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ARTICLE III UNDERTAKINGS BY DEVELOPER AND CITY Section 3.1. Land Acquisition, Site Improvements and Legal and Administrative Expenses. (1) The parties agree that the acquisition of the Development Property and the installation of the Site Improvements are essential to the successful completion of the Project. The costs of the acquisition of those portions of the Development Property necessary for the Project and the Site Improvements shall be paid by the Developer. The City shall reimburse the Developer for up to $659,000 of the costs of the Development Property and Site Improvements actually incurred and paid by the Developer (the "Reimbursement Amount as further provided in Section 3.2. (2) The Developer has deposited with the City the sum of $5,000 to reimburse the City for its actual out of pocket Legal and Administrative Expenses and any excess will be returned to the Developer. The Legal and Administrative Expenses shall by paid by the City from said Developer's deposit. If the City determines said deposit to be inadequate, the Developer shall provide additional funds to be escrowed or to pay Legal and Administrative expenses when due. Section 3.2. Reimbursement: Tax Increment Revenue Note. The City shall pay the Reimbursement Amount through the issuance of the City's TIF Note in substantially the form attached to this Agreement as Exhibit B, subject to the following conditions: (1) The TIF Note shall be dated, issued and delivered when the Developer shall have demonstrated in writing to the reasonable satisfaction of the City that the Developer has incurred and paid costs for acquisition of Development Property and all of the Site Improvement costs, as described in and limited by Section 3.1 and shall have submitted paid invoices for the Site Improvements and purchase and settlement statement(s) relating to the purchase of some or all of the Development Property in an amount not less than the Reimbursement Amount. (2) The unpaid principal amount of the TIF Note shall bear simple, non- compounding interest from the date of issuance of the TIF Note, at 7.00% per annum. Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30 day months. (3) The principal amount of the TIF Note and the interest thereon shall be payable solely from the Tax Increments. (4) On each Note Payment Date and subject to the provisions of the TIF Note, the City shall pay, against the principal and interest outstanding on the TIF Note, the Tax Increments received by the City during the preceding 6 months. All such payments shall be applied first to accrued interest and then to reduce the principal of the TIF Note. (5) The TIF Note shall be a special and limited obligation of the City and not a general obligation of the City, and only Tax Increments shall be used to pay the principal and 6 2753452v6