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. Process the development application including lot line adjustments and subdivision maps General Provisions: . A no-fault termination would occur if the City, through the PUD process, fails to approve the development or if CEQA approval is not obtained. If this should occur, the City and MidPen would meet to discuss amendments to the plans and project concept. . If the DDA is terminated, MidPen is required to provide the City with all plans and studies related to the project . The agreement expires consistent with approval of financing documents including a regulatory agreement setting forth affordable income rent levels and other critical operational matters and an executed ground lease . Both parties recognize that HUD has sole authority to approve or deny the demolition of the existing Kottinger Place development Funding and Predevelopment Loan Agreement As indicated above, part of the City's financial contribution includes an anticipated $2.8 million loan to cover predevelopment costs including professional services related to architecture, CEQA, traffic studies, engineering, general administration, funding related expenses and other processing fees. A summary of the anticipated costs include $408,000 for predevelopment analysis work completed, $1.3 million for Phase I entitlement through start of construction and $1.1 million for Phase II costs through start of construction. A budget outlining the anticipated uses for the predevelopment loan is included as Exhibit C-2 to the DDA. Loan proceeds, which are a component of the City's overall financial contribution of up to $10 million, will be paid upon invoicing from MidPen and verification of services rendered. In accordance with the Predevelopment Promissory Note, (Attachment 4), the loan carries a 3% interest rate. However, it is anticipated that the City will not receive any loan payments during the project's development phase and terms of the total $10 million contribution, which will also be in the form of loan, will be outlined later as part of development's overall financing plan. Typically, the City loan includes terms requiring payment based on available project cash flow with provisions that any outstanding loan payments would be forgiven at the end of the ground lease term. Regardless, there should be acceptance that the City may not ever receive principle or interest payments on the $10 million. As indicated, the City has traditionally used predevelopment loans as a means of funding the work required to conduct project activity until receipt of funds for construction financing. At the City Council meeting of October 16, 2012, the City Council accepted the Kottinger Place and Pleasanton Gardens Predevelopment Analysis Report and approved an appropriation of $8 million reflecting the anticipated City financial contribution to the project (this is in addition to making the site available at less than market value). The contribution represents the financial "gap" between the anticipated development/construction costs and potential funding from various sources including tax credit, private financing, a federal HOME loan, and a Federal Home Loan Bank loan. Page 6 of 9