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246 during the preceding six months. All such payments shall be applied first to accrued interest and 247 then to reduce the principal of the TIF Note. 248 (5) The TIF Note shall be a special and limited obligation of the City and not a 249 general obligation of the City, and only Tax Increments shall be used to pay the principal of and 250 interest on the TIF Note. If, on any Note Payment Date, the Tax Increments for the payment of 251 the accrued and unpaid interest on the TIF Note are insufficient for such purposes, the difference 252 shall be carried forward,, without interest accruing thereon, and shall be paid if and to the extent 253 that on a future Note Payment Date there are Tax Increments in excess of the amounts needed to 254 pay the accrued interest then due on the TIF Note 255 (6) The City's obligation to make payments on the TIF Note on any Note Payment 256 Date or any date thereafter shall be conditioned upon the requirements that.- (A) there shall not at 257 that time be an Event of Default that has occurred and is continuing under this Agreement and 1 258 (B) this Agreement shall not have been rescinded pursuant to Section 4.2(2). 259 (7), The TIF Note shall be governed by and payable pursuant to the additional terms 260 thereof, as set forth in Exhibit B. In the event of any conflict between the terms of the TIF Note 261 and the terms of this Section 3. 2,, the terms of the TIF Note shall govern. The issuance of the 262 TIF Note pursuant and subject to the terms of this Agreement, and the taking by the City of such 263 additional actions as bond counsel for the TIF Note may require in connection therewith, are 264 hereby authorized and approved by the City. 265 Section 3.3 CoMpliance with Low and Moderate Income Requirements. 266 (1), The City and the Developer understand and agree that the Tax Increment District 267 will constitute a "housing district" under Section 469.174, Subd. I I of the Tax Increment Act. 268 Accordingly, in compliance with Section 469.17 1, Subd. 3 of the Tax Increment Act,, the 269 Developer agrees that the Project must satisfy, or be treated as satisfying, the income 270 requirements for a qualified residential rental project as defined in Section 14 d), of the Internal 271 Revenue Code. The parties further agree that no more than 20% of the square footage of the 272 Project (which is the only building receiving assistance from Tax Increments), may consist of 273 commercial, retail,, or other nonresidential uses. The Developer must meet the above 274 requirements as follows.- 275 (A) At least 40% of the residential units in the Project must be occupied or 276 available for occupancy by persons whose incomes do not exceed 60% of the County 277 median income; and 278 (B) The limits described in clause (A) must be satisfied through the 279 Termination Date. Income for occupants of units described in clause (A) shall be 280 adjusted for family size in accordance with Section 142(d) of the Internal Revenue Code 281 and related regulations. 282 (2), On or before each January I and July 1, commencing on January 1, 2013, the 283 Developer or an agent of the Developer must deliver or cause to be delivered to the City a 284 Compliance Certificate executed by the Developer covering the preceding six months together VA 3873204v2