payable by the Borrower under any HedgmgArrangement, or the occurrencc of any other default or event of default, however descnbed, by the Borrower under any Hedging Ammgement: Remedies Upon an Event of Default Upon the occurrence of an Event of Default under the Reimbursement Agreement, the Obligations and all amounts owing under the Reimbursement Agreement may be declared by FannIe I\'lac to become immediately due and payable, without presentlllent, demand, protest or notice of all)' kind. lllcludlllg notice of default, notice of intent to accelerate or notice of acceleration. In C1dditiol1. Fannie f\.Icte shall have the right to take such action at law or In equity, \vithout notice or demand, as It deems mh'lsablc to protect and enforce the rights of Fannie J\ilae against the Borrower ~ll1dior 1Il and to thc I\'Iortgaged Property, lI1cluding, but not limited to, ClIlY one or more or all of the fnllo\\lIlg actIons: (I) deltver to the Trustee wnl!en notice that an Event of Default has occurreclundcr the Reimbursement Agreement and direct the Trustee to take such action pursuant to the Transaction Documents as Fannie Mae may determine, mcludmg a request that the Trustee declare the prmcipal of all or a portion of the Bonds then outstancltng ancl the mtcres! accrued thereon to be Immediately clue and payable in accordance with the terms and condll1ons of the Indenture; CiI-472S10.1 15 (ii) dernand cash collater3l or Pcrmltted Investments in an amount equal to the maximum l1abillty or fannlc i\'1ae under the Credit hlcility" \\'hether or not thcn duc and pay'able by Fannie ['vIae: and (Ill) Document:.;, excrclse any nghts and rCl1lcc!Jes a\'~l1bbk to Fannie [,vIae ul1lkr the Transadloll AmL'ndments rhc Reimbursement :\grccll1cllt call be amended by" the CredIt Provider and the BOITO\VCr \vlthout the consent of, or notlCt to, the Issuer. the Trustee or the holders of the Bonds. RATINGS Upon the lssuanee and delrvcry of the Credlt facllrty, Standard & Poor's Ratrngs Services, a Dlvls;on of The McGraw-HilI Companies, Inc. ("S&P") Will raise the ratings on the Bonds at "AANA-I+." The ratrngs renect only the views of S&P, and an explanation of the ratrngs can be obtamed learn S&P. There is no assurance that such ratings will continue for any given period of time or that they wl11 not be revlsed downward or withdrawn entlreIy by S&P if, in the judgment of such rating agency, Circumstances so \varrant. Any such do\vl1\vard revision or withdra\val of such ratings may have an adverse effect on the marketing price of the Bonds. TAX MATTERS LtW1S BrisbOls Hlsgaard & Smith, LLP, Los Angeles, Calrf01111a, Bond Counsel, has rendered an opimon to the effect that [the e'ccutlon and deIrvery of the Credit FaclIrty and the Second Supplemental Indenture \villnot, m and of thelllseln~s, adversely affect the exclusion hom gross income of mterest un the Hands for federal mcomc tax purposcs.] A form of the opmlon of Bond Counsel lS attached hereto at bhlblt A. LlI\IlTED INVOLVEMENT OF THE ISSUER The dlstribution of thls Second Supplement has been duly consented to by the Issuer, insofar as lt relates to the Issuer and the transactions to which the Issuer is a party. The Issuer, however, has not reviewed and lS not responsible for any inj(mnation set forth herem. I\IISCELLANEOliS TIllS C;ccond Supplement lS submitted m connection wlth the transfer of ownershlp of the Project and the execution and delivery of the documents descnbed herem and may not be reproduced or used, as a whole or in part, Irlr any other purpose. Any statements m thlS Second Supplement involving matters of opinion, \vhether or not expressly so stated, are intended as sllch and not as representations of fact. ThIS S'econd Supplement is not be construed as a contract or agreement between the Issuer and the purchasers or holders of the Bonds [Remamder of Page Left Blank IntentlonallyJ lil-.l/28j()] 16 IJi-.rnNI(11 [Borrower's SIgnature Page to the Second Supplement to Placement Memoranduml MG TUSCANY APARTMENTS I ,P, a CahCOrJlla hmited partnershIp By C;leibcrman lnycstmcnts, Inc. a California corporation Its Admllllstratlvc (Jcner~d Partner By f\tJark Gleiberman, President 17 EXHI lilT A FORM OF TilE OPINION OF BONn COUNSEL (J1-472~]Ol EXInBTT H FORM OF TIlE CREDIT FACILITY (i1-.:j:2SI(J I ** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT ** RESOLUTION AGENDA ITEM TRACKING FORM ~OC'.)2C03~\ 2- , Meeting Date (Date Adopted): 4-"2-\-03 Item # Vote: Ayes [-., Nays ~ Change to motion to amend original documents: "\:::3S"" Resolution # Absent .-G-- Abstain .0 Reso. # On Attachments: ~ Contract term: --- Note on Resolution of Attachment stored separately: --=-- Direct City Clerk to (circle I): PUBLISH, POST, RECORD W/COUNTY Date Sent to Mayor: A ~ 2703, Date of Mayor's Signature: :\- 1,,\-0) Date ofClerklCDC Signature: A -)"'-O~ Date Memo/Letter ~nt for Signature: ..---.--..-.-----""- 60 Day Reminder Letter Sent on 30th day: 90 Day Reminder Letter Sent on 45th day: See Attached: :seeI\.LLi:ldJ.\.d. See Attached: Request for Council Action & Staff Report Attached: Updated Prior Resolutions (Other Than Below): Updated CITY Personnel Folders (6413, 6429, 6433, 10584, 10585, 12634): Updated CDC Personnel Folders (5557): Updated Traffic Folders (3985, 8234, 655, 92-389): Copies Distributed to: City Attorney Parks & Rec. Code Compliance Dev. Services Public Services Water Police Notes: NullNoid After: By: Reso. Log Updated: .,/' Seal Impressed: Date Returned: - Yes /' No By Yes No / By Yes No ,/ By Yes NO~ By Yes No EDA ./ MIS Finance Others: BEFORE FILING. REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term. etc.) Ready to File: ~ Date: Revised 01/12/01