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<br />EXHIBIT 3 <br />12.9. Replacement Reserve Account. At or before the Conversion Date, <br />Developer shall establish an interest bearing account to be known as the Replacement <br />Reserve Account. Annually prior to March 31 of each year, Developer shall deposit into <br />the Replacement Reserve Account an amount equal to a minimum of two hundred fifty <br />dollars ($250) per unit but shall not exceed five hundred dollars ($500) per unit, which <br />amounts may increase by 3% annually, or such higher amount as may be required by the <br />Tax Credit Investor or Senior Lender and approved by City; provided, however, that City <br />acknowledges that the Tax Credit Investor and/or Senior Lender will require an annual <br />deposit of funds into the Replacement Reserve Account for all units, and City hereby <br />approves such requirement and agrees that any replacement reserve established by <br />Developer and held by the Tax Credit Investor and/or Senior Lender shall satisfy the <br />requirements of this Section 12.9. The funds in the Replacement Reserve Account shall <br />be held in an interest bearing account, and any earnings shall become and remain a part of <br />the Replacement Reserve. The Developer may withdraw funds from the Replacement <br />Reserve Account solely to replace or maintain Project assets that have a useful life of more <br />than one (1) year in accordance with Generally Accepted Accounting Principles <br />(“GAAP”), and have been or will be depreciated on the Partnership Tax Return, Form <br />1040P, filed with the Internal Revenue Service by the Developer’s accountant. Promptly <br />following any withdrawals from the Replacement Reserve Account, written notice shall be <br />provided to the City which provides a narrative of the nature of the repairs that are being <br />made, including all necessary amounts to repair them. Developer shall not withdraw funds <br />from the Replacement Reserve Account for any other purpose without the prior written <br />approval of the City. <br />In the event of a failure by the Developer to adequately maintain the Project, or pay <br />operating expenses, mandatory debt service payments, or other payments required under <br />the Loan Documents or Senior Loan Documents, or during the continuance of an event of <br />default by Developer under the Loan Documents or Senior Loan Documents that would <br />provide for the acceleration of the City/HOME-ARP Loan or Senior Loan, then the City <br />may, after delivery of written notice to Developer and the expiration of any applicable cure <br />periods and subject to the rights of any Senior Lender, apply the funds in the Replacement <br />Reserve Account to the City/HOME-ARP Loan, the Senior Loan, or use such funds for the <br />maintenance, improvement, or continued operation of the Project. <br />12.10. HOME-ARP Subsidy Reserve. <br />(a)A special "HOME-ARP Subsidy Reserve" shall be created and <br />maintained as a segregated interest-bearing account held by the Developer for a minimum <br />15-year HOME-ARP Subsidy Reserve Compliance Period, subject to subsections (c) and <br />(d) below. The HOME-ARP Subsidy Reserve shall be capitalized in the amount <br />established at closing and approved by the City in accordance with Sections 5.1 and 6.1 <br />of this Agreement, subject to the requirements of Section 6 above. Any interest earned <br />on funds in the HOME-ARP Subsidy Reserve shall be added to and become part of the <br />HOME-ARP Subsidy Reserve. <br />(b)The HOME-ARP Subsidy Reserve shall be used in accordance <br />with, and subject to, all requirements of the HOME-ARP Program, to pay any HOME- <br />36 <br />WISEPlace Permanent Supportive Housing <br />City HOME-ARP Loan Agreement