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HomeMy WebLinkAboutBANK OF AMERICA, N.A.-2017RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Paul Hastings LLP 515 South Flower Street Twenty -Fifth Floor Los Angeles, CA 90071 Attn: Kenneth Krug, Esq. SUBORDINATION AGREEMENT (City of Santa Ana) A-2017-175 USE) THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of July 5, 2017 by and among (i) BANK OF AMERICA, N.A. (the "Senior Lender"), (ii) the CITY OF SANTA ANA, a charter city and municipal corporation ("Subordinate Lender"), and (iii) SANTA ANA ARTS COLLECTIVE, L.P., a California limited partnership (the "Borrower"). Recitals A. The Senior Lender has made or is making a loan (the "First Mortgage Loan") to the Borrower in the original principal amount of $21,260,574. The First Mortgage Loan is or will be secured by a first mortgage lien (the "First Mortgage") on certain real property more filly described in Exhibit A attached hereto and the multifamily housing project to be constructed thereon (collectively, the "Property"). The Borrower's obligation to repay the First Mortgage Loan is evidenced by that certain Promissory Note Secured By Deed of Trust Note made by Borrower in favor of Senior Lender in the original principal amount of $21,260,574 (the "First Mortgage Note"). B. Subordinate Lender is making (i) a subordinate loan of Inclusionary Housing funds to Borrower in the amount of $4,775,000 (the "Inclusionary Loan"), (ii) a subordinate loan of Community Development Block Grant funds to Borrower in the amount of $500,000 (the "CDBG Loan") and (iii) a subordinate loan of HOME Investment Partnerships Program funds to Borrower in the anoint of $2,219,760 (the "HOME Loan", and together with the Inclusionary Loan and the CDBG Loan, the "Subordinate Loan"). Subordinate Lender is securing the Subordinate Loan by, among other things, recording the Subordinate Mortgage (as hereinafter defined) in the Official Records of Orange County, California (the "Official Records") substantially concurrently herewith. C. Subordinate Lender has agreed to specifically and unconditionally subordinate the Subordinate Loan and the Subordinate Loan Documents (specifically excluding the Regulatory Agreement, as defined below) to the liens and charges of the First Mortgage Loan and First (Page -1) LEGAL_US_W 8 90627312.2 Mortgage Loan Documents and shall at all times and in all respects be wholly subordinate and inferior in claim and right to the First Mortgage Loan and First Mortgage Loan Documents. E. If Borrower satisfies the "Conversion Conditions" contained in that certain Loan Purchase Agreement of even date herewith by and among Borrower, Senior Lender and California Community Reinvestment Corporation, a California nonprofit public benefit corporation ("CCRC"), CCRC will purchase a portion of the Loan, and the First Mortgage Loan will convert to a term loan ("Conversion"). NOW, TIIEREFORE, in order to induce the Senior Lender to permit the Subordinate Lender to make the Subordinate Loan to the Borrower and to place a subordinate mortgage lien against the Property, and in consideration thereof, the Senior Lender, the Subordinate Lender and the Borrower agree as follows: 1. 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 (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests). "Borrower" means the Person named as such in the first paragraph of this Agreement and any other Person (other than the Senior Lender) who acquires Borrower's interest in the Property after the date of this Agreement. "Business Day" means any day other than Saturday, Sunday or a day on which the Senior Lender or Subordinate Lender is not open for business. "Default Notice" means: (a) a copy of the written notice from the Senior Lender to the Borrower stating that a First Mortgage Loan Default has occurred cinder the First Mortgage Loan; or (b) a copy of the written notice from the Subordinate Lender to the Borrower stating that a Subordinate Loan Default has occurred under the Subordinate Loan or the Regulatory Agreement. Each Default Notice shall specify the default upon which such Default Notice is based. (Page -2) LEGAL -US -VV 1t 90627312.2 "First Mortgage Loan" means the senior loan described in Recital A hereof, and following Conversion, the Permanent Loan. "First Mortgage Loan Default" means the occurrence of an "Event of Default" as that term is defined in the First Mortgage Loan Documents. "First Mortgage Loan Documents" means (i) the First Mortgage Note and all other documents evidencing, securing or otherwise executed and delivered in connection with the First Mortgage Loan; and (ii) following Conversion, the Permanent Loan Documents. "Permanent Loan" means the First Mortgage Loan after Conversion. "Permanent Loan Documents" means the Permanent Note, the First Mortgage and all other documents evidencing, securing, purchased for, or otherwise executed and delivered in connection with, the Permanent Loan. "Permanent Note" means the First Mortgage Note, as it may be modified in connection with Conversion. "Person" means an individual, estate, trust, partnership, corporation, limited liability company, limited liability partnership, governmental department or agency or any other entity which has the legal capacity to own property. "Regulatory Agreement" means, collectively, that certain Affordability Restrictions on Transfer of Property executed by and between the Subordinate Lender and Borrower in connection with the CDBG Loan, that certain Affordability Restrictions on Transfer of Property executed by and between the Subordinate Lender and Borrower in connection with the HOME Loan, and that certain that certain Affordability Restrictions on Transfer of Property executed by arid between the Subordinate Lender and Borrower in connection with the Inclusionary Loan, each encumbering the Property and to be recorded in the Official Records substantially concurrently herewith. "Senior Lender" means the Person named as such in the first paragraph on page 1 of this Agreement. When any other Person becomes the legal holder of the First Mortgage Note or of the Permanent Loan Documents, such other Person shall automatically become the Senior Lender. Upon purchase of the First Mortgage at Conversion and Borrower's satisfaction of the Conversion Conditions, CCRC shall become Senior Lender hereunder. "Subordinate Lender" means the Subordinate Lender and any other Person who becomes the legal holder of the Subordinate Note after the date of this Agreement. (Page -3) LEGAL US W 4 90627312.2 "Subordinate Loan Agreement" means, collectively, that certain First Amended and Restated Loan Agreement dated as of July 5, 2017, by and between Subordinate Lender and Borrower in connection with the Inclusionary Loan, that certain HOME Investment Partnerships Program Loan Agreement dated as of July 5, 2017, by and between the Subordinate Lender and Borrower in connection with the HOME Loan, and that certain First Amended and Restated Loan Agreement dated as of July 5, 2017, by and between the Subordinate Lender and Borrower in connection with the CDBG Loan. "Subordinate Loan Default" means a default by the Borrower in performing or observing any of the terms, covenants or conditions in the Subordinate Loan Documents or Regulatory Agreement to be perfonned or observed by it, which continues beyond any applicable period provided in the Subordinate Loan Documents or Regulatory Agreement for curing the default. "Subordinate Loan Documents" means the Subordinate Loan Agreement, Subordinate Note, and all other documents evidencing, securing or otherwise executed and delivered in connection with the Subordinate Loan, but excluding the Regulatory Agreement. "Subordinate Mortgage" means, collectively, that certain Inclusionary Deed of Trust and Assignment of Rents executed by Borrower for the benefit of Subordinate Lender encumbering the Property and to be recorded in the Official Records substantially concurrently herewith to secure the Inclusionary Loan, that certain CDBG Deed of Trust and Assignment of Rents executed by Borrower for the benefit of Subordinate Lender encumbering the Property and to be recorded in the Official Records substantially concurrently herewith to secure the CDBG Loan, and that certain Deed of Trust executed by Borrower for the benefit of Subordinate Lender encumbering the Property and to be recorded in the Official Records substantially concurrently herewith to secure the HOME Loan. "Subordinate Note" means, collectively, that certain Inclusionary Housing Funds Promissory Note Secured by Subordinated First Amended and Restated Deed of Trust dated as of July 5, 2017, made by Borrower in favor of the Subordinate Lender to evidence the Inclusionary Loan, that certain CDBG Funds Promissory Note Secured by Subordinated Deed of Trust dated as of May 1, 20M, made by Borrower in favor of the Subordinate Lender to evidence the CDBG Loan, and that certain Promissory Note Secured by Subordinated Deed of Trust dated as of July 5, 2017, made by Borrower in favor of the Subordinate Lender to evidence the HOME Loan. 2. Permission to Place Mortgage Lien Against Property. The Senior Lender agrees, notwithstanding the prohibition against inferior liens on the Property contained in the First Mortgage Loan Documents or the Permanent Loan Documents, and (Page -4) LEGAL_US_W # 90627312.2 subject to the provisions of this Agreement, to permit the Subordinate Lender to record or retain the Regulatory Agreement, the Subordinate Mortgage and other recordable Subordinate Loan Documents against the Property (which, with the exception of the Regulatory Agreement, shall be subordinate in all respects to the lien of the First Mortgage) to secure the Borrower's obligation to repay the Subordinate Note and all other obligations, indebtedness and liabilities of the Borrower to the Subordinate Lender under and in connection with the Subordinate Loan. Such permission is subject to the condition that each of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is true and correct on the date of this Agreement. If any of the representations and warranties made by the Borrower and the Subordinate Lender in Section 3 is not true and correct on the date of this Agreement, the provisions of the First Mortgage Loan Documents and/or the Permanent: Loan Documents applicable to unpermitted liens on the Property shall apply. 3. Borrower's and Subordinate Lender's Representations and Warranties. The Borrower and Subordinate Lender (except with respect to Section 3(e), which is only made by Borrower) each makes the following representations and warranties to the Senior Lender: (a) Relationship of Borrower to Subordinate Lender and Senior Lender. The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower. (b) Term. The term of the Subordinate Note does not end before the term of the First Mortgage Note or the Permanent Note. (c) Subordinate Loan Documents. The executed Subordinate Loan Documents are substantially in the same forms as those reviewed by Senior Lender prior to the date of this Agreement. Upon execution and delivery of the Subordinate Loan Documents, Borrower shall deliver to Senior Lender an executed copy of each of the Subordinate Loan Documents, certified to be true, correct and complete. (d) First Mortgage Loan Documents. The executed First Mortgage Loan Documents will be substantially in the same forms as those reviewed by Subordinate Lender prior to the date of this Agreement. Upon execution and delivery of the First Mortgage Loan Documents, Borrower shall deliver to Subordinate Lender an executed copy of each of the First Mortgage Loan Documents, certified to be true, correct and complete. 4. Terms of Subordination. (a) Agreement to Subordinate. The Senior Lender and the Subordinate Lender agree that: (i) 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 First (Page -5) LEGAL_US_W # 90627312.2 Mortgage Loan Documents, and (ii) 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 First Mortgage and the other First Mortgage Loan Documents and to all advances heretofore made or which may hereafter be made pursuant to the First Mortgage and the other First Mortgage Loan Documents (including but not limited to, all sums advanced for the purposes of (1) protecting or further securing the lien of the First Mortgage, curing defaults by the Borrower under the First Mortgage Loan Documents or for any other purpose expressly permitted by the First Mortgage, or (2) constructing, renovating, repairing, furnishing, fixturing or equipping the Property). (b) Subordination of Subrogation Rights. The Subordinate Lender agrees that if, by reason of its payment of real estate taxes or other monetary obligations of the 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 Property which (but for this subsection) would be senior to the lien of the First Mortgage, then, in that event, such lien shall be subject and subordinate to the lien of the First Mortgage. (c) Payments Before First Mortgage Loan Default. Until the Subordinate Lender receives a Default Notice of a First Mortgage Loan Default from the Senior Lender, the 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 First Mortgage Loan Default. The Borrower agrees that, after it receives notice (or otherwise acquires knowledge) of a First Mortgage 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, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. The Subordinate Lender agrees that, after it receives a Default Notice from the Senior Lender with written instructions directing the Subordinate Lender not to accept payments from the 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, attorney's fees, or any other sums secured by the Subordinate Mortgage) without the Senior Lender's prior written consent. If the Subordinate Lender receives written notice from the Senior Lender that the First Mortgage Loan Default which gave rise to the Subordinate Lender's obligation not to accept payments has been cured, waived, or otherwise suspended by the Senior Lender, the restrictions on payment to the Subordinate Lender in this Section 4 shall terminate, and the Senior Lender shall have no right to any subsequent payments made to the Subordinate Lender by the Borrower prior to the Subordinate Lender's receipt of a new Default Notice from the Senior Lender in accordance with the provisions of this Section 4(d). (Page -6) LEGAL_US_W # 90627312.2 (e) Remitting Subordinate Loan Payments to Senior Lender. If, after the Subordinate Lender receives a Default Notice from the Senior Lender in accordance with subsection (d) above, the Subordinate Lender receives any payments under the Subordinate Loan Documents, the Subordinate Lender agrees that such payment or other distribution will be received and held in trust for the Senior Lender and unless the Senior Lender otherwise notifies the Subordinate Lender in writing, will be promptly remitted, in kind to the Senior Lender, properly endorsed to the Senior Lender, to be applied to the principal of, interest on and other amounts due under the First Mortgage Loan Documents in accordance with the provisions of the First Mortgage Loan Documents. By executing this Agreement, the Borrower specifically authorizes the Subordinate Lender to endorse and remit any such payments to the Senior Lender, and specifically waives any and all rights to have such payments returned to the Borrower or credited against the Subordinate Loan. Borrower and Senior Lender acknowledge and agree that payments received by the Subordinate Lender, and remitted to the Senior Lender render this Section 4, shall not be applied or otherwise credited against the Subordinate Loan, nor shall the tender of such payment to the Senior Lender waive any Subordinate Loan Default which may arise from the inability of the Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan. (t) Intentionally Omitted. (g) Affordability Restrictions Following Foreclosure of First Mortgage. Subordinate Lender agrees that, although the Regulatory Agreement remains senior to the lien of the First Mortgage 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 First Mortgage Loan Documents, notwithstanding anything to the contrary contained in the Regulatory Agreement, fifty-seven (57) of the units subject to restriction under the Regulatory Agreement shall be restricted for rental to and occupancy by households whose income does not exceed 60% of the area median income for the Orange County, California PMSA, adjusted for household size, as published by the U.S. Department of Housing and Urban Development, and rent in such units shall be restricted to the product: of thirty percent (30%) of sixty percent (60%) of the area median income adjusted for family size appropriate for the unit. 5. Default Under Subordinate Loan Documents. (a) Notice of Default and Cure Rights. The Subordinate Lender shall deliver to the Senior Lender a Default Notice within five (5) Business Days in each case where the Subordinate Lender has given a Default Notice to the Borrower. Failure of the Subordinate Lender to send a Default Notice to the Senior Lender shall not prevent the exercise of the Subordinate Lender's rights and remedies under the Subordinate Loan Documents, subject to the provisions of this Agreement. The Senior Lender shall have the right, but riot the obligation, to cure any Subordinate Loan Default within ninety (90) days following the date of such notice; provided, however that the Subordinate Lender shall be entitled, during such (Page -7) LEGAL US W H 90627312.2 90 -day period, to continue to pursue its rights and remedies under the Subordinate Loan Documents to the extent permitted under Section 5(b). All amounts paid by the Senior Lender in accordance with the First Mortgage Loan Documents to cure a Subordinate Loan Default shall be deemed to have been advanced by the Senior Lender pursuant to, and shall be secured by the lien of, the First Mortgage. (b) Subordinate Lender's Agreement to Standstill. If a Subordinate Loan Default occurs and is continuing, the Subordinate Lender agrees that it will not accelerate the Subordinate Loan, commence foreclosure proceedings with respect to the Property, collect rents, appoint (or seek the appointment of) a receiver or institute any other collection or enforcement action specifically related to the enforcement of any terms of the Subordinate Loan Documents or the Regulatory Agreement without first giving at least ninety (90) days' notice of a default under the Subordinate Loan and Subordinate Lender's intent to exercise one of the preceding actions; provided, however, that 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 Regulatory Agreement, 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. (e) Cross Default. The Borrower and the Subordinate Lender agree that a Subordinate Loan Default. shall constitute a First Mortgage Loan Default under the First Mortgage Loan Documents and the Senior Lender shall have the right to exercise all rights or remedies under the First Mortgage Loan Documents in the same maturer as in the case of any other First Mortgage Loan Default. If the Subordinate Lender notifies the Senior Lender in writing that any Subordinate Loan Default of which the Senior Lender has received a Default Notice has been cured or waived, as determined by the Subordinate Lender in its sole discretion, then provided that Senior Lender has not conducted a sale of the Property pursuant to its rights under the First Mortgage Loan Documents, any First Mortgage Loan Default under the First Mortgage Loan Documents arising solely from such Subordinate Loan Default shall be deemed cured, and the First Mortgage Loan shall be reinstated, provided, however, that the Senior Lender shall not be required to return or otherwise credit for the benefit of the Borrower any default rate interest or other default related charges or payments received by the Senior Lender during such First Mortgage Loan Default. G. Default Under First Mortgage Loan Documents. (Page -8) LEGAL -US -W # 90627312.2 (a) Notice of Default and Cure Rights. The Senior Lender shall deliver to the Subordinate Lender a Default Notice within five (5) Business Days in each case where the Senior Lender has given a Default Notice to the Borrower. Failure of the Senior Lender to send a Default Notice to the Subordinate Lender shall not prevent the exercise of the Senior Lender's rights and remedies under the First Mortgage Loan Documents, subject to the provisions of this Agreement. The Subordinate Lender shall have the right, but not the obligation, to cure any such First Mortgage Loan Default as provided below. Subordinate Lender may have up to thirty (30) days from the date of the Default Notice to cure any monetary default under the First Mortgage Loan Documents; provided, however, that the Senior Lender shall be entitled during such 30 -day period to continue to pursue its remedies with respect to the Property. Subordinate Lender may have up to sixty (60) days from the date of the Default Notice to cure a non -monetary default if during such 60 -day period Subordinate Lender keeps current all payments required by the First Mortgage Loan Documents. In the event that such a non -monetary default creates an unacceptable level of risk relative to the Property, or Senior Lender's secured position relative to the Property, as determined by Senior Lender in its sole discretion, then Senior Lender may exercise during such 60 -day period all available rights and remedies to protect and preserve the Property and the rents, revenues and other proceeds from the Property. All amounts paid by the Subordinate Lender to the Senior Lender to cure a First Mortgage Loan Default shall be deemed to have been advanced by the Subordinate Lender pursuant to, and shall be secured by the lien of, the Subordinate Mortgage. (b) Cross Default. The Subordinate Lender agrees that, notwithstanding any contrary provision contained in the Subordinate Loan Documents, a First Mortgage Loan Default shall not constitute a default under the Subordinate Loan Documents if no other default occurred under the Subordinate Loan Documents until either (i) the Senior Lender has accelerated the maturity of the First Mortgage Loan, or (ii) the Senior Lender has taken affirmative action to exercise its rights under the First Mortgage to collect rent, to appoint (or seek the appointment ot) a receiver or to foreclose on (or to exercise a power of sale contained in) the First Mortgage. At any time atter a First Mortgage Loan Default is determined to constitute a default under the Subordinate Loan Documents, the 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 the Borrower cures any First Mortgage Loan Default to the satisfaction of the Senior Lender, as evidenced by written notice from the Senior lender to the Subordinate Lender, any default under the Subordinate Loan Documents arising solely from such First Mortgage Loan Default shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as if such First Mortgage Loan Default had never occurred. 7. Conflict. (Page -9) LEGAL -US -W # 90627312.2 The Borrower, the Senior Lender and the Subordinate Lender each agrees that, in the event of any conflict or inconsistency between the terms of the First Mortgage 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 the Senior Lender and the Subordinate Lender in the Property; (b) the timing of the exercise of remedies by the Senior Lender and the Subordinate Lender under the First Mortgage and the Subordinate Mortgage, respectively; and (c) solely as between the Senior Lender and the Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which the Senior Lender and the 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 First Mortgage Loan Default or Subordinate Loan Default, as the case may be; give the Borrower the right to notice of any First Mortgage Loan Default or Subordinate Loan Default, as the case may be other than that, if any, provided, respectively under the First Mortgage Loan Documents or the Subordinate Loan Documents; or create any other right or benefit for Borrower as against Senior Lender or Subordinate Lender. 8. Rights and Obligations of the Subordinate Lender Under the Subordinate Loan Documents and of the Senior Lender under the First Mortgage 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. The Subordinate Lender shall not, without the prior written consent of the 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 the Subordinate Lender shall have the right to advance funds to cure First Mortgage Loan Defaults pursuant to Section 6(a) above and advance funds pursuant to the Subordinate Mortgage 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 Subordinate Loan Documents. (b) Condemnation or Casualty. In the event of: a taking or threatened taking by condemnation or other exercise of eminent domain of all or a portion of the Property (collectively, a "Taking"); or the occurrence of a fire or other casualty resulting in damage to all or a portion of the Property(collectively, a"Casualty"), at any time or times when the First Mortgage remains a lien on the Property the following provisions shall apply: (1) The Subordinate Lender hereby agrees that its rights (under the Subordinate Loan Documents or otherwise) to participate in any proceeding or action relating to a Taking and/or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be and remain subordinate in all respects to the Senior Lender's rights under the First (Page-10) LEGAL US W#90627312.2 Mortgage Loan Documents with respect thereto, and the Subordinate Lender shall be bound by any settlement or adjustment of a claim resulting from a Taking or a Casualty made by the Senior Lender; provided, however, this subsection and/or anything contained in this Agreement shall not limit the rights of the Subordinate Lender to file any pleadings, documents, claims or notices with the appropriate court with jurisdiction over the proposed Taking and/or Casualty; and (2) all proceeds received or to be received on account of a Taking 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 First Mortgage Loan) in the manner determined by the Senior Lender in its sole discretion;provided, however,that if the Senior Lender elects to apply such proceeds to payment of the principal of, interest on and other amounts payable under the First Mortgage Loan, any proceeds remaining after the satisfaction in full of the principal of, interest on and other amounts payable under the First Mortgage Loan shall be paidto, and may be applied by, the Subordinate Lender in accordance with the applicable provisions of the Subordinate Loan Documents, provided however, the Senior Lender agrees to consult with the Subordinate Lender in determining the application of Casualty proceeds, provided further however that in the event of any disagreement between the Senior Lender and the Subordinate Lender over the application of Casualty proceeds,the decision of the Senior Lender, in its sole discretion, shall prevail. (c) No Modification of Subordinate Loan Documents. The Borrower and the Subordinate Lender each agrees that, until the principal of, interest on and all other amounts payable under the First Mortgage Loan Documents have been paid in full, it will not, without the prior written consent of the 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 the Senior Lender under the First Mortgage Loan Documents. Any unauthorized amendment of the Subordinate Loan Documents or assignment of the Subordinate Lender's interest in the Subordinate Loan without the Senior Lender's consent shall be void ab initio and of no effect whatsoever and Subordinate Lender agrees that it shall not transfer or assign the Subordinate Loan or the Subordinate Loan Documents without the prior written consent of the Senior Lender. 9. Conversion,Modification or Refinancing of First Mortgage Loan. The Subordinate Lender consents to any agreement or arrangement in which the Senior Lender waives, postpones, extends, reduces or modifies any provisions of the First Mortgage Loan Documents, including any provision requiring the payment of money. Subordinate Lender further agrees that its agreement to subordinate hereunder shall extend to the Permanent Loan Documents, as well as to any new mortgage debt which is for the purpose of refinancing all or any part of the (Page-11) LEGAL_US_W#90627312.2 First Mortgage 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 First Mortgage Loan and, in the event of new mortgage debt, Subordinate Lender shall execute and deliver to Senior Lender a new subordination agreement on the same terms and conditions as this Subordination Agreement. Notwithstanding anything to the contrary in. this Section 9, or in Section 4(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 First Mortgage Loan Documents, increasing the required payments due under the First Mortgage Loan, decreasing the term of the First Mortgage Loan, or increasing the interest rate on the First Mortgage Loan, except that the Senior Lender shall have the right to advance funds to cure Subordinate Loan Defaults pursuant to Section 5(a) above and advance funds pursuant to the First Mortgage 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 First Mortgage 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 First Mortgage Loan,the First Mortgage Note and the First Mortgage Loan Documents shall mean, respectively, the Permanent Loan, the Permanent Note and the Permanent Loan Documents. 10. Default by the Subordinate Lender or Senior Lender. If the 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. 11. Notices. Each notice, request, demand, consent, approval or other communication (hereinafter in this Section referred to collectively as "notices" and referred to singly as a"notice") which the Senior Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a)personally delivered with proof of delivery thereof(any notice so delivered shall be deemed to have been received at the time so delivered); or (b) sent by Federal Express (or other similar national overnight courier) designating early morning delivery (any notice so delivered shall be deemed to have been received on the next Business Day following receipt by the courier); or (c) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any notice so sent shall be deemed to have been received two days after mailing in the United States), addressed to the respective parties as follows: SENIOR LENDER(Prior to Conversion): BORROWER: Bank of America,N.A. Santa Ana Arts Collective, L.P. (Page-12) LEGAL_U5_W#90627312.2 Community Development Banking c/o Meta I-lousing Corporation CA4-702-02-29 1640 S. Sepulveda Blvd., Suite 425 2001 Clayton Road, 2nd Floor Los Angeles, CA 90011 Concord, CA 94520 Attention: President Attention: Loan Administration Manager With a copy to: WCH Affordable XIX, LLC 151 Kalmus Drive, Suite J-5 Costa Mesa, California 92626 Attention: President SENIOR LENDER(After Conversion): SUBORDINATE LENDER: California Community Reinvestment Corp. City of Santa Ana 100 West Broadway, Suite 1000 Community Development Agency Glendale, California 91210 20 Civic Center Plaza(M-26) Attention: President P.O. Box 1988 Santa Ana, CA 92702 Attention: Housing Manager Either party may, by notice given pursuant to this Section, change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses for its notices,but notice of a change of address shall only be effective upon receipt. 12. General. (a) Assignment/Successors. This Agreement shall be binding upon the Borrower,the Senior Lender and the Subordinate Lender and shall inure to the benefit of the respective legal successors and assigns of the Senior,Lender and the Subordinate Lender. (b) No Partnership or Joint Venture. The Senior Lender's permission for the placement of the Subordinate Loan Documents does not constitute the Senior Lender as a joint venturer or partner of the Subordinate Lender, Neither party hereto shall hold itself out as a partner, agent or Affiliate of the other party hereto. (c) Senior Lender's and Subordinate Lender's Consent. Wherever the Senior Lender's consent or approval is required by any provision of this Agreement, such consent or approval may be granted or denied by the Senior Lender in its sole and absolute discretion, unless otherwise expressly provided in this Agreement. Wherever the Subordinate Lender's consent or approval is required by any provision of this Agreement, (Page-13) LEGAL_US_W#90627312.2 such consent or approval may be granted or denied by the Subordinate Lender in its sole and absolute discretion,unless otherwise expressly provided in this Agreement. (d) Further Assurances. The Subordinate Lender, the Senior Lender and the Borrower each agree, at the 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 First Mortgage, or to further evidence the intent of this Agreement. (e) Amendment. This Agreement shall not be amended except by written instrument signed by all parties hereto. (t) Governing Law. This Agreement shall be governed by the laws of the State in which the Property is located. (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. (b) Term. The term of this Agreement shall commence on the date hereof and shall continue until the earliest to occur of the following events: (i)the payment of all of the principal of, interest on and other amounts payable under the First Mortgage Loan Documents; (ii)the payment of all of the principal of,interest on and other amounts payable under the Subordinate Loan Documents, other than by reason of payments which the Subordinate Lender is obligated to remit to the Senior Lender pursuant to Section 4 hereof; (iii) the acquisition by the Senior Lender of title to the Property pursuant to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the First Mortgage; or(iv) the acquisition by the Subordinate Lender of title to the 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 Mortgage, 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 and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] (Page-14) LEGAL_US_W#90627312.2 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. SENIOR LENDER: BANK OF AMERICA,N.A. By: -- Name: Title: (Signature Page-i) LEGAL US W#90627312 SUBORDINATE LENDER: ATTEST: CITY OF SANTA ANA .• i — Maria D.Huizar ,'1 Cynthia J. Kurtz Cleric of the Council Interim City Manager APPROVED AS TO FORM Sonia R. Carvalho City ornei By: R In 1. odge Assist Cit Attorney RECOMMENDED FOR AP ROVAL: 7 Robert C. ortez Lzz Acting Executive Director Community Development Agency (Signature Page-2) LEGAL US W#90627312 BORROWER: SANTA ANA ARTS COLLECTIVE,L.P., a California limited partnership By: Santa Ana Arts Collective, LLC, a California limited liability company, its administrative general s er By: Kasey Burke, Vi`—esident By: WCH Affordable XVIII, LLC, a California limited liability company, its managing general partner By: Sandra Gibbons, Executive Vice President and CFO (Signature Page-3) LEGAL_US_W#90627312 ACKNOWLEDGMENT 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 Los Angeles ) On July 17, 2017 before me, Rutzel M. Castillo, Notary Public (insert name and title of the officer) personally appeared Kasey Burke 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. eoirrearbibisastra RIMELM CASTILLO WITNESS my hand and official seal. 1.f. Commission#2100469 ' [ t . Notary Public.California z __\X in.) Los Angeles County _, Mromm.Extires Mar 19,2019 E Signature W. (Seal) BORROWER: SANTA ANA ARTS COLLECTIVE,L.P., a California limited partnership By: Santa Ana Arts Collective, LLC, a California limited liability company, its administrative general partner By: Kasey Burke, Vice President By: WCH Affordable XVIII, LLC, a California limited liability company, its managing general partner .. e BY: G_�- �t a^' 1/ .n r g gf . p � Sandra Gibbons, Exec tive Vice President and CFO (Signature Page-3) LEGAL_US_W#90627312 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT CIVIL CODE § 1189 +.eat"Ma 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 Orange J} On July 17, 2017 before me, Leanne Truofreh,Notary Public Date Here Insert Name and Title of the Officer personally appeared Sandra Gibbons Name(s)of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(%)whose name(%) Is/are subscribed to the within instrument and acknowledged to me that be/she/they executed the same in pis/her/the-if authorized capacity(iea), and that by Iris/her/their signature(a) on the instrument the person(%), or the entity upon behalf of which the person(%) acted, executed the instrument. I . LEANNE TRUOFREll Commission # 2064657 I certify under PENALTY OF PERJURY under the Z'�t' F.i .. Notary Public -California z laws of the State of California that the foregoing Orange County " paragraph is true and correct. My Comm. Expires May 12,2018 WITNESS my hand and official seal. /o _ r • Signature �/� Ate--01 Place Notary Seal and/or Stamp Above Signature o Notary Puy t OPTIONAL Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Subordination Agreement (City of Santa Ana) Document Date: July 5,2017 Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: Signer's Name: ❑ Corporate Officer— Title(s): 0 Corporate Officer— Title(s): ❑ Partner— ❑ Limited 0 General ❑ Partner— 0 Limited 0 General ❑ Individual 0 Attorney in Fact ❑ Individual 0 Attorney in Fact ❑ Trustee ❑ Guardian of Conservator a Trustee ❑ Guardian of Conservator ❑ Other: 0 Other: Signer is Representing: Signer is Representing: a- ,te:'' olit aeti q. nk,7'a)t44.44.M:' tOONfiHRYf5r0.4.:,t244,9.N':aln9'.*IfC Y'i+'r^iA'"+'Y".V.:2451,14i0.zar as 44¢'.4^:'51..°4 as,:>a)f ©2017 National Notary Association EXHIBIT A Legal Description That certain real property situated in the City of Santa Ana, County of Orange, State of California, and is described as follows: PARCEL A: THAT PORTION OF SECTION 12, TOWNSHIP 5 SOUTH, RANGE 10 WEST, IN THE CITY OF SANTA ANA, COUNTY OF ORANGE, STATE OF CALIFORNIA, BEING A PORTION OF THE LAND ALLOCATED TO JACOB ROSS IN DECREE OF PARTITION OF THAT RANCHO SANTIAGO DE SANTA ANA, RECORDED IN BOOK "B" OF JUDGEMENTS OF 17TH JUDICIAL DISTRICT COURT OF CALIFORNIA, DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHEAST CORNER OF SAID SECTION 12, BEING ALSO THE INTERSECTION OF THE CENTER LINES OF SEVENTEENTH STREET AND MAIN STREET AS SAID INTERSECTION IS SHOWN ON A MAP FILED IN BOOK 11 PAGE 18 OF RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID ORANGE COUNTY, CALIFORNIA; THENCE ALONG THE NORTHERLY LINE OF SAID NORTHEAST QUARTER,NORTH 89° 56' 40" WEST 289.89 FEET; THENCE SOUTH 0° 16' 25" WEST 230.00 FEET; THENCE PARALLEL WITH THE NORTHERLY LINE OF SAID NORTHEAST QUARTER, SOUTH 89° 56' 40" EAST 289.78 FEET TO THE EASTERLY LINE OF SAID NORTHEAST QUARTER; THENCE ALONG SAID EASTERLY LINE NORTH 0° 16' 40" EAST 230.00 FEET TO THE POINT OF BEGINNING. EXCEPT THE NORTHERLY 40.00 FEET THEREOF. ALSO EXCEPT THE EASTERLY 35.00 FEET THEREOF. APN: 005-153-19 and 005-153-20 (Exhibit A) LEGAL_US_W#90627312.2