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2. Loan Purpose. The funds loaned hereunder are provided to Borrower for the purpose of <br />constructing the Development, as defined in the Loan Agreement between Borrower and <br />Lender (the "Loan Agreement") and creating 32 rental housing units (the "Assisted Dwelling <br />Units") as defined in the Loan Agreement. <br />3. Disbursement. <br />A. The amount of the advance by drawdown is Four Hundred Thousand Dollars ($400,000). <br />B. Borrower shall certify that funds released hereunder are used solely for the purpose of <br />constructing improvements upon the Subject Property. <br />4. Interest. Interest shall accrue at a rate of 1 percent (1 %) per annum compounded annually and <br />accruing upon the outstanding principal balance of this Promissory Note. <br />5. Repayment. <br />A. So long as Borrower is not in default hereunder, the unpaid principal and accrued interest <br />shall be due and payable in one lump sum thirty (30) years after the date written below and <br />shall be payable at the offices of Lender. <br />B The debt evidenced by this Promissory Note may be prepaid, in total or in part, at any time <br />prior to the final maturity date hereof, without penalty or prior written approval of Lender. <br />C. In the Event of Default as set forth hereunder, and Borrower's failure to cure such default <br />upon notice thereof if cure is available, all principal and accrued interest evidenced herein <br />shall be due and payable within thirty (30) days from the date Borrower receives written <br />notice of such default and demand by Lender for payment thereof. <br />6. Event of Default. Borrower shall be in default under the terms of this Promissory Note under <br />any one or more of the following conditions: <br />A. Failure of Borrower to substantially complete planned construction of improvements upon <br />the Subject Property by December 31, 2006. <br />B. Use of funds advanced hereunder by Borrower is used for purposes other than to construct <br />the Development. <br />C. Failure of Borrower to satisfy claims for payment for materials and services rendered upon <br />the Subject Property, unless Borrower reasonably disputes the validity of such claims and <br />sets aside and places in an escrow account with Lender sufficient funds to satisfy such <br />claims while the same remains pending. <br />S:\Downtown Revitalization\SCDP GrantV.oan Document\GPDOCS]-#,648821-v3-Promisory_Note.DOC <br />