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ATTACHMENT 1 (c) Forgiveness of Principal and Interest of City Loan. Subject to the Default provisions of Article 5, at the end of the Term, any interest owed in connection with the City Loan that has not yet been paid by the Borrower pursuant to this Section 2.3 shall be forgiven, and in such event the Note shall be cancelled and returned to the Borrower. (d) Use of Affordability Reserve. Pursuant to Section 2.4 of the Regulatory Agreement the City and the Borrower hereby agree that, in addition to the uses set forth Section 2.4 of the Regulatory Agreement, and only with prior written approval from the City, the Affordability Reserve may also be used to pay for Annual Operating Costs to the extent there are short term cash flow issues or other extraordinary circumstances. (e) Documentation to City of Surplus Cash. The Borrower shall provide the City with any documentation reasonably requested by the City to substantiate the Borrower's determination of Surplus Cash. Payments, if any, shall be delivered within one hundred eighty (180) days of the end of the fiscal year along with the audited financial statement required pursuant to Section 4.2. (f) Contributions or Loans to the Project from Borrower. The Borrower shall notify the City in the event any contributions or loans are made to the Borrower by a parent or affiliate of the Borrower and related to the Project. (g) Fannie Mae Eligibility. In the event that the terms of the City Loan (alone or in conjunction with the HELP Loan) do not comply with Fannie Mae's applicable subordinate debt requirements, the City shall cooperate with the Borrower to modify the terms of the City Loan so that the City Loan (alone or in conjunction with the HELP Loan) meets such requirements." Section 3. Amendment to Ground Lease. The City and the Borrower desire to no longer require that Bay Area Senior Services, a California nonprofit public benefit corporation invest Twenty-Four Thousand Dollars ($24,000) per year for ten (10) years. As such, Section 3.9 of the Ground Lease is deleted in its entirety and replaced with the following: "Intentionally Omitted." Section 4. Effective Date of Amendments. The amendments made to the Loan Agreement and to the Ground Lease are effective retroactively to September 1, 2005. Section 5. Counterparts. This Second Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. Section 6. No Other Changes to Loan Agreement or Ground Lease. Except as expressly modified by this Second Amendment, all other provisions of the Loan Agreement and the Ground Lease are unmodified and continue in full force and effect. I44\I05\1089664 2