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Home My WebLink About3 - LOAN AGREEMENT FOR AMCAL_2018-01-16 (2)REQUEST FOR HOUSING AUTHORITY ACTION MEETING DATE: JANUARY 16, 2018 TITLE: HOUSING SUCCESSOR AGENCY FUNDS LOAN AGREEMENT WITH AMCAL MULTI -HOUSING, INC FOR $8,522,740 FOR THE FIRST STREET APARTMENTS PROJECT {STRATEGIC PLAN NO. 5,3C) INTERIM C I E DIR TOR RECOMMENDED ACTION RECORDING SECRETARY USE ONLY: APPROVED ❑ As Recommended ❑ As Amended CONTINUED TO Authorize the City Manager, acting as the Executive Director of the Housing Authority of the City of Santa Ana, or his or her designee to execute a Loan Agreement with AMCAL Multi - Housing, Inc. for $8,522,740 in Housing Successor Agency Funds to create 69 units of affordable housing at 1440 East First Street in Santa Ana, subject to non -substantive changes approved by the City Manager and Authority General Counsel. 2. Authorize the City Manager, acting as the Executive Director of the Housing Authority of the City of Santa Ana, or his or her designee to execute a Subordination Agreement with Bank of America, N.A., for the Loan Agreement with AMCAL Multi -Housing, Inc., subject to non - substantive changes approved by the City Manager and Authority General Counsel. COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION RECOMMENDATION At a Special Meeting on December 20, 2017, by a vote of 6:0 (Cann, Santana absent) the Community Redevelopment and Housing Commission recommended that the Housing Authority of the City of Santa Ana acting as the Housing Successor Agency authorize the City Manager, acting as the Executive Director of the Housing Authority of the City of Santa Ana, or his or her designee to execute a Loan Agreement with AMCAL Multi -Housing, Inc. for $8,522,740 in Housing Successor Agency Funds to create 69 units of affordable housing at 1440 East. First Street in Santa Ana, subject to non -substantive changes approved by the City Manager and City Attorney. 3-1 Housing Successor Agency Funds Loan Agreement with AMCAL Multi -Housing, Inc. January 16, 2018 Page 2 DISCUSSION On June 20, 2017, the Housing Authority awarded $8,522,740 in Housing Successor Agency funds to AMCAL Multi -Housing, Inc. (AMCAL) for the development of the First Street Apartments project (Project) located at 1440 East First Street in Santa Ana (Exhibit 1). As a result, staff provided AMCAL with a pre -loan commitment letter evidencing the preliminary award of $8,522,740 of funds to the Project, funded exclusively from the Low and Moderate Income Housing Asset Fund (LMIHAF) held by the Housing Authority of the City of Santa Ana acting as the Housing Successor Agency (Exhibit 2). With this pre -loan commitment letter, AMCAL applied for 9% Low -Income Housing Tax Credits on June 28, 2017 and on September 20, 2017, the California Tax Credit Allocation Committee approved an award of Federal Tax Credits in the amount of $14,693,420 for the Project. As a result, AMCAL secured all necessary financing and funding for the construction and operation of the Project, which is a condition in their pre -loan commitment letter, and staff are now recommending the execution of a Loan Agreement with AMCAL for $8,522,740 in LMIHAF held by the Housing Successor Agency (Agency). The amount of the Agency Loan was determined based upon the City and Agency's review of the Developer's request for the receipt of the Agency Loan and the development proforma and projected cash flows for the Project submitted by the Developer to the City/Agency. The amount of the Loan was analyzed and confirmed by both Keyser Marston Associates and CSG Advisors as outside real estate advisors for the Agency. The Agency's Loan Agreement for $8,522,740 in Low and Moderate Income Housing Asset Funds will be provided by means of a 55 -year Agency Loan carrying a three percent interest rate (Exhibit 3). Repayment will be from 50% of residual receipts (after payment of operating expenses, debt service, any deferred developer fee, and partnership fees described in the Agency Loan Agreement) with the remaining 50% to be disbursed to AMCAL. The affordability restrictions for all of the units in the Project will be 55 years and units will be restricted to Santa Ana residents who live or work in the City. Regarding the Subordination Agreement with Bank of America, N.A., the Agency's total loan for this project is approximately 29% of the total Project cost (Exhibit 4). As a subordinate loan for a large affordable housing project such as this, it is not uncommon for a senior lender to request a Subordination Agreement for the Agency's smaller Loan Agreement that allow the senior lender to complete their underwriting and commit their private market financing. As such, this Subordination Agreement will allow Bank of American, N.A. to commit their private market financing for the Project. Project Description AMCAL's project, located at 1440 East First Street in Santa Ana, will provide 69 units of affordable workforce housing. The residential units will be located within six buildings. The rental units (less one manager's unit) are 100% affordable to family households earning between 30% and 60% of the Area Median Income (AMI). The unit mix currently consists of 6 four-bedroom 3-2 Housing Successor Agency Funds Loan Agreement with AMCAL Multi -Housing, Inc. January 16, 2018 Page 3 units, 28 three-bedroom units and 35 two-bedroom units (one being a manager's unit). Eight of the units will be assisted by the Santa Ana Housing Authority's Project -Based Voucher Program. The unit mix and affordabilitv restrictions are as follows: Bedroom Size 30% AMI 50% AMI 60% AMI Manager's Unit Total Two -Bedroom 29 4 1 1 35 Three -Bedroom 4 17 7 28 Four -Bedroom 1 0 5 6 Totals 34 21 13 1 69 On-site amenities will include a community room and amenity space including tot lots/play areas for children, outdoor seating, BBQs, a flex play space and planters. The community room will be incorporated into the development, providing a computer laboratory, kitchen, activity room for resident activities, and office space for property management and social services staff. AMCAL will engage the non-profit organization LifeSTEPS to provide free on-site social services to Project tenants. Services will be provided in the form of classes and workshops with the subject matter tailored by a social service coordinator to the specific needs of the community. STRATEGIC PLAN ALIGNMENT Approval of this item supports the City's efforts to meet Goal # 5 - Community Health, Livability, Engagement & Sustainability, Objective # 3 (Facilitate diverse housing opportunities and support efforts to preserve and improve the livability of Santa Ana neighborhoods), Strategy C (Provide that Santa Ana residents, employees, artists and veterans receive priority for affordable housing created under the City's Housing Opportunity Ordinance or with City funding to the extent allowed under state law). FISCAL IMPACT Funds in the amount of $8,522,740 are available in the Low and Moderate Income Housing Asset Fund, Loans and Grants account (no. 60718830-69152). Per the loan agreement, one percent of the loan amount will be retained until completion of construction, which is estimated to occur in FY 2019-20. The anticipated expenditure plan is as follows: Fiscal Year Amount 2017-2018 $8,437,513 2019-2020 $ 85,227 Total $8,522,740 3-3 Housing Successor Agency Funds Loan Agreement with AMCAL Multi -Housing, Inc. January 16, 2018 Page 4 Judson 6rown Housing Authority Manager Community Development Agency Exhibits: 1. Location Map APPROVED AS TO FUNDS AND ACCOUNTS: Francisco Gutierrez Executive Director Finance and Management Services Agency 2. Pre -Loan Commitment Letter 3. Draft Loan Agreement 4. Subordination Agreement with Bank of America, N.A. 3-4 EXHIBIT 1 o „e Sp1 R7 PN„ y P1 i M2 O _ 8 SD -21 R1 111 O M1 R3 R3 R1 M20 6rH n SPNR2 R2 e�'"" p,,�^ ,z: ¢ R1 _ Rl 6TH ST. fiTH n.'S RHDI R°D RHIIDn O M2 Mt V _ M� t�i131� R1 R7 R1 i_ms Rz- cz II Q- R3 R3 ,66 _, srH sT. sTH sr. 2 a M2 5TH Sr. ?- cz Cz p cz-Ho M2 Mol T cz C2-11cz Ci O N — P P HDII HDII ° - - CZ P,61.2' P ry 4TH ST. C2 - P— $ P gp x P ; p ° Ro M2 �� cz $ C2 S M2 -Hon o M2 Mi .M,� 1,m1 C2 R2 xoST. I R2 _ R2 z8 R2 R2 M7 � 6" ss, � Mt M1 cz C2 R2 + LM ST. rso, R2 I M2 I M2 M2 m M2 G z 6: -R2'fi 8 ,s R2 PA zND n. zN �om l_LJ �za R2 R2 R2 HDII M7 R2 az3 C2 — cs-Hon M2 „—c a C2 C2 -Hon (7 -Hon C2 -Hon C2 -Hon D M2 M1 �5 M1 `➢ I 6 M1 Mf�� tv11 �" r C2 T� � a �� g � O O OFG M1 z M1 M B99 — O O O Ri M1 M1 E M1 PROJECTS 612." ,�5�.- 52 I flNEST � M2 O � R3 FF. R3 M1 M1 M1 Ga, \ / M1 MZ �QiESMIRAV. — - - B p� M1 M2 M1 O O RI > M1RRE ST MMREST. R1 O �� CAMILE ST. J � z SD -16 aMlu s ss R1 R1 RI 5T M2 � � ® Ri M2 N M R1 z R1 R1 R1 — R4 R1O M1 M1 M1 AV Al G9VfflALAGRCULTURALt CR COMMEGALRESIDOJTIAL RI 3NGLEFAMILY RSIDENTIAL -B RkMNGMODIRCATION GC GOVEFNMBVTCBVTH2 R2 NVOFAM ILYF€9DBJCE C -SM ODMMEFUALSOUTH MAIN M1 LICHTINDUSTRAL R3 MULTIPLEDOJSITYMULTIPLE C1 OOMMUNITYCOMM9OAL M2 HEAVYINDUSTRAL FAMILYIESID9VCE C1 -MD OOMM.00MMBUAUMUS3JMDISTRCT MO MILITAWOP92AnONS PA SUBUFUANAPARfM9JTS C2 G9JBRALCOMM937AL 0 OPEN MkCE Fr FESIDOgTIALESfATE C3 C9JTRALBUSNESS P PROFEESONAL SO SI-MRCDEVE-OPMOdT C3 -A COJTRALBUSNESFAIRISFMLLAGE PCD RANNBJODMMUNITYDEVE-OPMBVT SP SPMFlCPLAN CA PIANN®SHOPRNGCOVTOR PTO RANN9JRSIDRV1I DB/ELOPM9VT 05 ARTHRIALCOMM90AL GPA 2016-1 & AA 2016-1 _ AMCAL FIRST STREET FAMILY APARTMENTS,Y 1440 EAST FIRST STREET — — =500F= 1" = 1000 FEET P L A N N I N G A N D B U I L D I N G A G E N C Y W This page intentionally left blank 3-6 June 20, 2017 AMCAL 1440 Santa Ana Fund, L.P. AMCAL Multi -Housing, Inc. Attn: Mario Turner, Vice President Development 17862 E. 17th Street, Suite 209 Tustin, CA 92780 SUBJECT: 69 Unit Multi -Family Housing Project 1440 East First Street, Santa Ana, California Dear Mr. Turner, AMCAL 1440 Santa Ana Fund, L.P., a California limited partnership ("Developer") requested financial assistance in connection with the proposed development of a 69 unit affordable housing complex to be located at 1440 East First Street, Santa Ana, California ("Project"). The Housing Authority of the City of Santa Ana ("Housing Authority") has reviewed the Developer's request for assistance and at the Housing Authority meeting on June 20, 2017, the Housing Authority Board authorized and approved issuance of this pre -commitment letter evidencing the preliminary award of $8,522,740 of funds to the Project (the "Agency Assistance"), which Agency Assistance shall be funded exclusively from the Low and Moderate Income Housing Asset Fund (the "LMIHAF") held by the Housing Authority of the City of Santa Ana acting as the Housing Successor Agency (the "Agency"). The Agency and the Developer have mutually agreed upon the pre - commitment of Agency Assistance in the maximum amount of $8,522,740. The purpose of this letter is to provide a pre -commitment from the Agency for a loan of up to $8,522,740 ("Agency Loan") from the LMIHAF held by the Housing Successor Agency. The Agency intends that this letter evidence the Agency's pre -commitment of the Agency Assistance to the Developer for the Project subject to the conditions described below. The Agency Loan Agreement for these funds requires Housing Authority Board approval prior to execution by the Developer and the Agency. The amount of the proposed Agency Loan has been determined based upon the Agency's review of the Developer's request for the receipt of the Agency Assistance and the development proforma and projected cash flows for the Project submitted by the Developer to the Agency as of March 18, 2016 ("Proforma"). The Housing Authority's Executive Director has authority to approve SANTA ANA CITY COUNCIL Miguel A. Pulido Michele Martinez Vicente Sarmiento Jose Soloria P. David Benavides Juan Villegas Sal Tinajero Mayor Mayor Pro Tem. Ward 2 Ward 1 3 Ward 4 Ward 5 Ward 6 mpulidoCosanla-ana.ora mimartinezasarta-ana.org vsarmientoCaisanta-ana.org anaorg dbenavides0santa-ana.ora jvillegiassainta-aina.orqslinaieroAsanla-ana.ora EXHIBIT 2 MAYOR INTERIM CITY MANAGER Miguel A. Pulido r Cynthia Kurtz MAYOR PRO TEMs CITY ATTORNEY Michele Martinez Sonia R. Carvalho COUNCiLMEMBERS CLERK OF THE COUNCIL P. David Benavides a Maria D. Huizar Vicente Sarmiento *T, Jose Solorio Sal Tinajero Juan Villegas CITY OF SANTA ANA 20 Civic Center Plaza • P.O. Box 1988 Santa Ana, California 92702 714-647-6900 www.santa-ana.org June 20, 2017 AMCAL 1440 Santa Ana Fund, L.P. AMCAL Multi -Housing, Inc. Attn: Mario Turner, Vice President Development 17862 E. 17th Street, Suite 209 Tustin, CA 92780 SUBJECT: 69 Unit Multi -Family Housing Project 1440 East First Street, Santa Ana, California Dear Mr. Turner, AMCAL 1440 Santa Ana Fund, L.P., a California limited partnership ("Developer") requested financial assistance in connection with the proposed development of a 69 unit affordable housing complex to be located at 1440 East First Street, Santa Ana, California ("Project"). The Housing Authority of the City of Santa Ana ("Housing Authority") has reviewed the Developer's request for assistance and at the Housing Authority meeting on June 20, 2017, the Housing Authority Board authorized and approved issuance of this pre -commitment letter evidencing the preliminary award of $8,522,740 of funds to the Project (the "Agency Assistance"), which Agency Assistance shall be funded exclusively from the Low and Moderate Income Housing Asset Fund (the "LMIHAF") held by the Housing Authority of the City of Santa Ana acting as the Housing Successor Agency (the "Agency"). The Agency and the Developer have mutually agreed upon the pre - commitment of Agency Assistance in the maximum amount of $8,522,740. The purpose of this letter is to provide a pre -commitment from the Agency for a loan of up to $8,522,740 ("Agency Loan") from the LMIHAF held by the Housing Successor Agency. The Agency intends that this letter evidence the Agency's pre -commitment of the Agency Assistance to the Developer for the Project subject to the conditions described below. The Agency Loan Agreement for these funds requires Housing Authority Board approval prior to execution by the Developer and the Agency. The amount of the proposed Agency Loan has been determined based upon the Agency's review of the Developer's request for the receipt of the Agency Assistance and the development proforma and projected cash flows for the Project submitted by the Developer to the Agency as of March 18, 2016 ("Proforma"). The Housing Authority's Executive Director has authority to approve SANTA ANA CITY COUNCIL Miguel A. Pulido Michele Martinez Vicente Sarmiento Jose Soloria P. David Benavides Juan Villegas Sal Tinajero Mayor Mayor Pro Tem. Ward 2 Ward 1 3 Ward 4 Ward 5 Ward 6 mpulidoCosanla-ana.ora mimartinezasarta-ana.org vsarmientoCaisanta-ana.org anaorg dbenavides0santa-ana.ora jvillegiassainta-aina.orqslinaieroAsanla-ana.ora EXHIBIT 2 AMCAL 1440 Santa Ana Fund, L.P. June 20, 2017 Page 2 revised development proformas and projected cash flows for the Project; provided, however, that the Agency Assistance is not materially increased or extended. In relation to this Agency Loan, the City Council approved a conditional, pre -commitment letter of up to $8,795,000 on April 19, 2016, to be funded exclusively from inclusionary housing in - lieu fee payments made pursuant to the City's Housing Opportunity Ordinance (Article XVIII.I of Chapter 41 of the Santa Ana Municipal Code) by the market rate developer of that certain mixed-use development to be located at 2001 East Dyer Road, Santa Ana, California (the "In -Lieu Fee"). The Developer and the City agree that the issuance of this pre -commitment letter from the Agency for a loan of up to $8,522,740 from the LMIHAF held by the Housing Successor Agency hereby releases the City of its commitment of the $8,795,000 in the conditional, pre -commitment letter approved by City Council on April 19, 2016, from funds to be received by the City from the In -Lieu Fee at a future date. As such, the conditional, pre -commitment letter of up to $8,795,000 approved by City Council on April 19, 2016, is hereby terminated by all parties and made null and void. The Developer's Project is intended to serve, in part, a target population of Very -Low and Extremely -Low Income persons using LMIHAF from the Agency, pursuant to California Health and Safety Code Section 34176.1. Section 34176. 1 (a)(3)(B) requires that the Agency must require at least 30% of the LMIHAF to be expended for development of rental housing affordable to and occupied by households earning 30% or less of the Area Median Income ("AMI"). If the Agency fails to comply with the Extremely -Low Income requirement in any five-year reporting period, then the Agency must ensure that at least 50% of the funds remaining in the LMIHAF be expended in each fiscal year following the latest fiscal year following the report on households earning 30% or less of the AMI until the Agency demonstrates compliance with the Extremely -Low Income requirement. In order for the Agency to meet this five-year Extremely -Low Income Test, the Agency and the Developer have mutually agreed that at least 50% of the units in the project, 34 of 68 total affordable Housing Units, will be affordable to and occupied by households earning 30% or less of the AMT. The Agency Loan, should it be issued, will have the following terms: • $8,522,740 principal amount, or as much thereof as is disbursed for acquisition costs and hard and soft costs in constructing the Project; • 3% simple interest per annum; • Repayment from 50% of Residual Receipts (after payment of operating expenses, debt service, any deferred developer fee, and partnership fees to be described in the Agency Loan Agreement) with the remaining 50% to be disbursed to the Developer; • Remaining principal and accrued interest due upon the 55th amniversary of the issuance of Certificate of Occupancy and/or final building permits or earlier upon sale, refinancing or default. On that date, the Agency agrees to review the performance of the property and consider in good faith any reasonable request by AMCAL to modify the terms or extend the term of the Agency Promissory Note. Additionally, the Agency will receive 50% of the net proceeds received from any sale or refinancing of the Project, after payment of outstanding debt and payment in full of any deferred developer fee and establislunent of any reserves and transaction costs; and MQ EXHIBIT 2 AMCAL 1440 Santa Ana Fund, L.P. Tune 20, 2017 Page 3 Cost savings from the Project, if any, will be applied first to pay down the Agency Loan, subject to compliance with the Tax Credit Allocation Committee ("TCAC") Regulations and California Health and Safety Code. The Agency's obligation to provide the Agency Loan to the Project are subject to each of the following conditions: Review and approval of the documents evidencing the Agency Loan by the Housing Authority of the City of Santa Ana acting as the Housing Successor Agency. 2. Compliance with California Health and Safety Code and applicable regulations set forth in Section 34176. 3. Compliance with and completion of an environmental review of the Project pursuant to the California Environmental Quality Act ("CEQA") and approval thereof. 4. The fivading of $8,522,740 is from the Low and Moderate Income Housing Asset Fund which requires legal restrictions which the Agency cannot amend or repeal. 68 of the 69 "Housing Units" at the Project shall and will be restricted to "Affordable Rents" as defined by the TCAC Regulations for a period not less than 55 years pursuant to conditions, covenants and restrictions recorded against the Project in the Official Records, County of Orange, California. 34 of the 68 Housing Units at the Project shall and will be restricted to households earning 30% or less of the AMI. One (1) Housing Unit will be rented to an on-site property manager; the manager's unit will not be rent -restricted. 5. The Agency Loan Agreement shall provide that each of the following conditions shall be met prior to the disbursement of any portion of the Agency Loan: a. All grading permits shall have been issued and the City shall have issued a letter stating that building permits are ready to issue, subject only to payment of fees and the completion of grading of the Project site. b. Developer shall have secured all necessary financing and funding for the construction and operation of the Project. Such financing and funding shall be sufficient to pay all Project development costs, through lease -up, as set forth in a final budget consistent with the approved Proforma (or as otherwise approved by the Agency). C. The Developer shall have provided evidence to the Agency that the Developer has obtained insurance policies and certificates or endorsements acceptable to the Agency, as described in the Agency Loan Agreement. d. The Developer shall have provided construction security in favor of the Agency, which may include a completion guarantee from AMCAL Multi -Housing, Inc. and/or a letter of credit and/or performance & payment bonds from the general contractor for the Project (or some combination of these), in an amount sufficient to ensure the Project will be completed and 3-9 EXHIBIT 2 AMCAL 1440 Santa Ana Fund, L.P. June 20, 2017 Page 4 placed in service within the time set forth in the Project schedule approved by the Agency. e. Developer shall submit and obtain Executive Director of the Housing Authority's approval of the construction contract, Developer's limited partnership agreement for the limited partnership entity to be formed to own and operate the Project, and management, marketing and tenant selection plans for the Project. 6. The Agency's obligation to provide the Agency Loan is and shall remain subject to all covenants, conditions, and restrictions set forth in the Agency Loan Agreement, and in particular Agency's analysis of the available funding sources and development and operating costs of the Project and the overall economic feasibility of the Project. This pre -commitment letter for the Project will expire two (2) years from issuance of the letter to the Developer. The Developer and the Agency agree in the Agency Loan Agreement that the provision of any funds to the Project is and shall be conditioned on the Agency's determination to proceed with, modify or cancel the Agency Assistance based on the results of a subsequent CEQA environmental review and the outcome of a Subsidy Layering Review. If you have any questions or require any additional information regarding this award letter, please contact Judson Brown, Housing Division Manager, by telephone at (714) 667-2241 or by e-mail at jbrowngsanta-ana.org. Sincerely, Cynthia Kurtz_ Interim City Manager City of Santa Ana / Housing Authority of the City of Santa Ana 3-10 EXHIBIT 3 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 When Recorded Mail to: City of Santa Ana Clerk of the Council 20 Civic Center Plaza (M-30) P.O. Box 1988 Santa Ana, California 92702 Attention: Clerk of the Council LOAN AGREEMENT by and between the SPACE ABOVE THIS LINE FOR RECORDING USE FREE RECORDING REQUESTED [Government Code Section 27383] HOUSING AUTHORITY OF THE CITY OF SANTA ANA ACTING AS THE HOUSING SUCCESSOR AGENCY and AMCAL 1440 Santa Ana Fund, LP, a California limited partnership (1440 East First Street, Santa Ana, California) Dated: January 16, 2018 3-11 EXHIBIT 3 LOAN AGREEMENT HOUSING SUCCESSOR AGENCY FUNDS THIS LOAN AGREEMENT (the "Agreement") dated, for identification purposes only, as of January 16, 2018, is made and entered into by and between the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency, a public body, corporate and politic ("Agency"), and AMCAL 1440 Santa Ana Fund, LP, a California limited partnership ("Developer") with reference to the following: RECITALS: A. The Agency is authorized by Section 34176 of the Health and Safety Code to perform housing functions previously performed by the City's former redevelopment agency to increase the supply of very low and low-income housing available at affordable housing costs. Pursuant to subdivision (d) of Section 34176, the low and moderate income housing asset fund ("LMIHAF") was established as a housing asset and the funds in the LMIHAF shall be used in a manner consistent with the affordable housing requirements of the Community Redevelopment Law of the State of California ("CRL"), (Part 1 commencing with Section 33000, et seq.). Such uses may include the construction, preservation, and rehabilitation of affordable housing for low-income households. B. Developer requested financial assistance in connection with the proposed development of a sixty-nine (69) unit affordable housing complex ("Project") to be located at 1440 East First Street, Santa Ana, California, and legally described within Exhibit A attached hereto and incorporated herein ("Property"). The residential units will be located within six (6) buildings. The rental units (less one manager's unit) are 100% affordable to family households earning no more than 30% to 60% of the Area Median Income ("AMI"). The unit mix currently consists of six (6) four-bedroom units, twenty-eight (28) three-bedroom units, and thirty-five (35) two-bedroom units (one being a manager's unit). Eight (8) of the units will be assisted by the Housing Authority of the City of Santa Ana's Project -Based Voucher Program. On-site amenities will include a community room and amenity space including tot lot/play area for children, outdoor seating, BBQs, a flex play space and planters. The community room will be incorporated into the development, providing a computer laboratory, kitchen, activity room for resident activities, and office space for property management and social services staff. Developer will contract with a qualified non-profit organization (of which LifeSTEPS is hereby approved by the City) to provide free on-site social services to Project tenants. Services will be provided in the form of classes and workshops with the subject matter tailored by a social service coordinator to the specific needs of the community. C. The City of Santa Ana ("City") and the Housing Authority of the City of Santa Ana ("Housing Authority") reviewed Developer's request for assistance and at the City Council/Housing Authority meeting on June 20, 2017, the Housing Authority Board authorized and approved issuance of a conditional, pre -commitment letter evidencing the preliminary award of $8,522,740 of funds to the Project ("Agency Loan"), to be funded 2 3-12 EXHIBIT 3 exclusively from the Low and Moderate Income Housing Asset Fund (the "LMIHAF") held by the Agency. D. The amount of the Agency Loan was determined based upon the City and Agency's review of the Developer's request for the receipt of the Agency Loan and the development proforma and projected cash flows for the Project submitted by the Developer to the City/Agency as of March 18, 2016 ("Proforma"). The Housing Authority's Executive Director has authority to approve revised development proformas and projected cash flows for the Project; provided, however, that the Agency Loan is not materially increased or extended. E. In furtherance of the CRL and the Redevelopment Plan, Developer has applied to the Agency for a loan with which to: 1. Provide deeper affordability and construct the improvements to the Property, and 2. Thereafter to maintain, operate and professionally manage the Project as decent, safe, sanitary and affordable rental housing. F. The Agency, on certain terms and conditions, desires to make such Agency Loan to the Developer in order to make possible the construction of the Project, thereby expanding the supply of decent, safe, sanitary and affordable housing. G. If there is any inconsistency between Federal, State, and local guidelines with regard to any of the terms and conditions contained herein, the more stringent shall apply. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, Agency and Developer agree as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 Defined Terms. All capitalized terms used herein, including, without limitation, in the Recitals above and in all other Project Documents, unless otherwise expressly defined, are defined where first used in this Agreement and/or as set forth in this Article 1. "Affordability Restrictions on Transfer of Property" means that certain document affecting real property benefiting the Agency, attached hereto and incorporated herein as Exhibit B. "Affordable Housing" means the total housing costs paid by a qualifying household, which shall not exceed the fraction of gross income specified in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. In the event of a conflict between the fractions specified in this Defined Terms section, and those found in 3 3-13 EXHIBIT 3 Sections 50052.5 and 50053 of the Health & Safety Code, the fractions specified by State law shall control. "Affordable Rent" means the monthly rents which do not exceed the maximum amount applicable to Extremely Low, Very Low and Low -Income households, as promulgated by the California Tax Credit Allocation Committee (TCAC), or by the State of California, as applicable. "Agency" means the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency, a public body, corporate and politic, exercising governmental functions and powers, and organized and existing under the CRL. The principal office of the Agency is located at 20 Civic Center Plaza, Santa Ana, California 92702. "Agency" shall also refer to the City where the context dictates, to the effect that the City shall have all rights granted to the Agency hereunder. "Agency Deed of Trust" means the deed of trust encumbering the Property, in the form attached hereto as Exhibit C, to be executed by the Developer pursuant to Section 5.B in order to secure the Agency Loan Note. "Agency Loan" means a loan in the original principal amount of up to eight million five hundred twenty-two thousand seven hundred forty dollars ($8,522,740) to be made to Developer by the Agency to be funded exclusively from the Low and Moderate Income Housing Asset Fund held by the Agency. "Agency Promissory Note" means that certain promissory note for Agency Loan funds in the original principal amount of $8,522,740 in the form attached hereto as Exhibit D, and to be executed by Developer in favor of Agency to evidence the obligation of Developer to repay the Agency Loan through residual receipts as further described in the Agency Promissory Note. "Building Permit" means the building permit(s) issued by the City and required for the construction. "Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday on which the City of Santa Ana City Hall is open to the public for the conduct of City affairs. "Calendar Year" means each consecutive twelve (12) month period from January 1 to December 31. "Certificate of Completion" has the meaning set forth in Section 17. "City" means the City of Santa Ana, California, a charter city and municipal corporation. "City" shall also refer to the Agency where the context dictates, to the effect that the Agency shall have all the rights granted to the City hereunder. M 3-14 EXHIBIT 3 "City Project Manager" shall mean the City Manager and/or his/her designee. "Close of Escrow" shall mean the date upon which the Agency Loan Agreement and Agency Deed of Trust is recorded in the Official Records of the County. "Closing Statement" means the final statement of Developer's Escrow account for the purchase of the Property pursuant to the purchase contract. "County" means the County of Orange, California. "Developer" means AMCAL 1440 Santa Ana Fund, LP, a California limited partnership. "Developer's Representative" shall mean an officer of the General Partner of the Developer or his/her designee. "Event of Default" has the meaning set forth in Section 20.1. "Extremely Low -Income" means an adjusted income which does not exceed thirty percent (30%) of the area median income for the Orange County, California primary metropolitan statistical area ("PMSA"), adjusted for household size, as published by HCD in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. "General Partner" means AMCAL Multi -Housing Two LLC, a California limited liability company. "Governmental Authority" means any governmental or quasi - governmental agency, board, bureau, commission, department, court, administrative tribunal or other instrumentality or authority, and any public utility. "Hazardous Materials" means flammable materials, explosives, radioactive materials, hazardous wastes, toxic substances and similar substances and materials, including all substances and materials defined as hazardous or toxic wastes, substances or materials under any applicable law, including without limitation the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601, et seq., as amended. Hazardous Material shall not include (i) construction products, household cleaners and office materials of the type and quantity ordinarily used in the normal construction, operation and maintenance of properties similar to the Project or (ii) small amounts of household mold to the extent promptly remediated upon discovery. "HCD" means the California Department of Housing and Community Development and any successors or assigns thereof. 5 3-15 EXHIBIT 3 "Housing Authority" means the Housing Authority of the City of Santa Ana, a public body, corporate and politic. "HUD" means the United States Department of Housing and Urban Development and any successors or assigns thereof. "Improvements" means all improvements and fixtures now and hereafter comprising any portion of the Property, including, without limitation, landscaping, trees and plant materials; and offsite improvements, as required through the City of Santa Ana Planning and Building Agency entitlement process. "Indebtedness" of a person means (a) all indebtedness for borrowed money, (b) notes payable and drafts accepted representing extensions of credit, whether or not representing obligations for borrowed money, (c) any obligation for the purchase of property or services in excess of $10,000 in the aggregate that is: (i) deferred for more than six (6) months, or (ii) evidenced by a note or similar instrument, and (d) all recourse and all non-recourse indebtedness secured by any Lien on any property or asset of such person (whether or not assumed by such person). "Indemnitees" has the meaning set forth in Section 14.5. "Laws" means all statutes, laws, ordinances, regulations, orders, writs, judgments, injunctions, decrees or awards of the United States or any state, county, municipality or other Governmental Authority. "Lien" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any lien or security interest). "Limited Partner" means, collectively, Bank of America, N.A., a national banking association, and Banc of America CDC Special Holding Company, Inc., a North Carolina corporation. "Loan Documents" or "Agency Loan Documents" means, collectively, this Agreement, the Agency Promissory Note, the Agency Deed of Trust, and the Affordability Restrictions on Transfer of Property, and any other agreement, document, or instrument that the Agency reasonably requires in connection with the execution of this Agreement or from time to time to effectuate the purposes of this Agreement. "Low -Income" means an adjusted income which does not exceed eighty percent (80%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by HCD in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. 0 3-16 EXHIBIT 3 "Median Income for the Area" means the median income for the Orange County, California PMSA as most recently determined by HCD. Also may be referred to interchangeably in the Agency Loan Documents as "Area Median Income" or "AMP'. "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of AMCAL 1440 SANTA ANA FUND, LP, dated as of [ , 2018] attached herein as Exhibit H. "Permitted Encumbrances for the Affordable Housing Restrictions" means collectively, the Senior Loan Deed of Trust and all other title exceptions and limitations with respect to the Property hereafter approved by the City Project Manager in writing. "Permitted Encumbrances for the Agency Deed of Trust" means the Senior Loan Deed(s) of Trust and all other title exceptions and limitations with respect to the Property hereafter approved by the City Project Manager in writing. "Project" means the construction of the Improvements upon the Property by Developer pursuant to this Agreement. "Project Budget" means the line -item budget for the Project attached hereto as Exhibit E, as modified from time to time in accordance with this Agreement. "Project Costs" means all costs of any nature incurred in connection with the Project in accordance with generally accepted accounting principles. "Property" means the property that is located at 1440 East First Street in the City of Santa Ana, and is more fully described in the "Legal Description" of the Property attached hereto as Exhibit A and incorporated herein by reference. "Scope of Work/Schedule of Performance" means the detailed statement of the work to be performed by Developer on and to the Property pursuant to this Agreement, along with the Schedule of Performance setting forth timeframes for certain tasks, which document is attached hereto as Exhibit F. "Senior Lender" means a commercial financial institution providing the Senior Loan or any other holder of the Senior Loan Note. "Senior Loan" means a loan from the Senior Lender concurrent to the Agency Loan for payment of a portion of the acquisition and construction costs, and shall include any subsequent loan that refinances the initial Senior Loan. "Senior Loan Deed of Trust" means the first deed(s) of trust securing the Senior Loan by encumbering the Property. "Senior Loan Documents" means, collectively, the loan agreement governing the Senior Loan, the Senior Loan Note, the Senior Loan Deed of Trust, and 7 3-17 EXHIBIT 3 any other agreement, document or instrument that the Senior Lender requires in connection with the Senior Loan. "Senior Loan Note" means the promissory note evidencing the Senior Loan from the Senior Lender. "Term of Affordability" means the terms and conditions contained herein shall remain in effect for fifty-five (55) years from the date of issuance of the Certificate of Completion. "Very Low -Income" means an adjusted income which does not exceed fifty percent (50%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by HCD in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. 1.2 Singular and Plural Terms. Any defined term used in the plural in this Agreement shall refer to all members of the relevant class and any defined term used in the singular shall refer to any number of the members of the relevant class. 1.3 References and Other Terms. Any reference to this Agreement shall include such document both as originally executed and as it may from time to time be modified. References herein to Articles, Sections and Exhibits shall be construed as references to this Agreement unless a different document is named. References to subparagraphs shall be construed as references to the same Section in which the reference appears. The term "document" is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms "including" and "include" mean "including (include) without limitation." 1.4 Exhibits Incorporated. All attachments and exhibits to this Agreement, as now existing and as the same may from time to time be modified, are incorporated herein by this reference. 2. [RESERVED] 3. SCOPE OF WORK/PROJECT BUDGET A "Scope of Work" and "Schedule of Performance" for the Property is attached hereto as Exhibit F. Any material change to the Scope of Work/Schedule of Performance requested by the Developer shall be subject to the prior written approval of the City Project Manager. The Scope of Work/Schedule of Performance sets forth the construction work that shall be performed on the Property and timeframes for approvals and such work. A line -item budget for the Project, including a summary statement of sources and uses of funds, is incorporated into Exhibit E ("Project Budget"). Any material change to the Project Budget requested by Developer shall be subject to the prior written approval of the City Project Manager as set forth in Section 10.3 hereof. 3-18 EXHIBIT 3 4. [RESERVED] 5. AGENCY LOAN: A. Amount and Purpose. Subject to the terms and conditions of this Agreement, Agency agrees to make a loan to the Developer from the Low and Moderate Income Housing Asset Fund ("LMIHAF") in the principal amount of up to $8,522,740.00 for the acquisition costs and hard and soft costs in constructing the Project. B. Agency Promissory Note and Deed of Trust. The Agency Loan shall be evidenced by the Agency Promissory Note in the form attached hereto as Exhibit D. The Agency Loan shall be secured by the Agency Deed of Trust in the form attached hereto as Exhibit C. C. Agency Loan Terms. The terms and conditions of the Agency Loan are as set forth in the Agency Promissory Note, which is a residual receipts Note. The term of affordability for the Project is fifty-five (55) years from the receipt of Certificate of Occupancy for the Project, or repayment of the Agency Loan, whichever is longer. 6. CONDITIONS TO DISBURSEMENT OF LOAN PROCEEDS 6.1 Conditions Precedent. Agency's obligation to disburse the Agency Loan is subject to the satisfaction of the following conditions precedent: (a) Housing; Authority. Review and approval of the documents evidencing the Agency Loan by the Housing Authority of the City of Santa Ana acting as the Housing Successor Agency. (b) Code Compliance. Compliance with California Health and Safety Code and applicable regulations set forth in Section 34176. (c) Environmental Review. Compliance with and completion of environmental review of the Project pursuant to the California Environmental Quality Act ("CEQA") and approval thereof. (d) Affordability Restrictions. The funding of $8,522,740 is from the Low and Moderate Income Housing Asset Fund, which requires legal restrictions that the Agency cannot amend or repeal. Sixty-eight (68) of the sixty-nine (69) "Housing Units" at the Project shall and will be restricted to "Affordable Rent" as defined by the California Tax Credit Allocation Committee (TCAC) Regulations for a period not less than fifty-five (55) years pursuant to conditions, covenants and restrictions recorded against the Project in the Official Records, County of Orange, California. Thirty-four (34) of the sixty-eight (68) Housing Units at the Project shall and will be restricted to households earning 30% or less of the AMI, twenty-one (21) of the sixty-eight (68) Housing Units at the Project shall and will be restricted to households earning 50% or less of the AMI, and thirteen (13) of the sixty-eight (68) Housing Units at the Project 0 3-19 EXHIBIT 3 shall and will be restricted to households earning 60% or less of the AMI. One (1) Housing Unit will be rented to an on-site property manager; the manager's unit will not be rent restricted. (e) Loan Documents. Developer shall have delivered to the Escrow Holder, signed by the authorized officer or officers of Developer, with such signature(s) acknowledged where necessary, each of the following documents: (i) this Agency Loan Agreement; (ii) the Agency Promissory Note ($8,522,740); (iii) the Agency Deed of Trust; and (iv) the Affordability Restrictions on Transfer of Property. (f) Title Insurance. Agency shall have received an American Land Title Association (ALTA) Extended (LP -10) Loan Policy (6-17-06), or evidence of a commitment therefore satisfactory to Agency, issued by Commonwealth Land Title Insurance Company and in form and substance satisfactory to the Agency, together with all endorsements and binders required, naming Agency as the insured, in a policy amount of not less than the total Agency Loan Amount, showing Developer as the fee owner of the Property and insuring the Agency Deed of Trust to be a valid priority lien on the Property. This Agreement, the Agency Promissory Note, and the Agency Deed of Trust shall all be subordinate to the Senior Loan Note and Senior Loan Deed of Trust. (g) Affordability Restrictions on Transfer of PropertX. Developer shall have delivered to the Escrow Holder, in the form attached hereto as Exhibit B, the Affordability Restrictions on Transfer of Property pursuant to which, among other things, Developer agrees that the Property shall be used only for decent, safe, sanitary and affordable rental housing pursuant to the affordability requirements of California Health and Safety Code ("H&S") sections 50052.5 and 33334.3, as applicable. The Agency's Affordability Restrictions on Transfer of Property shall remain in first position on title and shall not be subordinated. (h) Documents Recorded. This Loan Agreement, the Agency Deed of Trust, and the Affordability Restrictions on Transfer of Property shall have been recorded in the Official Records of the County. (i) Request for Notice. For the benefit of the Agency, Escrow Holder shall have recorded a Request for Notice of Default of the Senior Loan (the "Request for Notice of Default"). 0) Insurance. Agency shall have received evidence satisfactory to the City Attorney that all of the policies of insurance required by Section 19 of this Agreement are in full force and effect. 10 3-20 EXHIBIT 3 (k) Representations and Warranties. The representations and warranties of Developer contained in this Agreement and the other Loan Documents shall be correct in all material respects as of the Close of Escrow as though made on and as of that date and Agency shall have received a certificate to that effect signed by Developer's Representative. (1) No Default. No Event of Default by Developer shall have occurred, and no event shall have occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default by Developer under this Agreement, and if requested by the City Project Manager, Agency shall have received a certificate to that effect signed by Developer's Representative. (m) The Agency's obligation to provide the Agency Loan is and shall remain subject to all covenants, conditions, and restrictions set forth in this Loan Agreement, and in particular Agency's analysis of the available funding sources and development and operating costs of the Project and the overall economic feasibility of the Project. 6.2 Disbursement Procedures for Loan. The Agency Loan proceeds shall be disbursed through Escrow to finance the acquisition, development and construction of the Project (as evidenced in Exhibit E). The Agency Loan proceeds shall not be used for any purpose other than for acquisition and predevelopment and construction related costs, including Developer fee and soft costs related to the development of the Project (costs all subject to Agency's prior review). 6.3 First Disbursement. Agency's obligation to make the first disbursement of the Loan is subject to satisfaction of the following conditions precedent: (a) All grading permits shall have been issued or the City shall have issued a letter stating that building permits are ready to issue, subject only to payment of fees and the completion of grading of the Project site. (b) Developer shall have secured all necessary financing and funding for the construction and operation of the Project. Such financing and funding shall be sufficient to pay all Project development costs, through lease -up, as set forth in the final budget consistent with the approved Proforma (or as otherwise approved by the Agency). (c) Developer shall have provided evidence to the Agency that the Developer has obtained insurance policies and certificates or endorsements acceptable to the Agency, as described in this Loan Agreement. (d) Developer shall have provided construction security in favor of the Agency, which may include a completion guarantee from AMCAL Multi -Housing, Inc. and/or a letter of credit and/or performance and payment bonds from the general contractor for the Project (or some combination of these), in an amount sufficient to ensure the Project will be completed and placed in service within the time set forth in the Project schedule approved by the Agency. 11 3-21 EXHIBIT 3 (e) Developer shall submit and obtain the City Project Manager's approval of the construction contract, the identity and qualifications of the General Contractor, the Partnership Agreement, and management, marketing and tenant selection plans for the Project. 6.4 Termination for Failure of Condition. If (a) any of the conditions set forth herein are not timely satisfied (subject to applicable notice and cure rights), and (b) Agency is not in default under this Agreement, Agency may terminate this Agreement without any further liability on its part by giving written notice of termination to the Developer. Upon the giving of such notice, all principal, interest and other amounts will be due and payable immediately. 6.5 Any Disbursement. Agency's obligation to make any disbursement of the Loan, including the first and final disbursements, is subject to the satisfaction of the following conditions precedent: (a) Satisfactory Progress. The City Project Manager shall be satisfied that, based on his/her own inspections or other reliable information, the construction is progressing satisfactorily in conformance with all applicable laws and other requirements. (b) Condition of Title. Either (i) the City Project Manager reasonably believes that no event has occurred since the Close of Escrow that would give rise to a colorable claim against the Property (e.g., a mechanic's lien) superior to the claim of Agency against the Property with respect to the subject disbursement, or if such claim is made, then City Project Manager shall receive satisfactory evidence that such claim has been bonded over until its resolution; or (ii) Agency must have received, at Developer's expense but payable out of the Loan proceeds from the title insurer who issued City's LP - 10 Title Policy, all endorsements thereto then reasonably required by Agency (including, without limitation, CLTA Form 122 -- priority of advance endorsements). (c) Representations and Warranties. The representations and warranties of Developer contained in this Agreement and the other Agency Loan Documents shall be correct in all material respects as of the date of the disbursement as though made on and as of that date. (d) No Default. No Event of Default by Developer shall remain uncured and no event shall have occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default by Developer. 6.6 Final Disbursement. Agency's obligation to disburse that portion of the Loan funds retained pursuant to Section 6.12 is subject to the satisfaction of the following additional conditions precedent: complete. (a) Construction complete. The construction of the Project shall be 12 3-22 EXHIBIT 3 (b) Certificate of Occupancy Issued. Any portion of the construction work requiring inspection or certification by any Governmental Authority shall have been inspected and certified as complete. Developer shall request that the City of Santa Ana Planning and Building Agency issue a Certificate of Occupancy, a copy of which shall be delivered to the City Project Manager, in order for final disbursement to occur. (c) Lien Free. At least one of the following shall have occurred: (i) Thirty-five (35) days shall have passed since the recording of a valid notice of completion for the construction, and no mechanic's or materialman's lien shall be outstanding; or, (ii) Ninety-five (95) days shall have passed since actual completion of the construction, and no mechanic's or materialman's lien shall be outstanding, or Developer shall have bonded over any such lien to Agency's reasonable satisfaction; or, (iii) The City has received an endorsement from the Title Company ensuring no mechanic's or materialman's liens. 6.7 Waiver of Conditions. The conditions set forth pertaining to Agency's obligation to make disbursements of the Loan proceeds are for Agency's benefit only and the City Project Manager may waive all or any part of such rights by written notice to Developer. 6.8 Disbursement Requests. The Loan proceeds shall be disbursed on a line - item by line -item basis in accordance with the Project Budget and subject to the conditions in this section. In no event shall Agency have any obligation to disburse any amount for any item in excess of the amount allocated to such item in the Project Budget. Disbursements shall be made only upon Developer's written request in the form of a Disbursement Request showing all costs which Developer intends to fund with such disbursement, itemized in such detail as Agency may reasonably require, accompanied in each case by (a) invoices and lien releases satisfactory to Agency, including in any event partial lien releases executed by each contractor and subcontractor who has received any payment for work performed, and (b) all other documents and information reasonably required by Agency. Disbursement Requests shall be submitted no less than ten (10) Business Days prior to the date of the requested disbursement, and shall not be submitted more often than monthly. Prior to each disbursement by Agency of proceeds of the loan, Developer shall deliver to Agency a draw request ("Draw Request"), and all required supporting information as set forth in the Agency Loan Documents or as otherwise reasonably required by Agency in order to provide information for evaluating the requested disbursement pursuant to customary construction lending practices of the Senior Lender. 13 3-23 EXHIBIT 3 Agency shall notify the Developer of approval or disapproval of each Draw Request within five (5) Business Days after receipt of the Draw Request, using the Agency's "Disbursement/Change Order Approval Notice". Agency shall have the right, but not the obligation, to discontinue processing Draw Requests unless and until receipt of notification from the other of approval or disapproval of each outstanding Draw Request. Notwithstanding anything to the contrary set forth herein, to the extent required by the Senior Lender, the Agency agrees to fully disburse the proceeds of the Loan (subject to any applicable retainage as contemplated in Section 6.12 hereof) prior to the disbursement of the Senior Lender. 6.9 Manner of Disbursement. Agency may make any disbursement by check payable to Developer; or by wire transfer to the Escrow Company; or on a voucher basis; or by check payable jointly to Developer and any contractor, subcontractor or other claimant; or directly to any such claimant; or by any other means reasonably selected by Agency. 6.10 Cost Overruns. In the event that, at any time and for any reason, (a) the actual cost reasonably estimated by Agency or Developer to be required to complete all matters included in any line item in the Project Budget exceeds the amount allocated to that line item in the Project Budget, (b) Project costs for any matters not covered by a specific line item have been or will be incurred, or (c) the undisbursed portion of the Loan proceeds and all other approved financing sources are or may be insufficient to pay all construction of the Project that may be payable under the Agency Loan Documents or otherwise in connection with the construction, Developer shall, within ten (10) Business Days after it receives written notice thereof from Agency of any of the foregoing matters, do one or more of the following: (a) provide satisfactory evidence to Agency that Developer has previously paid such excess or otherwise provided for such insufficiency (collectively, the "Excess Cost") with funds from a source other than the Agency Loan; (b) reallocate sufficient funds to pay the Excess Cost from funds allocated to "Contingency" in the Project Budget; provided, however, that the City Project Manager's consent to any such reallocation shall be required; or (c) deposit an amount equal to the Excess Cost in a non-interest bearing account (the "Overrun Account") with the Senior Lender from which withdrawals may be made only with the consent of the City Project Manager but which will be exhausted prior to any further disbursement for any line item, so that any resulting surplus in any line item of the Project Budget will then be reallocated to the line item(s) in which the Excess Costs are expected to be incurred. Agency shall have no obligation to make further disbursements until Developer has paid or otherwise provided for the overrun as required above. Amounts deposited by Developer in the Overrun Account for any Excess Costs shall be disbursed by the Senior 14 3-24 EXHIBIT 3 Lender prior to the disbursement of any remaining Loan proceeds in the manner described in subsection 9.3(c). 6.11 Cost Savings. Upon completion of and disbursement for all matters covered by any line items in the Project Budget, any remaining undisbursed amounts allocated to that line item shall be reallocated to "Contingency" and thereafter be available for disbursement in accordance with the terms of this Agreement. 6.12 Retainage. Agency will withhold a Retainage of 10% from each Disbursement for each of the Hard Cost line items of the Project Cost Breakdown (and other line items thereof designated for withholding of retainage) until all conditions to the final Disbursement of Hard Costs have been satisfied. In lieu of Agency's withholding Retainage, Developer can by written notice to Agency elect not to draw any overhead or profit as would otherwise be permitted under the Construction Contract until such time as Retainage would otherwise have been released. Agency shall not retain funds for building materials purchased by Developer for which Developer supplies documentation to Agency proving payment in full, land acquisition costs, or for soft costs. 6.13 Holdback. The retainage otherwise available for disbursement shall be subject to a holdback of one hundred twenty-five percent (125%) of the estimated cost (as determined by the City Project Manager) for "punch -list" items. Such holdback will be released when all punch -list items have been completed to the satisfaction of Agency. 6.14 Waiver of Disbursement Conditions. Unless Agency otherwise agrees in writing, the making by Agency of any disbursement with knowledge that any condition to such disbursement is not fulfilled shall constitute a waiver of such condition only with respect to the particular disbursement made, and such condition shall be conditioned to all further disbursements until fulfilled. 6.15 Modification of Disbursement Conditions and Procedures. The City Project Manager shall have the authority to modify the disbursement conditions and procedures set forth herein in order to conform them to the payment provisions of the contract for construction. 6.16 Other Terms and Conditions of Loan. A. The Note shall become immediately due and payable, in the event of any of the following: (1) Failure to complete the Project within four (4) years of the Loan Agreement recording date; (2) Violation of any of the use covenants and restrictions contained in this Agreement after the expiration of any applicable notice and cure periods; or, 15 3-25 EXHIBIT 3 (3) An Event of Default by Developer which is not timely cured after expiration of any applicable notice and cure periods pursuant to the terms of this Agreement. 6.17 Closing Costs and Fees. Developer shall pay (a) all escrow fees and charges, (b) all recording fees and charges on any document recorded pursuant to this Agreement, and (c) the premium for the title insurance required hereunder. 7. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE PROJECT 7.1 Use Covenants and Restrictions. Developer agrees and covenants, which covenants shall run with the land and bind Developer, its successors, its assign and every successor in interest to the Property that Developer will make all of the rental units on the Property available to extremely low, very low and low-income households at rents affordable to such households for fifty-five (55) years (except for one (1) unit for the on-site manager). The Project shall consist of sixty-nine (69) residential units. Enforceability of restrictions on the sixty-eight (68) units shall be enforced until the date that is fifty-five (55) years after the date on which the Certificate of Occupancy is issued. 7.2 Affordability Levels/Unit Mix: The proposed unit mix and levels of affordability are as follows: Bedroom Size 30% AMI 50% AMI 60% AMI Manager's Unit Total Two Bedroom 29 4 1 1 35 Three Bedroom 4 17 7 28 Four Bedroom 1 0 5 6 Totals 34 21 13 1 69 The affordable rents charged at the Project must comply with the standards set forth by the California Tax Credit Allocation Committee (TCAC). Utility allowances must be deducted from the Maximum Gross Monthly Rent. The Housing Authority of the City of Santa Ana publishes a utility allowance schedule on an annual basis. However, in lieu of the utility allowance schedule published by the Housing Authority, the Developer may elect to use the California Utility Allowance Calculator to the extent allowed by TCAC. 7.3 Rent Increases: On an annual basis, the Agency shall provide the Developer with the maximum allowable schedule of rents for the Property which shall correspond to the maximum rent increase allowed by TCAC. In no event can Developer charge any tenant more than such amount. 16 3-26 EXHIBIT 3 7.4 Maintenance of the Property. Solely at Developer's expense, Developer agrees to maintain the Property in a clean, orderly, good condition, and repair and keep the Property free from any accumulation of debris and waste materials. If at any time Developer fails to maintain, or cause to be maintained, the Property as required by this section, and said condition is not corrected after the expiration of a reasonable period of time not to exceed thirty (30) calendar days from the date of written notice from the Agency, unless such condition cannot reasonably be cured within thirty (30) calendar days, in which case Developer shall have such additional time as reasonably necessary to complete such cure, the Agency may perform the necessary maintenance and Developer shall pay all reasonable costs incurred for such maintenance. The Agency shall inspect the Property annually after the date of issuance of the Certificate of Completion as described in Section 17 of this Agreement. 7.5 Oblieation to Refrain from Discrimination. Developer covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, disability, religion, sex, marital status, immigration status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property nor shall Developer itself or any person claiming under or through him establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall run with the land and shall remain in effect for the term of the Agreement. 8. DEFAULTS AND REMEDIES 8.1 Event of Default. Failure or delay by either party to perform any term or provision of this Agreement within the time periods provided herein for such performance constitutes a default under the Agreement. If any party defaults in performance of its obligations, covenants or agreements hereunder, the defaulting party shall be entitled to cure the default in accordance with this section. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. The defaulting party must, within thirty (30) calendar days following service of said written notice, commence to cure, correct or remedy such failure or delay and shall complete such cure, correction, or remedy with reasonable diligence. Upon a default by Developer which is not cured within thirty (30) calendar days following service of said notice, unless such default cannot reasonably be cured within thirty (30) calendar days, in which case Developer shall have such additional time as reasonably necessary to complete such cure but no more than ninety (90) calendar days, the Agency shall have the right to terminate this Agreement by delivery of written notice of termination to Developer. 8.2 Institution of Legal Actions. In addition to any other rights or remedies, either parry may institute legal action to cure, correct or remedy any default to recover 17 3-27 EXHIBIT 3 damages for any default, or to obtain any other remedy consistent with the purpose of this Agreement. 8.3 Rights and Remedies are Cumulative. Except with respect to rights and remedies expressly declared to be exclusive in this Agreement, the rights and remedies of the parties are cumulative and the exercise by either party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other parry. 8.4 Damages. In the event that the Agency is liable for damages to Developer, such liability shall not exceed costs incurred by the Developer in the performance of this Agreement and shall not extend to compensation for loss of future income, profits or assets; provided, however, Developer's only remedy for any breach of this Agreement by the Agency shall be an action for specific performance of such party's obligations. 8.5 Nonrecourse Liability. Neither Developer, nor any partner of Developer, shall have any personal liability under this Agreement, or the attached Note and Deed of Trust, and any judgment, decree or order for the payment of money obtained in any action to enforce the obligation of Developer to repay the loan evidenced by such documents shall be enforceable against Developer only to the extent of Developer's interest in the Property. 9. GENERAL PROVISIONS AND WARRANTIES As a material inducement to Agency to enter into this Agreement, Developer represents and warrants as follows: 9.1 Formation, Qualification and Compliance. AMCAL 1440 Santa Ana Fund, LP is a California limited partnership. Developer is in compliance with all laws applicable to its business and has obtained all approvals, licenses, exemptions and other authorizations from, and has accomplished all filings, registrations and qualifications with, any Governmental Authority that are necessary for the transaction of its business. 9.2 Execution and Performance of Agency Loan Documents. 9.2.1 Developer has all requisite authority to execute and perform its obligations under the Agency Loan Documents. 9.2.2 The execution and delivery by Developer of, and the performance by Developer of its obligations under, each Loan Document that has been authorized by all necessary action and does not and will not: (a) require any consent or approval not heretofore obtained of any person having any interest in Developer; (b) violate any provision of, or require any consent or approval not heretofore obtained under, any articles of incorporation, by-laws or other governing document applicable to Developer; IN i EXHIBIT 3 (c) result in or require the creation of any lien, claim, charge or other right of others of any kind (other than under the Agency Loan Documents) on or with respect to any property now or hereafter owned or leased by Developer; (d) to best of its knowledge, violate any provision of any law presently in effect; or (e) constitute a breach or default under, or permit the acceleration of obligations owed under, any contract, loan agreement, lease or other agreement or document to which Developer is a party or by which Developer or any of its property is bound. 9.2.3 Developer is not in default, in any respect that is materially adverse to the interests of Agency under the Agency Loan Documents or that would have any material adverse effect on the financial condition of Developer or the conduct of its business, under any law, contract, lease or other agreement or document described in sub- paragraph (d) or (e) of the previous subsection. 9.2.4 No approval, license, exemption or other authorization from, or filing, registration or qualification with, any Governmental Authority is required which has not been previously obtained in connection with: (a) the execution by Developer of, and the performance by Developer of its obligations under, the Agency Loan Documents; and (b) the creation of the liens described in the Agency Loan Documents. 9.3 Financial and Other Information. To the best of Developer's knowledge, all financial information furnished to Agency by the Developer or any affiliate thereof with respect to Developer in connection with the Loan (a) is complete and correct in all material respects as of the date of preparation thereof, (b) accurately presents the financial condition of Developer, and (c) has been prepared in accordance with generally accepted accounting principles consistently applied or in accordance with such other principles or methods as are reasonably acceptable to Agency. To the best of Developer's knowledge, all other documents and information furnished to Agency by the Developer or any affiliate thereof with respect to Developer, in connection with the Loan, are correct and complete insofar as completeness is necessary to give the Agency accurate knowledge of the subject matter. To the best of Developer's knowledge Developer has no material liability or contingent liability not disclosed to Agency in writing and there is no material lien, claim, charge or other right of others of any kinds (including liens or retained security titles of conditional vendors) on any property of Developer not disclosed in such financial statements or otherwise disclosed to Agency in writing. 19 3-29 EXHIBIT 3 9.4 No Material Adverse Change. There has been no material adverse change in the condition, financial or otherwise, of Developer since the dates of the latest financial statements furnished to Agency. Since those dates, Developer has not entered into any material transaction not disclosed in such financial statements or otherwise disclosed to Agency in writing. 9.5 Tax Liability. Developer has filed all required federal, state and local tax returns and has paid all taxes (including interest and penalties, but subject to lawful extensions disclosed to Agency in writing) other than taxes being promptly and actively contested in good faith and by appropriate proceedings. Developer is maintaining adequate reserves for tax liabilities (including contested liabilities) in accordance with generally accepted accounting principles or in accordance with such other principles or methods as are reasonably acceptable to Agency. 9.6 Governmental Requirements. To best of its knowledge, Developer is in compliance with all laws relating to the Property and all Governmental Authority approvals, including zoning, land use, planning requirements, and requirements arising from or relating to the adoption or amendment of, any applicable general plan, subdivision and parcel map requirement; environmental requirements, including the requirements of the California Environmental Quality Act and the National Environmental Policy Act and the preparation and approval of all required environmental impact statements and reports; use, occupancy and building permit requirements; and public utilities requirements. 9.7 Rights of Others. Developer is in compliance with all covenants, conditions, restrictions, easements, rights of way and other rights of third parties relating to the Property. 9.8 Liti!ation. There are no material actions or proceedings pending or, to the best of the Developer's knowledge, threatened against or affecting Developer or any property of Developer before any Governmental Authority, except as disclosed to Agency in writing prior to the execution of this Agreement. 9.9 Bankruptcy. To the best of Developer's knowledge, no attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings are pending or threatened against Developer, nor are any of such proceedings contemplated by Developer. 9.10 Information Accurate. To the best of Developer's knowledge, all information, regardless of its form, conveyed by Developer to Agency, by whatever means, is accurate, correct and sufficiently complete to give Agency true and accurate knowledge of its subject matter, and does not contain any misrepresentation or omission. 9.11 Conflicts of Interest. No member, elected official or employee of the Agency shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, elected official or employee participate in any decision relating to this Agreement which affects his/her personal interests or the interests of any corporation, 20 3-30 EXHIBIT 3 partnership or association in which he/she has a direct or indirect financial interest. The Developer warrants that it neither has paid nor given, nor will pay or give, any third party any money or other consideration for obtaining this Agreement. 9.12 Nonliability of Agency Officials and Employees. No member, elected official or employee of the Agency shall be personally liable to the Developer in the event of any default or breach by the Agency or for any amount which may become due to Developer or on any obligations under the terms of this Agreement. 9.13 No Assignment. Developer expressly acknowledges and agrees that the Agency has only agreed to assist the Developer as a means by which to induce the construction/development of the Project. Accordingly, Developer further expressly acknowledges and agrees that this Agreement is a personal right of Developer that is neither negotiable, transferable, nor assignable except as set forth herein. Developer may assign some or all of its rights under the Agreement only with the prior written consent of the City Project Manager. 9.14 Applicable Law. This Agreement shall be interpreted, governed and enforced under federal and California state law with venue in Orange County, California. 9.15 Third Parties. This Agreement is made for the sole benefit of Developer and the Agency and their successors and assigns, and no other person or persons shall have any rights or remedies under or by reason of this Agreement or any right to the exercise of any right or power of the Agency hereunder or arising from any default by Developer, nor shall the Agency owe any duty whatsoever to any claimant for labor performed or materials furnished in connection with the construction of the Property. 9.16 Control of Property. The parties acknowledge that the Agency has not at any time participated in any manner in the management or operation of the Property, and will not so participate at any time hereafter. 10. CONDITIONS FOR CONSTRUCTION 10.1 Permits and Approvals. Developer shall diligently obtain all permits, including all building permits, licenses, approvals, exemptions and other authorizations of Governmental Agencies required in connection with the construction and conversion of the Property. 10.2 Commencement and Completion of Construction. The construction of the Project shall be considered complete for purposes of this Agreement only when (a) all work described has been completed and fully paid for, and (b) all work requiring inspection and/or certification by Governmental Authority has been completed and all requisite certificates, approvals and other necessary authorizations (including the final Certificate of Occupancy) have been obtained. 10.3 Change Orders. The contract for construction shall not be modified except pursuant to change orders. Notwithstanding the foregoing, the City's approval of 21 3-31 EXHIBIT 3 a change order shall not be required unless the approval of the Senior Lender is required with respect to such change order. All change orders: (a) Shall be in writing, numbered in sequence, signed by Developer and submitted to Agency prior to the proposed effective date thereof and accompanied by any working drawings and a written narrative of the proposed change; and, (b) Shall be subject to the City Project Manager's prior written approval. 10.4 Entry and Inspection. At all times prior to completion of the construction, during regular business hours and subject to reasonable job site safety rules, Agency and its agents shall have (a) the right of free access to the Property and all sites away from the Property where materials for the construction are stored, (b) the right to inspect all labor performed and materials furnished for the construction, and (c) the right to inspect and copy all documents pertaining to the construction. 10.5 [RESERVED] 10.6 Construction Information. From time to time during the course of the construction, within ten (10) Business Days following Agency's written demand therefore, Developer shall furnish requested reports of project costs, progress schedules and contractors' costs breakdowns for the construction, itemized as to trade description and item, showing the name of the contractor(s) and/or subcontractor(s), and including such indirect costs as real estate taxes, legal and accounting fees, insurance, architects' and engineers' fees, loan fees, interest during construction and contractors' overhead. 10.7 Protection against Liens. Developer shall diligently file a valid Notice of Completion upon completion of the construction, diligently file a notice of cessation in the event of a cessation of labor on the construction for a period of thirty (30) calendar days or more, and take all actions reasonably required to prevent the assertion of claims of lien against the Property. In the event that any claim of lien is asserted against the property or any stop notice or claim is asserted against the Agency by any person furnishing labor or materials to the Property, Developer shall immediately give written notice of the same to Agency and shall, promptly and in any event within ten (10) Business Days after written demand therefor, (a) pay and discharge the same, (b) effect the release thereof by delivering to Agency a surety bond complying with the requirement of applicable laws for such release, or (c) take such other action as Agency may require to release Agency from any obligation or liability with respect to such stop notice or claim. 11. COVENANTS 11.1 Even though the Agency is providing funds authorized by the CRL, the Agency will utilize federal regulations and requirements referenced below for certain 22 3-32 EXHIBIT 3 covenants in order to reduce repetition and redundancy between local, state and federal requirements. 11.2 Qualification as Affordable Housing. As more particularly provided in the Affordability Restrictions on Transfer of Property, Developer shall use, manage and operate the Property in accordance with the requirements of California Health and Safety Code section 50052.5 and the California Tax Credit Allocation Committee so as to qualify the housing on the Property as Affordable Housing with affordable rents. 11.3 Tenant Protection and Selection. Developer shall comply with the same Tenant Protection and Selection requirements as the federal HOME Investment Partnerships Program at 24 CFR 92.253. 11.4 Local Preference. Local preference for Santa Ana residents and workers in tenant selection shall be a requirement of the Project. Subject to applicable laws and regulations governing nondiscrimination and preferences in housing occupancy required by HUD or the State of California, as well as the City of Santa Ana Affordable Housing Funds Policies and Procedures, the Developer shall give preference in leasing units in the following order of priority: 1. First priority shall be given to persons who have been permanently displaced or face permanent displacement from housing in Santa Ana as a result of any of the following: a. A redevelopment project undertaken pursuant to California's Community Redevelopment Law (Health & Safety Code Sections 33000, et seq.) -- applicable only to projects funded by the Low and Moderate Income Housing Asset Fund. b. Ellis Act, owner -occupancy, or removal permit eviction; c. Earthquake, fire, flood, or other natural disaster; d. Cancellation of a Housing Choice Voucher HAP Contract by property owner; or e. Governmental Action, such as Code Enforcement. 2. Second priority shall be given to persons who are either: a. Residents of Santa Ana and/or b. Working in Santa Ana at least 32 hours per week for at least the last 6 months. 11.5 Handicapped Accessibility. Developer shall comply with (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C; and (b) 23 3-33 EXHIBIT 3 the Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36 in order to make the Project readily accessible to and usable by individuals with disabilities. 11.6 Use of Debarred, Suspended, or Ineligible Contractors or Subrecipients. Developer shall comply with the provisions of the federal regulations for HUD at 24 CFR 570.609 relating to the employment, engagement of services, awarding of contracts, or funding of any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status. 11.7 Maintenance of a Drug -Free Workplace. Developer shall certify that Developer will provide a drug-free workplace in accordance with the federal regulations for HUD at 24 CFR 84.13. 11.8 Lead -Based Paint. Developer shall comply with the requirements, as applicable of the Lead Safe Housing Rule and implementing regulations at 24 CFR 35, as applicable. 11.9 Affirmative Marketing. Developer shall implement and perform such affirmative marketing procedures and requirements for the Property as required by the federal HOME Investment Partnerships Program at 24 CFR 92.351 and the City of Santa Ana's adopted affirmative marketing procedures and minority outreach program. 11.10 Equal Opportunity and Fair Housing. Developer shall carry out the construction and perform its obligations under this Agreement in compliance with all of the state and federal laws and regulations regarding equal opportunity and fair housing described in 24 CFR 92.350. Developer must also follow the requirements of California Health and Safety Code section 33435. 11.11 Property Standards. Developer shall cause the Property to meet the housing quality standards set forth in 24 CFR 882.109 at all times, as well as all applicable local, state and federal codes and ordinances, including zoning ordinances. Developer shall also cause the Property to meet the current edition of the Model Energy Code published by the Council of American Building Officials. 11.12 Displacement and Relocation. Developer acknowledges and agrees that, pursuant to 24 CFR 92.253 and consistent with the other goals and objectives of this part, Agency must ensure that it has taken all reasonable steps to minimize the displacement of persons as a result of the construction. Furthermore, to the extent feasible, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary and affordable dwelling unit on the Property upon completion of the construction. Developer agrees to cooperate fully and completely with Agency in meeting the requirements of 24 CFR 92.253 and shall take all actions and measures reasonably required by the City Project Manager in connection therewith. All applicable state guidelines must also be followed. 24 3-34 EXHIBIT 3 (a) Developer acknowledges and agrees to hire a Relocation Consultant to provide relocation services, pursuant to the Uniform Relocation Act and Real Property Acquisition Policies Act of 1970 ("URA") and 24 CFR 92.253. (b) The Agency, Developer, and Relocation Consultant will meet periodically during the relocation to provide updates and review tenant files, including at Project approval and prior to final benefit calculations. The Developer and Relocation Consultant shall carry out activity in compliance with URA and the Agency's Acquisition and Relocation Policy and Procedures Manual ("Manual"). (c) The Developer and Relocation Consultant shall maintain accurate records and files pertaining to the temporary and permanent relocation of tenants, in accordance with URA and the Agency's Manual. (d) The Developer and Relocation Consultant shall provide all relocation and tenant files to the Agency once relocation is complete at the Project. 11.13 Other Program Requirements. Developer shall carry out each activity in compliance with all federal laws and regulations described in subpart H of 24 CFR 570, except that Developer does not assume Agency's responsibilities for environmental review in 24 CFR 92.352 or the intergovernmental review process in 24 CFR 92.359. 11.14 Request for Disbursements of Funds. Notwithstanding anything contained in this Agreement to the contrary, Developer may not request disbursements of funds under this Agreement until the funds are needed for payment of eligible costs. The amount of each request shall be limited to the amount needed. 11.15 Eligible Costs. Developer shall use funds from the Low and Moderate Income Housing Asset Fund to pay eligible costs identified only within the Project Budget attached herewith as Exhibit E. 11.16 Records and Reports. Developer shall maintain and from time to time submit to Agency such records, reports and information as the City Project Manager may reasonably require in order to meet Agency record keeping and reporting requirements. 11.17 Uniform Administrative Requirements. Developer shall comply with the requirements and standards of OMB Circular No. A-122, "Cost Principles for Non - Profit Organizations," and with the following Attachments to OMB Circular No. A-110: (a) Attachment A, "Cash Depositories", except for paragraph 4 concerning deposit insurance; (b) Attachment B, "Bonding and Insurance"; 25 3-35 EXHIBIT 3 (c) Attachment C, "Retention and Custodial Requirements for Records"; (d) Attachment F, "Standards for Financial Management Systems"; (e) Attachment H, "Monitoring and Reporting Program Performance", Paragraph 2; (f) Attachment O, "Procurement Standards." 11.18 Conflict of Interest. Developer shall comply with and be bound by the conflict of interest provisions set forth at 24 CFR 570.611, as well as state regulations pertaining to conflict of interest. 11.19 Monitoring. Developer shall allow the Agency to conduct annual inspections of each of the assisted units on the Property after the date of construction completion, with reasonable notice. Developer shall cure any defects or deficiencies found by the Agency while conducting such inspections within ten (10) Business Days of written notice thereof, or such longer period as is reasonable within the sole discretion of the Agency. 11.20 Recertification of Tenant Income. (a) Developer shall take all necessary steps to review the income of all tenants prior to renting to them, as well as reviewing current tenants on an annual basis. At a minimum, every fifth (5th) year, Developer shall require new original income documents to be submitted by tenants. (b) Developer shall allow the Agency to conduct periodic reviews of tenant files and files relating to affirmative marketing and outreach to insure the Project's compliance with applicable regulations and guidelines. (c) Agency assisted units continue to qualify as affordable housing despite a temporary non-compliance caused by increases in the incomes of existing tenants if actions satisfactory to the Agency are being taken to ensure that all vacancies are filled in accordance with this section until the non-compliance is corrected. 11.21 Other Requirements. Developer shall comply with all other applicable requirements, including the following: (a) Onsite Services: The Developer shall provide on-site services that are available to the residents and shall report to the Agency annually the services provided. (b) Coordination with the WORK Center: The Developer and the Property Manager shall coordinate with the City's WORK 26 3-36 EXHIBIT 3 Center to provide services and outreach to tenants, as well as provide information on employment during the construction of the Project. (c) Tenant Satisfaction Survey: The Developer shall complete and submit to the Agency biennial tenant satisfaction surveys of tenants. 11.22 Controlling Covenants. If there is a discrepancy between Local, State and Federal law with regard to any of the aforementioned covenants, the more stringent shall apply. 12. MAINTENANCE, MANAGEMENT, OPERATION, PRESERVATION AND REPAIR OF PROPERTY 12.1 Maintenance. Developer shall maintain the Property (and all abutting grounds, sidewalks, roads, parking and landscape areas which Developer is otherwise required to maintain) in good condition and repair; shall operate the Property in a business -like manner; shall prudently preserve and protect its own as well as the Agency's interests in connection with the Property; shall not commit or permit any waste or deterioration of the Property (except for normal wear and tear); shall not abandon any portion of the Property or leave the Property unguarded or unprotected; and shall not otherwise act, or fail to act, in such a way as to unreasonably increase the risk of any damage to the Property or of any other impairment of Agency's interests under the Agency Loan Documents. Without limiting the generality of the foregoing, and except as otherwise agreed by Agency in writing from time to time, Developer shall promptly and faithfully perform and observe each of the following provisions: 12.1.1 Alterations and Repair. Developer shall not remove, demolish or materially alter any Improvement without Agency's prior consent, except to make non-structural repairs which preserve or increase the Property's value, and shall promptly restore, in a good and professional manner, any Improvement (or other aspect or portion of the Property) that is damaged or destroyed from any cause. 12.2 Compliance. Developer shall comply with all laws and requirements of Governmental Authority (including, without limitation, all requirements relating to the obtaining of Governmental Authority approvals), all Governmental Authority approvals and all rights of third parties, relating to Developer, the Property or Developer's business thereon. 12.3 Taxes and Impositions. Subject to any property tax abatement available, the Developer shall pay, prior to delinquency, all of the following (collectively, the "Impositions"): (a) all general and special real property taxes and assessments imposed on the Property; (b) all other taxes and assessments and charges of every kind that are assessed upon the Property (or upon the owner and/or operator of the Property) and that 27 3-37 EXHIBIT 3 create or may create a lien upon the Property (or upon any personal property or fixtures used in connection with the Property), including, without limitation, non-governmental levies and assessments pursuant to applicable covenants, conditions or restrictions; and (c) all license fees, taxes and assessments imposed on Agency (other than Agency's income or franchise taxes) which are measured by or based upon (in whole or in part) the amount of the obligations secured by the Property. If permitted by law, Developer may pay any Imposition in installments (together with any accrued interest). 12.3.1 Right to Contest. Developer shall not be required to pay any Imposition so long as (a) its validity is being actively contested in good faith and by appropriate proceedings, (b) Developer has demonstrated to Agency's reasonable satisfaction that leaving such Imposition unpaid pending the outcome of such proceedings could not result in conveyance of the Property in satisfaction of such Imposition or otherwise impair the Agency's interests under the Agency Loan Documents, and (c) Developer has furnished Agency with a bond or other security satisfactory in an amount not less than 100% of the applicable claim (including interest and penalties). 12.3.2 Evidence of Payment. Upon demand by Agency from time to time, Developer shall deliver to Agency, within thirty (30) calendar days following the due date of any Imposition, evidence of payment reasonably satisfactory to Agency. 12.3.3 Books and Records. Developer shall maintain complete books of account and other records reflecting its operations (in connection with any other businesses as well as with respect to the Property), in accordance with generally accepted accounting principles applied on a consistent basis or in accordance with such other principles or methods as are reasonably acceptable to Agency. 12.4 [Intentionally Omitted] 12.5 Project Operating Budget. Developer must promptly deposit all project income directly into a segregated depository account established exclusively for the Project ("Project Operating Account"). Withdrawals from this account may be made only in accordance with the provisions of this Agreement and the approved Operating Budget, as it may be revised from time to time with prior Agency approval. Developer may make withdrawals from this account solely for the payment of project expenses and project fees. Withdrawals from this account for other purposes may be made only with the prior written approval of the Agency. 12.6 Replacement Reserve Account. Developer must establish or cause to be established a segregated replacement reserve depository account ("Replacement Reserve Account") no later than the commencement of the permanent financing period for the Project. Developer must make monthly deposits from project income into the Replacement Reserve in accordance with Developer's Budget, as amended from time to time. Developer may withdraw funds from the Replacement Reserve Account solely to fund capital improvements for the Project, such as replacing or repairing structural elements, fixtures or equipment of the Project that are reasonably required to preserve the 3-38 EXHIBIT 3 Project. Developer may not withdraw funds from the Replacement Reserve Account for any other purpose without the prior written approval of the Agency. 13. NONDISCRIMINATION COVENANTS 13.1 Obligation to Refrain from Discrimination. Developer covenants and agrees that: (a) In Use of Property. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, disability, religion, sex, marital status, national origin, immigration status, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Developer or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendors of the Property. (b) In Affordable Housing Restrictions. The foregoing covenant shall (a) be included in the Affordability Restrictions on Transfer of Property, (b) run with the land, and (c) remain effective for the term of the agreement (for 55 years). (c) In Employment. In construction on the Property, Developer shall not discriminate against any employee or applicant because of race, color, creed, religion, sex, marital status, disability, national origin, immigration status, or ancestry. Developer shall take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, disability, creed, religion, sex, marital status, disability, national origin, immigration status, or ancestry. (d) In all Contracts. Developer shall cause the foregoing covenants to be inserted in all contracts for any work covered by this Agreement so that such provisions will be binding upon each contractor for the benefit of Agency, provided that the foregoing covenant shall not apply to contracts or subcontracts for standard commercial supplies or raw materials. 14. ENVIRONMENTAL MATTERS 14.1 Representation and Warranty. Except as disclosed in writing to the Agency, Developer has no knowledge (a) of the presence on, under or about the Property, now or in the past, of any Hazardous Materials, or of the transportation to or from the Property of any Hazardous Materials, (b) that asbestos or polychlorinated biphenyls (PCBs) are contained in or stored on the Property, or (c) that there are any underground storage tanks located in, on or under the Property. 14.2 Compliance with Environmental Laws. Developer shall (a) comply with all environmental laws and environmental permits applicable to the construction of the Property, (b) immediately pay or cause to be paid all costs and expenses incurred by reason of such compliance, (c) keep the Property free and clear of any environmental 29 3-39 EXHIBIT 3 claims or liens imposed pursuant to any environmental law, and (d) obtain and renew all environmental permits required for ownership or use of the Property. 14.3 Presence of Hazardous Materials. Developer shall not, and shall not permit anyone else to generate, use, treat, store, handle, release, or dispose of Hazardous Materials on the Property, or transport or permit the transportation of Hazardous Materials to or from the Property except for de minimis quantities used at the Property in compliance with all applicable environmental laws and required in connection with the routine operation and maintenance of the Property. 14.4 Notice of Environmental Matters. Developer shall immediately advise Agency in writing of any of the following: (a) any pending or threatened environmental claim against Developer or the Property, (b) any condition or occurrence that (i) results in noncompliance with any applicable environmental law, (ii) could reasonably be anticipated to cause the Property to be subject to any restrictions on the ownership, occupancy, use or transferability of the Property under any environmental Law, or (iii) could reasonably be anticipated to form the basis of an environmental claim against the Property or Developer. 14.5 Environmental Indemnification by the Developer. Developer agrees to defend, indemnify and hold harmless the Agency and its respective officers, directors, employees and agents (collectively the "Indemnitees") from and against any and all obligations (including removal and remediation), losses, claims (including third party claims), suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including consultants, and attorneys' fees) of whatever kind or nature whatsoever that may at any time be incurred by, imposed on, or asserted against the Indemnitees directly or indirectly based on, or arising or resulting from the actual or alleged presence of Hazardous Materials on the Property other than resulting from the gross negligence or willful misconduct of any Indemnitee. 15. OTHER AFFIRMATIVE COVENANTS While any obligation of Developer under the Agency Promissory Note or Agency Deed of Trust remain outstanding, the following provisions shall apply, except to the extent that City Project Manager otherwise consents in writing: 15.1 Existence. The sole member of Developer's General Partner shall maintain its existence in good standing under the laws of the State of California. 15.2 Protection of Lien. Developer shall maintain the lien of the Agency Deed of Trust as a valid second priority deed of trust on the Property and take all actions, and execute and deliver to Agency all documents, reasonably required by Agency from time to time in connection therewith. 15.3 Notice of Certain Matters. Developer shall give notice to Agency, within ten (10) Business Days of Developer's learning thereof, of each of the following: 30 3-40 EXHIBIT 3 (a) any filed litigation or claim affecting or relating to the Property and involving an amount in excess of $5,000; and any litigation or claim that might subject Developer or any general partner to liability in excess of $5,000, whether covered by insurance or not; (b) any dispute between Developer and a Governmental Authority relating to the Property, the adverse determination of which might materially affect the Property; (c) any change in Developer's principal place of business; (d) any aspect of the Improvements that is not in substantial conformity with City of Santa Ana approved building plans or municipal code; (e) any Event of Default or event which, with the giving of notice or the passage of time or both, would constitute an Event of Default; (f) any material default by Developer or any other party under any Senior Loan document, or the receipt by Developer of any notice of default under any Senior Loan document; (g) the creation or imposition of any mechanics' or materialmans' lien or other lien against the Property which might materially affect the Property; and/or (h) any material adverse change in the financial condition of Developer. 15.4 Further Assurances. Developer shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Agency all documents, and take all actions, reasonably required by Agency from time to time to confirm the rights created or now or hereafter intended to be created under the Agency Loan Documents; to protect and further the validity, priority and enforceability of the Agency Deed of Trust; to subject to the Deed of Trust any property intended by the terms of any Loan Document(s) to be covered by the Agency Deed of Trust or otherwise to carry out the purposes of the Agency Loan Documents and the transactions contemplated thereunder, provided, however, Developer shall have not obligation to take any action, or execute any document, which would alter a material term of any Loan Document. 15.5 Annual Financial Statements. Developer shall deliver to Agency, within one hundred fifty (150) calendar days after the end of each Calendar Year, (a) a certified public accountant reviewed balance sheet for Developer as of the end of such Calendar Year and a certified public accountant reviewed statement of profit and loss for Developer and for Developer's operations in connection with the Property for such Calendar Year, together with all supporting schedules, (b) a certificate of such certified public accountant that such documents were reviewed by such certified public accountant in accordance with generally accepted accounting principles and otherwise comply with 31 3-41 EXHIBIT 3 generally accepted accounting principles review requirements, and (c) a certificate of Developer's chief financial officer that such documents: (i) were prepared in accordance with generally accepted accounting principles applied on a consistent basis or in accordance with such other principles or methods as are reasonably acceptable to Agency, (ii) fairly present Developer's financial condition, (iii) show all material liabilities, direct and contingent, and (iv) fairly present the results of Developer's operations. Developer shall also provide the Agency with any other annual audit reports issued by other monitoring agencies. Developer shall include in said reports, a document in the "Form of Residual Receipts Report" attached hereto as Exhibit G and incorporated herein. 15.6 Audits and Access to Records. Developer agrees that Agency or any of their authorized representatives shall have the right of access, upon reasonable notice and during normal business hours, to any books, documents, papers, or other records of Developer which are pertinent to this Agreement in order to make audits, examinations, abstracts, excerpts or transcripts. Developer will maintain all books and records pertaining to this Agreement for a period of not less than five (5) years after all matters pertaining to this Agreement (i.e., audit, disputes or litigation) are resolved in accordance with applicable federal or state laws, regulations or policies, and when a period of affordability or recapture applies to Developer's activities, for a period of not less than five (5) years after the affordability or recapture period ends. 15.7 Termite Inspection Report. Developer shall deliver a termite report pertaining to the Property to the Agency every fifth (5th) year beginning January 2023. 16. OTHER COVENANTS While any obligation of Developer under the Agency Note or Agency Deed of Trust remain outstanding, the following provisions shall apply, except to the extent that City Project Manager otherwise consents in writing: 16.1 Default on Senior Loan. Developer shall not default on any of the Senior Loan Documents, provided however, that Developer shall have such period as is provided in the Senior Loan Documents during which to effectuate a cure. 16.2 Sale or Lease of Property. Unless and until Developer has received a Certificate of Occupancy, Developer shall not sell, lease (other than to tenants meeting the requirements set forth in this Agreement), sublease or otherwise transfer all or any part of the Property or any interest therein without the prior written consent of the City Project Manager, which consent may be withheld in the City Project Manager's reasonable discretion. In connection with the foregoing consent requirements, Developer acknowledges that Agency relied upon Developer's particular expertise in entering into this Agreement and continues to rely on such expertise to ensure the satisfactory completion of the construction. Notwithstanding anything to the contrary contained herein, a "transfer" shall not include (i) a transfer of a General Partner's interest in Developer when made in 32 3-42 EXHIBIT 3 connection with the exercise by the Limited Partner of its rights upon a default by a General Partner under the Partnership Agreement or upon a General Partner's withdrawal in violation of the Partnership Agreement, so long as the removal and substitution of the defaulting General Partner is made within thirty (30) calendar days of such default or, if such removal and substitution cannot reasonably be completed within thirty (30) calendar days, so long as the Limited Partner commences to take action to remove and substitute the General Partner within a reasonable period and thereafter diligently proceeds to complete such substitution; (ii) any transfer of the Property to the Managing General Partner pursuant to the right of first refusal or to one or more of the General Partners pursuant to the purchase option, as provided for in the Partnership Agreement; (iii) any transfer of the Limited Partner's interest in connection with a default by the Limited Partner under and in accordance with the Partnership Agreement; and (iv) any sale, transfer or other disposition of the Limited Partner's interest in the Developer or of an interest in the Limited Partner. 17. CERTIFICATE OF COMPLETION Upon satisfactory completion of the construction and upon the request of Developer, or at its own election, the Agency shall issue a Certificate of Completion. Such Certificate of Completion shall be, and shall so state, conclusive determination of satisfactory completion of the construction. If Agency declines to furnish a Certificate of Completion after written request from Developer, the City Project Manager shall, within thirty (30) calendar days after receipt of the request, provide Developer with a written statement of the reasons therefore. The statement shall contain a description of the action Developer must take to obtain a Certificate of Completion. If the reason therefore is that the Developer has not completed a minor portion of the construction, Agency may, in its sole and absolute discretion, issue the Certificate of Completion upon the posting with Agency of a bond or other form of security acceptable to the City Project Manager in the amount of the fair value of the uncompleted work. A Certificate of Completion is not evidence of compliance with or satisfaction of the Agency Loan Documents or any obligation of Developer to any other party whatsoever, including any holder of a mortgage or deed of trust. A Certificate of Completion is not "notice of completion" referred to in Section 3093 of the California Civil Code. 18. INDEMNIFICATION 18.1 Nonliability of Agency. Developer acknowledges and agrees that: (a) The relationship between Developer and the Agency is and shall remain solely that of Developer and lender. Agency neither undertakes nor assumes any responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform Developer of any matter in connection with the construction, including matters relating to: (i) the performance of the construction work, (ii) architects, contractors, 33 3-43 EXHIBIT 3 subcontractors and materialmen, or the workmanship of or materials used by any of them, or (iii) the progress of the construction; and Developer shall rely entirely on its own judgment with respect to such matters and acknowledges that any review, inspection, supervision, approval or information supplied to Developer by Agency in connection with such matters is solely for the protection of Agency and that neither Developer nor any third party is entitled to rely on it; (b) Notwithstanding any other provision of any Loan Document: (i) the Agency is not a partner, joint venture, alter -ego, manager, controlling person or other business associate or participant of any kind of Developer and Agency does not intend to ever assume any such status; (ii) Agency's activities in connection with the Loan shall not be "outside the scope of the activities of a lender of money" within the meaning of California Civil Code Section 3434, as modified or recodified from time to time, and Agency does not intend to ever assume any responsibility to any person for the quality or safety of the Property; and (iii) Agency shall not be deemed responsible for or a participant in any acts, omissions or decisions of Developer; (c) Agency shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Property, whether arising from: (i) any defect in any building, grading, landscaping or other onsite or offsite improvement; (ii) any act or omission of Developer or any of Developer's agents, employees, independent contractors, licensees or invitees; or (iii) any accident on the Property or any fire or other casualty or hazard thereon; and, (d) By accepting or approving anything required to be performed or given to Agency under the Loan Documents, including any certificate, financial statement, survey, appraisal or insurance policy, Agency shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by Agency to anyone. 18.2 Indemnity. Developer shall defend (by counsel satisfactory to Agency), indemnify, save and hold harmless the Indemnitees from and against all claims, damages, demands, actions, losses, liabilities, costs and expenses (including, without limitation, attorneys' fees and court costs) arising from or relating to (i) this Agreement; (ii) the making of the Loan(s); (iii) a claim, demand or cause of action that any person has or asserts against Developer; (iv) any act or omission of Developer, any contractor, subcontractor or material supplier, engineer, architect or other person with respect to the Property; or (v) the ownership, occupancy or use of the Property. Notwithstanding the foregoing, Developer shall not be obligated to indemnify Agency with respect to the consequences of any act of gross negligence or willful misconduct of Agency. Developer's obligations under this Section shall survive the cancellation of the Agency Promissory Note, release and re -conveyance of the Agency Deed of Trust, issuance of the Certificate of Completion, and termination of this Agreement. 34 3-44 EXHIBIT 3 18.2.1 Notwithstanding the foregoing, neither Developer, nor any of its partners, shall be personally liable for any indemnification obligation hereunder which would result as the repayment of principal and/or interest under the Loan. 18.3 Reimbursement of Agency. Developer shall reimburse Agency immediately upon written demand for all costs reasonably incurred by Agency (including the reasonable fees and expenses of attorneys, accountants, appraisers and other consultants, whether the same are independent contractors or employees of Agency) in connection with the enforcement of the Loan Documents and all related matters including all claims, demands, causes of action, liabilities, losses, commissions and other costs against which Agency is indemnified under the Loan Documents. Such reimbursement obligations shall bear interest from the date occurring twenty (20) calendar days after Agency gives written demand to Developer and shall be secured by the Agency Deed of Trust. Such reimbursement obligations shall survive the cancellation of the Loan Note, release and re -conveyance of the Agency Deed of Trust, issuance of a Certificate of Completion, and termination of this Agreement. 19. INSURANCE, CASUALTY AND CONDEMNATION 19.1 Policies Required. While any obligation of Developer under the Loan Documents remains outstanding, Developer shall maintain at Developer's sole expense, with insurers either (i) admitted in California or (ii) are not admitted to California but have an A.M. Best Rating of "A" or above and reasonably approved by the Agency, the following policies of insurance in form and substance reasonably satisfactory to the City Attorney: (a) worker's compensation insurance and any other insurance required by law in connection with the construction; (b) prior to commencement and following completion of the construction, fire and hazard "all risk" insurance covering 100% of the replacement cost of the Improvements in the event of fire, lightning, windstorm, vandalism, malicious mischief and all other risks normally covered by "all risk" coverage policies in the area where the Property is located (including loss by flood if the Property is in an area designated as subject to the danger of flood); (c) upon commencement of the construction and at all times prior to completion of the construction, builder's risk -all risk insurance covering 100% of the replacement cost of all Improvements (including offsite materials) during the course of construction in the event of fire, lightning, windstorm, vandalism, earthquake, malicious mischief and all other risks normally covered by "all risk" coverage policies in the area where the Property is located (including loss by flood if the Property is in an area designated as subject to the danger of flood); (d) public liability insurance in amounts reasonably required by Agency from time to time, and in no event less than $1,000,000 for "single occurrence;" 35 3-45 EXHIBIT 3 (e) property damage insurance in amounts reasonably required by the Agency from time to time, and in no event less than $1,000,000; and (f) any other insurance reasonably required by Agency. All such insurance shall provide that it may not be canceled or materially modified without thirty (30) days prior written notice to Agency. The policies required under subparagraphs (b) and (c) shall include a "lender's loss payable endorsement" in form and substance satisfactory to Agency, showing the Agency as encumbrance. The Agency shall be named as an additional insured in the policies required under subparagraphs (d) and (e). Certificates of insurance for the above policies (and/or original policies, if required by Agency) shall be primary and delivered within ten (10) Business Days after demand therefore, and prior to start of any construction work. All policies insuring against damage to the Improvements shall contain an agreed value clause sufficient to eliminate any risk of co-insurance. No less than thirty (30) calendar days prior to the expiration of each policy, Developer shall deliver to Agency evidence of renewal or replacement of such policy reasonably satisfactory to the City Attorney. 19.2 City Attorney May Modify. The City Attorney may modify the type and amounts of insurance required pursuant to this Section. 19.3 Claims and Proceedings. Developer shall give Agency immediate notice of any material casualty to any portion of the Property, whether or not covered by insurance, and of the initiation or threatened initiation of any proceeding for the condemnation or other taking for public or quasi -public use of any portion of the Property (collectively, "Condemnation"), and shall provide Agency with copies of all documents which pertain to any such casualty or Condemnation. Developer shall take all action reasonably required by Agency in connection therewith to protect the interests of Developer and/or Agency, and Agency shall be entitled (without regard to the adequacy of its security) to participate in any action, claim, adjustment or proceeding and to be represented therein by counsel of its choice. Developer shall not settle, adjust, or compromise any claim, action, adjustment or proceeding without prior written approval, which approval shall not be unreasonably withheld or delayed. 19.4 Delivery of Proceeds to Agency. In the event that, notwithstanding the "lender's loss payable endorsement" requirement set forth above, the proceeds of any casualty insurance policy described herein are paid to Developer, Developer shall, subject to any superior rights of the Senior Lender, deliver such proceeds to the Agency immediately upon receipt. 19.5 Application of Casualty Insurance Proceeds. Any proceeds collected (the "Proceeds") under any casualty insurance policy described in this Agreement shall be disbursed to Developer as provided below, but only upon fulfillment of each of the following conditions (the "Restoration Conditions") within ninety (90) calendar days (unless extended by mutual agreement of Developer and Agency) following the occurrence of the receipt of the Proceeds: 36 3-46 EXHIBIT 3 (a) Developer shall demonstrate to Agency's reasonable satisfaction that the Proceeds (together with amounts deposited by Developer pursuant to subparagraph (b) and any undisbursed loan and tax credit proceeds available to the Developer) will be adequate to repair the Improvements and to restore the fair market value of the Property, within a time period reasonably determined by Agency and Senior Lender, to at least the value it had immediately prior to sustaining the damage. Such demonstration shall include delivery to Agency of (i) plans and specifications reasonably satisfactory to Agency, and (ii) a construction contract in form and content, and with a contractor, reasonably satisfactory to Agency. (b) To the extent that the Proceeds (together with all undisbursed Loan proceeds and any other financing proceeds available to the Developer) are insufficient to accomplish the restoration required above, Developer shall deliver to Agency funds (the "Shortfall Funds") in the amount of such shortfall, which funds shall be assigned to Agency as security for Developer's obligation hereunder and held and disbursed in the same manner as the Proceeds. (c) Developer shall execute such documents as Agency reasonably requires to evidence and secure Developer's obligation to use all amounts disbursed for the diligent restoration of the Property. (d) No Event of Default shall remain uncured. 19.6 Method of Disbursement and Undisbursed Funds. Any Proceeds and Shortfall Funds to be disbursed to Developer shall be held by Agency and disbursed in accordance with then customary disbursement procedures and related provisions. Any amounts remaining undisbursed following completion of such restoration shall be returned to Developer up to the amount of any Shortfall Funds deposited by Developer, and any other amounts remaining shall either be paid to Developer or applied by Agency against any obligations to Agency that are secured by a lien on the Property, as they elect in their sole and absolute discretion. 19.7 Failure to Satisfy Conditions. In the event that Developer fails to fulfill the Restoration Conditions within one hundred eighty (180) days (unless extended pursuant to Section 19.5) following the date Proceeds are received, the Proceeds shall be applied by Agency against any obligations to Agency that are secured by a lien on the Property, and the selection of which such obligations to apply the Proceeds against shall be made by Agency in its sole and absolute discretion. 19.8 Restoration. Nothing in this Section 19 shall be construed to excuse Developer from repairing and restoring all damage to the Property in accordance with other Loan Document provisions, regardless of whether insurance proceeds are available or sufficient. 19.9 Condemnation; Treatment of Compensation. Subject to any superior rights of Senior Lender, Developer hereby assigns to the Agency, as security for all obligations to Agency secured by a lien on the Property, all amounts payable to 37 3-47 EXHIBIT 3 Developer in connection with any Condemnation, and any proceeds of any related settlement (collectively, "Compensation"). Subject to any superior rights of Senior Lender, Developer shall deliver such remaining Compensation to Agency immediately upon receipt. If the taking results in a loss of the Property to an extent that, in the reasonable opinion of Agency, renders or is likely to render the Property not economically viable or if, in Agency's reasonable judgment Developer's security is otherwise impaired, Agency may apply the Compensation received due to judgment or settlement in connection with any condemnation or other taking to reduce the unpaid obligations secured in such order as Agency may determine, and without any adjustment in the amount or due dates of payments due under the Note. If so applied, any award in excess of the unpaid balance of the Note and other sums due to Agency shall be paid to Developer or Developer's assignee. Agency shall have no obligation to take any action in connection with any actual or threatened condemnation or other proceeding. 19.9.1 Notwithstanding the foregoing, as long as the value of Agency's liens are not impaired, any condemnation proceeds may be used by the Developer for repair and/or restoration of the Project. 19.9.2 Notwithstanding the foregoing, during the tax credit compliance period for the Project, as determined under Section 42 of the Internal Revenue Code, any condemnation proceeds may be used by the Developer for repair and/or restoration of the Project. 19.10 Waiver of Subrogation. Developer hereby waives all rights to recover against the Agency (or any officer, employee, agent or representative of Agency) for any loss incurred by Developer from any cause insured against or required by any Loan Document, to be insured against; provided, however, that this waiver of subrogation shall not be effective with respect to any insurance policy if the coverage thereunder would be materially reduced or impaired as a result. Developer shall use its best efforts to obtain only policies which permit the foregoing waiver of subrogation. 20. DEFAULTS AND REMEDIES 20.1 Events of Default. The occurrence of any of the following, whatever the reason therefore, shall constitute an Event of Default by Developer: (a) Developer fails to make any payment of principal or interest under the Agency Promissory Note when due, and such failure is not cured within ten (10) Business Days after Developer's receipt of written notice that such payment was not received when due; (b) Developer fails to perform any other obligation for the payment of money under any Loan Document, and such failure is not cured within ten (10) Business Days after Developer's receipt of written notice that such obligation was not performed when due; OW EXHIBIT 3 (c) Developer fails to perform any obligation (other than the obligations described in subparagraphs (a) and (b) above) under any Loan Document, and such failure is not cured within thirty (30) calendar days after Developer's receipt of written notice that such obligation was not performed; provided that, if cure cannot reasonably be effected within such thirty (30) calendar day period, such failure shall not be an Event of Default so long as Developer (in any event, within ten (10) Business Days after receipt of such notice) commences to cure, and thereafter diligently (in any event within ninety (90) calendar days after receipt of such notice) prosecutes such cure to completion; (d) Any representation or warranty in any Loan Document proves to have been incorrect in any material respect when made; (e) The Property is materially damaged or destroyed by fire or other casualty unless Developer fulfills the Restoration Conditions set forth in the insurance provisions of this Agreement within one hundred twenty (120) calendar days (unless extended pursuant to Section 19.5) and thereafter diligently restores the Property in accordance with this Agreement; (f) Work on the construction ceases for thirty (30) consecutive days for any reason (other than governmental orders, decrees or regulations, acts of God or any other deity, strikes or other causes beyond Developer's reasonable control); (g) Developer is enjoined or otherwise prohibited by any Governmental Authority from constructing and/or occupying the improvements and such injunction or prohibition continues unstayed for sixty (60) calendar days or more for any reason; (h) Developer is dissolved, liquidated or terminated, or all or substantially all of the assets of Developer are sold or otherwise transferred without the City Project Manager's prior written consent; (i) Developer is the subject of an order for relief by a bankruptcy court, or is unable or admits its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Developer applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or any part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of Developer and the appointment continues undischarged or unstayed for ninety (90) calendar days; or Developer institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, construction or similar proceeding relating to it or any part of its property; or any similar proceeding is instituted without the consent of Developer and continues undismissed or unstayed for ninety (90) calendar days; or any judgment, writ, warrant of attachment or execution, or similar process is issued or levied against any property of Developer and is not released, vacated or fully bonded within ninety (90) calendar days after its issue or levy. 39 3-49 EXHIBIT 3 0) The following occurs: (i) any of the Senior Loan documents is revoked or terminated, in whole or in part and for any reason (except due to repayment of such loans), without the City Project Manager's prior written consent, or (ii) Developer defaults or otherwise fails to perform any of its duties or obligations under or in connection with any of the Senior Loan documents, subject to all applicable notice and cure periods, or (iii) any of the Senior Loan documents is amended, supplemented or otherwise modified without Agency's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding anything to the contrary contained herein, Agency hereby agrees that any cure of any default made or tendered by Developer's Limited Partner shall be deemed to be a cure by Developer and shall be accepted or rejected on the same basis as if made or tendered by Developer. 20.2 Remedies upon Default. Upon the occurrence of any Event of Default, Agency may, at its option and in its absolute discretion, do any or all of the following: (a) By written notice to Developer, declare the principal of all amounts owing under the Loan Documents, together with all accrued interest and other amounts owing in connection therewith, to be immediately due and payable, regardless of any other specified due date; provided that any Event of Default described in Section 20.1(e) shall automatically, without notice or other action on Agency's part, cause all such amounts to be immediately due and payable; (b) In its own right or by a court-appointed receiver, take possession of the Property, enter into contracts for and otherwise proceed with the completion of the construction by expenditure of its own funds; (c) Exercise any of its rights under the Loan Documents and any rights provided by law, including, without limitation, the right to seek specific performance and the right to foreclose on any security and exercise any other rights with respect to any security, all in such order and manner as Agency elects in its sole and absolute discretion; and, (d) Suspend or terminate the award of Agency funds if Developer fails to comply with any term of such award. 20.3 Cumulative Remedies: No Waiver. Agency's rights and remedies under the Loan Documents are cumulative and in addition to all rights and remedies provided by law. The exercise by Agency of any right or remedy shall not constitute a cure or waiver of any default, nor invalidate any notice of default or any act done pursuant to any such notice, nor prejudice the Agency in the exercise of any other right or remedy. No waiver of any default shall be implied from any omission by Agency to take action on account of such default if such default persists or is repeated. No waiver of any default shall affect any default other than the default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of any Loan Document shall be construed as a waiver of any subsequent breach of the same provision. Agency's consent to or approval of any act by Developer requiring further 3-50 EXHIBIT 3 consent or approval shall not be deemed to waive or render unnecessary Agency's consent to or approval of any subsequent act. The Agency's acceptance of the late performance of any obligation shall not constitute a waiver by Agency of the right to require prompt performance of all further obligations; Agency's acceptance of any performance following the sending or filing of any notice of default shall not constitute a waiver of either party's right to proceed with the exercise of its remedies for any unfulfilled obligations; and Agency's acceptance of any partial performance shall not constitute a waiver by Agency of any rights. 21. MISCELLANEOUS 21.1 Obligations Unconditional and Independent. Notwithstanding the existence at any time of any obligation or liability of Agency to Developer, or any other claim by developer against Agency, in connection with the Loan or otherwise, Developer hereby waives any right it might otherwise have (a) to offset any such obligation, liability or claim against Developer's obligations under the Loan Documents, or (b) to claim that the existence of any such outstanding obligation, liability or claim excuses the nonperformance by Developer of any of its obligations under the Loan Documents. 21.2 Notices. All notices, demands, approvals and other communications provided for in the Loan Documents shall be in writing and be delivered to the appropriate party by personal service or U.S. mail at its address as follows: If to Developer: AMCAL 1440 Santa Ana Fund, LP c/o AMCAL Multi -Housing, Inc. 17862 E. 17th Street, Suite 209 Tustin, CA 92780 Attention: Mario Turner With a copy to: AMCAL Multi -Housing, Inc. 30141 Agoura Road, Suite 100 Agoura Hills, CA 91301 Attention: General Counsel Banc of America CDC Special Holding Company, Inc. Community Development Banking MAI -225-02-02 225 Franklin Street Boston, MA 02110 Attention: Asset Management Bank of America, N.A. MAI -225-02-02 225 Franklin Street Boston, MA 02110 Attention: Asset Management 41 3-51 EXHIBIT 3 If to Agency: Housing Authority of the City of Santa Ana Executive Director 20 Civic Center Plaza (M-26) P.O. Box 1988 Santa Ana, California 92702 Attention: Housing Manager With a copy to: Office of the City Attorney City of Santa Ana 20 Civic Center Plaza, 7th Floor (M-29) Santa Ana, California 92702 Addresses for notice may be changed as required by written notice to all other parties. All notices personally served shall be effective when actually received. All notices mailed shall be effective three (3) business days after deposit in the U.S. Mail, postage prepaid. The foregoing notwithstanding, the non -receipt of any notice as the result of a change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such notice. 21.3 Survival of Representations and Warranties. All representations and warranties in the Loan Documents shall survive the making of the Loan(s) described herein and have been or will be relied on by Agency notwithstanding any investigation made by either party. 21.4 No Third Parties Benefited. This Agreement is made for the purpose of setting forth rights and obligations of Developer and the Agency, and no other person shall have any rights hereunder or by reason hereof; provided, however, Limited Partner is intended to be a direct beneficiary of the provisions set forth in Sections 21.17, 21.18, and 21.19 hereof, and is entitled to bring an action to enforce the same independent of any rights of Developer. 21.5 Binding Effect; Assignment of Obligations. This Agreement shall bind, and shall inure to the benefit of, Developer and Agency and their respective successors and assigns. Other than as expressly provided to the contrary in this Agreement, Developer shall not assign any of its rights or obligations under any Loan Document without the prior written consent of Agency, which consent may be withheld in Agency's sole and absolute discretion. Any such assignment without such consent shall, at Agency's option, be void. 21.6 Prior Agreements; Amendments; Consents. This Agreement (together with the other Loan Documents) contains the entire agreement between the Agency and Developer with respect to the Loan and the Property, and all prior negotiations, understandings and agreements are superseded by this Agreement and such other Loan Documents. No modification of any Loan Document (including waivers of rights and conditions) shall be effective unless in writing and signed by the party against whom enforcement of such modification is sought, and then only in the specific instance and for the specific purpose given. 42 3-52 EXHIBIT 3 21.7 Governing Law. All of the Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California and Federal law, whichever is more stringent. Developer irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the State of California for the County of Orange or the United States District Court of the Central District of California, as Agency may deem appropriate, in connection with any legal action or proceeding arising out of or relating to this Agreement or the Loan Documents. Assuming proper service of process, Developer also waives any objection regarding personal or in rem jurisdiction or venue. 21.8 Severability of Provisions. No provision of any Loan Document that is held to be unenforceable or invalid shall affect the remaining provisions, and to this end all provisions of the Loan Documents are hereby declared to be severable. 21.9 Headings. Article and section headings are included in the Loan Documents for convenience of reference only and shall not be used in construing the Loan Documents. 21.10 Conflicts. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, this Agreement, unless otherwise expressly provided, shall prevail; provided however that, with respect to any matter addressed in both such documents, the fact that one document provides for greater, lesser or different rights or obligations than the other shall not be deemed a conflict unless the applicable provisions are inconsistent and could not be simultaneously enforced or performed. 21.11 Time of the Essence. Time is of the essence under this Agreement and in the performance of every term, covenant, and obligation contained herein. 21.12 Conflict of Interest. No member, elected official or employee of the Agency shall have any direct or indirect interest in this Agreement, nor participate in any decision relating to the Agreement which is prohibited by law. 21.13 Warranty against Payment of Consideration. Developer warrants that it has not paid or given, and will not pay or give, any third person any money or other consideration for obtaining this Agreement. 21.14 [Reserved] 21.15 Plans and Data. Where Developer does not proceed with the work and construction of the Project, and when this Agreement is terminated with respect thereto for any reason, Developer shall deliver to Agency any and all plans and data concerning the Property, and Agency or any person or entity designated by Agency shall have the right to use such plans and data without compensation to Developer. Such right of Agency shall be subject to any right of the preparer of the plans to their use. 43 3-53 EXHIBIT 3 21.16 Authority to Enter Agreement. Each undersigned represents and warrants that its signature herein below has the power, authority and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify the Agency fully, including reasonable costs and attorney's fees, for any injuries or damages to Agency in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. 21.17 Transfer of Developer Limited Partner's Interest. Notwithstanding anything to the contrary in this Agreement or the Loan Documents, no consent shall be required of the Agency (and it shall not be deemed a default or an Event of Default under any of the Loan Documents), in connection with the transfer and/or the assignment by the Limited Partner of its interest in the Developer to an entity controlled or managed by an entity which is related to or under common control with the Limited Partner. 21.18 Removal of Developer's General Partner. Notwithstanding anything to the contrary in this Agreement or the Loan Documents, the removal and/or replacement of a General Partner for cause in accordance with the Partnership Agreement shall not require the consent of the Agency and shall not shall not constitute a default or an Event of Default under this Agreement or the Loan Documents or accelerate the maturity of the Agency Loan. If the Limited Partner exercises its right to remove a General Partner, Agency will not unreasonably withhold its consent to the substitute general partner; provided however, the consent of either the Agency shall not be required if the substitute general partner is an affiliate of the Limited Partner. The substitute general partner shall assume all of the rights and obligations of the removed general partner hereunder. 21.19 Limited Partner Protections. Notwithstanding anything to the contrary in this Agreement or the Loan Documents: (a) If Limited Partner presents payment or otherwise cures a monetary or non -monetary default within the cure periods set forth in the Loan Documents, Agency will accept such action as curing the respective default under the Loan Documents. For avoidance of doubt, Limited Partner is not obligated to cure any default. (b) The Agency Loan has not been and will not be cross -defaulted or cross -collateralized with any other loan made with respect to another property. 3-54 EXHIBIT 3 IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be executed on the date set forth at the beginning of this Agreement. ATTEST: HOUSING AUTHORITY OF THE CITY OF SANTA ANA ACTING AS THE HOUSING SUCCESSOR AGENCY Maria D. Huizar Raul Godinez lI Clerk of the Council City Manager APPROVED AS TO FORM Sonia R. Carvalho City,AOo ney, wo Cit�jAttorney RECOMMENDED FOR APPROVAL Robert M. Zur Schmiede Interim Executive Director Community Development Agency {Signatures continue on following page) 45 3-55 EXHIBIT 3 DEVELOPER: AMCAL 1440 Santa Ana Fund, LP, a California limited partnership By: AMCAL Multi -Housing, Inc., A California corporation, Its Administrative General Partner LOIN By: Las Palmas Foundation, A California nonprofit public benefit corporation, Its Managing General Partner 46 3-56 EXHIBIT 3 EXHIBITS A. Legal Description B. Affordability Restrictions on Transfer of Property C. Agency Deed of Trust D. Agency Promissory Note E. Project Budget F. Scope of Work / Schedule of Performance G. Form of Residual Receipts Report H. Partnership Agreement 47 3-57 EXHIBIT 3 Exhibit A: Legal Description 3-58 Order No: 91910077-917-CG8-KRE EXHIBIT 3 EXHIBIT "A" All that certain real property situated in the County of Orange, State of California, described as follows: Parcel 1: The Easterly 112.51 feet of the Westerly 43 7.5 1 feet of that portion of land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the Final Decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B" Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the center lines of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Excepting therefrom, that portion of the North 71.00 feet as described in the Deed to the City of Santa Ana, recorded April 15, 1960 in Book 5196, Page 381 of Official Records. Parcel 2: A non-exclusive easement for ingress and egress over the South 25 feet of the Westerly 325 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Parcel 3: The Westerly 175.00 feet of the Easterly 375.00 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. 3-59 EXHIBIT 3 Order No: 91910077-917-CG8-KRE Excepting therefrom, the South 21 feet of the North 71 feet thereof. Parcel 4: A non-exclusive easement for ingress and egress over the South 25 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Excepting therefrom, the Easterly 375.00 feet. Parcel 5: A non-exclusive easement for ingress and egress, for sewer lines, public utilities and drainage and the maintenance of these items over the South 25 feet of the following described land: The Westerly 437 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Assessor's Parcel Number: 011-154-43 3-60 EXHIBIT 3 Exhibit B: Affordability Restrictions on Transfer of Property 3-61 EXHIBIT 3 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 When Recorded Mail to: City of Santa Ana Clerk of the Council 20 Civic Center Plaza (M-30) P.O. Box 1988 Santa Ana, CA 92702-1988 Attention: Clerk of the Council AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY {Address: 1440 East First Street, Santa Ana, California} THESE AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY (the "Restrictions") are entered into by and between AMCAL 1440 Santa Ana Fund, LP, a California limited partnership ("Developer") and the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency, a public body, corporate and politic ("Agency"). RECITALS: A. Developer is the owner of that certain real property located at 1440 East First Street, Santa Ana, California (the "Property"), more particularly described in Exhibit A, which is attached hereto and incorporated herein by this reference. B. The Agency is authorized by Section 34176 of the Health and Safety Code to perform housing functions previously performed by the City's former redevelopment agency to increase the supply of very low and low-income housing available at affordable housing costs. Pursuant to subdivision (d) of Section 34176, the low and moderate income housing asset fund ("LMIHAF") was established as a housing asset and the funds in the LMIHAF shall be used in a manner consistent with the affordable housing requirements of the Community Redevelopment Law of the State of California ("CRL"), (Part 1 commencing with Section 33000, et seq.). Such uses may include the construction, preservation, and rehabilitation of affordable housing for low- income households. C. The City and the Housing Authority of the City of Santa Ana ("Housing Authority") reviewed Developer's request for assistance and at the City Council/Housing Authority meeting on June 20, 2017, the Housing Authority Board authorized and approved issuance of a conditional, pre -commitment letter evidencing the preliminary award of $8,522,740 of funds to the Project ("Agency Loan"), to be funded exclusively from the Low and Moderate Income Housing Asset Fund (the "LMIHAF") held by the Agency. 3-62 EXHIBIT 3 D. For the purpose of providing sixty-eight (68) units of housing that will be affordable to Extremely -Low, Very -Low and Low Income households ("Assisted Units") and one (1) manager's unit, the Developer and the Agency have entered into that certain Loan Agreement, dated on or about the date hereof (the "Agency Loan Agreement") to which these Restrictions are attached as Exhibit B, which, along with all of its attachments, is incorporated herein by this reference (any capitalized term that is not otherwise defined in these Restrictions shall have the meaning ascribed to such term in the Agency Loan Agreement). E. In furtherance of the LMIHAF goals, Developer has applied to the Agency for a loan with which to: 1. provide deeper affordability and construct the improvements to the Property, and 2. thereafter to maintain, operate and professionally manage the Project as decent, safe, sanitary and affordable rental housing. F. The Agency, on certain terms and conditions, desires to make such loan ("Agency Loan") to Developer in order to make possible the construction of the Project, thereby expanding the supply of decent, safe, sanitary and affordable housing. G. If there is any inconsistency between Federal, State, and local guidelines with regard to any of the terms and conditions contained herein, the more stringent shall apply. H. The Agency Loan Agreement, Agency Deed of Trust, and Agency Promissory Note, dated concurrently herewith (collectively the "Loan Documents") are entered into for the purpose of providing for affordable extremely low, very low, and low-income residential rental units in the City of Santa Ana pursuant to the LMIHAF regulations and guidance. NOW, THEREFORE, AGENCY AND OWNER COVENANT AND AGREE AS FOLLOWS: 1. DEFINITIONS "Affordable Housing" means the total housing costs paid by a qualifying household, which shall not exceed the fraction of gross income specified in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. In the event of a conflict between the fractions specified in this Defined Terms section, and those found in Sections 50052.5 and 50053 of the Health & Safety Code, the fractions specified by State law shall control. "Affordable Rent" means the monthly rents which do not exceed the maximum amount applicable to Extremely Low, Very Low and Low -Income households, as promulgated by the California Tax Credit Allocation Committee (TCAC), or by the State of California, as applicable. "Agency" means the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency, a public body, corporate and politic, exercising governmental functions and powers, and organized and existing under the CRL. The principal office of the Agency is located at 3-63 EXHIBIT 3 20 Civic Center Plaza, Santa Ana, California 92702. "Agency" shall also refer to the City where the context dictates, to the effect that City shall have all rights granted to the Agency hereunder. "Agency Deed of Trust" means the deed of trust encumbering the Property, in the form attached as Exhibit C to the Agency Loan Agreement, to be executed by Developer pursuant to Section 5.13.1 in order to secure the Agency Loan Note. "Agency Loan" means a loan in the original principal amount of up to eight million five hundred twenty-two thousand seven hundred forty dollars ($8,522,740) to be made to Developer by the Agency to be funded exclusively from the Low and Moderate Income Housing Asset Fund held by the Agency. "Agency Loan Agreement" means the Loan Agreement regarding the loan of LMIHAF funds between the Agency and the Developer, and any attachments thereto. "Agency Loan Documents" means, collectively, the Agency Loan Agreement, Agency Promissory Note, Agency Deed of Trust and this Agreement, and any other agreement, document, or instrument that the Agency requires in connection with the execution of this Agreement or from time to time to effectuate the purposes of this Agreement. "Agency Promissory Note" means that certain promissory note for Agency Loan funds in the original principal amount of $8,522,740 in the form attached as Exhibit D to the Agency Loan Agreement, and to be executed by Developer in favor of Agency to evidence the obligation of Developer to repay the Agency Loan through residual receipts as further described in the Agency Promissory Note. "Agreement" means this Affordability Restrictions on Transfer of Property between the Agency and the Owner affecting real property. "Applicable Law" shall mean those federal, state and local laws, ordinances, regulations, policies and procedures applicable to the Agency Funds. "Building Permit" means the building permit(s) issued by the City and required for the construction. "Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday on which Santa Ana City Hall is open to the public for the conduct of City affairs. "Calendar Year" means each consecutive twelve (12) month period from January 1 to December 31. "Certificate of Completion" has the meaning set forth in Article 17 of the Agency Loan Agreement. "City" means the City of Santa Ana, California, a charter city and municipal corporation. "City" shall also refer to the Agency where the context dictates, to the effect that the Agency shall have all the rights granted to the City hereunder. i •w EXHIBIT 3 "City Project Manager" shall mean the City Manager and/or his/her designee. "Close of Escrow" shall mean the date upon which the Agency Loan Agreement and Agency Deed of Trust is recorded in the Official Records of the County. "Closing Statement" means the final statement of Developer's Escrow account for the purchase of the Property pursuant to the purchase contract. "County" means the County of Orange, California. "Developer" or "Owner" means AMCAL 1440 Santa Ana Fund, LP, a California limited partnership. "Event of Default" has the meaning set forth in Section 20.1 of the Agency Loan Agreement. "Extremely Low Income" means an adjusted income which does not exceed thirty percent (30%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by TCAC in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. "Governmental Authority" means any governmental or quasi -governmental agency, board, bureau, commission, department, court, administrative tribunal or other instrumentality or authority, and any public utility. "Hazardous Materials" means flammable materials, explosives, radioactive materials, hazardous wastes, toxic substances and similar substances and materials, including all substances and materials defined as hazardous or toxic wastes, substances or materials under any applicable law, including without limitation the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq., and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601, et seq., as amended. Hazardous Material shall not include (i) construction products, household cleaners and office materials of the type and quantity ordinarily used in the normal construction, operation and maintenance of properties similar to the Project or (ii) small amounts of household mold to the extent promptly remediated upon discovery. "HCD" means the California Department of Housing and Community Development (HCD) and any successors or assigns thereof. "Housing Authority" means the Housing Authority of the City of Santa Ana, a public body, corporate and politic. "Improvements" means all improvements and fixtures now and hereafter comprising any portion of the Property, including, without limitation, landscaping, trees and plant materials; and offsite improvements, as required through the City of Santa Ana Planning and Building Agency entitlement process. "Indebtedness" of a person means (a) all indebtedness for borrowed money, (b) notes payable and drafts accepted representing extensions of credit, whether or not representing 3-65 EXHIBIT 3 obligations for borrowed money, (c) any obligation for the purchase of property or services in excess of $10,000 in the aggregate that is (i) deferred for more than six (6) months, or (ii) evidenced by a note or similar instrument, and (d) all recourse and all non-recourse indebtedness secured by any Lien on any property or asset of such person (whether or not assumed by such person). "Indemnitees" has the meaning set forth in Section 14.5 of the Agency Loan Agreement. "Laws" means all statutes, laws, ordinances, regulations, orders, writs, judgments, injunctions, decrees or awards of the United States or any state, county, municipality or other Governmental Authority. "Lien" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any lien or security interest). "Loan Documents" or "Agency Loan Documents" means, collectively, this Agreement, the Agency Promissory Note, the Agency Deed of Trust, and the Affordability Restrictions on Transfer of Property, and any other agreement, document, or instrument that the Agency reasonably requires in connection with the execution of this Agreement or from time to time to effectuate the purposes of this Agreement. "Low Income" means an adjusted income which does not exceed eighty percent (80%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by TCAC in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. "Median Income for the Area" means the median income for the Orange County, California PMSA as most recently determined by HCD. Also may be referred to interchangeably in the Agency Loan Documents as "Area Median Income" or "AMP'. "Permitted Encumbrances for the Affordable Housing Restrictions" means collectively, the Senior Loan Deed of Trust and all other title exceptions and limitations with respect to the Property hereafter approved by the City Project Manager in writing. "Permitted Encumbrances for the Agency Deed of Trust" means the Senior Loan Deed(s) of Trust and all other title exceptions and limitations with respect to the Property hereafter approved by the City Project Manager in writing. "Project" means the construction of the Improvements upon the Property by Developer pursuant to this Agreement. "Project Budget" means the line -item budget for the Project attached as Exhibit E to the Agency Loan Agreement, as modified from time to time in accordance with the Agency Loan Agreement. Km EXHIBIT 3 "Project Costs" means all costs of any nature incurred in connection with the Project in accordance with generally accepted accounting principles. "Property" means the property that is located at 1440 East First Street in the City of Santa Ana, and is more fully described in the "Legal Description" of the Property attached hereto as Exhibit A and incorporated herein by reference. "Restricted Units" means the units restricted as affordable by the Agency Loan Documents. "Scope of Work/Schedule of Performance" means the detailed statement of the work to be performed by Developer on and to the Property pursuant to this Agreement, which is attached as Exhibit F to the Agency Loan Agreement. "Senior Lender" means a commercial financial institution providing the Senior Loan or any other holder of the Senior Loan Note. "Senior Loan" means a loan from the Senior Lender concurrent to the Agency Loan for payment of a portion of the acquisition and construction costs, and shall include any subsequent loan that refinances the initial Senior Loan. "Senior Loan Deed of Trust" means the first deed(s) of trust securing the Senior Loan by encumbering the Property. "Senior Loan Documents" means, collectively, the loan agreement governing the Senior Loan, the Senior Loan Note, the Senior Loan Deed of Trust, and any other agreement, document or instrument that the Senior Lender requires in connection with the Senior Loan. "Senior Loan Note" means the promissory note evidencing the Senior Loan from the Senior Lender. "Term of Affordability" the terms and conditions contained herein shall remain in effect for fifty-five (55) years from the date of issuance of the Certificate of Completion. "Very Low Income" means an adjusted income which does not exceed fifty percent (50%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by TCAC in accordance with Sections 50052.5 and 50053 of the Health & Safety Code. 2. USE OF THE PROPERTY. Owner covenants and agrees (for itself, its successors, its assigns, and every successor in interest to the Property of any part thereof) that Owner, such successors, and assigns shall use the Property to provide affordable rental housing, for Extremely Low, Very Low, and Low Income households, as provided in the Agency Loan Agreement and these Restrictions. 3-67 EXHIBIT 3 3. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE PROPERTY 3.1 Use Covenants and Restrictions. a. Developer agrees and covenants, which covenants shall run with the land and bind Developer, its successors, its assign and every successor in interest to the Property that Developer will make all rental units on the Property available to extremely -low, very low and low income households at rents affordable to such households for fifty-five (55) years from the effective date of the issuance of the Certificate of Occupancy. b. The Project shall consist of approximately sixty-nine (69) units of which there will be six (6) four-bedroom units, twenty-eight (28) three-bedroom units, and thirty-five (35) two-bedroom units (one being a manager's unit). Thirty-four (34) of the sixty-eight (68) Housing Units at the Project shall and will be restricted to households earning 30% or less of the AMI, twenty-one (21) of the sixty-eight (68) Housing Units at the Project shall and will be restricted to households earning 50% or less of the AMI, and thirteen (13) of the sixty-eight (68) Housing Units at the Project shall and will be restricted to households earning 60% or less of the AMI. The affordability mix for the Project is as follows: Bedroom Size 30% AMI 50% AMI 60% AMI Manager's Unit Total Two Bedroom 29 4 1 1 35 Three Bedroom 4 17 7 28 Four Bedroom 1 0 5 6 Totals 34 21 13 1 69 C. The affordable rents charged at the Project must comply with the standards set forth by the California Tax Credit Allocation Committee (TCAC). d. Utility allowances must be deducted from the Maximum Gross Monthly Rent. The Housing Authority of the City of Santa Ana publishes a utility allowance schedule on an annual basis. However, in lieu of the utility allowance schedule published by the Housing Authority, the Developer may elect to use the California Utility Allowance Calculator to the extent allowed by TCAC. 3.2 Rent Increases: A. On an annual basis, the Agency shall provide the Developer with the maximum allowable schedule of rents for the Property, which shall correspond to the maximum rent increase allowed by TCAC. In no event can Developer charge any tenant more than such amount. EXHIBIT 3 B. Developer, its successors and assigns shall not charge rents for the Restricted Units in excess of the amounts set forth in the tables as adjusted from time -to -time by TCAC. The City Project Manager, or designee, shall notify the Owner in writing of the adjusted allowable maximum incomes and rents as allowed by TCAC. C. In no event shall the rent charged to the tenant of a Restricted Unit be more than that amount of the rent as published by TCAC, as amended from time to time. D. It is anticipated that eight (8) Housing Units in the Project will be partially subsidized through a Project -Based Housing Assistance Payments Contract or other rental subsidy (the "Rental Subsidy"). If in the future operation of the Project the Rental Subsidy is terminated through no fault of the Borrower, or any change in federal law occurs or any action (or inaction) by Congress or any federal or State agency occurs which results in a reduction, termination or nonrenewal of the Rental Subsidy, the Borrower shall notify the Agency of such occurrence, the impact of such termination on the financial feasibility of the Project (including Borrower's obligation to comply with this Section 3. 1), and Borrower's efforts to find an alternative subsidy. If the Agency in its sole and absolute discretion determines that the Borrower's requirement to rent eight (8) Housing Units to Extremely -Low and Very -Low income households in accordance with Section 3.1 has a detrimental impact on the financial feasibility of the Project given the loss of the Rental Subsidy, then only upon approval by the Agency in its sole and absolute discretion the Borrower may increase the rents on one or more of the Housing Units to 50% Area Median Income as necessary to maintain the financial stability of the Project (but in no event to rents above the rents published by TCAC for Low Income households) or implement the remedial measures set forth in California Code of Regulations Title 4, Division 17, Chapter 1, Section 10337(a)(2) or successor regulation applicable to California's Federal and State Low Income Housing Tax Credit Program, provided that subsequent legislative or judicial interpretation of the CRL and LMIHAF regulations and guidance allows for such remedial measures. 4. Miscellaneous Provisions: A. Owner shall adopt and include as part of its Management Plan (described in subsection G below), written tenant selection policies and criteria for the Units, that meet the following requirements: (a) Are consistent with the purpose of providing housing for Extremely -Low, Very -Low and Low Income households; (b) Are reasonably related to program eligibility and the applicants' ability to perform the obligations of the lease; (c) Reserved; (d) Provide for: (i) The selection of tenants from a written waiting list in the chronological order of their application based on the Santa Ana Local Preference, insofar as is practicable; and, 3-69 EXHIBIT 3 (ii) The prompt written notification to any rejected applicant of the grounds for any rejection; (e) Provide first priority in the selection of qualified eligible tenants to households that meet the Local Preference as more fully described in the Loan Agreement with first priority for persons who have been permanently displaced or face permanent displacement from housing in Santa Ana and second priority for persons who are either residents of Santa Ana and/or working in Santa Ana at least 32 hours per week for at least the last 6 months; and, (f) Carry out the Affirmative Marketing procedures of the City of Santa Ana, which are designed to provide information and otherwise attract eligible persons from all racial, ethnic and gender groups in the housing market area to the units. The Owner and the Agency shall cooperate to effectuate this provision prior to the initial renting, or upon occurrence of a vacancy, and the re -renting of any Restricted Units. B. Owner, its successors and assigns, shall not refuse to lease a unit to a holder of a rental voucher under 24 CFR part 887 (Housing Choice Voucher Program) or to a holder of a comparable document evidencing participation in a federally funded tenant -based assistance program (e.g. HUD -Veterans Affairs Support Housing) because of the status of the prospective tenant as a holder of such certificate of family participation, rental voucher, or comparable tenant -based assistance document. C. Any lease of any of the Units must be for not less than one year, unless by mutual agreement between the tenant and the Owner. Should the tenant and Owner agree to a term of less than one year, said agreement shall be expressed in some type of written form, signed by the tenant, and maintained in the tenant's rental file held by the Owner. The lease may not contain any of the following provisions (in which references to "Owner" shall mean the Owner, its successors or assigns): (a) Agreement by the tenant to be sued, to admit guilt, or to a judgment in favor of the owner in a lawsuit brought in connection with the lease; (b) Agreement by the tenant that the owner may take, hold, or sell personal property of household members without notice to the tenant and a court decision on the rights of the parties. This prohibition, however, does not apply to an agreement by the tenant concerning disposition of personal property remaining in the housing unit after the tenant has moved out of the unit. The owner may dispose of this personal property in accordance with state law; (c) Agreement by the tenant not to hold the owner or the owner's agent legally responsible for any action or failure to act, whether intentional or negligent; (d) Agreement of the tenant that the owner may institute a lawsuit without notice to the tenant; (e) Agreement by the tenant that the owner may evict the tenant or household members without instituting a civil court proceeding in which the tenant has the opportunity to present a defense, or before a court decision on the rights of the parties; 3-70 EXHIBIT 3 (f) Agreement by the tenant to waive any right to a trial by jury; (g) Agreement by the tenant to waive the tenant's right to appeal, or to otherwise challenge in court, a court decision in connection with the lease; and (h) Agreement by the tenant to pay attorney's fees or other legal costs even if the tenant wins in a court proceeding by the owner against the tenant. The tenant, however, may be obligated to pay costs if the tenant loses. D. Owner, its successors or assigns, must adhere to state law requirements with regard to termination of tenancy. E. Owner shall maintain the improvements on the Property in compliance with housing quality standards as defined by HUD in the federal regulations at 24 CFR 92.504 (c)(6) and state and local code requirements and shall keep the Property free from any unreasonable accumulation of debris or waste materials. Owner shall also maintain in a healthy condition any landscaping planted on the Property. F. Owner covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, there shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, disability, sex, marital status, national origin, immigration status, or ancestry in the sale, lease, transfer, use, occupancy, tenure or enjoyment of the Property nor shall the Owner itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property, as required by the Title VI of the Civil Rights Act of 1964, the Fair Housing Act (42 U.S.C. 3601-20) and all implementing regulations, and the Age Discrimination Act of 1975, and all implementing regulations. G. No later than the closing date for the construction loan for the Project, Owner shall submit to the City Project Manager a Management Plan in a form that is acceptable including, but not limited to, the components listed above and below. Approval of the Management Plan must be obtained from the City Project Manager no later than the time for the issuance of a Certificate of Occupancy for the Project. Owner shall manage the Restricted Units in accordance with the approved Management Plan, including such amendments as may be approved in writing from time to time by the City Project Manager, for the term of the income and rent restrictions contained in these Restrictions. The components of the Management Plan shall include: (a) Management Agent. Owner shall submit the name and qualifications of the proposed Management Agent. The City Project Manager shall approve or disapprove the proposed Management Agent in writing based on the experience and qualifications of the Management Agent. The City hereby approves FPI Property Management as the initial Management Agent for the Property. (b) Management Agreement. Owner shall submit a copy of the proposed management agreement specifying the amount of the management fee, and the relationship and division of responsibilities between Owner and Management Agent. 3-71 EXHIBIT 3 (c) Annual Budget and Projected Cash Flows. Prior to the issuance of a certificate of occupancy for the Project, and annually thereafter not later than one hundred fifty (150) days after the close of each calendar year thereafter, Owner shall submit a projected operating budget and cash flow to the City Project Manager. The budget and cash flow shall be in a form that is acceptable to the City Project Manager. (d) Tenant Selection Policies. Owner shall include in the Management Plan the tenant selection policies in accordance with Section 4 above. H. If at any time the Agency determines that the units are not being managed or maintained in accordance with the approved Management Plan, Agency shall provide Owner with notice thereof which notice shall include a reasonable cure period not less than thirty (30) calendar days. If the deficiencies have not been cured within the cure period provided in the Agency notice Owner shall change the management agent or the practices complained of, upon receipt of written notice from the City Manager. The Agency may require Owner to change management practices or to terminate the management contract and designate and retain a different management agent. The management agreement shall provide that it is subject to termination by Owner without penalty, upon thirty (30) calendar days prior written notice, at the direction of the City Project Manager. Within ten (10) Business Days following a direction of the City Project Manager to replace the management agent, the Owner shall select another management agent or make other arrangements satisfactory to the City Project Manager or designee for continuing management of the units. I. The covenants established in these Restrictions and any amendments hereto approved by the Agency, and Owner shall, without regard to technical classification and designation, be binding for the benefit and in favor of the Agency and their respective successors and assigns. These Restrictions shall remain in effect for fifty-five (55) years from the effective date of issuance of the Certificate of Occupancy. The covenants against discrimination shall remain in effect for the period of these Restrictions. J. Owner shall not request disbursement of Agency funds until the funds are needed to pay eligible costs. The Agency shall have the right to disapprove any request if the Agency determines the request is for an ineligible item or is otherwise not in compliance with or inconsistent with the Loan Agreements and these Restrictions. K. Owner shall prepare, maintain and submit to the Agency, as appropriate, the following records and reports: a. Annual Reports. Owner shall file with the Agency an Annual Report (herein referred to as the "Annual Report") within one hundred fifty (150) days following the end of each calendar year, commencing the Calendar Year following the issuance of the Certificate of Completion. The Annual Report shall contain a certification by Owner as to such information as the City Project Manager may then require, including, but not limited to, the following: (1) The fiscal condition of the Project, including the Annual Budget and Project Cash Flow report required by Section 4.G. (c) of this Agreement which shall include an audited financial statement for the previous calendar year that includes a balance sheet and a 3-72 EXHIBIT 3 profit and loss statement indicating any surplus or deficit in operating accounts; a detailed itemized listing of income and expenses; and the amounts of any fiscal reserves. Such Annual Budget and audited financial statement shall be prepared in accordance with generally accepted accounting practices. (2) Any substantial physical defects in the Project, including a description of any major repair or maintenance work undertaken or needed in the previous and current years. Such statement shall describe what steps Owner has taken in order to maintain the Project in a safe and sanitary condition in accordance with applicable housing and building codes and the housing quality standards set forth in 24 CFR 92.251. (3) The occupancy of the units indicating the income of each current resident and the current rents charged each resident and whether those rents include utilities. (4) General management performance, including tenant relations and other relevant information. (5) Records that demonstrate that the units meet the affordability requirements described herein for the required period of affordability. (6) Evidence of a currently paid hazard insurance policy in accordance with the requirements of Section 6 of the Agency Deed of Trust, with a loss payable endorsement naming the Agency as a loss payee together with other approved lenders (as their interests may appear), with a "Replacement Cost Endorsement" in an amount sufficient to prevent the Owner or the Agency from becoming a co-insurer under the terms of the policy, but in any event in an amount not less than 100% of the then full replacement cost, to be determined at least once annually and subject to reasonable approval by the City Project Manager. (7) Evidence of a currently paid liability insurance policy, naming the Agency as additional insured and in a form approved by the City Attorney with coverage as described in the Loan Agreements. (8) Termite reports pertaining to the Property every fifth (5th) year. (9) Such other information as may be reasonably required by the City Project Manager or his/her designee. b. Records and Audits. Owner shall maintain the following general program records, and make them available for inspection by the Agency or the State: (1) records which demonstrate that the project meets the Housing Quality Standards as specified in 24 CFR 92.251; (2) records for each Restricted Unit. (3) records which demonstrate compliance with the tenant and participant protections, as specified in 24 Section 29.253; 3-73 EXHIBIT 3 (4) records which demonstrate compliance with the Equal Opportunity and Fair Housing requirements outlined in these Restrictions, including: (A) data on the extent to which each racial and ethnic group and single head of household (by gender of head of household) have applied for, participated in, or benefited from, any program or activity funded in whole or in part with Agency funds; (B) documentation of actions undertaken to meet the equal opportunity requirements of 24 CFR 92.350, which implements Section 3 of the Housing Development Act of 1968, as amended (12 U.S.C. 1701u); (5) documentation of the steps taken to carry out an affirmative marketing program in accordance with 24 CFR 92.351, if applicable; (6) if applicable, records which demonstrate compliance with the requirements relating to relocation of displaced persons, as described in 24 CFR 92.353. At a minimum, these shall include project occupancy lists identifying the name and address of all persons occupying the project property up until the date of the date on which Owner obtained ownership of the Property; Housing Rule; (7) records concerning lead-based paint in accordance with the Lead Safe (8) reserved; (9) records of certifications of contractor qualifications as they relate to the debarment and suspension requirement as stated in 24 CFR 92.357 and 24 CFR Part 24; and (10) any other reports issued by other monitoring agencies. C. Reserved. d. If so directed by the Agency upon termination of the Loan Agreement, Owner shall cause all records, accounts, documentation and all other materials relevant to the work to be delivered to the Agency, as depository. e. All records, accounts, documentation and other materials relevant to the Project shall be accessible at any time to the authorized representatives of the Agency or the State, on reasonable prior notice, for the purpose of examination or audit. f. Reserved. g. Owner shall permit the Agency to perform an Annual Physical Inspection of the Property with reasonable notice. Owner shall cooperate with this Inspection and shall take all steps necessary to quickly correct any code deficiencies identified during the Inspection. 3-74 EXHIBIT 3 L. The Agency is the beneficiary of the terms and provisions of these Restrictions and the covenants herein, both for and in its own right and for the purposes of protecting the interests of the community and other parties, public or private, for whose benefit these Restrictions and the covenants running with the land have been provided. The Agency shall have the right if the covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which they or any other beneficiaries of these Restrictions and covenants are entitled. M. The covenants and agreements contained herein shall run with the land and not be personal obligations of Owner. Upon the sale, conveyance or other transfer of the Property (a "Transfer") and the assumption of the obligations hereunder by a transferee, Owner's liability for performance shall be terminated as to any obligation to be performed hereunder after the date of such Transfer. N. The Loan Agreement and all of its attachments shall be enforceable by the Agency in accordance with the terms thereof. Each of the Loan Agreement, the Affordability Restrictions on Transfer of Property, the Agency Note and the Agency Deed of Trust provide a means of enforcement by the Agency if Owner is in breach of its obligations hereunder and thereunder, including liens on the Property, deed restrictions and covenants running with the land. 3-75 EXHIBIT 3 IN 'WITNESS WHEREOF, the parties hereto have caused these Affordability Restrictions on Transfer of Property to be executed on the date first stated above. ATTEST: HOUSING AUTHORITY OF THE CITY OF SANTA ANA ACTING AS THE HOUSING SUCCESSOR AGENCY Maria D. Huizar Raul Godinez II Clerk of the Council City Manager APPROVED AS TO FORM Sonia R. Carvalho RECOMMENDED FOR APPROVAL Robert M. Zur Schmiede Interim Executive Director Community Development Agency (Signatures continue on following page) 3-76 EXHIBIT 3 DEVELOPER: AMCAL 1440 Santa Ana Fund, LP, a California limited partnership By: AMCAL Multi -Housing, Inc., a California corporation, its Administrative General Partner 10 By: Las Palmas Foundation, a California nonprofit public benefit corporation, its Managing General Partner Lo 3-77 EXHIBIT 3 Exhibit C: Deed of Trust 3-78 EXHIBIT 3 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 When Recorded Mail to: Clerk of the Council City of Santa Ana 20 Civic Center Plaza P.O. Box 1988 (M-30) Santa Ana, California 92702 Attn: Clerk of the Council AGENCY DEED OF TRUST AND ASSIGNMENT OF RENTS THIS AGENCY DEED OF TRUST AND ASSIGNMENT OF RENTS (the "Deed of Trust") made this 16 day of January, 2018, by between AMCAL 1440 Santa Ana Fund, LP, a California limited partnership (the "Trustor"), AmeriNat, a Minnesota corporation (the "Trustee"), and the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency, a public body, corporate and politic (the 'Beneficiary"). Trustor, in consideration of the promises herein recited and the trust herein created, irrevocably grants, transfers, conveys and assigns to Trustee, in trust, with power of sale, the property located in the City of Santa Ana, County of Orange, State of California, described in the attached Exhibit A and more commonly known as 1440 East First Street, Santa Ana, California (the "Property"); TOGETHER with all the improvements now or hereafter erected on the Property, and all easements, rights, appurtenances and all fixtures now or hereafter attached to the Property, all of which, including replacements and additions thereto, shall be deemed to be and remain a part of the Property covered by this Agency Deed of Trust; provided that so long as Trustor is not in default hereunder, it shall be permitted to control the Property in accordance with the requirements of that certain Agency Loan Agreement entered into between the Trustor and the Beneficiary, dated concurrently herewith, which Agreement is on file with the Beneficiary as a public record; TOGETHER with the right, power and authority during the continuance of this Trust, to collect the rents, issues, and profits of the Property, reserving unto the Trustor the right, prior to any default by Trustor in payment of the indebtedness secured by this Deed of Trust or in the performance of any agreement under this Deed of Trust, to collect and retain these rents, issues and profits as they become due and payable; and, TOGETHER with all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected, or hereafter to be erected, on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities 1 3-79 EXHIBIT 3 conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner; and all of the foregoing, together with the Property, is herein referred to as the "Security"; To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever; TO SECURE to the Beneficiary (a) the repayment of the sums evidenced by the Promissory Note to the Beneficiary executed by Trustor of even date herewith in the principal amount of eight million five hundred twenty-two thousand seven hundred forty dollars ($8,522,740) (the "Agency Promissory Note"); (b) the performance of the covenants and agreements of Borrower contained in a certain Agreement as hereinafter defined; and (c) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Deed of Trust; and the performance of the covenants and agreements of Trustor contained herein. �IiZif.`yC�77_�►1�71Y:1�:��1�I�1�1[�1 /_\�•ZK�li/�l�/-\�IIII_\�f �7e«fi�l�/_�•Y�L�]�liC�1+.�IC� 1. The Agreement. This Deed of Trust is executed and delivered, along with the Agency Promissory Note and the Agency Loan Agreement, to benefit the Property. A copy of said Agency Loan Agreement is on file as a public record with the Beneficiary and is incorporated herein by reference (the "Agreement"). Trustor acknowledges that but for the execution of this Agency Deed of Trust, the Beneficiary would not enter into the Agency Loan Agreement or Agency Promissory Note secured by this Agency Deed of Trust. 2. Trustor's Estate. Trustor is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Security; that other than this Deed of Trust, the Security is not encumbered except for obligations secured by deeds of trust, or any other security agreement, to secure financing or refinancing for the purchase and rehabilitation of the Property. 3. Repayment of the Loan. Trustor will promptly repay, when due, the principal loan amount, as required by the Agency Promissory Note secured by this Deed of Trust. 4. Subordination. This obligation secured by this Deed of Trust shall be subordinated to the Senior Loan, but the Agency's Affordability Restrictions on Transfer of Property shall remain in first place. 5. Prior Mortgages and Deeds of Trust; Charges; Liens. Trustor shall perform all of Trustor's obligations under any mortgage, deed of trust or other security agreement with a lien which has priority over this Instrument, including Trustor's covenants to make payments when due (subject to all applicable notice and cure provisions). Trustor will pay all taxes, assessments and other charges, fines and impositions attributable to the Security which may attain a priority over this Deed of Trust, by Trustor making any payment, when due, directly to the payee thereof. Trustor will promptly furnish to the Beneficiary all notices of amounts due under this paragraph, and in the event Trustor makes payment directly, Trustor will promptly discharge any lien which has priority over this Deed of Trust; provided that Trustor will not be required to discharge the lien of the Deed of Trust securing any senior lender or any other lien described in this paragraph so long as Trustor will agree in writing to the payment of the obligation secured by such lien in a manner acceptable to 4" EXHIBIT 3 the Beneficiary, or will, in good faith, contest such lien by, or defend enforcement of such lien in, legal proceedings which operate to prevent the enforcement of the lien or forfeiture of the Security or any part thereof. 6. Hazard Insurance. Trustor will keep the Security insured by such insurance policies in such amounts and for such periods as called for in the Agency Loan Agreement. All insurance policies and renewals thereof will include a standard mortgagee clause with standard lender's endorsement in favor of the holder of the Senior Lender and the Beneficiary as their interests may appear and in a form acceptable to the Beneficiary. The Beneficiary shall have the right to hold, or cause its designated agent to hold, the policies and renewals thereof, and Trustor shall promptly furnish to the Beneficiary, or its designated agent, the original insurance policies or certificates of insurance, all renewal notices and all receipts of paid premiums subject to the rights of Senior Lender. In the event of loss, Trustor will give prompt notice to the insurance carrier and the Beneficiary or its designated agent. The Beneficiary, or its designated agent, may make proof of loss if not made promptly by Trustor. The Beneficiary shall receive thirty (30) calendar days advance notice of cancellation of any insurance policies required under this Section. Unless the Beneficiary and Trustor otherwise agree in writing, insurance proceeds, subject to the rights of the Senior Lender, will be applied to restoration or repair of the Security damaged, provided such restoration or repair is economically feasible and the security of this Deed of Trust is not thereby impaired. If such restoration or repair is not economically feasible or if the security of this Deed of Trust would be impaired, again, subject to the rights of the Senior Lender, the insurance proceeds will be used to repay the loan secured by this Deed of Trust, with the excess, if any, paid to Trustor. If the Security is abandoned by Trustor, or if Trustor fails to respond to the Beneficiary, or its designated agent within thirty (30) calendar days from the date notice is mailed by either of them to Trustor that the insurance carrier offers to settle a claim for insurance benefits, the Beneficiary, or its designated agent, is authorized to collect and apply the insurance proceeds at the Beneficiary's option either to restoration or repair of the Security or to repay the loan. If the Security is acquired by the Beneficiary, all right, title and interest of Trustor in and to any insurance policy and in and to the proceeds thereof resulting from damage to the Security prior to the sale or acquisition will pass to the Beneficiary to the extent of the sums secured by this Deed of Trust immediately prior to such sale or acquisition subject to the rights of the Senior Lender. 7. Preservation and Maintenance of Security. Trustor will keep the Security in good repair and will not commit waste or permit impairment or deterioration of the Security. 8. Protection of the Beneficiary's Security. If Trustor fails to perform the covenants and agreements contained in this Deed of Trust or if any action or proceeding is commenced which materially affects the Beneficiary's interest in the Security, including, but not limited to, default under the Deed of Trust securing the Senior Lender, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then the Beneficiary, at the Beneficiary's option, upon notice to Trustor, may make such appearances, disburse such sums and take such action as it determines necessary to protect the Beneficiary's interest, including, but not limited to, disbursement of reasonable attorneys' fees and entry upon the Security to make repairs. 3 3-81 EXHIBIT 3 Any amounts disbursed by the Beneficiary pursuant to this paragraph, with interest thereon, will become an indebtedness of Trustor secured by this Deed of Trust. Unless Trustor and the Beneficiary agree to other terms of payment, such amount will be payable upon notice from the Beneficiary to Trustor requesting payment thereof, and will bear interest from the date of disbursement at the rate payable from time to time on outstanding principal under the Agency Promissory Note unless payment of interest at such rate would be contrary to applicable law, in which event such amounts will bear interest at the highest rate permissible under applicable law. Nothing contained in this paragraph will require the Beneficiary to insure any expense or take any action hereunder. 9. Inspection. The Beneficiary may make, or cause to be made, reasonable entries upon and inspections of the Security upon reasonable prior notice during normal business hours, provided that the Beneficiary will give Trustor reasonable notice of inspection. 10. Forbearance by the Beneficiary Not a Waiver. Any forbearance by the Beneficiary in exercising any right or remedy will not be a waiver of the exercise of any such right or remedy. The procurement of insurance or the payment of taxes or other liens or charges by the Beneficiary will not be a waiver of the Beneficiary's right to accelerate the maturity of the indebtedness secured by this Deed of Trust. 11. Remedies Cumulative. All remedies provided in this Deed of Trust are distinct and cumulative to any other right or remedy under this Deed of Trust or any other document, or afforded by law or equity, and may be exercised concurrently, independently or successively. 12. Successors and Assigns Bound. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the Beneficiary and Trustor subject to the provisions of this Deed of Trust. 13. Joint and Several Liability. All covenants and agreements of Trustor shall be joint and several. 14. Notice. Except for any notice required under applicable law to be given in another manner, all notices, demands, approvals and other communications provided for in this Agency Deed of Trust shall be in writing and be delivered by certified U.S. mail, return receipt requested, at the address as follows: If to Trustor: AMCAL 1440 Santa Ana Fund, LP c/o AMCAL Multi -Housing, Inc. 17862 E. 17th Street, Suite 209 Tustin, CA 92780 Attention: Mario Turner With a copy to: AMCAL Multi -Housing, Inc. 30141 Agoura Road, Suite 100 Agoura Hills, CA 91301 Attention: General Counsel 4 3-82 EXHIBIT 3 Banc of America CDC Special Holding Company, Inc. Community Development Banking MAl-225-02-02 225 Franklin Street Boston, MA 02110 Attention: Asset Management If to Trustee: AmeriNat 8121 E. Florence Avenue Downey, California 90240 If to Beneficiary: Housing Authority of the City of Santa Ana Executive Director 20 Civic Center Plaza (M-26) P.O. Box 1988 Santa Ana, California 92702 Attention: Housing Manager With a copy to: Office of the City Attorney City of Santa Ana 20 Civic Center Plaza, 7th Floor (M-29) Santa Ana, California 92702 Addresses for notice may be changed as required by written notice to all other parties. All notices personally served shall be effective when actually received. All notices mailed shall be effective three (3) business days after deposit in the U.S. Mail, postage prepaid. The foregoing notwithstanding, the non -receipt of any notice as the result of a change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such notice. 15. Governing Law. This Deed of Trust shall be governed by the laws of the State of California with venue in Orange County. 16. Severability. In the event that any provision or clause of this Deed of Trust or the Agency Promissory Note conflicts with applicable law, such conflict will not affect other provisions of this Deed of Trust or the Agency Promissory Note which can be given effect without the conflicting provision, and to this end the provisions of the Deed of Trust and the Agency Promissory Note are declared to be severable. 17. Captions. The captions and headings in this Deed of Trust are for convenience only and are not to be used to interpret or define the provisions hereof. 18. Default in Foreclosure; Remedies. Upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust or the Agency Promissory Note secured by this Deed of Trust, including, but not limited to, the covenants to pay, when due, any sums secured by this Deed of Trust, the Beneficiary may declare all sums secured by this Deed of Trust immediately due and payable by delivering to Trustor notice thereof specifying: (1) The breach; (2) the action required to cure such breach; (3) a date not less than thirty (30) calendar days from the date the notice is 5 3-83 EXHIBIT 3 received by Trustor as shown on the return receipt, by which such breach is to be cured provided, however, that if such default is not reasonable susceptible to being cured within thirty (30) calendar days, Trustor shall have a reasonable period to cure the defect so long as Trustor is diligently prosecuting the cure to completion; and (4) that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust and sale of the Security. The notice will also inform Trustor of Trustor's right to reinstate after acceleration and the right to bring a court action to assert the non-existence of default or any other defense of Trustor to acceleration and sale. Notwithstanding anything to the contrary contained herein, a "default" shall not include any transaction not considered a "transfer" under Section 16.2 of the Loan Agreement. If the breach is not cured on or before the date specified in the notice or such longer period as provided above or in the Agency Promissory Note or the Agreement, the Beneficiary, at the Beneficiary's option, may: (a) declare all of the sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by California law; (b) either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Security and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of the Trustee, and do any acts which it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security shall not cure or waive any breach hereunder or invalidate any act done in response to such breach and, notwithstanding the continuance in possession of the Security, the Beneficiary shall be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any uncured breach, including the right to exercise the power of sale; (c) commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (d) deliver to the Trustee a written declaration of default and demand for sale, pursuant to the provisions for notice of sale found at California Civil Code Sections 2924, et seq., as amended from time to time; or (e) exercise all other rights and remedies provided herein, in the instruments by which Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or provided by law. Notwithstanding anything to the contrary herein, Beneficiary hereby agrees that any cure of any default made or tendered by Trustor's limited partner shall be deemed to be a cure by Trustor and shall be accepted or rejected on the same basis as if made or tendered by Trustor. The Beneficiary shall be entitled to collect all reasonable costs and expenses incurred in pursuing the remedies provided in this paragraph, including, but not limited to, reasonable attorneys' fees. 19. Trustor's Right to Reinstate. Notwithstanding the Beneficiary's acceleration of the sums secured by this Deed of Trust, Trustor will have the right to have any proceedings begun by the Beneficiary to enforce this Deed of Trust discontinued at any time prior to three (3) business days before sale of the Security pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust i£ (a) Trustor pays the Beneficiary all sums which would be then due under this Deed of Trust and no acceleration under CIE EXHIBIT 3 the Agency Promissory Note has occurred; (b) Trustor cures all breaches of any other covenants or agreements of Trustor contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by the Beneficiary and the Trustee in enforcing the covenants and agreements of Trustor contained in this Deed of Trust and in enforcing the Beneficiary's and the Trustee's remedies, including, but not limited to, reasonable attorneys' fees; and (d) Trustor takes such action as the Beneficiary may reasonably require to assure that the lien of this Deed of Trust, the Beneficiary's interest in the Security and Trustor's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by Trustor, this Deed of Trust and the obligations secured hereby will remain in full force and effect as if no acceleration had occurred. 20. Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any parry to this Deed of Trust of pending sale under any other deed of trust or any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. 21. Reconveyance. Upon payment of all sums secured by this Deed of Trust, the Beneficiary will request the Trustee to reconvey the Security and will surrender this Deed of Trust and the Agency Promissory Note to the Trustee. The Trustee will reconvey the Security without warranty and without charge to the person or persons legally entitled thereto. Such person or persons will pay all costs of recordation, if any. 22. Substitute Trustee. The Beneficiary, at the Beneficiary's option, may from time to time remove the Trustee and appoint a successor trustee to any Trustee appointed hereunder. The successor trustee will succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law. 23. Request for Notice. Trustor requests that copies of any notice of default and/or notice of sale be sent to Trustee at the address set forth in Section 14 above. 24. Nonrecourse Liability. Neither Trustor nor any partner of Trustor shall have any personal liability under the Agreement, Agency Promissory Note, and this Deed of Trust and any judgment, decree or order for payment of money obtained in any action to enforce the obligation of Trustor to repay the loan evidenced by such documents shall be enforceable against Trustor only to the extent of Trustor's interest in the Property. (Signatures on Following Page) 7 3-85 EXHIBIT 3 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date first written above. AMCAL 1440 Santa Ana Fund, LP, a California limited partnership By: AMCAL Multi -Housing, Inc., a California corporation, its Administrative General Partner 10 By: Las Palmas Foundation, a California nonprofit public benefit corporation, its Managing General Partner LO Im EXHIBIT 3 Exhibit D.le Promissory Note 3-87 EXHIBIT 3 HOUSING FUNDS PROMISSORY NOTE SECURED BY AGENCY DEED OF TRUST FOR THE HOUSING AUTHORITY OF THE CITY OF SANTA ANA (1440 East First Street, Santa Ana, California) $8,522,740.00 1. Principal Amount of Loan January 16, 2018 Santa Ana, California FOR VALUE RECEIVED, AMCAL 1440 Santa Ana Fund, LP, a California limited partnership ("Borrower"), hereby promises to pay to the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency, a public body, corporate and politic ("Agency"), a principal amount not to exceed EIGHT MILLION FIVE HUNDRED TWENTY-TWO THOUSAND SEVEN HUNDRED FORTY DOLLARS ($8,522,740) or so much thereof as may be advanced by the Agency to the Borrower, due and payable with three percent simple interest (3%) commencing upon filing of the Notice of Completion by residual receipts over the fifty-five (55) year term, pursuant to the Agency Loan Agreement (said "Agreement") between Borrower and the Agency dated concurrently herewith, which is incorporated herein by this reference. This loan is made pursuant to subdivision (d) of Section 34176 of the California Health and Safety Code to establish the low and moderate income housing asset fund ("LMIHAF") with money funded as "Agency Housing Funds or Agency Funds". Any capitalized term not otherwise defined in this Promissory Note shall have the meaning ascribed to such term in the Agreement. The obligation of Borrower to Agency hereunder is subject to the terms of said Agreement, the Affordability Restrictions on Transfer of Property, Agency Deed of Trust and this Promissory Note. Said documents are public records on file in the offices of the Agency, and the provisions of said documents are incorporated herein by this reference. This Promissory Note, said Agreement, the Affordability Restrictions on Transfer of Property, and the Agency Deed of Trust are sometimes collectively referred to herein as the "Loan Documents". The Loan Documents and the rights and responsibilities inure to the benefit of the Agency. Any capitalized term which is not otherwise defined herein shall have the meaning ascribed to such term in the Agreement. This Promissory Note evidences the obligation of Borrower to the Agency for the repayment of the Agency Loan of Agency Funds attributable to the acquisition, development, and construction of the Property, and related soft costs. This Promissory Note is payable at the principal office of the City of Santa Ana — Community Development Agency, 20 Civic Center Drive, Santa Ana, California 92702, Attn: Housing Division, or at such other place as the holder hereof may inform Borrower in writing, in lawful money of the United States. am EXHIBIT 3 2. Definitions. For the purpose of calculating the payments to be made by Borrower to Agency pursuant to this Promissory Note, the following terms shall have the following respective meanings: "Agency Assisted Units" shall mean those rental units constructed on the Property which are subject to the term of affordability. "Agency Funds" shall mean the money provided by the Housing Successor Agency for the acquisition and construction of the rental units hereunder. "Agency Deed of Trust" shall mean the Agency Deed of Trust in favor of the Agency, securing the Agency Loan, substantially in the form attached to the Agreement as Exhibit D, which is incorporated herein by this reference. "Agency. Loan" shall mean the loan evidenced by this Promissory Note repayable to the Agency in accordance with the terms of this Promissory Note and secured by the Agency Deed of Trust. "Agency's Percentage" with reference to the Residual Receipts, shall mean fifty percent (50%) of the total Residual Receipts from the Property as further described in Section 5 hereof. "Agreement" means the Agency Loan Agreement between the Agency and the Developer, and any attachments or amendments thereto. "Applicable Law" shall mean those federal, state and local laws, ordinances, regulations, policies and procedures applicable to the Agency and the Agency Funds. "Area Median Income" means the median income figures for Orange County as published by the California Department of Housing and Community Development (HCD). Also may be referred to as "AMI" herein. "Borrower" means AMCAL 1440 Santa Ana Fund, LP, a California limited partnership. "Calendar Year" means each consecutive twelve (12) month period from January 1 to December 31. "Closing Costs" shall mean: (i) In the case of a Sale, reasonable brokerage commissions payable to a broker as a result of the Sale, which shall not in any event exceed the customary amount charged -for similar transactions in the immediate market place, costs of title insurance premiums, documentary stamp taxes, escrow fees, recording charges, loan repayment charges and other costs reasonably incurred with respect to the Property, in each case actually paid by Borrower as a condition of the Sale. 2 an EXHIBIT 3 (ii) In the case of a Refinancing, the reasonable and necessary costs of consummating such Refinancing, including, without limitation, loan fees, loan repayment charges, costs of title insurance premiums, escrow fees, recording fees and attorneys' fees. "Gross Revenues" shall mean all revenues and receipts of every kind actually received by Borrower from operating the Property, and all parts thereof, including, but not limited to, income from both cash and credit transactions, rental from leased and/or subleased spaces and parking fees and charges (but not including security deposits and other tenant deposits, except to the extent such deposits are forfeited to the Borrower under the tenant's lease). Gross Revenues also includes any casualty insurance proceeds in excess of those used to restore the Property and any rental interruption insurance proceeds. Any credit consideration shall be included in Gross Revenues at the time cash proceeds (principal and/or other) are received. Borrower shall establish and maintain accounts for the Gross Revenues (the "Project Accounts") that are segregated from revenues and income received by Borrower from all other projects. Gross Revenues shall also include all interest earned on the Project Accounts. "Housing Successor Agency Loan" means the loan made by the Housing Authority of the City of Santa Ana, acting as the Housing Successor Agency to the Developer in the original principal amount of $8,522,740. "Operating Expenses" shall mean the sum of the following: (i) payments of principal and interest and all other charges relating to the Senior Loan(s); a property management fee equal to 8% of gross rents; (iii) Owner Administration Fee of 5% of gross rents; (iv) deposits into required reserves; (v) any deferred developer fee; (vi) all other actual, reasonable cash operating costs and expenses, calculated on an annual basis, that are directly attributable to managing and operating the Property, including, without limiting the generality of the foregoing, the following: costs and expenses for real and personal property taxes, special assessments or similar charges; water, fuel, electricity and other utilities; heating, ventilation and air conditioning expenses; labor; supplies; tools; equipment; insurance; advertising and marketing; accounting and legal fees; brokerage commissions and other leasing expenses; and other such items constituting operation, maintenance and repair costs actually paid by the Borrower, subject to the following conditions: (a) Depreciation and amortization expenses shall not be considered Operating Expenses, except as otherwise provided herein. 3 3-90 EXHIBIT 3 (b) Any expenses, compensation or fees paid to any affiliate of Borrower shall only be included as Operating Expenses to the extent they are not in excess of the reasonable expenses, compensation or fees which would be payable to unrelated third parties in arms -length transactions for similar services in Orange County, California area. "Extremely Low Income" means an adjusted income which does not exceed thirty percent (30%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by HCD. "Low Income" means an adjusted income which does not exceed eighty percent (80%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by HCD. "Property" shall mean that property located at 1440 East First Street, Santa Ana, California. "Refinancing" shall mean changing the then existing financing on the Property by, without limitation, modifying the interest rate and/or the term of the existing Senior Loan, increasing or reducing the amount of the existing Senior Loan, paying off the existing Senior Loan and obtaining a new Senior Loan, except for the payoff of the conventional lender's acquisition loan for the Property. "Refinancing Proceeds" shall be disbursed as set forth in Section 6 hereof. "Residual Receipts" shall mean the Gross Revenues from the Property for each year, less deductions for Operating Expenses from the Property, applicable to each such year to the extent not already deducted as an Operating Expense. "Sale" shall mean any transfer, assignment, or conveyance or lease of the Property or any portion thereof, or any interest therein by the Borrower, and includes any transfer, assignment or sale of any partnership interest in the Borrower by an individual or entity which is a general or limited partner in the Borrower, or any interest by any individual or entity which holds an interest in any such general or limited partner in the Borrower, which brings the cumulative total of all such direct and indirect transfers, assignments and sales during the term of this Promissory Note to more than thirty-five percent (35%) of the ownership interests in the Borrower, and any such transfer, assignment or sale of a direct or indirect partnership interest thereafter. Sale includes a sale in condemnation or under threat thereof. Sale does not include dedications and grants of easements to public and private utility companies of the kind customary in real estate development. Notwithstanding anything to the contrary contained herein, a "Sale" shall not include any transaction not considered a "transfer" under Section 13. "Senior Loan" shall mean any senior loan made to Borrower, for payment of Acquisition and/or Construction Costs, and shall include any subsequent loan that refinances said Senior Loan. 2 3-91 EXHIBIT 3 "Term" the term for repayment of this Promissory Note shall mean fifty-five (55) years from the date of recording of the Deed of Trust securing the Promissory Note. "Term of Affordability" the term of affordability shall be fifty-five (55) years. "Very Low Income" means an adjusted income which does not exceed fifty percent (50%) of the area median income for the Orange County, California PMSA, adjusted for household size, as published by HCD. 3. Loan Repayment. Borrower shall make payments to the Agency as provided in Sections 5 (Residual Receipts), 6 (Refinancing Proceeds), 7 (Sale Proceeds) and 9 (Accelerated Loan Repayment) of the Agreement. 4. Operating Capital Improvement Loan. If the replacement reserve account ("Reserves") is depleted due to unforeseen repairs and the General Partner makes a loan to the Partnership, the reserves must be fully funded prior to payment of said loan. The outstanding loan balance will be reflected in the annual report. 5. Annual Loan Repayment/ Residual Receipts. a. Commencing on the date one hundred fifty (150) calendar days after the close of the initial Calendar Year following the issuance of the Certificate of Completion and on or before the 150th day of each Calendar Year thereafter, the Borrower shall thereafter make a loan payment to the Agency annually, in the amount of the lesser of the outstanding balance due under this Promissory Note or the Agency's Percentage of the Residual Receipts, as provided in this Section 5. b. Within one hundred fifty (150) days after the close of the initial Calendar Year following the Issuance of the Certificate of Completion and on or before the 150th day of each Calendar Year thereafter, the Borrower shall submit to the Agency an audited financial statement of Gross Revenues and Operating Expenses attributable to the Property for the applicable Calendar Year, along with a computation of the amount of the Residual Receipts applicable to such Calendar Year with which to make an Agency Loan payment then due. C. Except as otherwise provided, the Borrower shall pay to the Agency the Agency's Percentage of the Residual Receipts as payment of principal. At least fifty percent (50%) of the Residual Receipts shall remain with the Borrower, with all Residual Receipts remaining with Borrower to the extent the Agency Loan has been fully repaid. d. Borrower shall retain fifty percent (50%) of the Residual Receipts. The other fifty percent (50%) will be the Agency's Percentage of the Residual Receipts and applied to the 5 3-92 EXHIBIT 3 Agency Loan. As Borrower repays its loans, the payment percentage applied to the remaining loans shall increase. e. The Residual Receipts payment shall be made not later than one hundred fifty (150) days after the close of the Calendar Year. Such payment shall be applied first to any late fees, then to reduce the principal balance of the loan. 6. Loan Repayment from Refinancing Proceeds. The Borrower shall make a loan payment to the Agency from every Refinancing that occurs during the term of this Promissory Note (other than refinancing of the conventional lender acquisition and/or construction loan) not to exceed the outstanding balance of principal on this Promissory Note, to the extent of the Agency's Percentage of the Refinancing Proceeds (if any), as follows: the cash proceeds from such Refinancing shall be applied first to pay Closing Costs; next, the amount necessary to pay in full the balance remaining on the Senior Loan; next, the Borrower shall pay to the Agency the Agency's Percentage of the Refinancing Proceeds of which Agency Percentage shall be used to repay the Agency Loan to the extent of the outstanding balance on this Promissory Note; and next, the amount necessary to pay any deferred developer fee in full. At least fifty percent (50%) of the Refinancing proceeds shall remain with Borrower, with all remaining Refinancing proceeds remaining with the Borrower to the extent the outstanding balance of the Promissory Note has been fully paid. Such payment shall be due on the date of such Refinancing, and shall be applied to reduce the principal balance of the Loan. The Agency shall not be required to reconvey the lien of the Deed of Trust if Refinancing Proceeds are insufficient to repay the Agency Loan in full. 7. Loan Repayment from Sale Proceeds. The Borrower shall make a loan payment, not to exceed the outstanding balance of principal on this Promissory Note subject to Section 14 herein, to the Agency from any Sale that occurs during the term of the Agency Loan, to the extent of the Agency's Percentage of the Sale Proceeds, as follows: gross sale proceeds are applied first to pay Closing Costs, next to pay in full the balance remaining on the Senior Loan; next, the Borrower shall pay to the Agency the Agency's Percentage of the Refinancing Proceeds of which Agency Percentage shall be used to repay the Agency Loan not to exceed the outstanding amount of principal due on this Promissory Note; and next to pay the amount necessary to pay any deferred developer fee in full. At least fifty percent (50%) of the Sale Proceeds shall remain with Borrower, with all remaining Refinancing proceeds remaining with the Borrower to the extent the outstanding balance of the Promissory Note has been fully paid. Such payment shall be due on the date of such Sale, and shall be applied to reduce the principal balance of the Loan. The Agency shall not be required to reconvey the lien of the Deed of Trust if Sale Proceeds are insufficient to repay the Loan in full. 8. Accelerated Loan Payment. The full principal amount outstanding shall be due and payable on the earlier to occur of the following: 6 3-93 EXHIBIT 3 a. Sale or Refinancing of the Property as provided further in Section 13 hereof; unless: (i) in the case of a Sale in which the Sale Proceeds are insufficient to repay in full the Agency Loan, the Agency approves such sale and the purchaser assumes the balance of the Agency Loan in accordance with the terms of this Promissory Note; or (ii) in the case of a Refinancing in which the Refinancing Proceeds are insufficient to repay in full the Agency Loan, the Agency approves such Refinancing and the Borrower remains obligated pursuant to the terms of this Promissory Note. b. An event of default (subject to any applicable notice and cure provisions) pursuant to any of the Loan Documents or the Senior Loan Documents. c. Any default (subject to any applicable notice and cure provisions by Borrower) as to any other loan or loans by Agency to Borrower with respect to the Property; or d. The date that is fifty-five (55) years after the date of execution of this Promissory Note. On that date, the Agency agrees to review the performance of the Property and consider in good faith any reasonable request by Borrower to modify the terms or extend the Term of this Agency Promissory Note. 9. Prepayment Borrower may prepay the outstanding principal balance under this Promissory Note, in whole or in part, at any time without penalty, however the Affordability Covenants and Restrictions still remain for the entire Affordability Period of fifty-five (55) years. 10. Lawful Money. Principal is payable in lawful money of the United States of America. 11. Application of Payments; Late Charges. a. Any payments received by the Agency pursuant to the terms hereof shall be applied first to sums, other than principal, due the Agency pursuant to this Promissory Note, and the balance, if any, to the payment of principal. b. If any payment is not received by the Agency within ten (10) Business Days after Borrower's receipt of written notice that such payment was not received when due; then in addition to the remedies conferred upon the Agency pursuant to this Promissory Note and the other Loan Documents, (i) a late charge of four percent (4%) of the amount due and unpaid will be added to the delinquent amount to compensate the Agency for the expense of handling the delinquency and (ii) the amount due and unpaid, excluding the late charge, shall bear interest at the highest annual rate which may lawfully be charged and collected under applicable law on the obligation evidenced by this Promissory Note, computed from the date on which the amount was due and payable until paid. Without prejudice to the rights of the Agency hereunder or under any 7 EXHIBIT 3 of the other Loan Documents, Borrower shall indemnify the Agency against, and shall pay the Agency on demand, any expense or loss which it may sustain or incur as a result of the failure by Borrower to pay when due any installment of principal, fees, or other amounts payable to the Agency under this Promissory Note or any other Loan Document, to the extent that any such expense or loss is not recovered pursuant to such foregoing provisions. A certificate of the Agency setting forth the basis for the determination of the amounts necessary to indemnify the Agency in respect of such expenses or direct loss, submitted to Borrower by the Agency, shall be conclusive and binding for all purposes except as immediately corrected by Borrower notice to Agency. 12. Security This Promissory Note is secured by the recorded Deed of Trust. 13. Acceleration by Reason of Transfer or Financing. a. In order to induce Agency to make the loan evidenced hereby, Borrower agrees that in the event of any transfer of the Property without the prior written consent of Agency (other than a transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the Senior Loan Deed of Trust), Agency shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Agency may grant or deny such consent in its sole discretion and, if consent should be given, any such transfer shall be subject to this Section 13, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Borrower from any liability thereunder without the prior written consent of Agency. b. As used herein, "transfer" includes the Sale, agreement to sell, transfer or convey the Property, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Property, or the lease of all or substantially all of the Property. "Transfer" shall not include the leasing of individual residential units on the Property, so long as Borrower complies with the provisions of the Loan Agreement and the Affordability Covenants and Restrictions relating to such leasing activity, nor shall it include a conveyance of the Property to a limited partnership in which Borrower is a general partner, or to a corporation or limited liability company that is wholly owned by the Borrower or its affiliates and that is formed for the sole purpose of owning and operating the Property, or the sale back to the Borrower. In the event of any Refinancing or partial Refinancing in an amount in excess of the balance of the Senior Loan, without the prior written consent of Agency (which consent Agency may grant or deny in its sole discretion), then the entire outstanding balance of the Agency Loan shall be repaid to the Agency at the time of each Refinancing or partial Refinancing. Additionally, a "Transfer" shall not include any transaction not considered a "transfer" under Section 16.2 of the Loan Agreement. 3-95 EXHIBIT 3 14. Event of Default. Subject to the provisions of Sections 23 hereof, the occurrence of any of the following shall be deemed to be an event of default ("Event of Default") hereunder: (a) failure by Borrower to make any payments provided for herein, and if such default is not made good within ten (10) Business Days after Developer's receipt of written notice that such payment was not received when due; (b) failure by Borrower to perform any covenant or agreement in the Deed of Trust, the Agreement, or the Affordability Covenants and Restrictions within thirty (30) calendar days after written demand therefor by Agency (or, in the event that more than thirty (30) calendar days is reasonably required to cure such default, should Borrower fail to promptly commence such cure, and diligently and continuously prosecute same to completion); or (c) a default under the Senior Loan Deed of Trust that remains uncured after any applicable notice has been provided and the expiration of any applicable cure period therefore, if any, provided therein. 15. Remedies. Upon the occurrence of an Event of Default, after any applicable notice has been provided and the expiration of any applicable cure period therefore, Agency may declare all sums evidenced hereby immediately due and payable by delivery to the Trustee named in the Deed of Trust securing this Promissory Note, and to Borrower, written declaration of default and demand for sale, and written notice of default and of election to cause the Property to be sold, which notice Trustee shall cause to be duly filed for record and Agency may foreclose on the Deed of Trust. Agency shall also deposit with Trustee the Deed of Trust, this Promissory Note and all documents evidencing expenditures secured thereby and evidenced hereby. Upon the occurrence of an Event of Default (and so long as such Event of Default shall continue), the entire balance of principal shall bear interest at the Bank of America reference rate on the due date of the delinquent payment plus four percent (4%). No delay or omission on the part of the Agency in exercising any right under this Promissory Note or under any of the other Loan Documents shall operate as a waiver of such right. 16. Attorney Fees. If this Agency Promissory Note is not paid when due or if any Event of Default occurs, Borrower promises to pay all costs of enforcement and collection, including but not limited to, reasonable attorneys' fees, whether or not any action or proceeding is brought to enforce the provisions hereof. 17. Severability. Every provision of this Promissory Note is intended to be severable. In the event any term or provision hereof is declared by a court of competent jurisdiction, to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 0 3-96 EXHIBIT 3 18. Number and Gender. In this Promissory Note the singular shall include the plural and the masculine shall include the feminine and neuter gender, and vice versa, if the context so requires. 19. Non-recourse. The Agency Loan is a nonrecourse obligation of the Borrower. Neither Borrower, nor its partners nor any other party shall have any personal liability for repayment of the Agency Loan or for any other amounts under any of the documentation evidencing, securing or describing the Agency Loan. The sole recourse of Agency under this Promissory Note and the Deed of Trust for repayment of the Agency Loan and for such other amounts arising therefrom shall be the exercise of its rights against the Property and related security thereunder. 20. Subordination. It is hereby expressly agreed and acknowledged by Borrower and Agency that the Deed of Trust is a subordinate Deed of Trust to the Senior Loan, and that this Promissory Note is subject and subordinate to any Senior Loan Deed of Trust, as further described in the Subordination Agreement between the Agency and Senior Lender. 21. Notice of Default. a. Subject to the applicable cure periods set forth in Section 14 and subject to the further provisions of this Section 21, failure or delay by the Borrower to perform any term or provision of this Promissory Note constitutes a default under this Promissory Note. The Borrower must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. b. The Agency shall give written notice of default to the Borrower specifying the default complained of by the Agency. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. C. Except in the case of a monetary event of default, the Borrower shall not be in default so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, provided such cure, correction or remedy is completed within the applicable time period set forth herein after receipt of written notice (or such additional time as may be deemed by the Agency to be reasonably necessary to correct the default). d. Any failures or delays by the Agency in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by the Agency in asserting any of its rights and remedies shall not deprive the Agency of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. 10 3-97 EXHIBIT 3 e. If a monetary event of default occurs under the terms of this Promissory Note or the Deed of Trust, prior to exercising any remedies thereunder Agency shall give Borrower written notice of such default. Borrower shall have a period of ten (10) business days after such notice is received within which to cure the default prior to exercise of remedies by Agency under this Promissory Note and the Deed of Trust. f. If a non -monetary event of default occurs under the terms of this Promissory Note or the Deed of Trust, prior to exercising any remedies thereunder, Agency shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days, Borrower shall have such period to effect a cure prior to exercise of remedies by the Agency under this Promissory Note and the Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) calendar days, and Borrower (i) initiates corrective action within said period, and (ii) diligently, continually, and in good faith works to effect a cure as soon as possible, then borrower shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Agency. In no event shall Agency be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given. 22. Insurance and Condemnation. In the event of any fire or other casualty to the Property or eminent domain proceedings resulting in condemnation of the Property or any part thereof, Borrower shall have the right to rebuild the Property, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to keep the Agency Loan in balance and rebuild the Property in a manner that provides adequate security to Agency for repayment of the Agency Loan or if such proceeds are insufficient then Borrower shall have funded any deficiency, (b) Agency shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists under this Promissory Note or the Deed of Trust. If the casualty or condemnation affects only part of the Property and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Agency Loan in a manner that provides adequate security for repayment of the remaining balance of the Agency Loan. 23. Force Majeure. Notwithstanding specific provisions of this Promissory Note, performance hereunder shall not be deemed to be in default where delays or defaults are due to: war; insurrection; strikes; lock -outs; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; acts of the other party; acts or failure to act of the Agency or any other public or governmental Agency or entity (except that any act or failure to act of Agency shall not excuse performance by Agency); or any other 11 OW EXHIBIT 3 causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time the party claiming such extension gives notice to the other party, provided notice by the party claiming such extension is given within thirty (30) calendar days after the commencement of the cause. Times of performance under this Promissory Note may also be extended in writing by the Agency and the Borrower. 24. Assignments. The Agency, and the assignee of the Agency, shall have the right to assign this Promissory Note and the Deed of Trust securing this Promissory Note, without any further act of Borrower. The assignee shall give notice to Borrower as soon as practicable after such assignment. 12 3-99 EXHIBIT 3 This Agency Promissory Note is hereby agreed to and executed on the date first set forth above. "BORROWER" AMCAL 1440 Santa Ana Fund, LP, a California limited partnership By: AMCAL Multi -Housing, Inc. a California corporation, its Administrative General Partner By: Las Palmas Foundation, a California nonprofit public benefit corporation, its Managing General Partner Lo 13 3-100 EXHIBIT 3 Exhibit El.s Project Budget 3-101 EXHIBIT 3 ACQUISITION COSTS Residential Total Rental Development Component Costs Costs 9%tax credits LIHTC Equity Investment Local Private City of Santa Ana - Bank of America - Successor Agency Construction funds Loan Private Deferred Costs SOURCES TOTAL Lesser of Land Cost or Value $4,500,000 $4,500,000 $4,500,000 $4,500,000 Legal & Closing Costs $19,375 $19,375 $19,375 $19,375 Verifiable Carrying Costs $765,983 $765,983 $765,983 $765,983 Other: (Predevelopment Loan Interest $61,000 $61,000 $61,000 $61,000 Total Acquisition $5,346,358 $5,346,358 $5,346,358 Permanent Relocation $955,161 $955,161 $955,161 $955,161 Total Relocation CONSTRUCTION Off -Site Improvements 5955,161 $193,393 $955,161 $193,393 $193,393 $955,161 $193,393 Site Work (hard costs) $1,945,880 $1,945,880 $1,945,880 $1,945,880 Structures (hard costs) $11,253,686 $11,253,686 $11,253,686 $11,253,686 Demolition & Remediatoin $350,000 $350,000 $350,000 $350,000 General Requirements $1,075,033 $1,075,033 $1,075,033 $1,075,033 Contractor Overhead $457,696 $457,696 $457,696 $457,696 Contractor Profit $457,696 $457,696 $457,696 $457,696 Total Construction $15,733,384 $15,733,384 $15,733,384 ARCHITECTURAL Design 1 $941,5501 $941,5501 1 $941,5501 1 1 941,550 Total Architectural Costs $941,550 $941,550 $941,550 SURVEY & ENGINEERING burvev & Enaineenna S480,0461 80,046 $394,8191 85,227 $480,046 Environmental Consultants $205,650 $205,650 $205,650 $205,650 Misc. Consultants $13,051 $13,051 $13,051 $13,051 Total Surve & En ineerin CONTINGENCYCOSTS Hard Cost Contingency $698,747 1 $786,6691 $698,747 786,569 $786,6691 i $698,747 $786,669 Soft Cost Contingency $465,550 $465,550 $465,550 $465,550 Total Contin enc Costs CONSTRUCTION PERIOD EXPENSES Construction Loan Interest $1,252,219 $820,239 $1,252,219 $820,239 $820,239 $1,252,219 $820,239 Origination Fee $225,295 $225,295 $225,295 $225,295 Improvement Bond Premium $15,000 $15,000 $15,000 $15,000 Closing Costs $30,000 $30,000 $30,000 $30,000 Property Taxes $130,542 $130,542 $130,542 $130,542 Insurance During Construction $196,667 $196,667 $196,667 $196,667 Title and Recording Fees $57,000 $57,000 $57,000 $57,000 Total Construction Expenses PERMANENT FINANCING EXPENSES Loan Origination Fee(s) $1,474,743 $76,870 $1,474,743 $76,870 $76,870 $1,474,743 $76,870 Closing Fees & Reports $20,000 $20,000 $11,643 $8,357 $20,000 Title and Recording Fees $10,000 $10,000 $10,000 $10,000 Insurance $50,0001 $50,000 $50,000 $50,000 Total Permanent Financing $156,8701 $156,870 5156,870 LEGALFEES Construction Lender Legal Expenses $80,000 $80,000 $80,000 $80,000 Permanent Lender Legal Fees $20,000 $20,000 $20,000 $20,000 Sponsor Legal Fees $150,000 $150,000 $150,000 $150,000 Total Legal Fees CAPITALIZED RESERVES $250,000 $250,000 1 1 1 $250,000 Operating Reserve $214,053 $214,053 $214,053 $214,053 Total Capitalized Reserves REPORTS $214,053 5214,053 $214,053 Appraisal & Market Study $31,125 $31,125 $31,125 $31,125 Other: Accounting $54,900 $54,900 $54,900 $54,900 Total Reports & Studies $86,025 $86,025 $86,025 TCAC App./Alloc./Monitor Fees $119,548 $119,548 $119,548 $119,548 Local Permit Fees $693,785 $693,785 $511,029 $182,756 $693,785 Other Impact Fees $1,331,050 $1,331,050 $128,564 $1,202,486 $1,331,050 Furnishings $75,900 $75,900 $75,900 $75,900 Marketing $114,999 $114,999 $29,772 $85,227 $114,999 Total Other Costs DEVELOPER COSTS 52,335,282 52,335,282 $2,335,282 Developer Fee/Overhead/Profit $1,944,9891 1,944,989 $170,454 1 $629,341 $1,145,194 $1,944,989 Other: Non -Profit Partner Fee I 1 $100,0001 $100,0001 $100,0001i I 1 $100,000 Total Developer Costs 1 1 $2,044,9891 $2,044,9891 1 1 1 1 $2,044,989 TOTAL DEVELOPMENT COST 1 1 $31,489,3811 $31,489,3811 $2,291,9441 $8,522,7401 $19,529,5031 $1,145,1941 $31,489,381 3-102 EXHIBIT 3 Exhibit F: Scope of Work / Schedule of Performance 3-103 EXHIBIT 3 Exhibit F- Scope of Work First Street Apartments OVERVIEW AMCAL Multi -Housing proposes to develop a multi -family apartment complex consisting of seven buildings (Six Residential + One Community Laundry Building) on one site located at 1440 East First Street Santa Ana, CA 92701, with the following unit plan: 35 Two Bedroom / Two Bath 782 Average Square Feet 28 Three Bedroom / Two Bath 1,031 Square Feet 6 Four Bedroom / Two Bath 1,219 Square Feet 69 Total Units Of the 69 total units, 68 will be reserved for affordable households and 1 unit will be an unrestricted Manager's Unit. Unit Types: Flats Buildings: Six (6) Residential + One (1) Community Laundry Building Number of Stories: Three Stories from grade (three residential levels with tuck under parking and additional on grade parking). Construction: Type V Energy Efficiency: LEED Silver Site Area: 2.16 Gross Acres (94,098 SF) Laundry Facility: A central laundry building will be provided for all residents including a total of seven (7) washers and seven (7) dryers. Community Room: A 2,008 square foot Community Space will be provided including a community kitchenette, lounge, computer lab, and supportive services offices. 3-104 EXHIBIT 3 TYPE OF CONSTRUCTION AND DESIGN Project Design Elements: Conventional wood frame Brick veneer exteriors & stucco Ornamental balcony railings Double Loaded Corridors Concrete slab on grade 69 tuck under parking spaces/ 50 on -grade parking spaces = 119 Total parking spaces Unique floor plans, custom-designed interiors Contemporary style Appeals to the current residential rental market Elegant and spacious floor plans Interior common space which includes a Community Room measuring approximately 2,008 SF and includes a kitchenette, lounge, community services area, leasing offices, and computer room Common area features including extensive landscaping with barbeque area, a variety of plant life, walkways, children's play area and seating areas for parents and residents The development will meet LEED Silver requirements Security cameras and controlled access *In addition, all design elements listed below will be in compliance with all current codes, standards and ordinances as required by the City of Santa Ana. Grading/Drainage Paving Retaining Walls Walls, Fencing, and Gates Landscaping and Irrigation: The use of drought and disease resistant vegetation, water efficient sprinklers, and EPA Water -Sense labeled irrigation controllers will be incorporated. Site Lighting: Appropriate timers and Energy Star labeled fixtures will be installed. Interior Stairs, Railings, and Landings Garages, Carports, and Outbuildings Foundations Porches, and Balconies Exterior Walls Roofs: Building shall use roofing that is light in color to prevent heat gain. Exterior Doors: Energy Star labeled doors will be installed. Windows: Energy Star labeled windows will be installed. Floors: All floors, except for the bedrooms, will have vinyl plank flooring. Bedrooms will be carpeted 3-105 EXHIBIT 3 Walls and Ceilings Interior Doors Kitchen Cabinets and Countertops: Medium grade, KCMA labeled (or approved equal) cabinets will be installed. Kitchen Sinks, Faucets, and Garbage Disposals: EPA Water Sense labeled faucets will be installed. Kitchen Appliances and Fixtures: Energy Star labeled appliances will be installed. Bathroom Fixtures and Equipment: EPA Water Sense labeled faucets, valves and showerheads will be installed, as well as Energy Star labeled light fixtures and equipment. Water Supply, Waste, and Vent Piping Water Heaters: Conventional water heater tanks will be installed. Electrical Service and Wiring Electrical Switches, Outlets, and Light Fixtures: Energy Star labeled fixtures will be installed. Heating, Ventilation and Air Conditioning: Energy Star labeled appliances and programmable thermostats will be installed. Smoke Alarms / Carbon Monoxide Alarms: Interconnected combination alarms will be installed. Unit Interiors: Interior designs incorporate wood doors, vinyl windows, painted gypsum board walls and ceilings, and window privacy by use of mini -blinds Cabinets will be of pre -manufactured wood with plastic laminate countertops Kitchens will include a refrigerator, electric stove and cooktop with vented hood, garbage disposal, and dishwasher Bathrooms will include fiberglass bath/shower units, mirror, vanity, and medicine cabinet 3-106 First Street Project Schedule Item EXHIBIT 3 Date Plan Check Complete - Building Permit Ready 01/16/18 Partnership Closing 02/28/18 Construction Start 03/01/18 50% Complete 12/01/18 Construction Completion (18 months) 09/01/19 Final Certificate of Occupancy 09/01/19 Complete Move In Tenants 12/31/19 3 -months stabilized occupancy 03/31/20 Close on Permanent Financing/Conversion 03/31/20 Receive 8609 Certificate from TCAC 09/30/20 3-107 EXHIBIT 3 Exhibit Gl.s Form of Residual Receipts Report 3-108 EXHIBIT 3 EXHIBIT G FORM OF RESIDUAL RECEIPTS REPORT Community Development Agency of the City of Santa Ana Residual Receipts Report for the Year Ending, Date Prepared Please complete the following information and execute the certification at the bottom of this form. Annual Project Revenue Please report Annual Project Revenue for the year ending on the following lines: Rent Payments (including Section 8 tenant assistance payments, if any) (1) $• Interest Income (do DQLinclude interest income from replacement and operating reserves nor interest income on tenant security deposits) Additional Income (for example, vending machine income, tenant forfeited deposits, laundry income not paid to the residents' association) Total Annual Project Revenue (Add lines 1, 2, and 3) Operating Expenses' Please report Operating Expenses incurred for the year ending on the following lines: Operating and Maintenance Expenses Utilities Property Management Expenses and On -Site Staff Payroll Administrative Expenses Property Taxes Insurance 3-109 (2) (9) $ (10) $ EXHIBIT 3 Other Expenses Please list these expenses: Total Annual Operating Expenses for the Housing Project (Add lines 5, 6, 7, 8, 9, 10, and 11) Net Operating Income (Subtract Line 12 from Line 4) Do not include expense unrelated to the operation ofthe Rental Portion of the Project, such as depreciation, amortization, accrued principal and interest expense on deferred payment debt, or capital expenditures. Additional Cash Flow Payments Obligated First Mortgage Debt Service Payments (as approved by the Agency and other parties that may have such approval rights) and Obligated Secondary Subordinate Debt Service Payments (as approved by the Agency and other parties that may have such approval rights) Scheduled Deposits to Reserves (as approved by the Agency) Additional Payment Obligations (such as partnership management fees, deferred developer fees, or repayments on loans to partners, as approved by the Agency to have priority over Residual Receipt Payment to the Agency) Total Additional Cash Flow Payments (Add lines 14, 15, and 16) Residual Receipts for Year Ending (Subtract Line 17 from Line 13) Percentage of Residual Receipts to be Paid to the Agency (as shown in the Promissory Note by and between the Agency and Borrower dated Amount Payable to the Agency (Multiply Line 18 by Line 19) (12) $ (13) $ (14) $ (15) (16) $ $ (17) $ (18) $ (19) % (20) $ The amount payable to the Agency listed on Line 20 is subject to payment according to the terms of the Promissory Note by and between the Agency and Borrower dated . If Line 20 is $0.00 or negative, you owe nothing to the Agency this year. If Line 20 is a positive number, remit check payable to and attach to this report. 3-110 EXHIBIT 3 Exhibit H 1: Partnership Agreement 3-111 EXHIBIT 3 NO PARTNERSHIP INTEREST REPRESENTED BY THIS AGREEMENT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968, AS AMENDED, IN RELIANCE UPON EXEMPTIONS FOR SALES NOT INVOLVING ANY PUBIC OFFERING AND UPON THE REPRESENTATION THAT SUCH PARTNERSHIP INTERESTS WILL NOT BE TRANSFERRED UNLESS AN OPINION OF COUNSEL IS GIVEN, SATISFACTORY TO THE GENERAL PARTNER AND ITS COUNSEL, THAT REGISTRATION IS NOT REQUIRED. LIMITED PARTNERSHIP AGREEMENT OF AMCAL 1440 Santa Ana Fund, L.P. This Limited Partnership Agreement of AMCAL 1440 SANTA ANA FUND, L.P, ("Agreement") is entered into as of September 1, 2015 between AMCAL Multi -l --lousing Two LLC, a California limited liability company, as general partner ("Administrative General Partner"), and the parties signing at the end of this Agreement, as limited partners ("Limited Partner" or "Limited Partners"). The Partners agree as follows: 1. Formation. The Limited Partners and the General Partner hereby enter into a Limited Partnership ("Partnership") pursuant to the Uniform Limited Partnership Act of 2008, Corporations Code Section 15900 and following, ("the Act") and the rights and liabilities of the Partners shall be as provided under California Law, except as set forth below. 2. Name. The name of the Partnership is AMCAL 1440 SAN'TA ANA FUND, L.P., a California Limited Partnership. 3. Principal Place of Business. The principal place of business of the Partnership is 30141 Agoura Rd., Suite 100, Agoura Hills, CA 91301. 4. Purpose. The purpose of the Partnership shall be to purchase, hold, develop, manage, improve, lease, sell that certain real property, described on Exhibit "B" ("Partnership Property") and all related activities. 5. Term. The Partnership shall begin when the Certificate of Limited Partnership is filed with the Secretary of State as required by the Act and shall continue until the first to occur of (a) December 31, 2045 (b) dissolution by mutual agreement of the General and Limited Partners (c) termination as hereinafter provided, or (d) by operation of law. Initial 1.P Agreement - Santa Ana 9.1.159.1.15 1 3-112 EXHIBIT 3 6. Capital Contributions. 6.1. Initial Capital. The Administrative General Partner shall contribute administrative services and not money or other property to the Partnership. The initial capital contribution of the Limited Partners shall be the total amount shown on Exhibit "A" under the heading "Initial Contribution". The Administrative General Partner shall also hold Limited Partners' interests to the extent shown on Exhibit "A" hereto. 6.2, Additional Limited Partners, If all the Limited Partners do not respond to a call for additional funds when due or for additional funds pursuant to paragraph 6.8, the Administrative General Partner shall be authorized to admit additional Limited Partners. Such Limited Partners shall become parties hereto by executing such documents as the Administrative General Partner may require pursuant to which they agree to be bound by this Agreement. The admission of additional Limited Partners shall not cause a dissolution of the Partnership. 6.3. Capital Accounts. A "Capital Account" shall be maintained for each Partner. The Capital Account for each Partner shall be equal to such Partner's initial capital contribution increased by: (i) cash and the fair market value of any property subsequently contributed to the Partnership by such Partner (net of liabilities assumed or taken subject to by the Partnership, pursuant to the provisions of Section 752 of the Internal Revenue Code of 1986 "[IRC"]) and (ii) such Partner's allocable share of Partnership income and gains, including any tax-exempt income; and decreased by: (a) cash and the fair market value of property distributed to such Partner (net of liabilities assumed or taken subject to by such Partner pursuant to the provisions of IRC Section 752), (b) such Partner's allocable share of Partnership losses and (c) such Partner's allocable share of expenditures of the Partnership described in IRC Section 705(a)(2)(B); and, notwithstanding the above, further adjusted as required to comply with Treasury Regulations Sections 1.704-1(b)(2)(iv), including without limitation the provisions of subparagraphs (d), (e), (g), 0), (m), (n) and (r) thereof. All allocations for purposes of this Paragraph 6.3 shall be determined in accordance with the provisions of Article 7 (entitled "Profits, Losses and Distributions"). Each Partner shall have a single Capital Account which shall reflect all interests that Partner. 6.4. Limited Liability. Although a Limited Partner is personally liable to the Partnership for payment of his capital contribution, no Limited Partner will be bound by, or personally liable for the expenses, liabilities, or obligations of the Partnership, except to the extent of the Limited Partner's contribution to the capital of the Partnership and his share of the Partnership's undistributed profits; however, to the extent required by law, any Limited Partner receiving a distribution in return of all or a portion of his capital contribution shall be liable to the Partnership for any sum returned, plus interest, necessary to discharge Partnership liabilities to creditors whose claims arose before such return and before an amended certificate of limited partnership was filed reflecting such return of capital. 6.5. Role of Limited Partner, Except as otherwise provided in this Agreement or by law no Limited Partner shall take part in or interfere in any manner with the conduct or Ini.ti.al. l,P Agreement - Santa Ana 9.1..159.1.15 2 3-113 EXHIBIT 3 control of the business of the Partnership or have any right or authority to act for or on behalf of the Partnership. 6.6. Interest. Interest earned on Partnership funds shall inure to the benefit of the Partnership, and Limited Partners shall not receive interest on funds contributed by them. 6.7. Right to Withdraw Contribution. No partner shall have the right to withdraw or reduce his contribution to the capital of the Partnership except as a result of the dissolution of the Partnership or as otherwise permitted by the Act, and no partner shall have the right to demand or receive property other than cash in return for his contributions to the Partnership. 6.8. Failure to Make Additional Capital Contributions. If the Partnership has insufficient funds to pay the Partnership's obligations, the Administrative General Partner shall have the option of either advancing the necessary sums and thereafter being reimbursed from Partnership funds as they become available or levy a capital contribution assessment on all Partners in proportion to their respective partnership interests. If any such additional contributions are not received within 15 days after the Partners are notified of the election to assess, the additional capital would be raised by first giving the remaining partners the first right of refusal to buy the incremental funding of the partners who do not come up with the required sum. If this fails the, Administrative General Partner would attempt to get new partners to buy the incremental funding required. The new money contributed (hereinafter "New Money") will receive a 30% annual return and the New Money will be returned to the investor before previously contributed capital receives a return or is returned to partners. 6.9. Loans. Any sums in excess of the total capital contributions required by this Agreement, required to meet the costs of owning and operating the Partnership Property may be loaned to the Partnership by the Partners, either General or Limited, and may be repaid with interest not to exceed the legal maximum when the Partnership has funds available not required in the operation of the Partnership business. Any such loans shall not increase the lending Partner's interest in the Partnership. 7. Profits, Losses and Distributions. 7.1. Definitions. For purposes of this Agreement, the following capitalized terms are defined as follows; 7.1.1. "Distributable Cash" is all cash of the Partnership (including without limitation cash from the sale of any or all of the Partnership property) less (i) the amount necessary for payment of all costs, expenses, obligations and liabilities of the Partnership then due (including any then due advances to the Partnership by the Partners), and (ii) the amount deemed necessary by the Administrative General Partner, in the exercise of its reasonable discretion, to establish a reserve for the payment of foreseen or unforeseen costs, expenses, obligations or liabilities of the Partnership. Initial LP Agreement - Santa Ana 9.1..7.59.1.15 3-114 EXHIBIT 3 The Partnership shall not make, or receive and retain, any distribution of assets or any income of any kind of the project except surplus cash and except on the following conditions: (1) All distributions shall be made only as of and after the end of a semiannual or annual fiscal period; (2) No distribution shall be made from borrowed funds, prior to the completion of the project or when there is any default under this Agreement or under the note or mortgage; (3) Any distribution of any funds of the project, which the party receiving such funds is not entitled to retain hereunder, shall be held in trust separate and apart from any other funds; and (4) There shall have been compliance with all outstanding notices of requirements for proper maintenance of the project. 7.1.2. "Income", "gains", "losses" "deductions", and "credits" are the Partnership's income, gains, Iosses, deductions and credits, respectively, as finally determined for federal income tax purposes; provided, however, that in making the allocations of such items for purposes of capital account adjustments, the adjustments required byTreasury Regulations Section 1. 704-1 (b)(2)(iv)(g) shall be taken into account. 7.1.3. The "Accounting Period" of the Partnership will be each period commencing on the first day following the last day of the immediately preceding Accounting Period (which for the Partnership's first fiscal year shall be deemed to be the date of the commencement of the Partnership) and ending on December 31 (which shall also be the Partnership's fiscal year end). 7.1.4 "Minimum Gain" shall mean the taxable gain (whether taxable as capital gain or as ordinary income), which would be recognized by the Partnership if the nonrecourse debt of the Partnership were foreclosed upon and the Partnership's property securing such debt were transferred to the creditor in satisfaction thereof, but only to the extent of the excess of (a) the outstanding principal balance of such nonrecourse debt plus any accrued but unpaid interest thereon (whether or not added to principal) to the extent permitted by law, over (b) the adjusted basis of such property. 7.1.5. "Invested Capital" shall be the amount of capital contributed or deemed contributed to the Partnership by the Limited Partners pursuant to Paragraph 6.1 (entitled "Initial Capital). Initial LP Agreement - Santa Ana 9.1,159.1.15 4 3-115 EXHIBIT 3 7.1.6. "Invested Capital Balance" shall be the amount of a Partner's Invested Capital, plus the amount of any additional capital contributed by such Partner and reduced by the amount of cash distributed to such Partner pursuant to any provision of Paragraph 7.10 (entitled "Distributions of Cash from Operations"), Paragraph 7.11 (entitled Distribution of Cash from Capital Event) and subparagraph 11.3.3. 7.2. Allocation of Losses. For all Accounting Periods on a cumulative basis, except as otherwise specifically provided in this Agreement (including without limitation the provisions of Paragraphs 7.5 [entitled "Minimum Gain"], 7.6 [entitled "Recourse Debt Loss Allocation"]), 7.8 [entitled "Qualified Income Offset"], 7.12 [entitled "Allocations for Contributed Property; IRC Section 754 Adjustments"] and 7.15 [entitled "Revaluation Adjustment"]) (collectively such Paragraphs 7.5, 7.6, 7.8, 7.12 and 7.15 allocations shall be referred to as the "Required Allocations"), all losses (including all expense items separately stated on the Partnership's tax return) of the Partnership shall be allocated to the Partners in proportion to their then Partnership's Interests as set forth on Exhibit "A". 7.3. Allocation of Profits. For each Accounting Period, except as otherwise specifically provided in this Agreement (including without limitation the provisions of Paragraphs 7.5 [entitled "Minimum Gain"], 7.7 [entitled "Allocation of Ordinary Income"], 7.8 [entitled "Qualified Income Offset"], 7.12 [entitled "Allocations for Contributed Property; IRC Section 754 Adjustments"] and 7.15 [entitled "Revaluation Adjustment"]), all profits and gains (collectively "profits") (including all income items separately stated on the Partnership's tax return) of the Partnership shall be allocated to the Partners as follows: 7.3.1. First, if profits arise from the sale or other disposition of property with respect to which an investment tax credit was previously claimed, profits equal to the amount by which the basis of such property was reduced as a result of such claimed investment tax credit shall be allocated among the Partners in the same manner as such investment tax credit was previously allocated; 7.3.2. Second, to the same Partners, in the same amounts and in the same order of allocation as losses were theretofore allocated pursuant to Paragraph 7.2 (entitled "Allocation of Losses") and the Required Allocations, less the amount, if any, of profits previously allocated under this subparagraph 7.3.2 and/or the Required Allocations; and 7.3.3. Thereafter, to the Partners in proportion to their then Partnership Interests as set forth on Exhibit "A". 7.3.4. Notwithstanding anything to the contrary contained in this Agreement and except as provided in subparagraph 7.5.2 and 7.8.1, in the event any profits from the sale or other disposition of all or any portion of the Partnership's assets constitute interest income (including "imputed interest"), such interest income, for each year, shall be allocated among the Partners pro rata based upon the amount of deferred principal proceeds (exclusive of "imputed interest") received by each of the Partners pursuant to Paragraph 7.10 (entitled "Distributions of Tnitial LP Agreement - Santa Ana 9.1.159.1.15 5 3-116 EXHIBIT 3 Cash fTom Operations"), Paragraph 7.11 (entitled Distribution of Cash from Capital Events) and subparagraph 11.3.3. during each such year. 7.4. Allocation of Credits. All income tax credits of the Partnership shall be allocated in accordance with the ratio in which the profits of the Partnership are allocated (or would be allocated) among the Partners pursuant to Paragraph 7.3 (entitled "Allocation of Profits"), for the Partnership's taxable year during which the property which gives rise to the income tax credit is placed in service, regardless of whether the Partnership has a profit or a loss for such taxable year, However, if the ratio in which the Partners divide the profits of the Partnership changes during the taxable year of the Partnership in which such property is placed in service, the ratio effective for the date on which the property is placed in service shall apply. To the extent that any income tax credits allocated to the Partners are subject to recapture, such recapture income shall be allocated to the Partners to whom such tax credits were previously allocated. 7.5. Minimum Gain. Notwithstanding any other provision of this Agreement to the contrary and with a priority allocation pursuant to Treasury Regulations Section 1.704-1 [b] [4] [iv] [e] : 7.5.1. The Limited Partners shall not be allocated loss or deduction (or items thereof) attributable to nonrecourse debt which is secured by Partnership Property if such allocation would cause the sum of the deficit capital account balances of the Partner receiving such allocation (increased by the additional capital contributions such Partner is obligated to make pursuant to Paragraph 6.1 [entitled "Initial Capital"]) to exceed the Minimum Gain (determined at the end of the Partnership's taxable year to which such allocation relates) a Limited Partner's allocable share of the minimum gain shall be equal to the product of (a) the Minimum Gain, times (b) such Partner's then Partnership Interest. 7.5.2. The Partners with deficit Capital Account balances resulting in whole or in part from allocations of loss or deduction (or item thereof) attributable to nonrecourse debt which is secured by Partnership property shall, to the extent possible, be allocated income or gain (or item thereof) until the sum of such deficit Capital Account balances equals the Minimum Gain, 7.5.3. For purposes of computing the sum of the Partners' deficit Capital Account balances, if any property (including cash) is held by the Partnership at the end of the Partnership taxable year and there is a reasonable expectation that such property will be distributed to a Partner (other than in liquidation of the Partnership) prior to a corresponding increase in such Partner's Capital Account, such property shall be treated as having been distributed to such Partner on the last day of such taxable year. 7.5.4. The Minimum Gain shall be reduced by the cost of any capital improvements to be made to the subject property and the amount of any principal payments to be made with respect to the non recourse debts secured by such property to the extent there is a Initial L& Agreement - Santa Ana 9.1.159.1.15 3-117 EXHIBIT 3 reasonable expectation that such improvements or payments would reduce the Minimum Gain below the sum of the deficit Capital Account balances. 7.6. Recourse Debt Loss Allocation. The allocation of loss or deduction (or items thereof] not attributable to nonrecourse debt which is secured by Partnership property shall not be made to a Partner if such Partner has a deficit Capital Account balance. Any such loss shall be allocated first among the Partners with positive Capital Account balances (and among them in proportion to their then positive Capital Account Balances) and then to the Administrative General Partner (and among them in proportion to their then respective Partnership Interests). Furthermore, losses attributable to nonrecourse liabilities of the Partnership where a Partner has economic risk of loss shall be allocated as required pursuant to Treasury Regulations Section 1.704-1(b)(4) (iv)(g). 7.7. Allocation of Ordinary Income. Notwithstanding anything to the contrary contained herein, any gain which is taxable as ordinary income as a result of depreciation or cost recovery taken by the Partnership shall be allocated among the Partners in the proportion that depreciation or cost recovery deductions were previously allocated among the Partners. 7.8. Qualified Income Offset. Notwithstanding anything to the contrary contained herein, allocations of profits, gain and losses to the Partners shall be made in a manner to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d). It is the Partners' intent that the following provisions, to the extent permitted by Treasury Regulations Section 1.704-1(b)(2)(ii)(d), shall not affect (a) losses or deductions (or items thereof) attributable to nonrecourse debt which is secured by Partnership property and/or (b) the priority allocation, if any, pursuant to subparagraph 7.5.2. In furtherance thereof, the following provisions shall apply to the extent required pursuant to the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d). 7.8.1. Losses shall not be allocated to any Partner if such allocation would, together with any decrease (and increase) of such Partner's Capital Account pursuant to the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6), cause or increase a deficit balance (in excess of any limited dollar amount of such deficit that such Partner is obligated to restore which shall include the amount of any Partner's share of minimum gain as provided by the provisions of Treasury Regulations Section 1.704-1 [b][4][iv][f]) in such Partner's Capital Account as of the end of the Partnership's taxable year to which such allocation relates. A Partner's Capital Account adjusted as provided by this subparagraph 7.8.1 (including any obligation to restore any deficit) shall be referred to as the "Adjusted Capital Account". 7.8.2. Any losses not allocable to a Partner pursuant to the foregoing subparagraph shall be allocated to such Partners who have positive Adjusted Capital Accounts in proportion to their respective positive Adjusted Capital ,Accounts, with any losses in excess of such positive Adjusted Capital Accounts, being allocated to the Administrative General Partner (and among them in proportion to their then respective Partnership Interests. 7.8.3. If a Partner unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and/or (6), initial 4F Agreement .. Santa lana 9.1.159.1.15 3-118 EXHIBIT 3 then such Partner will be allocated items of income and gain in an amount and manner sufficient to eliminate any deficit balance in such Partner's Adjusted Capital Account as quickly as possible. 7.9. IRC Section 704 Modifications. If the General Partner receives the written opinion of tax counsel to the Partnership that the allocations of income, gain, loss, deduction or credit (or items thereof) would not fully conform to IRC Section 704(b), the Administrative General Partner is directed to make such allocations and/or amendment to this Agreement as advised by such tax counsel but only so long as none of the Partners would be materially adversely affected thereby. A Partner shall be deemed to be "materially adversely affected thereby" only if the effect of such allocation or amendment would be to cause such Partner to receive Distributable Cash in a manner inconsistent with the Partners' intentions as evidenced by this Agreement. It is the further intent of the Partners that the Administrative General Partner shall cause, to the extent permitted pursuant to the provisions of Treasury Regulations Section 1.704-1(b), items of income, gain, loss and deductions not required to be allocated in accordance with the Required Allocations to be allocated among the Partners to minimize the differences between the allocations provided by Paragraphs 7.2 (entitled "Allocation of Losses") and 7.3 (entitled "Allocation of Profits") and the allocations pursuant to the Required Allocations. Any allocation made pursuant to this Paragraph shall supersede any allocation otherwise provided in this Agreement and no approval of any Partner shall be required. The Partners agree to promptly execute any amendment to this Agreement pursuant to the provisions of this Paragraph and upon failure to do so, the Administrative General Partner, as the Limited Partners' attorney-in-fact, is authorized to execute any such amendment on behalf of the Limited Partners. 7.10. Distribution of Cash from Sales/Refinance. Except as required under paragraph 7.10.9 and pursuant to subparagraph 113.3, for each Accounting Period, Distributable Cash shall be distributed to the Partners as follows: 7.10.1. First, to payment of interest on partner's loans (if any); 7.10.2. Second, to payment of the principal of partner's loans (if any); 7.10.3. Third, to the return of "New Money" contributed pursuant to paragraph 6.8 (if any); 7.10.4. Next to payment of a 30% return on the New Money calculated from the date contributed until the date returned; 7.10.5. Next, to the Original Partners (and among them in proportion to their then respective Invested Capital Balances) until each Partner has received an amount of cash equal to the amount of his then Invested Capital Balance; 7.10.6. Next, to the Limited Partners until the Limited Partners have received an overall annualized return of 18% (including previous distributions from operations); Initial LP Agreement - santa Ana 9.1.159.1.7.5 8 3-119 EXHIBIT 3 7.10.7 Next, to the Administrative General Partner until the Administrative General Partner receives a distribution of 10% of the sum of 7. 10.6 and 7.10.7. 7.10.8 Thereafter, to the Limited and Administrative General Partner simultaneously in the ratio of 90110 respectively. 7.10.9. Notwithstanding anything to the contrary contained in this Agreement, if any Distributable Cash constitutes interest income received in connection with the sale or other disposition of all or any portion of the Partnership's assets (including "imputed interest"), cash equal to such interest received by the Partnership shall be distributed, during each year, among the Partners in the same ratio as the principal amount of such installment sale is distributed to the Partners during such year and such distribution shall not be treated as a distribution of Distributable Cash pursuant to subparagraphs 7.I0.3 and 7.10.4; 7.10.10. Distribution of Cash from Operations. All periodic Distributions from Operations will be made in accordance with the partners interests in the partnership per Exhibit A, Column I until the Limited Partners have received a 9% cash on cash return. The Partnership is authorized to execute a Note and Mortgage in order to secure a loan to be insured by the Secretary of Housing and Urban Development and to execute a Regulatory Agreement and other documents required by the Secretary in connection with such loan. Any incoming general partner shall, as a condition of receiving an interest in the Partnership, agree to be bound by the Note, Mortgage, and Regulatory Agreement and other documents required in connection with the FHA insured loan to the same extent and on the same terms as the other general partners. Upon any dissolution, no title or right to possession and control of the Project, and no right to collect the rents therefrom, shall pass to any person who is not bound by the Regulatory Agreement in a manner satisfactory to the Secretary. 7.10.11 Next, the Administrative General Partner will receive a distribution of 10% of the sum of 7. 10.10 and 7.10.11. 7.10.121'hereafter, in the ratio of Exhibit A, Column 2. 7.11. Allocations for Contributed Property; IRC Section 754 Adjustments. If any Partner contributes any property to the Partnership, gain or loss with respect to such property on the sale or other taxable disposition of such property and the depreciation or cost recovery deductions for such property shall be allocated to the Partners as required in IRC Section 704 (c). To the extent required pursuant to Treasury Regulations Section 1.704-1 (b) (2) (iv) (m), the Partnership gain or loss, with respect to a Partner for whom the provisions of IRC Section 734 (b) or Section 743 (b) are applicable, shall be allocated in accordance with such provisions. Initial LP Agreement - Santa Ana 9.1.159.1.15 9 3-120 EXHIBIT 3 7.12. Identity of Distributees. Distributions shall be made only to persons who, according to the books and records of the Partnership, are the owners of record of partnership interest on a date to be determined by the Administrative General Partner. Neither the General Partners nor the Partnership shall incur any liability for making distributions in accordance with the preceding sentence, whether or not the General Partners has knowledge or notice of any transfer of ownership of any partnership interests. 7.13. Sharing Between Transferor and Transferee. If an interest in the Partnership is transferred, the income, gains, losses and deductions allocable to the interest transferred for the Accounting Period during which the transfer occurred will be allocated between the transferor and transferee of the interest in proportion to the time during the Accounting Period that the interest was owned by the transferor and transferee. Credits shall be allocated to the party who owned the interest at the time that the property giving rise to the credit was placed in service. Each transferee will be credited with the capital account of the transferee's transferor. If a transferor transfers less than all of the transferor's interest in the Partnership, the capital account will be allocated in proportion to the fraction of the interest respectively transferred and retained. 7.14. Revaluation Adjustment. 7.14.1. The Administrative General Partner, upon advice of the Partnership's tax counsel that the Partnership is authorized pursuant to the provisions of Treasury Regulations Section 1.704-1(b) (2)(iv)(f) and that it is in the Partners' interest to do so, shall cause an increase or decrease in the Partners' Capital Accounts to reflect a revaluation of Partnership property (including intangible assets such as goodwill) on the Partnership books. Any such revaluation shall be made strictly in compliance with the provisions of Treasury Regulations Section 1.704-1(b)(2) (iv)(f), including without limitation: (a) such adjustments shall (i) be based on the fair market value of Partnership property (as agreed to by the Partners (as hereinafter provided) and taking IRC Section 7701 [g] into account) on the date of adjustment and (ii) reflect the manner in which the unrealized income, gain, loss or deduction inherent in such property (that has not been previously reflected in the Capital Accounts) would be allocated among the Partners if there were a taxable disposition of such property for its fair market value at the date of adjustment; (b) the Capital Accounts shall be adjusted in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization gain or loss (all as computed for book purposes) with respect to such property following the date of adjustment; and (c) the Partners' shares of depreciation, depletion, amortization, gain or loss (all as computed for tax purposes), with respect to such property, shall be determined so as to take account of the variation between the adjusted tax basis and book value of such property in the same manner as under TRC Section 704(c) following the date of adjustment. 7.14.2. In accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv)(g), the amount of book depreciation, depletion or amortization, for a period, with respect to any Partnership Property, is the amount that bears the same relationship to the book value Xnitial LP Agreement - Santa Ana 9.1.159.1.15 10 3-121 EXHIBIT 3 of such property as the depreciation (or cost recovery deduction), depletion or amortization computed for tax purposes for such property, for such period, bears to the adjusted tax basis of such property. 7.14.3. For purposes of the foregoing, except as herein- after provided, the fair market value of any such Partnership Property shall be equal to the amount determined by the General Partner as set forth in a written notice delivered by the Administrative General Partner to the Limited Partners (the "Notice"). Notwithstanding the foregoing, if those Limited Partners ("Dissenting Limited Partners") owning a majority of the Partnership Interests owned by all the Limited Partners object in writing to such fair market value within 10 days of delivery of the Notice, then the fair market value of such property shall be determined by the mutual agreement of the Dissenting Limited Partners and the Administrative General Partner. If they cannot so agree, then the fair market value shall be determined by a qualified appraiser selected by the mutual agreement of the Administrative General Partner and the dissenting Limited Partners (and if they are unable to agree on such selection, the appraiser shall be selected by the American Arbitration Association or any successor organization thereto). All appraisal costs shall be paid by the Partnership. 8. Management. 8.1. Authority of General Partners. The Administrative General Partner and the Managing General Partner, if so named at this time, shall each have complete power of management of the Partnership and shall have authority to act on behalf of the Partnership in all Partnership matters including without limitation the power to execute notes, deeds of trust, contracts and leases; to assume direction of business operations and the Administrative General Partner and the Managing General Partner, if so named at this time, shall each have all rights, powers and authority generally conferred by law or necessary, advisable or consistent with accomplishing the purpose of the Partnership as set forth in Article 4 of this Agreement. During the operation phase the Managing General Partner shall be primarily responsible for the Partnership's operations. The Managing General Partner when entered into the Agreement shall perform other tasks and duties as may be required for non-profit general partners in order to maintain property tax abatement under the welfare exemption of the California Revenue and Tax Code and will perform all duties to qualify as a Managing General Partner under rule 140.1 adopted by the Board of Equalization each year. 8.2. Restrictions. The Administrative General Partner shall have no authority to (a) do any act which would make it impossible to carry on the ordinary business of the Partnership; (b) do any act in contravention of this Agreement; (c) possess Partnership Property or assign the right of the Partnership in any Partnership Property for other than a Partnership purpose; (d) obligate the Partnership as a surety or guarantor, endorser, or accommodation endorser for any other person or firm; or (e) make an assignment of the Partnership assets for the benefit of creditors. Initial LP Agreement - Santa Ana 9.1.159.1,15 11 3-122 EXHIBIT 3 8.3. Approval Rights. The Limited Partners shall have the right, by vote of more than 50% of the Limited Partners' Interests, as shown on Exhibit "A", to approve the following matters affecting the basic structure of the Partnership: 8.3.1. The dissolution and winding up of the limited partnership. 8.3.2. The merger of the limited partnership or sale, exchange, lease, mortgage, pledge, or other transfer of, all or a substantial part of the assets of the limited partnership other than in the ordinary course of its business. 8.3.3. Incur indebtedness by the limited partnership other than in the ordinary course of business. 8.3.4. A change in the nature of the business. 8.3.5. Transactions in which the General Partners has an actual or potential conflict of interest with the limited partners or the partnership. 8.3.6. The removal of a general partner. 8.3.7. An election to continue the business of the Limited Partnership other than under the circumstances described in subparagraph 8.3.9 or 8.3.10. 8.3.8. The admission of a general partner other than under the circumstances described in subparagraph 8.3.9 or 8.3.10, subject to the unanimous vote requirement of paragraph 11.6. 8.3.9. The admission of a general partner or an election to continue the business of the limited partnership after a general partner ceases to be a general partner other than pursuant to subdivision (b), (c) or (d) of Section 15642 of the Act where there is no remaining or surviving general partner, subject to the unanimous vote requirement of paragraph 11.6 8.3.10.The admission of a general partner or an election to continue the business of the limited partnership after the general partner ceases to be a General Partner pursuant to subdivision (b), (c) or (d) of Section 15642 of the Act where there is no remaining or surviving general partner, subject to the unanimous vote requirement of paragraph 11.6 All other matters are within the discretion of the Administrative General Partner and the Limited Partners shall have no right to vote on those matters. 8.4. Meetings of Partners. Meetings of Partners shall be held at the principal place of business of the Partnership. Meetings shall be held only when called by either the Administrative General Partner or by Limited Partners representing more than 10% of the Limited Initial LP Agreement - Santa Ana 9.1.159.1.75 12 3-123 EXHIBIT 3 Partners' Interests, as shown on Exhibit A. Meeting notices and procedures shall be in conformity with California Corporations Code Section 15637. 8.5 Power of Attorney. The Limited Partners hereby irrevocably constitute and appoint the Administrative General Partner as his attorney to make, execute, acknowledge, and record any instrument which may be required by law to be filed by the Partnership, and any and all deeds, leases, deeds of trust, loan applications, promissory notes, loan agreements, assignments of lease, or other instruments or documents which the Administrative General Partner deems appropriate or necessary to carry out the purposes of this Agreement. The foregoing power of attorney shall survive the delivery of any assignment by a Limited Partner of the whole or any portion of his limited partner's interest, and any assignee of a Limited Partner hereby constitutes and appoints the Administrative General Partner as his attorney in the same manner and with the same force as if such assignee had executed this Agreement. 8.6. Other Activities. The Administrative General Partner shall devote so much of its time and attention to the Partnership business as it deems necessary or advisable under the circumstances. Any partner, General or Limited, may engage in or possess an interest in other partnerships and other business ventures of every nature and description and neither the Partnership nor the Partners shall have any right in such independent ventures or to the income or profits derived therefrom. Neither the General Partners or any Limited Partner shall be obligated to present any particular investment opportunity to the Partnership, even if the opportunity is of a character which, if presented to the Partnership, could be taken by the Partnership and the Partner receiving the opportunity shall have the right to take it for his or her own account or to recommend it to others. The fact that a Partner is employed, or is directly or indirectly interested in or connected with any firm or corporation employed by the Partnership to perform a service, shall not prohibit the General Partners from employing such person, firm or corporation, or from otherwise dealing with him or it. Neither the Partnership nor the Partners shall have any rights in or to any income or profits derived from such employment, nor shall such employment change the status of the partner as a Limited Partner hereunder. 8.7. Scope of Authority. Except as herein set forth, the Administrative General Partner shall have the right to cause the Partnership to enter into transactions with other persons, firms or entities with which the Administrative General Partner is affiliated, and to receive compensation, directly or indirectly through such affiliated corporation or other persons, for services rendered in connection with the Partnership from any source or transaction. 8.8. Limitation on Liability. The Partners acknowledge and agree that it is their intent that the General Partners shall not be liable, responsible or accountable in damages or otherwise, to any third person nor to the Partnership, nor to the other Partners for any loss, liability, obligations, penalties, actions, judgments, proceedings, darnages, costs or expenses of any kind or nature whatsoever, including without limitation, all costs and expenses of defense, appeal and settlement, in any way relating to or arising out of or alleged to relate or arise out of any action or inaction on the part of the Partnership or the General Partners, except for the willful misconduct, gross negligence or reckless disregard by the General Partners of its duties. The Partnership shall initial LP Agreement - Santa Ana 9.1.159.1.15 13 3-124 EXHIBIT 3 indemnify the General Partners and hold it harmless from any of the foregoing, The General Partners is hereby authorized to withhold distributions if they determine in their sole discretion that such funds should be held as a reserve for indemnification. 8.9. Reimbursement of Expenses. The Administrative General Partner shall be entitled to reimbursement for all legal and auditing fees and expenses of agents and advisors, costs of insurance, and the cost of preparing the Partnership's tax returns. The Administrative General Partner shall also be entitled to reimbursement from the Partnership for direct and specific project expenses, overhead and administration costs, which shall include expenses connected with the distribution to and communication with Partners. The Administrative General Partner shall be entitled to a fee equal to 5% of the gross annual revenues as an asset/property management fee. In addition an affiliated company of the Administrative General Partner will act as a real estate broker and will receive a commission not to exceed 1% of the price on the purchase and on the sale of the property. No Limited Partner shall be entitled to any share of any such sums paid to the Administrative General Partner or its affiliate. 8. 10. Administrative and Development Fees. The General Partners shall not be entitled to any compensation for time, labor or overhead, except as specifically provided for in this Agreement. 9. Transferability of Parrtners' Interest. 9.1. Permitted Transfers. The interest of a Partner may be sold or transferred only: (a) to an entity in which the transferring Partner owns a 51% or greater interest; (b) to the Partnership or to any Partner; (c) by testamentary disposition or by gift to a Partner's spouse or issue or to a trust fur such spouse or issue; (d) upon the sale of a Limited Partnership interest to a non partner, subject to the provisions of Paragraph 9.2, 9.2. Sale of Limited Partnership Interest. Except as set forth in Section 9.1.1, 9.2.2 or 9.2.3, the interest of a Partner in the Partnership only in its entirety, and on the following conditions. Any attempted transfer to any other person, including a transfer by operation of law, shall be void. 9.2.1. If any Partner ("Selling Partner") receives a bona fide offer to purchase all or any part of his Partnership interest, which offer the Selling Partner wishes to accept, the Selling Partner shall immediately notify the other Partners ("Remaining Partners") of the offer. The offer shall be communicated as provided in Paragraph 13 and shall include, the terms and conditions of the offer, the name of the person making the offer, the date on which the offer expires, and all other relevant information concerning the offer, Each Remaining Partner shall have 20 days after receipt of the offer, to match the price in the offer by giving notice in writing to the Administrative General Partner specifying how much of the Selling Partner's interest he wishes to purchase. Initial LP Agreement - Santa And 3.1.159.1.15 14 3-125 EXHIBIT 3 9.2.2. If the total of the offers of the Remaining Partners offering to purchase ("Accepting Partners") equals or exceeds the interest the Selling Partner offered to sell, the Accepting Partners shall become bound to purchase, and Selling Partner shall become bound to sell his interest to the Accepting Partners on the terms of the offer. The portion of the price payable by each of the Accepting Partners shall be the several, and not joint, obligation of each of the Accepting Partners, and shall be paid to the Selling Partner. If the total of the offers of the Accepting Partners equals the interest the Selling Partner offered to sell, each Accepting Partner shall purchase the proportion of the Selling Partner's interest specified in his notice. If the aggregate of the offers of the Accepting Partners exceeds the interest the Selling Partner offered to sell, each Accepting Partner shall purchase that proportion of the offered interest equal to such Accepting Partner's interest in the Partnership. No later than 7 days after expiration of the period for the Remaining Partners to exercise their rights under this article, the Administrative General Partner shall advise the Partners of the amount payable by each Accepting Partner, and the Administrative General Partner shall cause the interest of the Selling Partner to be eliminated and the interest of each of the Accepting Partners to be increased by the respective portion of the Selling Partner's interest purchased. 9.2.3. If the Remaining Partners do not offer to purchase all of the offered interest of Selling Partner within 20 days after receipt of the Proposed Offer, the Selling Partner may disregard all offers received from the Remaining Partners and may, within 30 days after the 20 -day period, dispose of his interest on the terms of the offer, provided that such sale shall not be at a lower price or upon terms more favorable to the buyer than those specified in the offer. If the Selling Partner can not sell his interest within said 30 day period, he may then only sell his interest after re -offering it to the other Partners as set forth above. 9.3. Substituted Limited Partner. No Limited Partner shall have the right to substitute an assignee for his capital contribution, and no transferee pursuant to paragraphs 9.1 and 9.2 of the whole or any portion of the Limited Partner's interest in the Partnership shall become a substituted Limited Partner unless: (a) such assignee delivers to the Administrative General Partner an agreement in writing to assume all of the obligations of Selling Partner under this Agreement; and (b) the Administrative General Partner consents in writing to such substitution; the Administrative General Partner may grant or withhold its consent in its sole and absolute discretion. 9.4. Election of General Partner. The Administrative General Partner may elect to treat and assignee who has not become a substituted limited partner as a substituted limited partner in the place of his assignor should the Administrative General Partner deem, in its sole discretion, that such treatment is in the best interests of the Partnership. 9.5. Non -Termination. The Partnership shall not be terminated by the death, insanity, bankruptcy, insolvency, dissolution, withdrawal, or expulsion of any Limited Partner, nor Initial LP Agreement - Santa Ana 9.9..159.1.35 15 3-126 EXHIBIT 3 by the assignment by any Limited Partner of his interest or by the admission of new Limited Partners. 9.6. Death or Incompetency of Limited Partner. Upon the death or legal incompetency of a Limited Partner his personal representative shall have all the rights of a limited partner for the purpose of settling or managing his estate. 9.7. Other Limited Partners. Upon the bankruptcy, insolvency, dissolution or other cessation of a corporate limited partner, the authorized representative of such entity shall have the rights of a limited partner to effect the orderly disposition of said Limited Partner's interest. 10. Financial Information. 10.1. Boobs of Account. The Administrative General Partner shall keep accurate books of account in which all matters relating to the Partnership, including all income, expenses, assets, and liabilities shall be entered. Said books shall be kept on a cash basis and shall be opened to examination by any partner at any time. 10.2. Accounting. A financial statement describing the condition of the partnership, as of the close of business on the last day of the calendar year and such additional information as may be needed by the partners to file their tax returns, shall be rendered to each partner within 90 days thereafter. Except for substantial errors brought to the attention of the Administrative General Partner within 30 days of its rendition, such accounting shall be final and conclusive as to all ,partners. 10.3. Tax Matters Partner. AMCAL Multi -Housing Two, LLC, shall be the "Tax Matters Partner" pursuant to IRC Section 6231 (a) (7). The Tax Matters Partner shall keep the other partners apprised of all proceedings regarding Partnership tax items. The `fax Matters Partner shall not enter into a settlement agreement with the Internal Revenue Service on behalf of any partner without that partner's consent. 104, Accounting Decisions. All decisions as to accounting matters, except as specifically provided to the contrary in this Agreement, will be made by the Partnership's accountants subject to the approval of the Administrative General Partner. 10.5. Federal Income Tax Elections. The Administrative General Partner shall cause the Partnership to make an election (or consent) to any such election by a Partner) pursuant to any of IRC Sections 732(4) and/or 754 (or corresponding provisions of succeeding law or state law), as may be determined by the Administrative General Partner in the Administrative General Partner's reasonable discretion, except to the extent otherwise determined by this Agreement. 11. Dissolution. Initiai LP Agreement - Santa Ana 9.1.159.1.15 16 3-127 EXHIBIT 3 11. 1. Mutual Agreement. The Partnership shall be dissolved upon: (a) the vote of the Limited Partners as provided in paragraph 8.3, or (b) upon sale of the Partnership Property; provided, however, if the Partnership receives a promissory note as part of the consideration for the Partnership Property, the Partnership shall continue for the sole purpose of collecting and enforcing such obligation. The Partnership shall engage in no further business thereafter other than that which is necessary to wind up the business and distribute the assets. 11.2. Proceedings Upon Dissolution. Upon the dissolution of the Partnership, the Administrative General Partner shall notify partners of such dissolution, wind up the affairs of the Partnership, liquidate the assets of the Partnership, pay or provide for the payment of all the debts, and divide the surplus, if any, among the partners according to the provisions of paragraph 11.3 hereof, subject to such adjustment as may be required by the Partnership's accountant in accordance with generally accepted accounting principles. If after the liquidation and distribution, any Partner or Partners would have a negative Capital Account, net income, if any, resulting from the liquidation shall first be allocated to that Partner or those Partners on a pro rata basis in the amount of the deficit and the remaining net income to the Partners in proportion to their receipt, or entitlement to receipt of the proceeds of liquidation. If after that allocation a Partner has a negative Capital Account, that Partner shall contribute to the Partnership cash in the amount of the remaining deficit. 11.3. Distributions on Dissolution. The assets of the Partnership shall be applied in the following order of priority: 11.3.1. To the payment of debts and liabilities of the Partnership (other than any loans and advances that may have been made by any of the Partners, or amounts owing to any of the Partners) and the expenses of liquidation; 11.3.2. To the setting up of any reserves that the Administrative General Partner may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership, and, at the expiration of such period as the Administrative General Partner shall deem advisable, to distribute the balance thereafter remaining in the manner hereinafter provided; 11.3.3. Any balance then remaining will be distributed to the Partners in accordance with their respective Capital Accounts, provided that profits shall first be allocated in accordance with the provisions of Paragraph 7.3 (entitled "Allocation of Profits"), in the manner as if all the Distributable Cash were then distributed in accordance with the provisions of Paragraph 7.11 (entitled "Distributions of Cash from Capital Event"). 11.4. Assets Other Than Cash. Assets of the Partnership may be distributed in kind on the basis of the then fair market value of such assets as determined by agreement of the Partners, and if no such agreement of value is reached within 10 days, then such value shall be determined by an independent appraiser appointed by the American Arbitration Association upon application of the Administrative General Partner (the cost and expense of said appraisal to be borne by the Partnership). If agreed to by all the Partners, distributions in-kind will be made to the initial I,P Agreement - Santa Ana 17 3-128 EXHIBIT 3 Partners as tenants-in-common. For purposes of making such distribution only, the unrealized profit or loss on any such asset (based on its fair market value) shall be first allocated among the Partners and the distribution of the asset shall be treated as a distribution of cash equal to the fair market value of such asset. 11.5, Liquidation of Partner's Interest. Upon liquidation of any Partner's interest in the Partnership, the liquidation distributions shall be made in accordance with the positive Capital Account balances of the Partners adjusted as otherwise required by the provisions of this Agreement. A liquidation of a Partner's interest shall occur as required pursuant to Treasury Regulations Section 1.704-1 (b)(2)(ii)(g). 11.6. Reconstitution of Partnership. The Limited Partners may, upon the occurrence of any of the events described in paragraphs 8.3.6 or 11. 1, reconstitute the business of the Partnership in a new limited partnership on the terms as this Agreement provided that if all of the General Partner cease to be a General Partner other than pursuant to subdivision (b), (c) or (d) of Section 15642 of the Act, and there is no remaining or surviving General Partner, admission of a new General Partner or a decision to continue the Partnership business by reconstituting the Partnership must be approved by the affirmative vote of all of the Limited Partners. Expenses incurred in the reformation, or attempted reformation, of the Partnership shall be deemed expenses of the Partnership. 11.7. Partnership Assets. Each partner shall look solely to the assets of the Partnership for the return of his investment, and if the assets of the Partnership remaining after the discharge of all debts and liabilities of the Partnership are insufficient to return the investment of each Limited Partner, such Limited .Partner shall have no recourse against the Administrative General Partners or any other Limited Partner. 12. Books and Records. The Administrative General Partner shall keep at the partnership's office the following Partnership documents; 12.1. A current list of the full name, and last known business or residence address of each Partner, together with the contribution and share in profits and losses of each partner. 12.2. A copy of the Certificate of Limited Partnership and all Certificates of Amendment, and executed copies of any powers of attorney pursuant to which any certificate has been executed. 12.3. Copies of the Partnership's federal, state and local income tax or information returns and reports, if any, for the 6 most recent taxable years. 12.4. Copies of the original Agreement and all Amendments to the Agreement. 12.5. Financial statements of the Partnership for the 6 most recent fiscal years. Initial LP Agreement - Santa Ana 9.1.159.7..1$ 18 3-129 EXHIBIT 3 12.6. The Partnership's books and records for at least the current and past 3 fiscal years. Upon the request of a Limited Partner, the Administrative General Partner shall promptly deliver to the requesting Limited Partner, at the expense of the Partnership, copies of the documents described in items 12.1, 12.2, or 12.4 above. All other documents may be inspected and copied by a Limited Partner during normal business hours upon reasonable, prior request. Copies of any amendments to this Agreement signed pursuant to the Administrative General Partner' power of attorney shall be promptly delivered to all Partners. 13. Notices. Any notices required to be given under this Agreement shall be in writing and signed by or on behalf of the party giving the notice sent by prepaid certified or registered mail, return receipt requested, to each partner at the address set forth after his signature or such other address as may be designated by notice given as aforesaid. Service of notice shall be deemed to be effective as of the date shown on the receipt issued by the post office for such registered mail, and if such receipt is not returned, 48 hours after deposit in the United States mail. 14. Attorne s' Fees. If any party hereto files an action or proceeding concerning any provision of this Agreement or the rights and duties of any person in relation thereto, the party or parties in whose favor final judgment shall be entered shall be entitled to recover from the other party or parties his court costs and reasonable attorneys' fees. 15. Miscellaneous Provisions. 15.1. Entire Agreement. All of the agreements heretofore and contemporaneously made by the parties are contained in this Agreement and, except as provided in Paragraph 8.3 this Agreement cannot be modified in any respect except in writing executed by parties holding an aggregate majority of the Partnership interests. 15.2. Validity. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application or interpretation of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby and shall remain in full force and effect. 15.3. Waiver of Action for Partition. Each of the parties hereto irrevocably waives his right to maintain any actions for partition with respect to the Partnership Property and other investments of the Partnership. 15.4. Governing Instruments. In the event of any conflict between the provisions of this Agreement and any document executed or filed by the Administrative General Partner pursuant to the power of attorney granted to him this Agreement shall govern. 15.5. Headings. The headings used herein are for convenience only and shall have no effect upon the interpretation of this Agreement. Whenever the context so requires, the Initial Cdr Agreement - Santa luta 9.1.159.1.15 19 3-130 EXHIBIT 3 singular number shall include the plural, the plural shall include the singular, the neuter gender shall include the masculine and feminine genders and vice versa. 15.6. Counterparts. This Agreement may be executed in counterparts, each of which so executed shall be deemed an original, and said counterparts together shall constitute one and the same document. 15.7. Binding Effect. This Agreement shall be binding on, and shall inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of each party. 16. Limited Partners Representations. Each Limited Partner by signing below represents and warrants to the Partnership and to the Administrative General Partner that; 16.1. The Limited Partner has received such information about the partnership, as the Limited Partner deemed necessary to evaluate this investment, and a copy of this Limited Partnership Agreement, 16.2. That the Limited Partner is taking all of the Limited Partnership Interest (the "Units") listed after his name on Exhibit "A" for his own account and not as an agent, trustee, custodian or the like for any other person or with a view to or for sale in connection with a distribution thereof. Each Partner understands that the interest being purchased and sold hereunder has not been registered under the Securities Act of 1933, as amended, nor qualified under the California Corporate Securities Law of 1968, as amended, because the contemplated transaction constitutes a private offering within the meaning of Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under, and is exempt from qualification pursuant to Section 25102 (f) of the California Corporate Securities Law of 1968, as amended. 16.3. That the Limited Partner is taking the Units for investment purposes only and has no present intention to dispose of them to any other person. 16.4. That the Limited Partner has such knowledge and experience in financial and business matters that he is capable of evaluating the risks of the prospective investment. 16.5. That the Limited Partner is a person who is able to bear the economic risk of the investment. 16.6. That the Limited Partner has an adjusted gross income of at least $30,000 in the year he is subscribing and a net worth of at least $60,000; or a net worth of $100,000 or three times the initial cash investment for the Units subscribed, whichever is greater; and 16.7. That the Administrative General Partner has made available to the Limited Partner the opportunity to obtain any additional information, to the extent the Administrative General Partner possesses such information or can acquire without unreasonable effort or expense, necessary to verify the accuracy of any information contained herein; and Initial LP Agreement - Santa Ana 9.1,159.1.15 20 3-131 EXHIBIT 3 16.8. Each Partner has been fully advised of the facts respecting the formation of the Partnership and has been given the opportunity to consult his attorney with respect to the Partnership. Each Partner hereby agrees that the offer and sale of the interest to it does not involve any public offering of such interest, and 16.9. The Limited Partner understands that there is no public market for the Units and none is expected to develop and he must continue to bear the economic risk of this investment for an indefinite period. Initial LP Agreement - Santa Ana 9.1.159.1.15 21 3-132 EXHIBIT 3 Dated: September 1, 2015 General Partners: AMCAL Multising Two LLC, a California limit lability company By: Percival V Limited Partners: For: AMCAL Enterprises, Inc., a California corporation By. Arjun Nagarkatti, President Initial LP Agreement - Santa Ana 9.1.159.1.15 22 3-133 EXHIBIT 3 EXHIBIT "A" AMCAL 1440 SANTA ANA FUND, L.P. CAPITAL CONTRIBUTION AND PARTNERSHIP INTERIJST Column 1 Column 2 CAPITAL NAME OF PARTNER CONTRIBUTIONS % OF INTEREST % OF PROFIT AMCAL Multi -Housing Two LLC $ 1.00 1.00 1.00 an Administrative General Partner AMCAL Enterprises, Inc. $ 99.00 99.00 99.00 Limited Partner TOTAL: $ 100.00 100.00 100.00 111itia3. LP Agreement - Sauta Ana 6.1.159.1 -is 23 3-134 EXHIBIT 3 EXHIBIT "B" AMCAL 1440 SANTA ANA FUND, L.P. LEGAL DESCRIPTION All that certain real property situated in the County of Orange, State of California, described as follows: Parcel 1: The Easterly 112.51 feet of the Westerly 437.51 feet of that portion of land allotted to N.O. Stafford and C. Tustin, in the City of 1440 Santa Ana, County of Orange, State of California, as described in the Final Decree of partition of the Rancho Santiago De 1440 Santa Ana, which was entered September 12, 1868 in Book "B" Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the center lines of First Street and Mc Clay Street, as shown on a Map filed in Book 47 Page 32 of Record of Surveys, in the Office of the County recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860 Page 4 of Official Records; Thence South 00 06' 40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89' 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'40" West 398.34 feet to the point of beginning. Excepting therefrom, that portion of the North 71.00 feet as described in the Deed to the City of 1440 Santa Ana, recorded April 15, 1960 in Book 5196, Page 381 of Official Records. Parcel 2: A non-exclusive easement for ingress and egress over the South 25 feet of the Westerly 325 feet of that portion of the land allotted to N.O. Stafford and C. Tustin, in the City of 1440 Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De 1440 Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Initial. L)) Agreement - Santa Ana 9. i. 159. 1. 15 24 3-135 EXHIBIT 3 Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 00 06' 40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06' 48" West 398.34 feet to the point of beginning. Parcel 3: The Westerly 175.00 feet of the Easterly 375.00 feet of that portion of the land allotted to N.O. Stafford and C. Tustin, in the City of 1440 Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De 1440 Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West San Bernardino Base and Meridian; Thence North 890 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06' 40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89" 08'20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 00 06' 48" West 398.34 feet to the point of beginning. Excepting therefrom, the South 21 feet of the North 71 feet thereof. Parcel 4: A non-exclusive easement for ingress and egress over the South 25 feet of that portion of the land allotted to N,O. Stafford and C. Tustin, in the City of 1440 Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De 1440 Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, initial LP Agreement - Santa Ana 9.1.159.1.15 25 3-136 EXHIBIT 3 California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0" 06' 40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89" 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 00 06'48" West 398.34 feet to the point of beginning. Excepting therefrom, the Easterly 375.00 feet. Assessor's Parcel Number: 011154-43 initial LP Agreement - Santa Ana 9.1.159.1.15 25 3-137 This page intentionally left blank 3-138 EXHIBIT 4 *** DISTRIBUTED FOR DISCUSSION PURPOSES ONLY - CREDIT APPROVAL HAS NOT BEEN OBTAINED *** RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) Buchalter, a Professional Corporation ) 1000 Wilshire Blvd., Suite 1500 ) Los Angeles, CA 90017 ) Attention: Scott M. Salomon, Esq. ) [Space Above This Line For Recording Data] ---------------------------- SUBORDINATION AGREEMENT (1440 East First Street, Santa Ana, California) This SUBORDINATION AGREEMENT (this "Agreement") dated as of [ , 2018], is executed by and among (i) BANK OF AMERICA, N.A., a national banking association ("Senior Lender"), (ii) the HOUSING AUTHORITY OF THE CITY OF SANTA ANA, acting as the Housing Successor Agency, a public body, corporate and politic ("Subordinate Lender"), and (iii) AMCAL 1440 SANTA ANA FUND, LP, a California limited partnership ("Borrower"). RF.C1TA1,C- A. Pursuant to that certain Construction Loan Agreement dated as of the date hereof, executed by and between Borrower and Senior Lender (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Senior Loan Agreement"), Senior Lender has agreed to make a loan to Borrower in the original principal amount of [Nineteen Million Fifty -Six Thousand Four Hundred Ninety -Five and 00/100 Dollars ($19,056,495)] (the "Senior Loan"), as evidenced by that certain Promissory Note dated as of the date hereof, executed by Borrower and made payable to the order of Senior Lender in the amount of the Senior Loan (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Senior Note"). B. In addition to the Senior Loan Agreement, the Senior Loan and the Senior Note are also secured by a certain Construction Deed of Trust, Assignment, Security Agreement and Fixture Filing dated as of the date hereof (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Senior Security Instrument"), encumbering the property described on Exhibit A attached hereto and described in the Senior Security Instrument as the "Mortgaged Property." The Senior Security Instrument shall be recorded substantially concurrently herewith in the Official Records of Orange County ("Official Records"). C. Borrower has requested Senior Lender to permit that certain subordinate loan in the amount of $[8,522,740] (the "Subordinate Loan") from the Low and Moderate Income Subordination Agreement (Affordable) (First Street Apartments) BN 31557804x4 3-139 Page 1 EXHIBIT 4 Housing Asset Fund of the Subordinate Lender to Borrower and to allow the Subordinate Loan to be secured by a mortgage lien against the Mortgaged Property. D. Upon satisfaction of all conditions set forth in the Senior Loan Agreement, the Senior Loan will convert ("Conversion") to a Permanent Loan, as defined in the Senior Loan Agreement E. Senior Lender has agreed to permit the Subordinate Loan and to allow the subordinate mortgage lien against the Mortgaged Property subject to all of the conditions contained in this Agreement. F. Subordinate Lender has agreed to subordinate the Subordinate Loan and the Subordinate Loan Documents, as defined herein, to the Senior Loan and the Senior Loan Documents, as defined herein, with the specific exclusion of the Affordability Restrictions, as defined herein. AGREEMENTS: NOW, THEREFORE, in order to induce Senior Lender to permit the Subordinate Loan to Borrower and to allow 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. 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. "Affordability Restrictions" means the Affordability Restrictions on Transfer of Property [of even date herewith] by and between the Borrower and Subordinate Lender, which shall be specifically excluded from the terms, covenants or conditions of this Agreement. "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 or Subordinate Lender is not open for business, or (d) a day on which the Federal Reserve Bank of New York is not open for business. Subordination Agreement (Affordable) Page 2 (First Street Apartments) 3-140 EXHIBIT 4 "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 the written notice from Subordinate Lender to Borrower and Senior Lender stating that a Subordinate Loan Default has occurred under the Subordinate Loan Documents or the Affordability Restrictions. Each Default Notice shall specify the default upon which such Default Notice is based. "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). "Permanent Loan Agreement" means that certain Multifamily Loan and Security Agreement to be delivered by Borrower to Senior Lender in connection with the Permanent Loan. "Permanent Note" means that certain Multifamily Note in the amount of up to $[7,425,426] to be delivered by Borrower to Senior Lender to evidence the Permanent Loan. "Permanent Mortgage" means that certain Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to be delivered by Borrower to Senior Lender and encumbering the Property to secure the obligations of Borrower under the Permanent Note, which Permanent Mortgage will become the Senior Security Instrument upon Conversion. "Permanent Loan Documents" means the Permanent Note, the Permanent Mortgage, Permanent Loan Agreement and all other documents evidencing, securing or otherwise executed and delivered in connection with the Permanent Loan. "Senior Lender" means the Person named as such in the first paragraph on Page 1 of this Agreement, its successors and assigns and any other Person who becomes the legal holder of the Senior Loan after the date of this Agreement. Following Conversion, the Senior Lender means the holder of the Permanent Loan. "Senior Loan Default" means the occurrence of an "Event of Default" as that term is defined in the Senior Loan Documents, including, following Conversion of the Senior Loan, the Permanent Loan Documents. "Senior Loan Documents" means the Senior Security Instrument, the Senior Note, the Senior Loan Agreement, and all other "Loan Documents" as that term is defined in the Senior Loan Agreement, and following the Conversion of the Senior Loan, the Permanent Loan Documents. Subordination Agreement (Affordable) Page 3 (First Street Apartments) 3-141 EXHIBIT 4 "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, including without limitation, a receiver, trustee or debtor-in-possession and any other Person who becomes the legal holder of the Subordinate Note after the date of this Agreement. "Subordinate Loan Agreement" means the Loan Agreement [of even date herewith] by and between Borrower and Subordinate Lender. "Subordinate Loan Default" means a default by Borrower in performing or observing any of the terms, covenants or conditions in the Subordinate Loan Documents or Affordability Restrictions to be performed or observed by it, which continues beyond any applicable period provided in the Subordinate Loan Documents or Affordability Restrictions for curing the default. "Subordinate Loan Documents" means the Subordinate Note, the Subordinate Mortgage, the Subordinate Loan Agreement, and all other documents evidencing, securing or otherwise executed and delivered in connection with the Subordinate Loan, but specifically excluding the Affordability Restrictions. "Subordinate Mortgage" means the Agency Deed of Trust and Assignment of Rents [of even date herewith and to be recorded in the Official Records concurrently herewith] by Borrower, as trustor, in favor of Subordinate Lender, as beneficiary. "Subordinate Note" means the Housing Funds Promissory Note Secured by Agency Deed of Trust for the Housing Authority of the City of Santa Ana [of even date herewith] issued by Borrower to Subordinate Lender in the maximum principal amount of $[8,522,740]. 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 or retain the Affordability Restrictions (which shall not be subordinate to the Senior Loan Documents), the Subordinate Mortgage 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. 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. The Subordinate Loan is evidenced by the Subordinate Note and is secured by the Subordinate Mortgage, the Subordinate Loan Agreement and the Subordinate Loan Documents. Subordination Agreement (Affordable) Page 4 (First Street Apartments) 3-142 EXHIBIT 4 (b) [Reserved]. (c) Relationship of Borrower to Subordinate Lender and Senior Lender. Subordinate Lender is not an Affiliate of Borrower and is not in possession of any facts which would lead it to believe that Senior Lender is an Affiliate of Borrower. (d) Term. The term of the Subordinate Note does not end before the stated term of the Senior Note. (e) Subordinate Loan Documents. The executed Subordinate Loan Documents are substantially in the same forms as those submitted to, and approved by, Senior Lender prior to the date of this Agreement. 5. Deliveries. Borrower shall submit the following items to Senior Lender the later of (a) ten (10) Business Days after the date on which the proceeds of the Subordinate Loan are disbursed to Borrower, and (b) the effective date of the Senior Loan Documents: (1) Title Policy Endorsement. An endorsement to the policy of title insurance insuring the lien of the Senior Security Instrument which insures that (A) there are no liens or other encumbrances affecting the Mortgaged Property, other than "Permitted Encumbrances" (as defined in the Senior Security Instrument), the Subordinate Mortgage, and other Subordinate Loan Documents filed or recorded against the Mortgaged Property, (B) the lien of the Subordinate Mortgage is subordinate to the lien of the Senior Security Instrument, and (C) this Agreement has been recorded among the applicable land records. (2) Certification. A certification from Borrower and Subordinate Lender to Senior Lender that the Subordinate Loan Documents do not contain any changes from the Subordinate Loan Documents submitted to, and approved by, Senior Lender prior to the date of this Agreement. (3) Subordinate Loan Documents. A complete set of the fully executed Subordinate Loan Documents, certified by Borrower to be true, correct and complete. (4) Senior Loan Documents. An executed copy of each of the Senior Loan Documents, certified by Borrower to be true, correct and complete. Subordination Agreement (Affordable) (First Street Apartments) 3-143 Page 5 EXHIBIT 4 6. Terms of Subordination. (a) Agreement to Subordinate. Senior Lender and Subordinate Lender agree that (1) 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 (2) the liens, terms, covenants and conditions of the Subordinate Mortgage and the other Subordinate Loan Documents are and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the 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, 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. 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. 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 Subordination Agreement (Affordable) Page 6 (First Street Apartments) 3-144 EXHIBIT 4 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). (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 to notify (telephonically or via email, followed by written notice) Senior Lender prior to commencing, or joining with any other creditor to commence any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings against or with respect to Borrower. (h) Affordability Restrictions Following Foreclosure of First Mortgage. Subordinate Lender agrees that although the Affordability Restrictions remain senior to the lien of the Senior Loan Documents, in the event title to the Property is transferred as a result of a foreclosure, a deed in lieu of foreclosure or other realization upon the Property under the Senior Loan Documents, notwithstanding anything to the contrary contained in the Affordability Restrictions, sixty-eight (68) of the units subject to restriction under the Affordability Restrictions shall be restricted for rental to and occupancy by households whose income does not exceed 60% of the AMI (as defined in the Affordability Restrictions), and the rent in such units Subordination Agreement (Affordable) Page 7 (First Street Apartments) 3-145 EXHIBIT 4 shall be restricted to the produce of thirty percent (30%) of sixty percent (60%) of the AMI, as adjusted for household size. 7. Default Under Subordinate Loan Documents. (a) Notice of Subordinate Loan Default and Cure Rights. 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, subject to the provisions of this Agreement. Senior Lender shall have the right, but not the obligation, to cure any Subordinate Loan Default 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. All amounts paid by Senior Lender in accordance with the Senior Loan Documents to cure a Subordinate Loan Default 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 Exercise of Remedies After Notice to Senior Lender. If a Subordinate Loan Default occurs and is continuing, Subordinate Lender agrees that, without Senior Lender's prior written consent, it will not commence foreclosure proceedings with respect to the Mortgaged Property under the Subordinate Loan Documents or exercise any other rights or remedies it may have under the Subordinate Loan Documents, including, but not limited to accelerating the Subordinate Loan (and enforcing any "due on sale" provision included in the Subordinate Loan Documents), collecting rents, appointing (or seeking the appointment of) a receiver or exercising any other rights or remedies thereunder unless and until it has given Senior Lender at least sixty (60) days prior written notice; during such sixty (60) day period, provided, however, such limitation on the remedies of Subordinate Lender shall not derogate or otherwise limit Subordinate Lender's rights, following an event of default under the Subordinate Loan Documents to (a) compute interest on all amounts due and payable under the Subordinate Loan at the default rate described in the Subordinate Loan Documents, (b) compute prepayment premiums and late charges, (c) enforce against any person, other than Borrower and any guarantors or indemnitors under the Senior Loan Documents, any guaranty of the obligations of Borrower under the Subordinate Loan, and (d) seek specific performance to enforce covenants and agreements of Borrower relating to income, rent, or affordability restrictions contained in the Affordability Restrictions, and (e) appear in, defend or bring an action in connection with the Property in Subordinate Lender's capacity as a municipal authority to the extent required by law. (c) Cross Default. Borrower and Subordinate Lender agree that a Subordinate Loan Default 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 Subordination Agreement (Affordable) Page 8 (First Street Apartments) 3-146 EXHIBIT 4 that any Subordinate Loan Default 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 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 Section 8(a), nor shall such failure constitute a default by Senior Lender under this Agreement. Subordinate Lender shall have the right, but not the obligation, to cure any such Senior Loan Default within sixty (60) days following the date of such Default Notice; provided, however, that Senior Lender shall be entitled during such sixty (60) day period to continue to pursue its remedies under the Senior Loan Documents. Subordinate Lender may have up to ninety (90) days from the date of the Default Notice to cure a non -monetary default if during such ninety (90) 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 determined by Senior Lender in its sole discretion, then Senior Lender may exercise during such ninety (90) 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 Subordinate Lender to Senior Lender to cure a Senior Loan Default shall be deemed to have been advanced by Subordinate Lender pursuant to, and shall be secured by the Second Mortgage Loan Agreement and 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 Subordination Agreement (Affordable) Page 9 (First Street Apartments) 3-147 EXHIBIT 4 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 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, 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, as the case may be; give Borrower the right to notice of any Senior Loan Default or Subordinate Loan Default, as the case may be other than that, if any, provided, respectively under the Senior Loan Documents or the Subordinate Loan Documents; or create any other right or benefit for Borrower as against Senior Lender or Subordinate Lender. 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 Subordination Agreement (Affordable) (First Street Apartments) 3-148 Page 10 EXHIBIT 4 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 determined by Senior Lender in its sole discretion; provided, however, that if Senior Lender 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 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 its sole discretion, 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. 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 the Subordinate Loan, increase the required payments due under the Subordinate Loan, decrease the term of the Subordinate Loan, increase the interest rate on the Subordinate Loan, or otherwise amend the Subordinate Loan terms in a manner that creates an adverse effect upon Senior Lender under the Senior Loan Documents. Any unauthorized amendment of the Subordinate Loan Subordination Agreement (Affordable) Page I 1 (First Street Apartments) 3-149 EXHIBIT 4 Documents or assignment of Subordinate Lender's interest in the Subordinate Loan without Senior Lender's consent shall be void ab initio and of no effect whatsoever. 11. 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) so long as the new mortgage debt does not increase the maximum principal amount of the Senior Loan; 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 evidencing securing or otherwise pertaining to the refinance note and the holder of the refinance note. Notwithstanding anything to the contrary in this Section 11, or in Section 6(a) above, the Senior Lender shall not, without the prior written consent of the Subordinate Lender in each instance, which shall not be unreasonably withheld, take any action which has the effect of increasing the indebtedness outstanding under, or secured by, the Senior Loan Documents, increasing the required payments due under the Senior Loan, decreasing the term of the Senior Loan, or increasing the interest rate on the Senior Loan, except that the Senior Lender shall have the right to advance funds to cure Subordinate Loan Defaults pursuant to Section 7(a) above and advance funds pursuant to the Senior Loan for the purpose of paying real estate taxes and insurance premiums, making necessary repairs to the Property and curing other defaults by the Borrower under the Senior Loan Documents. Following Conversion, all the terms and covenants of this Agreement shall inure to the benefit of any holder of the Permanent Loan; and all references to the Senior Loan, the Senior Security Instrument, the Senior Note and the Senior Loan Documents shall mean, respectively, the Permanent Loan, the Permanent Mortgage, the Permanent Note and the Permanent Loan Documents. 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. 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 Subordination Agreement (Affordable) Page 12 (First Street Apartments) 3-150 EXHIBIT 4 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. 14. Notices. (a) Process of Serving Notice. All notices under this Agreement shall be: (1) in writing and shall be: (A) delivered, in person; (B) mailed, postage prepaid, either by registered or certified delivery, return receipt requested; (C) sent by overnight courier; or (D) sent by electronic mail with originals to follow by overnight courier; (2) addressed to the intended recipient at the address(es) below the signature block, as applicable; and (3) deemed given on the earlier to occur o£ (A) the date when the notice is received by the addressee; or (B) if the recipient refuses or rejects delivery, the date on which the notice is so refused or rejected, as conclusively established by the records of the United States Postal Service or any express courier service. (b) Change of Address. Any party to Agreement may change the address to which notices intended for it are to be directed by means of notice given to the other parties identified in this Agreement. (c) Receipt of Notices. Senior Lender, Subordinate Lender or Borrower shall not refuse or reject delivery of any notice given in accordance with this Agreement. Each party is required to acknowledge, in writing, the receipt of any notice upon request by the other party. Subordination Agreement (Affordable) (First Street Apartments) 3-151 Page 13 EXHIBIT 4 15. 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 parry 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. (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. hereto. (e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties (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 Subordination Agreement (Affordable) Page 14 (First Street Apartments) 3-152 EXHIBIT 4 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) Term. The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (1) the payment in full of the principal of, interest on and other amounts payable under the Senior Loan Documents; (2) the payment in full of the principal of, interest on and other amounts payable under the Subordinate Loan Documents, other than by reason of payments which Subordinate Lender is obligated to remit to Senior Lender pursuant to Section 6 hereof, (3) the acquisition by Senior Lender of title to the Mortgaged Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the Senior Loan Documents; or (4) the acquisition by Subordinate Lender of title to the Mortgaged Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the Subordinate Loan Documents, but only if such acquisition of title does not violate any of the terms of this Agreement. (i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one (1) and the same instrument. 0) 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 (Affordable) (First Street Apartments) 3-153 Page 15 EXHIBIT 4 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: BANK OF AMERICA, N.A., a national banking association By: Name: Karen Davis Title: Vice President Address for notices: Bank of America, N.A. Mail Code # CA4-704-06-06 2000 Clayton Road, Building D, 6th Floor Concord, CA 94520 Attention: Loan Administration Manager A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF On before me, SS. Date Name And Title Of Officer (e.g. "Jane Doe, Notary Public") personally appeared Name of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Subordination Agreement (Affordable) (First Street Apartments) 3-154 Page S-1 EXHIBIT 4 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. SUBORDINATE LENDER: HOUSING AUTHORITY OF THE CITY OF SANTA ANA ACTING AS THE HOUSING SUCCESSOR AGENCY, a public body, corporate and politic By: Name: Raul Godinez II Title: City Manager ATTEST: Maria D. Huizar Cleric of the Council APPROVED AS TO FORM: Sonia R. Carvalho City Attorna IM Ryan Q. PIdd gg ,Assistant City Attorney RECOMMENDED FOR APPROVAL Robert M. Zur Schmiede Interim Executive Director Community Development Agency Address for notices: Housing Authority of the City of Santa Ana Executive Director 20 Civic Center Plaza (M-26) P.O, Box 1988 Attention: Housing Manager Subordination Agreement (Affordable) Page S-2 (First Street Apartments) 3-155 EXHIBIT 4 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF On , before me, Date SS. Name And Title Of Officer (e.g. "Jane Doe, Notary Public") personally appeared , Name of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Subordination Agreement (Affordable) (First Street Apartments) 3-156 Page S-3 EXHIBIT 4 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. BORROWER: Address for notices: AMCAL 1440 SANTA ANA FUND, LP, a California limited partnership AMCAL 1440 Santa Ana Fund, L.P. c/o AMCAL Multi -Housing, Inc. 30141 Agoura Road, Suite #100 By: AMCAL Multi -Housing, Inc., Agoura Hills, CA 91301 a California corporation, Attention: General Counsel its Administrative General Partner By: Name: Title: By: Las Palmas Foundation, a California nonprofit public benefit corporation, its Managing General Partner By: Name: Title: Subordination Agreement (Affordable) (First Street Apartments) 3-157 Page S-4 EXHIBIT 4 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF On Date before me, SS. Name And Title Of Officer (e.g. "Jane Doe, Notary Public") personally appeared , Name of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Subordination Agreement (Affordable) (First Street Apartments) 3-158 Page S-5 EXHIBIT 4 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF On Date before me, SS. Name And Title Of Officer (e.g. "Jane Doe, Notary Public") personally appeared , Name of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Subordination Agreement (Affordable) (First Street Apartments) 3-159 Page S-6 Subordination Agreement (Affordable) (First Street Apartments) EXHIBIT 4 EXHIBIT A LEGAL DESCRIPTION [to be inserted] 3-160 Page A-1 Order No: 91910077-917-CG8-KRE EXHIBIT 4 EXHIBIT "A" All that certain real property situated in the County of Orange, State of California, described as follows: Parcel 1: The Easterly 112.51 feet of the Westerly 43 7.5 1 feet of that portion of land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the Final Decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B" Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the center lines of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Excepting therefrom, that portion of the North 71.00 feet as described in the Deed to the City of Santa Ana, recorded April 15, 1960 in Book 5196, Page 381 of Official Records. Parcel 2: A non-exclusive easement for ingress and egress over the South 25 feet of the Westerly 325 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Parcel 3: The Westerly 175.00 feet of the Easterly 375.00 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. 3-161 EXHIBIT 4 Order No: 91910077-917-CG8-KRE Excepting therefrom, the South 21 feet of the North 71 feet thereof. Parcel 4: A non-exclusive easement for ingress and egress over the South 25 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Excepting therefrom, the Easterly 375.00 feet. Parcel 5: A non-exclusive easement for ingress and egress, for sewer lines, public utilities and drainage and the maintenance of these items over the South 25 feet of the following described land: The Westerly 437 feet of that portion of the land allotted to N. O. Stafford and C. Tustin, in the City of Santa Ana, County of Orange, State of California, as described in the final decree of partition of the Rancho Santiago De Santa Ana, which was entered September 12, 1868 in Book "B", Page 410 of Judgments of the District Court of the 17th Judicial District, in and for Los Angeles County, California, described as follows: Beginning at the intersection of the centerline of First Street and Mc Clay Street, as shown on a Map filed in Book 47, Page 32 of Record of Surveys, in the Office of the County Recorder of said County, California, said point being the Northwest corner of Section 17, Township 5 South, Range 9 West, San Bernardino Base and Meridian; Thence North 89° 10' 10" East 812.56 feet along the centerline of said First Street to the Northeast corner of land described in a Deed to Croddy Corporation and others, recorded August 28, 1959 in Book 4860, Page 4 of Official Records; Thence South 0° 06'40" East 397.90 feet to the Southeast corner of said land of Croddy Corporation; Thence South 89° 08' 20" West 812.54 feet along the Southerly line of said land of Croddy Corporation to the centerline of said Mc Clay Street; Thence North 0° 06'48" West 398.34 feet to the point of beginning. Assessor's Parcel Number: 011-154-43 3-162 This page intentionally left blank