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AGR-7450.0.C.3 - MERCY HOUSING CALIFORNIA 107 LP - VILLA ST. JOSEPH 480 S BATAVIA ST - SUBORDINATION AGREEMENTAGR-7a-50.O.C.3 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Davis Wright Tremaine LLP 865 S.Figueroa Street Suite 2400 Los Angeles, California 90017 Attention: Nancy Clapp,Esq. SPACE ABOVE THIS LINE FOR RECORDER'S USE SUBORDINATION AGREEMENT City of Orange) This SUBORDINATION AGREEMENT (this "Agreement") dated as of 2022, is executed by and among (i) UMPQUA BANK, an Oregon state- chartered bank, as agent (in such capacity, "Agent"), for the CALIFORNIA MUNICIPAL FINANCE AUTHORITY, a joint exercise of powers agency, duly organized and validly existing under the laws of the State of California ("Issuer"), under and pursuant to that certain Master Agency Agreement dated as of 1, 2022 (as amended from time to time, the Master Agency Agreement"), by and between Issuer and Agent (Agent, together with any successors and assigns of its interest under the Senior Deed of Trust described below, is referred to herein as "Senior Lender"), (ii) CITY OF ORANGE, a municipal corporation of the State of California ("Subordinate Lender"), and (iii) MERCY HOUSING CALIFORNIA 107, L.P., a California limited partnership ("Borrower"). RECITALS: A. Borrower has applied to Issuer for two loans in the aggregate maximum principal amount of$collectively, the "Senior Loan"), comprised of a tax-exempt loan the"Tax-Exempt Loan") in the maximum principal amount of$and a taxable loan (the "Taxable Loan") in the maximum principal amount of$ Borrower will use the proceeds of the Loans to finance, in part, the construction of a fifty (50)-unit multifamily housing project known as Villa St. Joseph (the "Improvements" or the "Project"), on certain real property located in the County of Orange, State of California, more particularly described on Exhibit A attached hereto (the"Land"). B. Issuer, in order to raise sufficient funds to make the Senior Loan to Borrower, has determined to issue its California Municipal Finance Authority Multifamily Housing Revenue Bonds (Villa St. Joseph) 2022 Series A-1 in the original principal amount of$ the "Tax-Exempt Bond") and its California Municipal Finance Authority Multifamily Housing Revenue Bonds (Villa St. Joseph) 2022 Series A-2 (Taxable) in the original principal amount of the"Taxable Bond", and together with the Tax-Exempt Bond,the"Bonds"). The Senior Loan will be funded with the proceeds of the sale of the Bonds to Umpqua Bank, an Oregon banking corporation (in its capacity as holder of the Bonds, "Holder"). Subordination Agreement(City of Orange) Form 6456 Page 1 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 C. The Loan is being made pursuant to that certain Construction Loan Agreement dated as of even date herewith (the "Senior Loan Agreement"), by and between Agent and Borrower. The Tax-Exempt Loan will be evidenced by that certain Promissory Note (Tax- Exempt) dated as of even date herewith (the "Tax-Exempt Note"), executed by Borrower to the order of Lender in the face principal amount of the Tax-Exempt Loan, and the Taxable Loan will be evidenced by that certain Promissory Note (Taxable) dated as of even date herewith (the Taxable Note", and together with the Tax-Exempt Note, the "Senior Note"), executed by Borrower to the order of Lender in the face principal amount of the Taxable Loan. The Loans will be secured by that certain Construction Deed of Trust, Security Agreement,Assignment of Leases and Rents, and Fixture Filing dated as of even date herewith(the"Senior Security Instrument"), executed by Borrower for the benefit of Lender and recorded in the Official Records of Orange County, California (the "Official Records"), encumbering, among other things, Borrower's fee simple interest in the Land and certain personal property described in the Mortgage (collectively, the"Mortgaged Property"). In accordance with that certain Master Pledge and Assignment dated as of even date herewith (the "Master Pledge"), by and among Issuer, Agent and Holder, the interests of Issuer in this Agreement,the Notes,the Deed of Trust and the other Loan Documents, excluding the Reserved Rights(as defined in the Master Pledge), are concurrently herewith, being assigned by Lender to Holder, pursuant to that certain Assignment of Deed of Trust and Related Documents dated as of even date herewith (the "Assignment") and recorded in the Official Records substantially concurrently with the Deed of Trust. The Senior Loan Agreement, the Senior Note,the Senior Security Instrument and all other Loan Documents(as defined in the Senior Loan Agreement) are hereinafter referred to as the "Senior Loan Documents". D. Borrower has requested Senior Lender to permit three subordinate loans, a 651,244 loan (the "HOME Loan"), a $576,000 (the "LMIHAF Loan"), and a $372,756 loan the "In Lieu Fees Loan", and collectively with the HOME Loan and the LMIHAF Loan, the Subordinated Loan"),from Subordinate Lender to Borrower and to allow the Subordinate Loan to be secured by mortgage liens against the Mortgaged Property. E. Senior Lender has agreed to permit the Subordinate Loan and to allow the subordinate mortgage liens against the Mortgaged Property subject to all of the conditions contained in this Agreement. AGREEMENTS: NOW, THEREFORE, in order to induce the Senior Lender to permit the Subordinate Lender to make the Subordinate Loan to Borrower and to place a subordinate mortgage lien against the Mortgaged Property, and in consideration thereof, Senior Lender, Subordinate Lender and Borrower agree as follows: 1. Recitals. The recitals set forth above are incorporated herein by reference. Subordination Agreement(City of Orange) Form 6456 Page 2 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 2. Definitions. In addition to the terms defined in the Recitals to this Agreement, for purposes of this Agreement the following terms have the respective meanings set forth below: Affiliate"means,when used with respect to a Person,any corporation,partnership,joint venture, limited liability company, limited liability partnership, trust or individual Controlled by, under common Control with, or which Controls such Person,and in all cases any other Person that holds fifty percent(50%) or more of the ownership interests in such Person. Borrower"means the Person named as such in the first paragraph on page 1 of this Agreement, any successor or assign of Borrower, including without limitation, a receiver,trustee or debtor-in- possession and any other Person (other than Senior Lender) who acquires title to the Mortgaged Property after the date of this Agreement. Business Day"means any day other than(a) a Saturday, (b) a Sunday, (c)a day on which Senior Lender is not open for business, or(d) a day on which the Federal Reserve Bank of New York is not open for business. City Affordability Covenants"means that certain Agreement Containing Covenants (Including Rental Restrictions) dated 2022, executed by and between Borrower and Subordinate Lender, which is recording in the Official Records substantially concurrently herewith. City Notice of Restrictions"means that certain Notice of Restrictions executed by the City and consented to by Borrower, which is recording in the Official Records substantially concurrently herewith. City Restrictions" means, collectively, the City Affordability Covenants, the City Notice of Restrictions and the HOME Regulatory Agreement. Condemnation Action" means any action or proceeding, however characterized or named, relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property,whether direct or indirect. Control" (including with correlative meanings, the terms "Controlling," "Controlled by" and under common Control with"), as applied to any entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or operations of such entity, whether through the ownership of voting securities, ownership interests or by contract or otherwise. Default Notice" means: (a) a copy of any written notice from Senior Lender to Borrower and Subordinate Lender stating that a Senior Loan Default has occurred under the Senior Loan Documents; or(b) a copy of any written notice from Subordinate Lender to Borrower and Senior Lender stating that a Subordinate Loan Default or a default under the City Restrictions has Subordination Agreement(City of Orange) Form 6456 Page 3 Fannie Mae 08-13 CO 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 occurred under the Subordinate Loan Documents or the City Restrictions, as applicable. Each Default Notice shall specify the default upon which such Default Notice is based. HOME Regulatory Agreement" means that certain Agreement Containing HOME Program Requirements dated 2022, executed by and between Borrower and Subordinate Lender, which is recording in the Official Records substantially concurrently herewith. Official Records"means the Official Records of Orange County, California. Person" means an individual, an estate, a trust, a corporation, a partnership, a limited liability company or any other organization or entity (whether governmental or private). Senior Lender"means the Person named as such in the first paragraph on page 1 of this Agreement. When any other Person becomes the legal holder of the Senior Note, such other Person shall automatically become the Senior Lender. Senior Loan"has the meaning set forth in Recital A, above. Senior Loan Agreement" has the meaning set forth in Recital C, above. Senior Loan Default" means the occurrence of an"Event of Default" as that term is defined in the Senior Loan Documents. Senior Loan Documents"has the meaning set forth in Recital C, above. Senior Note"has the meaning set forth in Recital C, above. Senior Security Instrument"has the meaning set forth in Recital C, above. Subordinate Assignment" means that certain Assignment of Rents and Leases dated as of 2022, executed by Borrower in favor of Subordinate Lender, which is recording in the Official Records substantially concurrently herewith,encumbering the Mortgaged Property as security for the Subordinate Loan. Subordinate Assignment of Agreements"means that certain Assignment of Agreements dated as of 2022, executed by Borrower in favor of Subordinate Lender. Subordinate Disbursement Agreement" means that certain Disbursement Agreement dated as of 2022, executed by Borrower in favor of Subordinate Lender. Subordinate Environmental Indemnity"means that certain Environmental Indemnity dated as of 2022, executed by Borrower in favor of Subordinate Lender. Subordinate Lender" means the Person named as such in the first paragraph on page 1 of this Agreement, any successor or assign of Subordinate Lender, or any other Person who becomes the legal holder of the Subordinate Note after the date of this Agreement. Subordination Agreement(City of Orange) Form 6456 Page 4 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 Subordinate Loan Agreement" means that certain Affordable Housing Agreement dated as of 2022,by and between Subordinate Lender and Borrower. Subordinate Loan Default"means a default by Borrower in performing or observing any of the terms, covenants or conditions in the Subordinate Loan Documents to be performed or observed by it,which continues beyond any applicable period provided in the Subordinate Loan Documents for curing the default. Subordinate Loan Documents"means the Subordinate Loan Agreement, Subordinate Note,the Subordinate Mortgage, the Subordinate Assignment, the Subordinate Environmental Indemnity, the Subordinate Assignment of Agreements,the Subordinate Disbursement Agreement,any UCC- 1 financing statement filed showing Borrower, as debtor, and Subordinate Lender, as secured party,filed in connection with the Subordinate Loan,and all other documents evidencing,securing or otherwise executed and delivered in connection with the Subordinate Loan. The term Subordinate Loan Documents" shall not include the City Restrictions. Subordinate Loan"has the meaning set forth in Recital D, above. Subordinate Mortgage" means that certain Subordinated Deed of Trust, Security Agreement and Fixture Filing (with Assignment of Rents) dated as of 2022, executed by Borrower in favor of Subordinate Lender, which is recording in the Official Records substantially concurrently herewith, encumbering the Mortgaged Property as security for the Subordinate Loan. Subordinate Note" means, collectively, (a) that certain Promissory Note to the City of Orange HOME Program Funds) dated as of 2022, executed by Borrower to the order of Subordinate Lender, in the face principal amount of ///[$651,244]///, (b) that certain Promissory Note to the City of Orange (LMIHAF) dated as of 2022, executed by Borrower to the order of Subordinate Lender, in the face principal amount of 576,000]///, and (c) that certain Promissory Note to the City of Orange (In Lieu Fee Funds) dated as of 2022, executed by Borrower to the order of Subordinate Lender, in the face principal amount of///[$372,756]///. 3. Permission to Place Mortgage Lien Against Mortgaged Property. Senior Lender agrees, notwithstanding the prohibition against inferior liens on the Mortgaged Property contained in the Senior Loan Documents and subject to the provisions of this Agreement, to permit Subordinate Lender to record the Subordinate Mortgage, the City Restrictions, and other recordable Subordinate Loan Documents against the Mortgaged Property to secure Borrower's obligation to repay the Subordinate Note and all other obligations, indebtedness and liabilities of Borrower to Subordinate Lender under and in connection with the Subordinate Loan. Such permission is subject to the condition that each of the representations and warranties made by the Borrower and the Subordinate Lender in Section 4 is true and correct on the date of this Agreement and on the date on which the proceeds of the Subordinate Loan are disbursed to the Borrower. If any of the representations and warranties made by the Borrower and the Subordination Agreement(City of Orange) Form 6456 Page 5 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 Subordinate Lender in Section 4 is not true and correct on both of those dates,the provisions of the Senior Loan Documents applicable to unpermitted liens on the Mortgaged Property shall apply. 4. Borrower's and Subordinate Lender's Representations and Warranties. Borrower and Subordinate Lender each makes the following representations and warranties to Senior Lender: a) Subordinate Loan Documents. Each Subordinate Loan is evidenced by the Subordinate Note and is secured by the Subordinate Mortgage,the Subordinate Loan Agreement and the Subordinate Loan Documents. b) Relationship of Borrower to Subordinate Lender and Senior Lender. The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower. c) Term. The term of the Subordinate Note does not end before the stated term of the Senior Note. d) Subordinate Loan Documents and City Restrictions The executed Subordinate Loan Documents and the City Restrictions are substantially in the same forms as those submitted to,and approved by,Senior Lender prior to the date of this Agreement. Upon execution and delivery of the Subordinate Loan Documents and the City Restrictions, Borrower shall deliver to Senior Lender an executed copy of each of the Subordinate Loan Documents and the City Restrictions,certified to be true,correct and complete. 5. Deliveries. Upon execution and delivery of the Senior Loan Documents, Borrower shall deliver to Subordinate Lender an executed copy of each of the Senior Loan Documents, certified to be true, correct and complete. 6. Terms of Subordination. a) Agreement to Subordinate. Senior Lender and Subordinate Lender agree that (1) the City Restrictions shall remain senior to the lien of the Senior Security Instrument and the other Senior Loan Documents, 2) subject to the terms of paragraph (c)below in this Section 6,the indebtedness evidenced by the Subordinate Loan Documents is and shall be subordinated in right of payment, to the extent and in the manner provided in this Agreement, to the prior payment in full of the Indebtedness evidenced by the Senior Loan Documents, and (3) the liens, terms, covenants and conditions of the Subordinate Mortgage and the other Subordinate Loan Documents are and shall be subject and Subordination Agreement(City of Orange) Form 6456 Page 6 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 subordinate in all respects to the liens, terms, covenants and conditions of the Senior Security Instrument and the other Senior Loan Documents and to all advances heretofore made or which may hereafter be made pursuant to the Senior Security Instrument and the other Senior Loan Documents (including but not limited to, all sums advanced for the purposes of(A) protecting or further securing the lien of the Senior Security Instrument, curing defaults by Borrower under the Senior Loan Documents or for any other purpose expressly permitted by the Senior Loan Documents, or (B) constructing, renovating, repairing, furnishing, fixturing or equipping the Mortgaged Property). b) Subordination of Subrogation Rights. Subordinate Lender agrees that if, by reason of its payment of real estate taxes or other monetary obligations of Borrower, or by reason of its exercise of any other right or remedy under the Subordinate Loan Documents or the City Restrictions, it acquires by right of subrogation or otherwise a lien on the Mortgaged Property which (but for this subsection)would be senior to the lien of the Senior Security Instrument,then,in that event,such lien shall be subject and subordinate to the lien of the Senior Security Instrument. c) Payments Before Senior Loan Default. Notwithstanding anything to the contrary in this Agreement, until Subordinate Lender receives a Default Notice (or otherwise acquires actual knowledge) of a Senior Loan Default, Subordinate Lender shall be entitled to retain for its own account all payments made under or pursuant to the Subordinate Loan Documents. d) Payments After Senior Loan Default. Borrower agrees that, after it receives a Default Notice(or otherwise acquires knowledge) of a Senior Loan Default,it will not make any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorneys' fees, or any other sums secured by the Subordinate Loan Documents)without Senior Lender's prior written consent. Subordinate Lender agrees that, after it receives a Default Notice from Senior Lender with written instructions directing Subordinate Lender not to accept payments from Borrower on account of the Subordinate Loan, it will not accept any payments under or pursuant to the Subordinate Loan Documents (including but not limited to principal, interest, additional interest, late payment charges, default interest, attorneys' fees, or any other sums secured by the Subordinate Loan Documents) without Senior Lender's prior written consent or until the Senior Loan has been repaid in full. If Subordinate Lender receives written notice from Senior Lender that the Senior Loan Default which gave rise to Subordinate Lender's obligation not to accept payments has been cured, waived, or otherwise suspended by Senior Lender, the restrictions on payment to Subordinate Lender in this Section 6 shall terminate, and Senior Lender shall have no right to any subsequent payments made to Subordinate Lender by Borrower prior to Subordinate Lender's receipt of a new Default Notice from Senior Lender in accordance with the provisions of this Section 6(d). Subordination Agreement(City of Orange) Form 6456 Page 7 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 e) Remitting Subordinate Loan Payments to Senior Lender. If, after Subordinate Lender receives a Default Notice from Senior Lender in accordance with Section 6(d), Subordinate Lender receives any payments under the Subordinate Loan Documents, Subordinate Lender agrees that such payment or other distribution will be received and held in trust for Senior Lender and unless Senior Lender otherwise notifies Subordinate Lender in writing,will be promptly remitted,in kind to Senior Lender,properly endorsed to Senior Lender, to be applied to the principal of, interest on and other amounts due under the Senior Loan Documents in accordance with the provisions of the Senior Loan Documents. By executing this Agreement, Borrower specifically authorizes Subordinate Lender to endorse and remit any such payments to Senior Lender, and specifically waives any and all rights to have such payments returned to Borrower or credited against the Subordinate Loan. Borrower and Senior Lender acknowledge and agree that payments received by Subordinate Lender, and remitted to Senior Lender under this Section 6, shall not be applied or otherwise credited against the Subordinate Loan,nor shall the tender of such payment to Senior Lender waive any Subordinate Loan Default which may arise from the inability of Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan. f) Notice of Payment from Other Persons. Subordinate Lender agrees to notify (telephonically or via email, followed by written notice) Senior Lender of Subordinate Lender's receipt from any Person other than Borrower of a payment with respect to Borrower's obligations under the Subordinate Loan Documents,promptly after Subordinate Lender obtains knowledge of such payment. g) Agreement Not to Commence Bankruptcy Proceeding. Subordinate Lender agrees that during the term of this Agreement it will not commence, or join with any other creditor in commencing any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings against or with respect to Borrower,without Senior Lender's prior written consent. 7. Default Under Subordinate Loan Documents or City Restrictions. a) Notice of Subordinate Loan Default and Cure Rights. During the term of this Agreement, Subordinate Lender shall deliver to Senior Lender a Default Notice within five (5) Business Days in each case where Subordinate Lender has given a Default Notice to Borrower. Failure of Subordinate Lender to send a Default Notice to Senior Lender shall not prevent the exercise of Subordinate Lender's rights and remedies under the Subordinate Loan Documents or the City Restrictions, as appliable, subject to the provisions of this Agreement. Senior Lender shall have the right,but not the obligation,to cure any Subordinate Loan Default or any default under the City Restrictions within sixty (60) days following the date of such notice;provided,however that Subordinate Lender shall be entitled, during such sixty (60) day period, to continue to pursue its rights and remedies under the Subordinate Loan Documents or the City Restrictions, as applicable, to the extent permitted under Section 7(b). All amounts Subordination Agreement(City of Orange) Form 6456 Page 8 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 paid by Senior Lender in accordance with the Senior Loan Documents to cure a Subordinate Loan Default or a default under the City Restrictions shall be deemed to have been advanced by Senior Lender pursuant to, and shall be secured by, the Senior Loan Agreement and the Senior Security Instrument. b) Subordinate Lender's Agreement to Standstill. If a Subordinate Loan Default or a default under the City Restrictions occurs and is continuing, the Subordinate Lender agrees that,without the Senior Lender's prior written consent, it will not accelerate the Subordinate Loan, commence foreclosure proceedings with respect to the Mortgaged Property, collect rents, appoint (or seek the appointment of) a receiver or institute any other collection or enforcement action. c) Cross Default. Borrower and Subordinate Lender agree that a Subordinate Loan Default and/or a default under the City Restrictions shall constitute a Senior Loan Default under the Senior Loan Documents and Senior Lender shall have the right to exercise all rights or remedies under the Senior Loan Documents in the same manner as in the case of any other Senior Loan Default. If Subordinate Lender notifies Senior Lender in writing that any Subordinate Loan Default or of any default under the City Restrictions of which Senior Lender has received a Default Notice has been cured or waived, as determined by Subordinate Lender in its sole discretion, then provided that Senior Lender has not conducted a sale of the Mortgaged Property pursuant to its rights under the Senior Loan Documents,any Senior Loan Default under the Senior Loan Documents arising solely from such Subordinate Loan Default or default under the City Restrictions shall be deemed cured, and the Senior Loan shall be reinstated,provided,however,that Senior Lender shall not be required to return or otherwise credit for the benefit of Borrower any default rate interest or other default related charges or payments received by Senior Lender during such Senior Loan Default. 8. Default Under Senior Loan Documents. a) Notice of Senior Loan Default and Cure Rights. Senior Lender shall deliver to Subordinate Lender a Default Notice within five (5)Business Days in each case where Senior Lender has given a Default Notice to Borrower. Failure of Senior Lender to send a Default Notice to Subordinate Lender shall not prevent the exercise of Senior Lender's rights and remedies under the Senior Loan Documents, subject to the provisions of this Agreement. The Subordinate Lender shall have the right, but not the obligation, to cure any such Senior Loan Default as provided below. Subordinate Lender shall have up to thirty (30) days from the date of the Default Notice to cure any monetary default under the Senior Loan Documents; provided,however,that the Senior Lender shall be entitled during such 30-day period to continue to pursue its remedies with respect to the Mortgaged Property. Subordinate Lender shall have up to sixty(60)days from the date of the Default Notice to cure a non-monetary default if during such 60- day period Subordinate Lender keeps current all payments required by the Senior Loan Documents. In the event that such a non-monetary default creates an unacceptable level of risk relative to the Mortgaged Property, or Senior Lender's secured position relative to the Mortgaged Property, as Subordination Agreement(City of Orange) Form 6456 Page 9 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 determined by Senior Lender in its sole discretion,then Senior Lender may exercise during such 60- day period all available rights and remedies to protect and preserve the Mortgaged Property and the rents, revenues and other proceeds from the Mortgaged Property. All amounts paid by the Subordinate Lender to the Senior Lender to cure a Senior Loan Default shall be deemed to have been advanced by the Subordinate Lender pursuant to,and shall be secured by the lien of,the Subordinate Mortgage. b) Cross Default. Subordinate Lender agrees that, notwithstanding any contrary provision contained in the Subordinate Loan Documents, a Senior Loan Default shall not constitute a default under the Subordinate Loan Documents (if no other default has occurred under the Subordinate Loan Documents) until either (1) Senior Lender has accelerated the maturity of the Senior Loan, or (2) Senior Lender has taken affirmative action to exercise its rights under the Senior Loan Documents to collect rent,to appoint(or seek the appointment of) a receiver or to foreclose on(or to exercise a power of sale contained in)the Senior Loan Documents. At any time after a Senior Loan Default is determined to constitute a default under the Subordinate Loan Documents, Subordinate Lender shall be permitted to pursue its remedies for default under the Subordinate Loan Documents, subject to the restrictions and limitations of this Agreement. If at any time Borrower cures any Senior Loan Default to the satisfaction of Senior Lender, as evidenced by written notice from Senior Lender to Subordinate Lender, any default under the Subordinate Loan Documents arising from such Senior Loan Default shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as if such Senior Loan Default had never occurred. 9. Conflict. Borrower, Senior Lender and Subordinate Lender each agrees that, in the event of any conflict or inconsistency between the terms of the Senior Loan Documents,the Subordinate Loan Documents, the City Restrictions and the terms of this Agreement, the terms of this Agreement shall govern and control solely as to the following: (a)the relative priority of the security interests of Senior Lender and Subordinate Lender in the Mortgaged Property;(b)the timing of the exercise of remedies by Senior Lender and Subordinate Lender under the Senior Loan Documents and the Subordinate Loan Documents and/or the City Restrictions,respectively; and(c) solely as between Senior Lender and Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which Senior Lender and Subordinate Lender have agreed to as expressly provided in this Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and shall not be deemed to: extend Borrower's time to cure any Senior Loan Default or Subordinate Loan Default and/or default under the City Restrictions, as the case may be; give Borrower the right to notice of any Senior Loan Default or Subordinate Loan Default and/or default under the City Restrictions,as the case may be other than that,if any,provided,respectively under the Senior Loan Documents or the Subordinate Loan Documents and/or City Restrictions;or create any other right or benefit for Borrower as against Senior Lender or Subordinate Lender. Subordination Agreement(City of Orange) Form 6456 Page 10 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 10. Rights and Obligations of Subordinate Lender Under the Subordinate Loan Documents and of Senior Lender under the Senior Loan Documents. Subject to each of the other terms of this Agreement, all of the following provisions shall supersede any provisions of the Subordinate Loan Documents covering the same subject matter: a) Protection of Security Interest. Subordinate Lender shall not, without the prior written consent of Senior Lender in each instance,take any action which has the effect of increasing the indebtedness outstanding under, or secured by,the Subordinate Loan Documents, except that Subordinate Lender shall have the right to advance funds to cure Senior Loan Defaults pursuant to Section 8(a)and advance funds pursuant to the Subordinate Loan Documents for the purpose of paying real estate taxes and insurance premiums, making necessary repairs to the Mortgaged Property and curing other defaults by Borrower under the Subordinate Loan Documents. b) Condemnation or Casualty. Following the occurrence of(1) a Condemnation Action, or (2) a fire or other casualty resulting in damage to all or a portion of the Mortgaged Property (collectively, a"Casualty"), at any time or times when the Senior Security Instrument remains a lien on the Mortgaged Property the following provisions shall apply: A) Subordinate Lender hereby agrees that its rights (under the Subordinate Loan Documents or otherwise) to participate in any proceeding or action relating to a Condemnation Action or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Condemnation Action or a Casualty shall be and remain subject and subordinate in all respects to Senior Lender's rights under the Senior Loan Documents with respect thereto, and Subordinate Lender shall be bound by any settlement or adjustment of a claim resulting from a Condemnation Action or a Casualty made by Senior Lender; provided, however, this subsection or anything contained in this Agreement shall not limit the rights of Subordinate Lender to file any pleadings, documents, claims or notices with the appropriate court with jurisdiction over the proposed Condemnation Action or Casualty; and B) all proceeds received or to be received on account of a Condemnation Action or a Casualty, or both, shall be applied(either to payment of the costs and expenses of repair and restoration or to payment of the Senior Loan) in the manner provided by the Senior Lender Loan Documents;provided,however, that if Senior Lender is entitled to and elects to apply such proceeds to payment of the principal of, interest on and other amounts payable under the Senior Loan, any proceeds remaining after the satisfaction in full of the principal of, interest on and other amounts payable under the Senior Loan shall be paid to, and may be applied by, Subordinate Lender in accordance with the applicable provisions of the Subordinate Loan Documents, provided however, Senior Lender agrees to consult Subordination Agreement(City of Orange) Form 6456 Page 11 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 with Subordinate Lender in determining the application of Casualty proceeds, provided further however that in the event of any disagreement between Senior Lender and Subordinate Lender over the application of Casualty proceeds, the decision of Senior Lender, in accordance with the rights under its Senior Loan Documents, shall prevail. c) Insurance. Subordinate Lender agrees that all original.policies of insurance required pursuant to the Senior Security Instrument shall be held by Senior Lender. The preceding sentence shall not preclude Subordinate Lender from requiring'that it be"named as a loss payee, as its interest may appear, under all policies of property damage insurance maintained by Borrower with respect to the Mortgaged Property, provided such action does not affect the priority of payment of the proceeds of property damage insurance under the Senior Security Instrument, or that it be named as an additional insured under all policies of liability insurance maintained by Borrower with respect to the Mortgaged Property. d) No Modification of Subordinate Loan Documents or City Restrictions. Borrower and Subordinate Lender each agree that,until the principal of, interest on and all other amounts payable under the Senior Loan Documents have been paid in full,it will not,without the prior written consent of Senior Lender in each instance,increase the amount of any Subordinate Loan, increase the required payments due under any Subordinate Loan, decrease the term of any, Subordinate Loan, increase the interest rate on any Subordinate Loan, or otherwise amend any Subordinate Loan terms or the City Restrictions in a manner that creates an adverse effect upon Senior Lender under the Senior Loan Documents. Any unauthorized amendment of the Subordinate Loan Documents or the City Restrictions or assignment of Subordinate Lender's interest in any Subordinate Loan without Senior Lender's consent shall be void ab initio and of no effect whatsoever and Subordinate Lender agrees that it shall not transfer or assign the Subordinate Loan or the Subordinate Loan Documents without the prior written consent of the Senior Lender. 11. Conversion,Modification or Refinancing of Senior Loan. Subordinate Lender consents to any agreement or arrangement in which Senior Lender waives, postpones, extends, reduces or modifies any provisions of the Senior Loan Documents, including any provision requiring the payment of money. Subordinate Lender further agrees that its agreement to subordinate hereunder shall extend to any new mortgage debt which is for the purpose of refinancing all or any part of the Senior Loan(including reasonable and necessary costs associated with the closing and/or the refinancing) and, in the event of new mortgage debt, Subordinate Lender shall execute and deliver to Senior Lender a new subordination agreement on the same terms and conditions as this Subordination Agreement; and that all the terms and covenants of this Agreement shall inure to the benefit of any holder of any such refinanced debt; and that all references to the Senior Loan, the Senior Note, the Senior Loan Agreement, the Senior Security Instrument,the Senior Loan Documents and Senior Lender shall mean,respectively,the refinance loan, the refinance note loan agreement, the mortgage securing the refinance note, all documents Subordination Agreement(City.of Orange) Form 6456 Page 12 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 evidencing securing or otherwise pertaining to the refinance note and the holder of the refinance note. 12. Default by Subordinate Lender or Senior Lender. If Subordinate Lender or Senior Lender defaults in performing or observing any of the terms, covenants or conditions to be performed or observed by it under this Agreement,the other, non-defaulting lender shall have the right to all available legal and equitable relief. 13. Special Provisions Regarding City Restrictions a) Transfers. Notwithstanding anything set forth in the City Restrictions to the contrary,nothing in the City Restrictions shall be deemed to restrict or limit,or require the consent of Subordinate Lender to, the following: (i) any foreclosure or deed in lieu of foreclosure of the Senior Security Instrument by Senior Lender or its successor,assigns,or nominee(a"Foreclosure Action"),or(ii)the first subsequent transfer by Senior Lender or its successors,assigns or nominee following a Foreclosure Action. Neither the successor owner initially acquiring title to the Mortgaged Property as a result of a Foreclosure Action, nor its immediate successor in interest, shall be subject to any of the limitations upon creation of indebtedness nor creation of any lien securing indebtedness set forth in the City Restrictions; provided that any subsequent mortgagee or lienholder with respect to such indebtedness shall agree that in the event of foreclosure or deed in lieu of foreclosure, the transferee under such foreclosure agrees that it will take subject to the City Restrictions; and provided further that all other subsequent encumbrances shall be subject to Subordinate Lender's approval under the City Restrictions. Any sale, assignment or transfer of the Mortgaged Property following a transfer pursuant to a Foreclosure Action (other than the first transfer thereafter) shall be subject to Subordinate Lender's rights under the City Restrictions to approve such transfer,except that Subordinate Lender agrees that its decision to approve any such sale, assignment or other transfer will be based solely upon whether the proposed transferee is qualified to manage and operate affordable housing projects similar to the Mortgaged Property, and the Subordinate Lender will not unreasonably withhold, delay or condition its consent to any such proposed transfer. b) Compliance with Subordinate Loan Documents. Notwithstanding anything to the contrary set forth in the City Restrictions, from and after any foreclosure or deed in lieu of foreclosure, neither Senior Lender nor any successor in interest to the Property following any foreclosure or deed in lieu of foreclosure of the Senior Deed of Trust(collectively,the"Successor Owner"), shall be obligated to comply with the terms of any Subordinate Loan Document, and neither Senior Lender nor any Successor Owner shall have any obligation to repay the Subordinate Loan. c) Indemnification Provisions in the City Restrictions. Notwithstanding anything to the contrary set forth in the City Restrictions, in no event shall Senior Lender or any Successor Owner be liable to Subordinate Lender for amounts due to the Subordinate Lender under the City Restrictions as the result of an act or a failure to act occurring prior to the date on which Senior Subordination Agreement(City of Orange) Form 6456 Page 13 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 Lender or its successor,assigns,or nominee acquires title to the Mortgaged Property by foreclosure or deed in lieu of foreclosure. d) Default Under City Restrictions. No Successor Owner shall be required to cure any default under the City Restrictions first occurring prior to the date upon which such Successor Owner acquired title to the Mortgaged Property, except that each Successor Owner shall be required to cure continuing defaults under the City Restrictions related to the Mortgaged Property; provided further,however,that each such Successor Owner shall have 120 days after the date upon which it acquires title to the Mortgaged Property to cure such continuing defaults, or, if any such continuing default is not reasonably susceptible to a cure by such Successor Owner within such period, to commence curing such default (and in such latter case, such Successor Owner shall thereafter continuously and diligently pursue the cure of such default to completion, which shall in no event be more than 240 days after acquiring title to the Mortgaged Property). e) Construction Covenants. Notwithstanding anything to the contrary contained herein, Sections 3.a and 3.b of the HOME Regulatory Agreement and Section 1 of the City Affordability Covenants (collectively, the "Construction Covenants") are and shall at all times be subject and subordinate in all respects to the liens,terms,covenants and conditions of the Senior Security Instrument and the other Senior Loan Documents, and from and after any Foreclosure Action, neither Senior Lender nor any Successor Owner shall be obligated to comply with the Construction Covenants. 14. Reinstatement. To the extent that Borrower makes a payment to Senior Lender or Senior Lender receives any payment or proceeds of the collateral securing the Senior Loan for Borrower's benefit,which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable doctrine, then to the extent of such payment or proceeds received and not retained by Senior Lender, this Agreement shall be reinstated and continue in full force and effect until full and final payment shall have been made to Senior Lender. Subordinate Lender agrees to hold in trust for Senior Lender and promptly remit to Senior Lender any payments received by Subordinate Lender after such invalidated, rescinded or returned payment was originally made. 15. Notices. Each notice, request, demand, consent, approval or other communication (hereinafter in this Section referred to collectively as "notices" and referred to singly as a "notice") which the Senior Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a) personally delivered with proof of delivery thereof(any notice so delivered shall be deemed to have been received at the time so delivered); or (b) sent by Federal Express (or other similar national overnight courier) designating early morning delivery (any notice so delivered shall be deemed to have been received on the next Business Day following receipt by the courier); or(c) sent by United States registered or certified mail,return receipt requested,postage prepaid,at a post office regularly Subordination Agreement(City of Orange) Form 6456 Page 14 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 maintained by the United States Postal Service (any notice so sent shall be deemed to have been received two days after mailing in the United States),addressed to the respective parties as follows: SENIOR LENDER: Umpqua Bank One Capitol Mall, Suite 610 Sacramento, California 95814 Attention: Monica Sharp SUBORDINATE LENDER: City of Orange 300 E. Chapman Avenue Orange, California 92866 Attention: City Manager Either party may,by notice given pursuant to this Section,change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses for its notices,but notice of a change of address shall only be effective upon receipt. 16. General. a) Assignment/Successors. This Agreement shall be binding upon Borrower, Senior Lender and Subordinate Lender and shall inure to the benefit of the respective legal successors, transferees and assigns of Borrower, Senior Lender and Subordinate Lender. Borrower shall not assign any of its rights and obligations under this Agreement without the prior written consent of Senior Lender and Subordinate Lender. b) No Partnership or Joint Venture. Senior Lender's permission for the placement of the Subordinate Loan does not constitute Senior Lender as a joint venturer or partner of Subordinate Lender. Neither party hereto shall hold itself out as a partner, agent or Affiliate of the other party hereto. c) Senior Lender's and Subordinate Lender's Consent. Wherever Senior Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by Senior Lender in its sole and absolute discretion,unless otherwise expressly provided in this Agreement. Wherever Subordinate Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by Subordinate Lender in its sole and absolute discretion,unless otherwise expressly provided in this Agreement. Subordination Agreement(City of Orange) Form 6456 Page 15 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 d) Further Assurances. Subordinate Lender, Senior Lender-and Borrower each agrees, at Borrower's expense, to execute and deliver all additional instruments and/or documents reasonably required by any other party to this Agreement in order to evidence that the Subordinate Mortgage is subordinate to the lien, covenants and conditions of the Senior Loan Documents, or to further evidence the intent of this Agreement. e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties hereto. f) Governing Law. This Agreement shall be governed by the laws of the jurisdiction in which the Mortgaged Property is located without giving effect to any choice of law provisions thereof that would result in the application of the laws of another jurisdiction.' Senior Lender, Subordinate Lender and Borrower agree that any controversy arising under or in relation to this Security Instrument shall be litigated exclusively in the jurisdiction in which the Mortgaged Property is located. The state and federal courts and authorities with jurisdiction in such locale shall have exclusive jurisdiction over all controversies that arise under or in relation to this Agreement. The parties hereto irrevocably consent to service,jurisdiction, and venue of such courts for any such litigation and waive any other venue to which any might be entitled by virtue of domicile, habitual residence or otherwise. g) Severable Provisions. If any provision of this Agreement shall be invalid or unenforceable to any extent,then the other provisions of this Agreement, shall not be affected thereby and shall be enforced to the greatest extent permitted by law. h) Counterparts. This Agreement may be executed in any number of counterparts, each of which.shall be considered an original for all purposes;provided,however,that all such counterparts shall together constitute one (1) and the same instrument. i) Sale of Senior Loan. Nothing in this Agreement shall limit Senior Lender's(including any assignee or transferee of Senior Lender)right to sell or transfer the Senior Loan, or any interest in the Senior Loan. The Senior Loan or a partial interest in the Senior Loan (together with this Agreement and the other Loan Documents)may be sold one or more times without prior notice to Borrower. Remainder of Page Intentionally Blank] Subordination Agreement(City of Orange) Form 6456 Page 16 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 IN WITNESS WHEREOF, Borrower, Senior Lender and Subordinate Lender have signed and delivered this Agreement under seal(where applicable)or have caused this Agreement to be signed and delivered under seal (where applicable) by a duly authorized representative. Where applicable law so provides, Borrower, Senior Lender, and Subordinate Lender intend that this Agreement shall be deemed to be signed and delivered as a sealed instrument. SENIOR LENDER: UMPQUA BANK, an Oregon banking corporation, as Agent under that certain Master Agency Agreement dated as of December 1, 2022, between Issuer and Agent By: Monica Sharp Vice President Subordination Agreement(City of Orange) Form 6456 Page S-1 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] BORROWER: MERCY HOUSING CALIFORNIA 107,L.P., a California limited partnership By: Mercy Housing California 107 LLC, a California limited liability company, its General Partner By: Mercy Housing Calwest, a California nonprofit public benefit corporation, its sole Member/Manager By: Erika Villablanca Vice President Address: Mercy Housing California 107, L.P. c/o Mercy Housing California 1500 S. Grand Avenue, Suite 100 Los Angeles, California 90015 Attention: President With a Copy to: Gubb&Barshay LLP 505 14th Street, Suite 450 Oakland, California 94612 Attention: Nicole Kline, Esq. Subordination Agreement(City of Orange) , Form 6456 Page S-2 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] SUBORDINATE LENDER: CITY OF ORANGE, a municipal corporation of the State of California By: I c A. Murphy, Mayor Tar e\ R. S\a-A'2 r) Mayor ATTEST: r nngit, A A ,-____- Pamela Coleman, City Clerk APPROVED AS TO FORM: 6.1111111 like 4111111& A. S-e. z, City Attor .---" I"' f Subordination Agreement(City of Orange) Form 6456 Page•S-3 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] EXHIBIT A Legal Description Subordination Agreement(City of Orange) Form 6456 Page A-1 Fannie Mae 08-13 2013 Fannie Mae Villa St.Joseph] 4872-6629-4833v.5 0113877-000034 Attachment 2 All that certain real property situated in the County of Orange, State of California, described as follows: PARCEL 1: PARCEL A: THE BUILDING AND IMPROVEMENTS WITHIN THE AIRSPACE OF PARCEL 3 OF PARCEL MAP NO. 2019-166, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK , PAGES TO _, INCLUSIVE OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER.OF SAID COUNTY, WHICH BUILDING AND IMPROVEMENTS ARE AND SHALL REMAIN REAL PROPERTY PARCEL B: RECIPROCAL EASEMENTS FOR INGRESS, EGRESS, SUPPORT, ENCROACHMENTS, AND UTILITIES AS GRANTED IN THE DOCUMENT ENTITLED RECIPROCAL EASEMENT AND MAINTENANCE AGREEMENT RECORDED AS INSTRUMENT O. 2022 OFFICIAL RECORDS OF SAID COUNTY, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. PARCEL C: AN EASEMENT FOR VEHICULAR AND PEDESTRIAN INGRESS, EGRESS, PARKING UTILITIES AND RECREATION AS GRANTED IN THE DOCUMENT ENTITLED 'GRANT OF EASEMENT AND MAINTENANCE AGREEMENT RECORDED AS INSTRUMENT 0. 2022 OFFICIAL RECORDS OF SAID COUNTY, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. PARCEL 2: PARCEL A: PARCEL 3 OF PARCEL MAP, NO. 2019-166, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK , PAGES TO _, INCLUSIVE OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THE BUILDING AND IMPROVEMENTS WITHIN THE AIRSPACE OF PARCEL 3, WHICH BUILDING AND IMPROVEMENTS ARE AND SHALL REMAIN REAL PROPERTY PARCEL B: RECIPROCAL EASEMENTS FOR INGRESS, EGRESS, SUPPORT, ENCROACHMENTS, AND UTILITIES AS GRANTED IN THE DOCUMENT ENTITLED RECIPROCAL EASEMENT AND MAINTENANCE AGREEMENT RECORDED AS INSTRUMENT O. legal rev. (010698) 2022 , OFFICIAL RECORDS OF SAID COUNTY, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. PARCEL C: AN EASEMENT FOR VEHICULAR AND PEDESTRIAN INGRESS, EGRESS, PARKING UTILITIES AND RECREATION AS GRANTED IN THE DOCUMENT ENTITLED 'GRANT OF EASEMENT AND MAINTENANCE AGREEMENT RECORDED AS INSTRUMENT O. 2022 OFFICIAL RECORDS OF SAID COUNTY, SUBJECT TO THE TERMS AND CONDITIONS CONTAINED THEREIN. legal rev. (010698)