0^ INTERCREDITOR AND SUBORDINATION AGREEMENT

Transcription

1 ^ /04/ :36 PM OFFICIflU RECORDS OF fluflriedfl COUNTY Recording requested by and retum to: Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, Califomia PGS Attention: Eugene Clark-Herrera, Esq. 0^ INTERCREDITOR AND SUBORDINATION AGREEMENT THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this "Agreement"), dated as of October 1, 2012, and effective as of October 4, 2012 (the "Effective Date"), is entered into by and among LIVERMORE VALLEY CHARTER SCHOOL and LIVERMORE VALLEY PREPARATORY CHARTER HIGH SCHOOL, both operated as TRI- VALLEY LEARNING CORPORATION (the "Borrower"), MONTEVINA PHASE II, LLC, a Delaware limited liability company ("Montevina" or the "Subordinated Lender"), in its capacity as holder ofthe indebtedness created by the Northstar Documents, as hereinafter defined, NRFC WA HOLDINGS II, LLC, a Delaware limited liability company ("Northstar"), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as trustee (the "Senior Trustee") for the Senior Bonds (as defined herein), to set forth the respective rights, remedies and interests ofthe Subordinated Lender, on the one hand, and the Senior Trastee, as representative ofthe holders of the Senior Bonds, on the other. This Agreement is made with respect to the following facts: A. On the Effective Date, the Califomia School Finance Authority (the "Authority") issued its California School Finance Authority Educational Facilities Revenue Bonds (Tri-Valley Learning Corporation), Series 2012A (as they may be amended, deferred, extended, or otherwise modified in compliance with this Agreement, the "Senior Bonds") on behalf of the Borrower. The proceeds of the Senior Bonds were (a) loaned to the Borrower to, among other things, finance the constraction and renovation of educational facilities and (b) used by the Authority to pay certain amounts due under a Site Lease, by and between the Authority and Montevina Phase I, LLC (the "Senior Site Lease"). Payment of principal of and interest on the Senior Bonds will be made pursuant to the Indenture, dated as of October 1, 2012 (the "Senior Indenture"), by and between the Authority and the Senior Trastee, from Payments (as defined in the Senior Indenture). Payments are payable from money received by the Trastee from the Borrower pursuant to (a) Loan Repayments and Additional Payments under the Loan Agreement, dated as of October 1, 2012 (the "Senior Loan Agreement"), by and between the Authority and the Borrower and (b) Base Rental Payments and Additional Rent under the Sublease, dated as of October 1, 2012 (the "Senior Sublease Agreement" and together with the Senior Site Lease, the Senior Loan Agreement and the Senior Indenture, as each ofthe foregoing OHSUSA: ,17 nj\^

2 may be amended, restated, or modified from time to time, the "Senior Documents"), by and between the Authority and the Borrower. B. On the Effective Date, the Authority entered into a Limited Obligation Site Lease, dated as of October 1, 2012 (the "Subordinate Lease Agreemenf), by and between the Authority and Montevina, for the use and occupancy of the Site (as defmed in the Subordinate Lease Agreement, and described in Exhibit "A" attached hereto, the "Phase II Site"). On the Effective Date, Borrower is executing that certain Release and Indemnity Agreement, dated as of October 1, 2012 (the "Subordinate Indemnity Agreement). Payment of rent will be made pursuant to the Subordinate Lease Agreement, from Lease Payments (as defined in the Subordinate Lease Agreement). Lease Payments are limited to the amounts received by The Bank of New York Mellon Trast Company, N.A., as Paying Agent (the "Subordinate Paying Agenf) from the Borrower pursuant to the Subordinate Obligation Sublease, dated as of October 1, 2012 (the "Subordinate Sublease Agreemenf) and from the United States Treasury as Subsidy Payments, as defined in the.paying Agent Agreement, dated as of October 1, 2012 (the "Subordinate Paying Agent Agreement", and together with the Subordinate Lease Agreement, the Subordinate Sublease Agreement, and the Subordinate Indemnity Agreement, as each ofthe foregoing may be amended, restated, or modified from time to time, the "Subordinate Documents"), by and among the Authority, the Subordinate Paying Agent, Montevina, and the Borrower. Amounts payable under the Subordinate Sublease Agreement by the Borrower are limited to "Net Revenues" (as defined under the Subordinate Sublease Agreement) after deducting any amounts to be deposited in the Liquidity Fund in accordance with the Senior Loan Agreement. For the avoidance of doubt, the Subordinate Documents do not include the Northstar Documents, as defmed below. C. The Authority is unwilling to issue the Senior Bonds unless the Subordinated Lender agrees to the terms of this Agreement, including, without limitation, the subordination of its rights and claims against the Borrower on the terms and in the manner set forth below. D. Northstar is the secured party on an outstanding mortgage of Montevina and thus Northstar desires to be able to act in the place of Montevina under this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows: 1. Definitions: Intemretation. a. "Insolvencv Event" means, with respect to Borrower, (a) the filing of a decree or order for relief by a court having jurisdiction with respect to Borrower or any substantial part of its assets or property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trastee, sequestrator or similar official for Borrower or for any substantial part of its assets or property, or ordering the winding-up or liquidation of Borrower's affairs, and such decree or order shall remain unstayed and in effect for a period of thirty (30) days, (b) the commencement by Borrower of a voluntary case under any applicable Insolvency Law now or hereafter in effect, (c) OHSUSA: ,17

3 the bonsent by Borrower to the entry of an order for relief in an involuntary case under any Insolvency Law, (d) the consent by Borrower to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trastee, sequestrator or similar official for Borrower or for any substantial part of its assets or property, (e) the making by Borrower of any general assignment for the benefit of creditors, (f) the admission in a legal proceeding ofthe inability of Borrower to pay its debts generally as they become due, (g) the failure by Borrower generally to pay its debts as they become due, or (h) the taking of action by Borrower in furtherance ofany of the foregoing. b. "Insolvencv Laws" means Title 11 of the United States Code and all other applicable liquidation, conservatorship, bankraptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments and similar debtor relief laws from time to time in effect affecting the rights of creditors generally. c. "Northstar Documents" means (i) that certain Deed of Trast, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of March 15, 2007, given by Montevina, in favor of Stewart Title Guaranty Company, for the benefit of Northstar, recorded on March 16, 2007 in the Official Records of Alameda County as Instrament Number , as amended by that certain Modification Agreement dated as of October 8, 2009, that certain Modification Agreement dated as of January 27, 2012, and that certain Deed of Trast Modification Agreement dated as of the Effective Date; (ii) that certain Environmental Indemnity Agreement dated March 15, 2007 given by Montevina and Michael G. Parker in favor of Northstar; (iii) that certain Environmental Indemnity Agreement dated as ofthe Effective Date given by Montevina, Mark A. Holmstedt and Anthony E. Cone in favor of Northstar; (iv) that certain Guaranty dated as of the Effective Date given by Mark A. Holmstedt and Anthony E. Cone in favor of Northstar; (v) that certain Constraction Loan Agreement dated as of March 15, 2007 between Montevina and Northstar, as amended by that certain First Amendment to Constraction Loan Agreement dated as of June 30, 2007, that certain Omnibus Amendment to Loan Documents (Montevina Phase II Mortgage Loan) dated as of October 8, 2009, that certain Second Omnibus Amendment to Loan Documents (Montevina Phase II Mortgage Loan) dated as of March 31, 2010, that certain Third Omnibus Amendment to Loan Documents (Montevina Phase II Mortgage Loan) dated as of January 27, 2012, and that certain Fourth Omnibus Amendment to Loan Documents (Montevina Phase II Mortgage Loan) dated as of the Effective Date; and (vi) that certain Amended and Restated Secured Promissory Note dated as of the Effective Date and given by Montevina for the benefit of Northstar; as each ofthe foregoing may be amended, restated, or modified from time to time. d. "Pavment or Distribution" means with respect to indebtedness or obligations of any Person, (i) deliveries of cash, securities or other property on or in respect of such indebtedness or as a result of rescission or damages in respect of such indebtedness or obligations, or (ii) deliveries of cash, securities or other property made on or in respect of the purchase, repurchase, redemption or other acquisition of such indebtedness or obligations, in each case whether received through a direct payment, setoff, foreclosure, a deed in lieu of foreclosure, judgment lien, casualty insurance proceeds or in any other manner. e. "Senior Indebtedness" means, for any period, all Loan Repayments and Additional Payments payable by the Borrower pursuant to the Senior Loan Agreement and OHSUSA: Ol'

4 all Base Rental Payments and Additional Rent payable by the Borrower pursuant to the Senior Sublease Agreement, and any other sums payable from time to time by Borrower pursuant to the Senior Documents. "Senior Indebtedness" shall include any amounts owing pursuant to any amendments, deferrals, extensions, modifications, increases, renewals, replacements, consolidations, supplements, reftmdings or waivers ofthe Senior Bonds or any Senior Document permitted by Section 5 hereof f "Subordinated Indebtedness" means, for any period, (i) all Base Rental Payments and Additional Rent payable by the Borrower pursuant to the Subordinate Sublease Agreement, whether payable directly or indirectly to Montevina or Northstar, and (ii) any indebtedness or obligations of Montevina to Northstar, including the indebtedness secured by the Northstar Documents, and (iii) all obligations of Borrower under the Subordinate Documents, as they may be amended. g. "Subordinated Lender Remedies" means any action to commence, advance or consummate (a) the sale, foreclosure, realization on or liquidation ofany collateral for the Subordinated Indebtedness, (b) the execution on any judgment obtained against the Borrower, (c) the filing of, or joining with any others in filing, any (i) petition or lien under any bankraptcy, insolvency or creditors' rights laws with respect to the Borrower or (ii) application for or the appointment ofany administrator under any bankraptcy, insolvency or creditors' rights laws with respect to the Borrower, or (d) a demand for payment, exercise of any put right, or institution or exercise against the Borrower of any suit, legal action, arbitration, set-off or other enforcement remedy in respect of the Subordinated Indebtedness or otherwise available to the Subordinated Lender or Northstar under the Subordinate Documents or Northstar Documents, or otherwise available under applicable law or at equity or pursuant to any other instrament or document. h. Other Definitions, etc. Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in the Senior Indenture; and the rales of interpretation set forth in the Senior Indenture shall apply to this Agreement. 2. Subordination. Liens. On and subject to the terms and to the extent and in the manner set forth herein, the payment ofthe Subordinated Indebtedness ofthe Borrower is and shall be expressly subordinate and junior in right of payment and exercise of remedies to the prior indefeasible payment in full in cash of the Senior Indebtedness, and the Subordinated Indebtedness ofthe Borrower is hereby subordinated as a claim against the Borrower or any of their assets to such extent and in such manner to the prior indefeasible payment in full in cash of the Senior Indebtedness. Except as expressly set forth in Section 3 of this Agreement, unless and until all Senior Indebtedness has been indefeasibly and fully paid and satisfied in cash, the Borrower shall not pay and the Subordinate Paying Agent and Subordinated Lender and Northstar shall not ask for, demand, accept or receive, by direct or indirect payment, by setoff or in any other manner, from the Borrower the whole or any part of any sums which may now or hereafter be owing to Subordinated Lender or Northstar in respect of the Subordinated Indebtedness, or any of their predecessors, successors or assigns, including, without limitation, a receiver, trastee or debtor in possession under or in connection with the Subordinated Indebtedness. OHSUSA: ,17 ^ ^

5 3. Permitted Pavments. The Borrower agrees not to make, and no holder of Subordinated Indebtedness shall accept or receive any Payment or Distribution from Borrower on or in respect of Subordinated Indebtedness, of any kind or character (including cash, securities or other property but excluding Costs and Expenses, as hereinafter defined), including by way of setoff or otherwise, except that, provided the Borrower has not defaulted in any of its obligations to pay interest or principal on the Senior Bonds under the Senior Documents, (i) all or any portion of the Subordinated Indebtedness may be paid to Northstar and/or the Subordinate Lender on or after the Lease Expiration Date (as defined in the Subordinate Sublease Agreement, and as it may be extended in accordance with Section 2.02 thereof), to the extent of "Net Revenues" (as defined in the Subordinate Sublease Agreement) and deposits into the Subordinate Revenue Fund after deducting any amounts to be deposited in the Liquidity Fund in accordance with the Senior Loan Agreement, and (ii) payments owing under the Subordinate Indemnity Agreement may be made by Borrower to Northstar to the extent of "Net Revenues" (as defined in the Subordinate Sublease Agreement), after deducting any amounts to be deposited in the Liquidity Fund in accordance with the Senior Loan Agreement, and deposits into the Subordinate Revenue Fund, after deducting any amounts to be deposited in the Liquidity Fund in accordance with the Senior Loan Agreement. Nothing in this Agreement or any other transaction document shall preclude (i) the Subordinate Lender or Northstar from receiving any Subsidy Payments, or disbursements from the Subordinate Revenue Fund (as defined in the Subordinate Paying Agent Agreement) of amounts deposited therein from "Net Revenues" (as defined in the Subordinate Sublease Agreement) after deducting any amounts to be deposited in the Liquidity Fund in accordance with the Senior Loan Agreement, or (ii) Northstar from receiving payments from Montevina, or (iii) Northstar from receiving the benefit of any defense, payment, or other protection provided by any available insurance policy that Northstar is a beneficiary or additional insured of, provided that any insurance proceeds from a fire, earthquake, or casualty affecting the Phase I Collateral (as defined in Section 16 hereof) shall be paid or distributed in accordance with the Senior Documents and Northstar shall have no right to receive such proceeds. Further, notwithstanding the foregoing. Borrower shall pay to Montevina and Northstar all of their respective reasonable out of pocket costs and expenses related to the signing and negotiation ofthe Subordinate Documents and Northstar Documents and ordinary administration of the Subordinate Documents and Northstar Documents in the normal course of business (the "Costs and Expenses") incurred not in violation of this Agreement, but excluding costs of exercising Subordinated Lender Remedies. No party other than Montevina and Northstar or their successors and assigns shall have the right to receive the Subsidy Payments. 4. Forbearance of Legal Remedies: Right to Cure Default. a. (1) Subordinated Lender and Northstar shall not have the right to exercise any Subordinated Lender Remedies as long as the Senior Bonds remain Outstanding or the Senior Indebtedness has not been fully and indefeasibly paid in cash, unless the following have occurred: (a) an Event ofdefauh exists and is continuing under the Senior Documents, and (b) either (i) upon the Lease Expiration Date of the Subordinate Sublease Agreement (as extended pursuant to Section 2.02 thereof) all Lease Payments then due have not been paid to the Subordinate Lender in full (including any and all deferred and accraed Lease Payments and interest thereon), or (ii) the Interest Component (as defined in the Subordinate Sublease OHSUSA: ?' ^\p

6 Agreement) (including any and all deferred and accmed Lease Payments and interest thereon) of any rent under the Subordinate Sublease Agreement has not been paid when due, or (iii) an Insolvency Event has occurred with respect to the Borrower. Further, if an Event of Default exists and is continuing under the Senior Documents, Northstar may exercise the Subordinated Lender Remedies if Montevina has sold, assigned, transferred, conveyed or otherwise disposed of (whether voluntarily, involuntarily or by operation of law) all or any portion ofthe Phase II Site or any ownership interest in Montevina or any ownership interest at any level of the ownership stracture of Montevina, or has attempted to do any ofthe foregoing, in violation ofthe Northstar Documents and without Northstar's consent. Further, Northstar may exercise the Subordinated Lender Remedies if both (x) Borrower has not made any payment which is then owing under the Subordinate Indemnity Agreement, and (y) either (i) upon the Lease Expiration Date of the Subordinate Sublease Agreement (as extended pursuant to Section 2.02 thereof) all Lease Payments then due have not been paid to the Subordinate Lender in full (including any and all deferred and accraed Lease Payments and interest thereon), or (ii) the Interest Component (as defined in the Subordinate Sublease Agreement) (including any and all deferred and accraed Lease Payments and interest thereon) of any rent under the Subordinate Sublease Agreement has not been paid when due. (2) However, notwithstanding anything to the contrary contained in this Agreement, but subject to the remainder of this Section 4(a), so long as the Senior Bonds are Outstanding or any Senior Indebtedness is outstanding, Subordinated Lender and Northstar may exercise remedies, if permitted under Section 4(a)(1), solely on a nonrecourse basis and solely with respect to the Phase II Site, the Subordinate Revenue Fund, and Subordinated Lender and Northstar may not pursue any remedies against Borrower personally or any other property of Borrower. If Subordinated Lender or NorthStar are exercising remedies in accordance with this Section 4(a), to the extent reasonably necessary for NorthStar to foreclose on the Phase II Site, sell or dispose ofthe Phase II Site, cause a sale or disposition ofthe Phase II Site to occur, or for Subordinated Lender to terminate the Subordinate Lease Agreement or Subordinate Sublease Agreement, or otherwise recover possession ofthe Phase II Site, NorthStar and Subordinated Lender may include Borrower as a defendant or party in interest in a foreclosure action, action or proceeding to sell or dispose ofthe Phase II Site or pemiit such sale or disposition to occur, an eviction action, or action to terminate the Subordinate Lease Agreement or Subordinate Sublease Agreement or otherwise recover possession of the Phase II Site, or may take any other action reasonably necessary for NorthStar to foreclose on the Phase II Site'or for Subordinated Lender to terminate the Subordinate Lease Agreement or Subordinate Sublease Agreement or otherwise recover possession of the Phase II Site (any such action or recovery, a "Foreclosure Action"), provided that Borrower shall not be personally liable under any such Foreclosure Action and NorthStar's and Subordinated Lender's recourse shall be limited to the Phase II Site, the Subordinate Revenue Fund and Northstar's subordinate lien on the Site, as defined in the Senior Site Lease, subject to that certain Subordination Agreement of even date herewith between Senior Trastee, Northstar, and Montevina Phase I, LLC the ("Phase I Subordination Agreement") Phase I Subordination Agreement, and no other revenue, property, or other assets of Borrower. Senior Trastee agrees that it has no rights in the Phase II Site or the Subordinate Revenue Fund. If Subordinated Lender and NorthStar are exercising remedies in accordance with this Section 4(a), then notwithstanding any other provisions or limitations elsewhere in this Agreement (other than this Section 4(a)), Senior Trastee agrees that it will have OHSUSA: ,17 ^0, -2/

7 no right to enjoin or otherwise obtain a judicial or administrative order or take other legal or equitable action preventing NorthStar or Subordinated Lender from taking any Foreclosure Action. (3) For avoidance of doubt, upon (i) a foreclosure of that certain Fee Deed oftrust, Assignment of Rents, Security Agreement and Fixture Filing of even date herewith given by Montevina Phase I, LLC in favor of Senior Trastee (the "Phase I Deed of Trast"), or delivery by Montevina Phase I, LLC of a deed in lieu of foreclosure of such deed of tmst, or a sale or disposition of the property subject to such deed of trast pursuant to Section 17(d) hereof, or (ii) Montevina Phase I, LLC's obligation to convey to Senior Trastee title to the property subject to the Senior Site Lease in accordance with Section 10 thereof, or (iii) Subordinated Lender or Northstar's exercise and completion of remedies hereunder (for example, completion of foreclosure or eviction proceedings), Subordinated Lender and Northstar shall have no further right to receive or demand payments on the Subordinated Indebtedness from Borrower from Net Revenues or otherwise from Borrower. However, unless a foreclosure, deed in lieu, sale, or conveyance in accordance with Section 4(a)(3)(i) or (ii) has occurred, Northstar's subordinate lien in the Site (as defined in the Senior Site Lease) shall remain in effect, subject to the Phase I Subordination Agreement. b. Senior Trastee shall provide a copy of any notice that Senior Trastee sends under the Senior Documents simultaneously to Subordinated Lender and Senior Trastee will fiimish any correspondence Senior Trastee receives from Borrower or any other party with respect to a defauh under the Senior Documents to Subordinated Lender within one (1) Business Day of Senior Trastee's receiving the same. Senior Tmstee's failure to provide notice in accordance with this Section 4 shall not modify any of the parties' other rights or obligations under this Agreement nor resuh in any liability on the part of Senior Trastee or the holders ofthe Senior Bonds. c. In the event of a defauh under the Senior Documents, Montevina, or Northstar on its behalf, shall have the right to cure any defauh ofthe Borrower within the time period for Borrower to cure such defauh set forth under the Senior Documents, and redeem (or, at the Tmstee's option, in lieu of redemption, defease) all of the outstanding Senior Bonds in accordance with the provisions of the Senior Indenture. Montevina, or Northstar on hs behalf, must give notice of hs election to redeem or defease the Senior Bonds within the time period provided for Borrower to cure the applicable default set forth under the Senior Documents, and Montevina, or Northstar on hs behalf, must complete such redemption or defeasance within sixty (60) days of its election to redeem, time being ofthe essence. 5. Modifications of Senior Documents. Amendments, deferrals, extensions, modifications, increases, renewals, replacements, consolidations, supplements or waivers ofthe Senior Bonds or any Senior Document, (each, a "Modification") shall be permitted without consent ofthe Subordinated Lender or Northstar provided that no such Modification: a. increases the principal amount of the Senior Bonds, modifies any scheduled payments of interest or principal, extends the scheduled maturity date, or recharacterizes principal payments as interest, fees or other amounts on the Senior Bonds, the OHSUSA: ,17 "h' f

8 Loan Agreement or the Senior Sublease Agreement, or Refinances the Senior Indebtedness (a "Restracturing Evenf) (except that the Subordinate Lender and Northstar's consent will not be required for any such Restracturing Event if the net present value of the principal and interest payments on the indebtedness (including any Refinancing) following such event is less than the net present value of the principal and interest payments on the indebtedness prior to such event (each discounted at the "yield" on the refiinding or modified indebtedness, as defined in Treas. Reg ) (the "Restracturing Tesf). "Refinances" or a "Refmancing" means the issuance of debt to refinance indebtedness, including the issuance of debt the proceeds of which are deposited in a defeasance escrow for the Bonds, and any such indebtedness shall constitute Senior Indebtedness, provided that such issuance shall be permitted under this Section 5 only if the Restracturing Test is satisfied. Nothing in this subparagraph 5a. waives the requirement for Subordinated Lender consent to a Modification requiring Subordinated Lender or Northstar consent under subparagraphs 5b. through 5x below; b. other than an increase in principal and/or interest that satisfies the Restracturing Test, increases in any material respect an obligation for the payment of money by the Borrower under the Senior Documents; provided that the mere modification of an immaterial and nonmonetary affirmative or negative covenant will not in and of hself be a violation of this subparagraph 5b.; c. shortens the scheduled maturity date of the Senior Bonds or shortens any notice, cure or grace period; d. converts or exchanges the Senior Bonds into or for any other indebtedness or subordinates any ofthe Senior Bonds to any indebtedness of Borrower; provided, however, that if such conversion or exchange occurs in connection with a Restracturing Event, then so long as the conversion or exchange meets the Restracturing Test, then no consent of Subordinate Lender or Northstar shall be required; e. amends or modifies the provisions limiting transfers of interests in the Borrower or the Site (as defined in the Senior Site Lease) or any assignment and subletting provisions; f modifies or amends the terms and provisions relating to the manner, timing and method of the application of payments under the Senior Documents; provided however, if such modification or amendment constitutes a Restmcturing Event that meets the Restracturing Test, then no consent of the Subordinate Lender or Northstar shall be required for such Restracturing Event; g. cross defauhs the Senior Bonds with any other indebtedness ofthe Borrower other than as set forth in the original Senior Documents; h. obtains any contingent interest, additional interest or so-called "kicker" measured on the basis of the cash flow or appreciation of the Site (as defined in the Senior Site Lease) (or other similar equity participation), unless, assuming the total maximum payment under such arrangement is made, it would satisfy the Restracturing Test; OHSUSA: !) ) %

9 i. extends the period during which voluntary prepayments are prohibited or during which prepayments require the payment of a prepayment fee or premium or yield maintenance charge or increases the amount of any such prepayment fee, premium or yield maintenance charge; j. amends the terms of any of the documents conceming the application of proceeds upon the occurrence of a casualty or condemnation affecting the Site (as defined in the Senior Site Lease) in a manner less favorable to the Borrower or Montevina; k. amends the terms of any consent provisions granted to Montevina or Northstar, or Montevina's or NorthStar's right to give consents or receive notices; Lease); 1. amends the description of the Site (as defined in the Senior Site m. amends the amount of any Lease Payments under the Senior Site Lease or modifies the scheduled payment thereof; n. amends the term of the Senior She Lease other than an extension constituting a Restmcturing Event satisfying the Restracturing Test; o. modifies any permitted use provision relating to the Site (as defined in the Senior Site Lease) under the Senior She Lease or the Senior Loan Agreement; p. modifies or amends the termination provision in the Senior Site Lease (relating to the delivery of the fee and right in favor of Northstar to hold subordinate lien on the fee); q. modifies any of the indemnity provisions in any Senior Document or any indemnity agreement entered into by the Subordinate Lender or Montevina Phase I, LLC; Document; r. modifies any of the third party beneficiary provisions in any Senior s. amends any of the provisions relating to expenses or reserves in any Senior Document; t. provides for any additional releases or relinquishment of rights by Montevina, or imposes limhations on any existing rights of Montevina; on Montevina;. u. increases the obligations of Montevina or imposes new restrictions V. amends the defined terms "Event of Defauh", "Site", "Gross Revenues," "Net Revenues," "Senior Debt Service," "Permitted Encumbrances" and "Operating Expenses" in any Senior Document; OHSUSA: (I k ")

10 w. modifies the provisions related to insurance requirements in any Senior Document, other than to require increase in coverage amounts or require additional types of coverage to be obtained by Borrower; or Document. X. waives or amends the default/remedies provisions in any Senior Neither Senior Tmstee nor Borrower shall enter into any Modification without Subordinated Lender's and Northstar's written consent where such consent is required under this Section 5. In any case where a Modification requires Subordinated Lender and/or Northstar's consent under this Section 5, such consent must be evidenced in writing to be effective. Any Modification in breach ofthis Section 5 shall be null and void and of no force and effect. Subject to Senior Trastee's and Borrower's obligations under Section 23, Senior Trastee and Borrower's obligations under this Section 5(a) and this Agreement shall terminate upon the occurrence ofthe events described in Section 23 hereof 6. Modifications to Subordinate Documents. Until the Senior Indebtedness has been fiilly and indefeasibly paid in cash ("Finally Paid"), and notwithstanding anything to the contrary contained in the Subordinate Documents, neither Borrower nor the Subordinated Lender shall, without the prior written consent ofthe Senior Trastee, agree to any amendment, modification or supplement to the Subordinate Documents the effect of which is to: a. increase the principal amount of Subordinated Indebtedness; b. accelerate the amortization or maturity date or other payments on the Subordinated Indebtedness; c. increase the interest rate on the Subordinated Indebtedness; provided, however, that any increase in the principal amount ofthe Subordinated Indebtedness as a resuh of the addition to principal of any outstanding interest, fees or expenses shall not be deemed to be an increase in the amount ofthe Subordinated Indebtedness; d. Increase any rent payments or other monetary obligations of Borrower under the Subordinate Documents; e. Change the permitted use or description ofthe Phase II Site; or f Change the definhion of Net Revenues, Senior Debt Service, or Operating Expenses under the Subordinate Sublease Agreement. Any amendment, modification, or supplement in breach ofthis Section 6 shall be null and void and of no force and effect. 7. Continuing agreement. This Agreement will inure to the benefit ofthe Senior Bonds and any extension, modification, renewal or refinancing (including refunding) of the Senior Bonds, subject to the limhations ofsection 5 hereof OHSUSA: /

11 8. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED IN ALL RESPECTS (WHETHER IN CONTRACT OR IN TORT) BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS. 9. SUBMISSION TO JURISDICTION. THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY CALIFORNIA STATE COURT IN ALAMEDA COUNTY, CALIFORNIA OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND SUCH PARTIES HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA STATE OR FEDERAL COURT, THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THAT THEY MAY LEGALLY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING, THE PARTIES HERETO IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY ACTION OR PROCEEDING BY THE MAILING OR DELIVERY OF COPIES OF SUCH PROCESS TO EACH SUCH PARTY AT THE ADDRESS SPECIFIED IN SECTION 13 OF THIS AGREEMENT, THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. 10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit ofthe parties' respective successors and assigns, subject to the provisions hereof Any assignment shall be subject to the assignee's assumption of the assignor's obligations under this Agreement, and written notice of such assignment shall be provided to the other parties to this Agreement. 11. Amendment. This Agreement may only be amended, modified or waived by an instrament in writing by the parties hereto. 12. Complete Agreement. This Agreement represents the complete agreement between the parties with respect to the relationship of the parties hereto and related matters. 13. Notices. Any notices provided in this Agreement shall be deemed to have been duly given and effective if ha:nd delivered, or when sent if sent by nationally recognized ovemight delivery service, or by certified mail, rettim receipt requested, to the addresses stated on the signature pages hereof with respect to Northstar, Montevina, and Borrower, and if to the Senior Trastee to the address set forth in the Senior Documents, or to such other address as may be designated in wrhing by any party hereto. OHSUSA: H 1^

12 14. Representation and Warranty. Northstar represents and warrants to Senior Trastee that h is the legal and beneficial owner of all rights of the lender under the Northstar Documents, free and clear of any lien, security interest, option or other charge or encumbrance. The Subordinated Lender represents and warrants to Senior Trastee that ft is the legal and beneficial owner of all rights to payment and performance of Borrower's obligations under the Subordinate Documents, free and clear of any lien, security interest, option or other charge or encumbrance. 15. Expenses. Montevina agrees upon demand to pay to the Senior Trastee the amount ofany and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts or agents, which the Senior Trastee may incur in connection with (i) the administration ofthis Agreement, (ii) the exercise or enforcement ofany ofthe rights ofthe Senior Trastee hereunder, or (iii) the failure by Montevina to perform or observe any of the provisions hereof to be performed or observed by it. 16. In Furtherance of Subordination. a. Until the Senior Indebtedness is Finally Paid, the Subordinated Lender and Northstar will not institute any dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection, relief or other similar case or proceeding under any Federal or state bankraptcy or similar law or upon an assignment for the benefit of creditors (singularly or collectively, a "Proceeding") or other marshalling of the assets and liabilities of Borrower or any guarantor of any Senior Indebtedness, against Borrower or with respect to any collateral in which the Senior Trastee has a security interest or lien (the "Phase I Collateral") or otherwise. b. To the extent the Senior Trastee receives payments on, or proceeds of, collateral for the Senior Indebtedness which are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trastee, receiver or any other party under Federal or state bankraptcy law or similar law or at common law or in equity, then to the extent of such payment or proceeds received, the Senior Indebtedness or any part thereof, intended to be satisfied shall be revived and continued in full force and effect as if such payments or proceeds had not been received by the Senior Trastee. 17. Liquidation. Dissolution. Bankruptcy. In the event of any Proceeding involving Borrower: a. Borrower shall not make and Subordinated Lender and Northstar shall not receive from Borrower any distribution, whether in cash, securities or other property, on account ofany Subordinated Indebtedness prior to the Senior Indebtedness being Finally Paid. b. Any disttibution, whether in cash, securhies or other property which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Subordinated Indebtedness (other than payments from Montevina to Northstar pursuant to the Northstar Documents) shall be paid or delivered directly to the Senior Trastee (to be held and/or applied by the Senior Trastee in accordance with the terms of the Senior Documents) until the OHSUSA;7S /\

13 Senior Indebtedness is Finally Paid. Subordinated Lender and Northstar irrevocably authorize, empower and direct any debtor, debtor in possession, receiver, trastee, liquidator, custodian, conservator or other person having authority, to pay or otherwise deliver all such distributions to Senior Trastee. Subordinated Lender and Northstar also irrevocably authorize and empower Senior Trastee, in the name of Subordinated Lender or Northstar, as applicable, to demand, sue for, collect and receive any and all such distributions and other amounts owing under the Subordinate Documents. c. Subordinated Lender and Northstar agree not to imtiate, prosecute or participate in any claim, action or other proceeding challenging the enforceability, validity, perfection or priority of the Senior Indebtedness or any liens and security interests securing the Senior Indebtedness. d. Subordinated Lender and Northstar agree that they will not object to or oppose a sale or other disposhion of any property securing all of any part of the Senior Indebtedness. Subordinated Lender and Northstar agree that they will not contest any Senior Trastee motion for relief from the bankraptcy court to allow Senior Tmstee to exercise its remedies under the Senior Documents. Any sale or disposhion pursuant to this paragraph shall be free and clear of security interests, liens or other claims of Subordinated Lender or Northstar under Section 363 ofthe Bankraptcy Code or any other provision ofthe Bankruptcy Code if the Senior Trastee has consented to such sale or disposhion. e. The Senior Indebtedness shall continue to be treated as Senior Indebtedness and the provisions of this Agreement shall continue to govem the relative rights and priorities ofthe Senior Trastee, Northstar and Subordinated Lender even if all or part ofthe Senior Indebtedness or Subordinated Indebtedness or the security interests securing the Senior Indebtedness or Subordinated Indebtedness are subordinated, set aside, avoided, invalidated, or disallowed in connection with any such Proceeding, and this Agreement shall be reinstated if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise be retumed by any holder of Senior Indebtedness or any representative of such holder. Nothing in Section 17(a) or (b) shall prohibh Subordinated Lender or Northstar from receiving Subsidy Payments, or disbursements from funds deposited into the Subordinate Revenue Fund (as defined in the Subordinate Paying Agent Agreement) in compliance with this Agreement and the Subordinate Paying Agent Agreement, or Costs and Expenses, and nothing in this Section 17 shall prohibh Northstar from receiving any payments from Montevina. 18. Specific Enforcement: Remedies. Nothing in this Agreement waives any right of a party hereto to sue another party hereto to enforce the breaching party's obligations under this Agreement. No breach ofthis Agreement by a party to this Agreement shall excuse performance or observance of the terms of this Agreement by the other parties to this Agreement. No party hereto may take any action or seek to avoid the observance and performance of the terms and condhions of this Agreement. Each of the parties hereto are hereby authorized to demand specific performance of this Agreement, and to seek injunctive relief to stop a violation of this Agreement. Each party hereto hereby irrevocably waives any defenses based on the adequacy of a remedy at law which might be asserted as a bar to an action for injunctive relief or specific performance. OHSUSA; ,17 13 J

14 / 19. Addhional Defenses. a. Except for claims arising from Senior Tmstee's violation of this Agreement or receipt of payments which Subordinated Lender or Northstar are enthled to under the Subordinate Documents, to the extent permitted hereunder, to the fullest extent permitted by applicable law. Subordinated Lender and Northstar hereby waive: (i) any rights to assert against the Senior Tmstee or any other holder of Senior Indebtedness any defense (legal or equitable), set-off, counterclaim, or claim which Subordinated Lender or Northstar may now or at any time hereafter have against the Senior Trastee or any other holder of Senior Indebtedness; (ii) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or ftiture lack of perfection, sufficiency, validity, or enforceability of any Senior Indebtedness or any security for the same (iii) any defense arising by reason of any claim or defense based upon an election of remedies by the Senior Trustee or any other holder of Senior Indebtedness; and (iv) the benefit of any statute of limhations affecting the obligations of Subordinated Lender or Northstar hereunder or the enforcement thereof, and any act which shall defer or delay the operation of any statute of limhations applicable to the Senior Indebtedness shall similarly operate to defer or delay the operation of such statute of limhations applicable to such obligations ofthe Subordinated Lender or Northstar hereunder. b. Montevina acknowledges that interest on the Senior Bonds is intended not to be includable in gross income for federal income tax purposes and that under the Intemal Revenue Code of 1986, as amended (the "Code") there are a number of requirements which must be met in order for such interest to be and to remain so excluded. Montevina further acknowledges that if interest were so included, the holders of the Senior Bonds would suffer a material economic loss. Accordingly, without limiting the terms ofthis Agreement, Montevma hereby agrees that, without the prior written consent ofthe Senior Trustee), it shall take no action and shall not omit to take any action in connection with hs rights under any Subordinate Document if the effect of such action or omission would be to cause interest on the Senior Bonds to be included in gross income of any owner or former owner thereof The provisions of this paragraph shall survive termination of this Agreement and payment in fiiu of the Senior Indebtedness. Collateral. 20. Rights Related to Senior Trastee's Actions With Respect to the Phase I Subordinated Lender and Northstar hereby waive, to the extent permitted by applicable law, any rights which they may have to enjoin or otherwise obtain a judicial or administtative order preventing the Senior Trastee from taking, or refraining from taking, any action with respect to all or any part of the Phase I Collateral. The parties acknowledge that Northstar's rights in hs capacity as holder of a subordinate lien on the Site (as defined in the Senior She Lease) are addressed in the Phase I Subordination Agreement and not this Agreeement. Without hmhation of the foregoing, Montevina hereby agrees that h has no rights in the Phase I Collateral. Subordinated Lender and Northstar agree that they have no right to direct or object to the manner in which the Senior Trastee apply the proceeds of the Phase I Collateral resulting from the exercise by the Senior Tmstee of rights and remedies under the Senior Documents to the Semor Indebtedness. OHSUSA: ,17 14

15 21. Unconditional Subordination. a. No action which the Senior Tmstee may take or omh to take in connection with any of the Senior Documents, any of the Senior Indebtedness, or any security therefor (other than actions or omissions that are in violation of this Agreement), and no course of dealing of the Senior Trastee with Borrower or any other person obligated on the Senior Indebtedness (each, a "Senior Debt Obligor"), Subordinated Lender, Northstar, or any other person, shall release or diminish any of Subordinated Lender or Northstar's obligations, liabilhies, agreements or duties hereunder, or afford Subordinated Lender or Northstar any recourse against the Senior Trastee, regardless of whether any such action or inaction may increase any risks to or liabilhies of the Senior Trastee, Subordinated Lender, Northstar, or any Senior Debt Obligor or increase any risk to or diminish any safeguard of any security. Without limiting the foregoing, Subordinated Lender and Northstar hereby expressly agree that the Senior Trastee may, from time to time in accordance with this Agreement and subject to the limhations on Modifications in Section 5 hereof, without notice to or the consent ofthe Subordinated Lender or Northstar: i. neglect, delay, fail, or refuse to take or prosecute any action for the collection or enforcement of any of the Senior Indebtedness, to foreclose or take or prosecute any action in connection with the Senior Documents, or any security, to bring suh against the Borrower or any other person, or to take any other action conceming the Senior Indebtedness or the Senior Documents; without limiting the generality of the foregoing, the Senior Trastee and the holders ofthe Senior Indebtedness shall be under no obligation to marshal any Phase I Collateral; Senior Indebtedness; ii. in accordance with the Senior Documents, accelerate the iii. compromise or settle (but not waive) any unpaid or unperformed Senior Indebtedness or any other obligation or amount due or owing, or claimed to be due or owing, under any one or more ofthe Senior Documents; iv. take, exchange, eliminate, surrender, release, or subordinate any or all security for any or all of the Senior Indebtedness, accept additional or substituted security therefor, and perfect or fail to perfect the Senior Trastee's rights in any or all security; V. discharge, release, substitute or add obligors with respect to the Senior Indebtedness, subject to, for the avoidance of doubt, complying with the Restmcturing Test; and vi. apply all monies received from the Borrower or others, or from any security for any ofthe Senior Indebtedness, as the Senior Trastee may determine to be in its best interest, without in any way being required to marshal security or assets or to apply all or any part of such monies upon any particular Senior Indebtedness. OHSUSA: ,17 15 f

16 b. No change of law or circumstances shall release or diminish Senior Trastee, Subordinated Lender and Northstar's rights, obligations, liabilhies, agreements, or duties hereunder (including, without limhation, under Section 18 hereof). Without limiting the foregoing, no obligations, liabilities, agreements, or duties of Senior Tmstee, the Subordinated Lender or Northstar under this Agreement shall be released, diminished, impaired, reduced, or affected by the occurrence of any of the following from time to time, even if occurring without notice to or without the consent of Senior Trastee, Subordinated Lender and Northstar: i. any Proceeding or any discharge, impairment, modification, release, or limhation ofthe liability of, or stay of actions or lien enforcement proceedings against, the Borrower, any properties of Borrower, or the estate in bankraptcy of Borrower in the course of or resuhing from any such proceedings; h. the failure by the Senior Trastee to file or enforce a claim in any proceeding described in the immediately preceding subsection (i) or to take any other action in any proceeding to which any Senior Debt Obligor is a party; iii. the release by operation of law of Borrower from any of the Senior Indebtedness or any other obligations to the Tmstee; iv. the invalidity, deficiency, illegality, or unenforceability of any of the Senior Indebtedness or the Senior Documents, in whole or in part, any bar by any statute of limhations or other law of recovery on any ofthe Senior Indebtedness, or any defense or excuse for failure to perform on account of force majeure, act of God, casualty, impossibility, impracticability, or other defense or excuse whatsoever; V. the failure of Borrower or any other person to sign any instrament or agreement within the contemplation of such parties or the Senior Tmstee; 22. Limhation on Liabilitv. Subordinated Lender and Northstar shall not have any liability to Senior Trastee with respect to payment ofthe Senior Indebtedness, except as expressly provided in this Agreement. Senior Trustee shall not have any liability to Subordinated Lender or Northstar with respect to payment of the Subordinated Indebtedness, except as expressly provided in this Agreement. Senior Trastee also acknowledges that Subordinated Lender and Northstar do not owe Senior Trastee any fiduciary duty with respect to any action taken pursuant to this Agreement, the Senior Documents, the Subordinate Documents, the Northstar Documents, or otherwise. Subordinated Lender and Northstar acknowledge that Senior Trastee does not owe Subordinated Lender or Northstar any fiduciary duty with respect to any action taken pursuant to this Agreement, the Senior Documents, the Subordinated Documents, the Northstar Documents, or otherwise. 23. Termination. This Agreement shall terminate (except for such rights as are expressly provided to survive any termination of this Agreement) when the Senior Indebtedness has been Finally Paid. Subordinated Lender and Northstar acknowledge and agree that except as provided below. Senior Trastee shall have no further obligations under this Agreement (including without limhation under Section 5 hereof), and Borrower's obligations under Section 5 of this Agreement shall expire, upon (i) a foreclosure of the Phase I Deed of OHSUSA: ,17 16 'l,-*^