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Aaencv Assistance Precedent. and Conditions Section 2.02. The Agency hereby agrees that in order to assist the Developer in the development of the Project, the Agency shall, subject to the terms and conditions contained herein, convey to Developer the Property at no cost (the "Land Grant") and provide monetary assistance in the form of a loan in the amount of Two Million Six Hundred Twenty-Seven Thousand Dollars ($2,627,000) (the "Development Loan" and a subsidy to be used for the sole purpose of . paying water facility fees in an amount not to exceed Five Hundred Thirty Three Thousand Dollars ($533,000) (the "Fee Subsidy"). The Land Grant, the Development Loan and the Fee Subsidy are from time to time referred to collectively herein as the "Agency Assistance". a. The Agency shall provide the Developer with the Land Grant, which shall be deemed to have a value of One Million Three Hundred Fifty Thousand Dollars ($1,350,000). b. Proceeds from the Development Loan shall only be used to help offset the costs of the construction of the Project. Proceeds from the Fee Subsidy shall be directly allocated to the payment of the water facility fees. The parties acknowledge that the amount of the Fee Subsidy necessary to pay for the water facility fees of the Project is unknown at this time. However, the Fee Subsidy shall not exceed Five Hundred Thirty-Three Thousand Dollars ($533,000)without additional Agency approval for the additional amount. Repayment of the Development Loan and the Fee Subsidy shall be evidenced by a Promissory Note (the "Note")and secured by a deed of trust on the Property and the Project (the "Deed of Trust"). The Note and the Deed of Trust shall be substantially in the same form attached hereto as Exhibit "C" and "D", respectively. The Note shall provide that the Development Loan and Fee Subsidy will accrue at three percent (3%) simple interest and have a term of forty (40) years, except in the case of default as hereinafter provided. Further, the Note shall provide that the Development Loan and the Fee Subsidy shall be repaid on an annual basis, from seventy percent (70%) of the Project's Net Cash Flow, defined herein as gross receipts, less 1) actual operating costs; 2) actual property taxes; 3) actual debt service costs; 4) an annual reserve deposit of $35,000 per year (2005 $), escalated at 3% per year; 5) a $15,000 annual tax credit partnership management fee, escalated at 3% per year, until dissolution of the partnership; 6) a $5,000 annual asset management fee, escalated at 3% per year; 7) annual repayment of any deferred developer fee, i.e, any amount of the developer fee not paid for by the project's final permanent funding sources. The total amount of the developer 4 REDW\0006\DOC\001-5 1/27/05 7:00 /mve