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In the event this payment is less than accumulated interest owed plus <br />current interest, any unpaid interest will carry over to the following <br />year. Interest will not compound on this interest carry-over. The <br />entire outstanding principal balance plus any unpaid accrued interest <br />will be due and payable upon Note Maturity. <br />The first payment will be due immediately upon receipt of the <br />Notification Letter and annually, thereafter. A copy of the annual <br />independent financial audit delineating Residual Receipts payment <br />to City will also be delivered to City no later than May 15c after the <br />end of each of the Project's fiscal years. A self -certified financial <br />statement shall be permitted in lieu of an independent audit. <br />iii. Definitions: <br />1. "Residual Receipts" means, with respect to the Project's fiscal <br />year, the amount by which "Gross Revenue" exceeds "Annual <br />Operating Expenses", as defined below. <br />2. "Gross Revenue" is defined as all rental and incidental income <br />from the Project, but excluding tenant security deposits, loan <br />proceeds and capital contributions and any interest earned on <br />said deposits; and interest on reserves, impounds and other <br />restricted accounts. <br />3. "Annual Operating Expenses" means reasonable costs <br />actually incurred for operations and maintenance of the <br />Project to the extent that they are consistent with an annual <br />independent audit performed by a certified public accountant <br />using generally accepted accounting principles. A copy of the <br />audit will be delivered with payment as specified above. Costs <br />associated with the Project operations and maintenance <br />include the following: property and other taxes and <br />assessments imposed on the Project; premiums for property <br />damage and liability insurance and other such insurance as <br />may be required by Owner's senior lenders; utility services not <br />paid for directly by the tenants, including but not limited to <br />water, sewer, trash collection, gas, and electricity; <br />maintenance and repairs, including but not limited to pest <br />control, landscaping and grounds maintenance, painting and <br />decorating, cleaning, common systems repairs, general <br />repairs, janitorial supplies, and others; and license or <br />certificates of occupancy fees required for operation of the <br />Project; general administrative expenses, including but not <br />limited to advertising, marketing, security services and <br />systems, professional fees for legal, audit, accounting and tax <br />returns, and other services; property management fees and <br />reimbursements, including on-site manager expenses, not to <br />ATTY/AGR/2017.145.2/ STAFFORD FUNDING AGREEMENT —PROMISSORY NOTE <br />REV: 06-21-1715 <br />Page 2 of 5 <br />