Exhibit 10.1

 

AGREEMENT FOR PURCHASE AND SALE OF

REAL PROPERTY AND ESCROW INSTRUCTIONS

 

[Scotts Valley, CA]

 

THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND ESCROW INSTRUCTIONS
(“Agreement”) is made as of March 16, 2006 (“Agreement Date”), between AVIZA
TECHNOLOGY, INC., a Delaware corporation (“Seller”), and KB HOME SOUTH BAY INC.,
a California corporation (“Buyer”), with reference to the following facts:

 

A.            Seller is the owner of approximately 42.689 acres of property
located in the unincorporated area of Scotts Valley, County of Santa Cruz, State
of California (the “Property”), as more particularly described on Exhibit A
attached hereto.

 

B.            Seller desires to sell the Property to Buyer, and Buyer desires to
purchase the Property from Seller, in accordance with the terms and conditions
contained in this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged by Seller, Buyer and Seller
hereby agree as follows:

 

1.             PURCHASE AND SALE.

 

1.1.          AGREEMENT TO BUY AND SELL. SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH HEREIN, SELLER HEREBY AGREES TO SELL AND CONVEY TO BUYER, AND BUYER HEREBY
AGREES TO ACQUIRE AND PURCHASE FROM SELLER, THE PROPERTY. AS USED HEREIN THE
“PROPERTY” SHALL INCLUDE THE PROPERTY AND ALL OF SELLER’S RIGHT, TITLE AND
INTEREST IN AND TO ALL ENTITLEMENTS, EASEMENTS, RIGHTS, MINERAL RIGHTS, OIL AND
GAS RIGHTS, WATER, WATER RIGHTS, AIR RIGHTS, DEVELOPMENT RIGHTS AND PRIVILEGES
APPURTENANT THERETO AND ALL IMPROVEMENTS LOCATED THEREON (EXCEPT FOR ANY
MONITORING WELLS, REMEDIATION SYSTEMS AND RELATED EQUIPMENT).

 

1.2.          PURCHASE PRICE.

 

1.2.1.       PURCHASE PRICE. THE PURCHASE PRICE (“PURCHASE PRICE”) FOR THE
PROPERTY SHALL BE TWENTY SIX MILLION DOLLARS ($26,000,000). THE AMOUNT SET FORTH
IN THIS PARAGRAPH 1.2.1 IS ONLY AN ESTIMATED PURCHASE PRICE AND SUBJECT TO
ADJUSTMENT AS SET FORTH IN EXHIBIT E EITHER DOWNWARD OR, WITH PARTICIPATION IN
PROFITS AS DESCRIBED IN EXHIBIT E, UPWARD TO A NUMBER IN EXCESS OF TWENTY SIX
MILLION ($26,000,000). IF THE PURCHASE PRICE AS CALCULATED PURSUANT TO EXHIBIT E
LESS THAN TWENTY TWO MILLION DOLLARS ($22,000,000) AND BUYER DOES NOT ELECT, IN
ITS SOLE DISCRETION TO PAY TWENTY TWO MILLION DOLLARS ($22,000,000) AS THE
PURCHASE PRICE, SELLER SHALL HAVE A RIGHT TO TERMINATE THIS AGREEMENT PURSUANT
TO EXHIBIT E.

 

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1.2.2.       DEPOSIT. WITHIN TWO (2) DAYS AFTER THE OPENING OF ESCROW (DEFINED
BELOW), BUYER SHALL DEPOSIT WITH ESCROW HOLDER (DEFINED BELOW) BY COMPANY CHECK
THE SUM OF FIVE HUNDRED THOUSAND DOLLARS ($500,000) (THE “FIRST DEPOSIT”), WHICH
ESCROW HOLDER SHALL INVEST IN AN INTEREST BEARING ACCOUNT WITH INTEREST ACCRUING
FOR THE BENEFIT OF BUYER. UPON THE LAST OF THE FOLLOWING TO OCCUR: (I) DELIVERY
BY BUYER TO ESCROW HOLDER AND SELLER OF THE FEASIBILITY APPROVAL NOTICE (AS
DEFINED IN PARAGRAPH 3.1.2 BELOW), AND (II) RECORDATION OF THE MEMORANDUM OF
AGREEMENT ATTACHED HERETO AS EXHIBIT G, THE FIRST DEPOSIT (PLUS THE INTEREST
THEN ACCRUED THEREON), SHALL BE RELEASED IN ITS ENTIRETY TO SELLER BY ESCROW
HOLDER ON A NON-REFUNDABLE BASIS (EXCEPT AS EXPRESSLY SET FORTH HEREIN).

 

1.2.3.       Additional Deposit. If the Approved Entitlements have been obtained
(as defined in Paragraph 2.2.1) and provided Buyer and Seller have completed the
Update (as defined in Exhibit E), Buyer shall deposit with Escrow Holder by
company check the sum of Three Million Dollars ($3,000,000) (the “Second
Deposit”), which shall be released in its entirety to Seller by Escrow Holder on
a non-refundable basis, except as expressly set forth herein. The First Deposit
and Second Deposit, and all accrued interest thereon, shall collectively be
referred to herein as the “Deposit.”

 

1.2.4.       APPLICABILITY OF DEPOSIT. UPON THEIR RELEASE TO SELLER IN
ACCORDANCE WITH THE TERMS OF PARAGRAPHS 1.2.2 AND 1.2.3, THE RELEASED PORTIONS
OF THE DEPOSIT SHALL BE APPLICABLE TO THE PURCHASE PRICE, BUT SHALL THEREAFTER
BE NON-REFUNDABLE TO BUYER EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN. IF
BUYER ELECTS NOT TO PROVIDE THE FEASIBILITY APPROVAL NOTICE, ESCROW HOLDER SHALL
AUTOMATICALLY RETURN TO BUYER ALL SUMS (INCLUDING THE DEPOSIT PLUS ALL ACCRUED
INTEREST THEREON) DEPOSITED BY BUYER, SELLER SHALL IMMEDIATELY PAY TO BUYER ANY
PORTION OF THE DEPOSIT PREVIOUSLY RELEASED TO SELLER AT THE TIME OF SUCH
TERMINATION TO BUYER, SELLER AND BUYER SHALL SHARE ANY ESCROW TERMINATION
CHARGES, THIS AGREEMENT AND THE ESCROW SHALL TERMINATE AND THE PARTIES SHALL
HAVE NO FURTHER OBLIGATION TO ONE ANOTHER WITH RESPECT TO THIS AGREEMENT, EXCEPT
AS SET FORTH IN PARAGRAPHS 3.4, 6 AND 8.14.

 

1.2.5.       Purchase Price Balance. If Buyer elects to provide the Feasibility
Approval Notice within the time required herein, and provided all of the other
conditions precedent to Buyer’s obligation to purchase the Property are timely
satisfied, then, at least one (1) business day prior to the Close of Escrow,
Buyer shall deposit with Escrow Holder by cash, cashier’s check, or other
immediately available funds the sum of (a) the Purchase Price, less (b) the
Deposit and any Extension Payments (as defined below) (the “Purchase Price
Balance”), plus (c) Buyer’s Escrow charges and other cash charges as set forth
in Paragraph 2.1.2 below.

 

2.             ESCROW AND CLOSING.

 

2.1.          OPENING OF ESCROW. WITHIN THREE (3) DAYS AFTER THIS AGREEMENT IS
SIGNED BY THE LAST OF SELLER OR BUYER, BUYER SHALL OPEN AN ESCROW (THE “ESCROW”)
WITH FIRST AMERICAN TITLE INSURANCE COMPANY AT THE ADDRESS SET FORTH IN
PARAGRAPH 7.13 BELOW (“ESCROW HOLDER”), BY DEPOSITING WITH ESCROW HOLDER THE
FULLY EXECUTED AGREEMENT, OR

 

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EXECUTED COUNTERPARTS THEREOF. THE DATE SUCH FULLY EXECUTED AGREEMENT IS SIGNED
AND ACCEPTED BY ESCROW HOLDER ON THE LAST PAGE HEREOF SHALL BE DEEMED THE
“OPENING OF ESCROW” AND ESCROW HOLDER SHALL ADVISE BUYER AND SELLER OF SUCH DATE
IN WRITING.

 

2.1.1.       Additional Escrow Instructions. The following paragraphs, or the
applicable portions thereof, constitute the joint escrow instructions of Buyer
and Seller, which Escrow Holder is to use along with any fully executed counter
offers and amendments that are delivered to Escrow Holder and any additional
mutual instructions required by Escrow Holder: 1.2, 2.1, 2.2, 2.3, 2.4, 2.5,
2.6, 3.2.1, 3.3, 8.1, 8.3, 8.9, and 8.13. If Escrow Holder requires additional
mutual instructions, those instructions shall contain such general and standard
provisions as may be reasonably required by Escrow Holder, provided, however,
that no general or standard provisions shall modify or amend any provision of
this Agreement, unless expressly set forth in writing by mutual consent of Buyer
and Seller. In the event there is a conflict between any such general or
standard provisions and the provisions of this Agreement, the provisions of this
Agreement shall control. Notwithstanding the foregoing provisions of this
Paragraph 2.1.1, nothing shall preclude either Buyer or Seller from delivering
to Escrow Holder any additional instructions such party shall deem necessary as
are consistent with the terms of this Agreement.

 

2.1.2.       Escrow Fees and Other Charges. At the Close of Escrow, (a) Seller
shall pay: (i) one-half (1/2) of the Escrow Holder’s fees, (ii) the documentary
transfer taxes and recording fees, and (iii) the cost of the Title Policy
(defined below), including any curative endorsements for title defects that
Seller has agreed to obtain pursuant to Paragraph 3.2.3 below (“Curative
Endorsements”) but excluding any other endorsements Buyer requests; (b) Buyer
shall pay: (i) one-half (1/2) of the Escrow Holder’s fees, and (ii) all
endorsements (other than Curative Endorsements) requested by Buyer and the
additional costs in excess of the costs of a CLTA portion of the Title Policy in
order to obtain an ALTA Title Policy; and (c) all other costs related to the
closing of the transaction (excluding all costs required to obtain the Approved
Entitlements, and Buyer’s due diligence which shall be at the sole cost and
expense of Buyer) shall be paid split equally by the parties.

 

2.2.          Closing Date. Subject to the satisfaction of the conditions set
forth in Paragraph 2.3 below, and subject to extension as provided in Paragraphs
2.2.3 and 2.2.4 below, the Close of Escrow shall occur on the date (the “Closing
Date”) which is the sooner of (a) thirty (30) months after the Agreement Date
(the “Outside Closing Date”), or (b) five (5) business days after Buyer’s
delivery to Seller of the Update (as defined in Exhibit E) which shall occur
Forty-five (45) days after the Approved Entitlements (as defined in Paragraph
2.2.1 below) are obtained. Notwithstanding the foregoing, if the Closing Date
would otherwise occur within fifteen (15) days prior to any fiscal quarter-end
of Buyer (February 28/29, May 31, August 31 or November 30), then Buyer shall
have the option to extend the Closing Date without the payment of Extension
Payments described in Paragraph 2.2.4 below, until the second business day in
the next calendar month, by providing written notice to Seller, three (3) days
prior to the Closing Date

 

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2.2.1.       Entitlements. As used in this Agreement, the “Entitlements” shall
mean (i) a General Plan Amendment and if applicable a Specific Plan that sets
forth a residential use with a density of at least the number of residents
proposed on the Tentative Map, as defined below (“Plan Amendments”), (ii)
annexation of all of the Property into the City of Scotts Valley consistent with
the Plan Amendments, (iii) approval by the City of Scotts Valley of Buyer’s
tentative subdivision map of the Property prepared in compliance with the
California Subdivision Map Act (commencing at Section 66410 of the Government
Code which subdivides the Property into lots on which may be built detached
single family homes or townhomes in accordance with Buyer’s development plans
for the Property, and which is in a form reasonably acceptable to Buyer (the
“Tentative Map”); and (iv) zoning approval to permit single family residential
use with a density of at least the number of residential lots included in the
Tentative Map (“Zoning Approval”). The Entitlements shall be deemed approved
(the “Approved Entitlements”) when: (i) the City of Scotts Valley has adopted
the Plan Amendments, (ii) all portions of the Property have been annexed into
the City of Scotts Valley consistent with the Plan Amendments and the County
LAFCO has approved the annexation (iii)  the City has issued a written decision
approving the Tentative Map and establishing all of the conditions of approval
for the final subdivision map conforming to the Tentative Map, and (d) the
Tentative Map and conditions of approval of the final subdivision map have been
approved by Buyer in its sole and absolute discretion, and (iv) all time periods
for filing an appeal of the City’s approval of the General Plan Amendment,
Specific Plan, Tentative Map have passed, and LAFCO’s approval of the annexation
has been approved, without such an appeal having been filed, or, if an appeal
has been filed, it has been resolved on terms and conditions satisfactory to
Buyer in its sole and absolute discretion; and (ii) the Property is zoned to
permit single family residential use with a density of at least the number of
residential lots included in the Tentative Map and, if applicable, all time
periods for filing an appeal of the City’s approval of the rezoning of the
property have passed without such an appeal having been filed, or, if an appeal
has been filed, it has been resolved on terms and conditions satisfactory to
Buyer in its sole and absolute discretion. Notwithstanding anything to the
contrary in this Paragraph 2.2.1, Seller shall have the approval rights with
respect to the Entitlements as set forth in Paragraph 3.5.1.

 

2.2.2.       Close of Escrow. As used in this Agreement, the “Close of Escrow”
shall mean the date a Grant Deed, as provided in Paragraph 2.4.2(a), for the
Property is recorded in the Official Records of the County. The Close of Escrow
shall take place on the Closing Date at the offices of the Title Company.

 

2.2.3.       Buyer Extension. Provided that Buyer has not obtained the Approved
Entitlements by the Outside Closing Date, Buyer shall have the right to extend
the Outside Closing Date for up to one (1) year by delivering written notice to
Seller and Escrow Holder of Buyer’s Extension (“Buyer’s Extension Notice”) and
to Escrow Holder an extension payment (“Extension Payment”) in the amount of
Five Hundred Thousand Dollars ($500,000) at least five (5) business days before
the previously scheduled Closing Date. The Closing Date shall be deemed extended
for an additional one (1) year, or a sooner date designated by Buyer in the
Buyer’s Extension Notice, upon Buyer’s payment of the Extension Payment. The
Extension Payment shall

 

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be released to Seller immediately upon payment by Buyer, shall be non-refundable
to Buyer except on the occurrence of a default by Seller hereunder, shall be
applicable to the Purchase Price at the Close of Escrow herein and shall serve
as additional liquidated damages in the event of Buyer’s default hereunder.

 

2.2.4.       Seller Extension. Seller shall have the right to extend the Closing
Date for up to one (1) year by delivering to Escrow Holder an extension notice
(“Seller’s Extension Notice”) at least thirty (30) days before the previously
scheduled Closing Date. The Closing Date shall be deemed extended for an
additional one (1) year, or a sooner date designated by Seller in the Seller’s
Extension Notice, upon Seller’s delivery of Seller’s Extension Notice
Notwithstanding anything to the contrary contained in this Agreement, the Seller
Extension set forth in this Paragraph 2.2.4 and the Buyer Extension set forth in
Paragraph 2.2.3 shall not be mutually exclusive such that either Buyer or Seller
may exercise their right to extend as provided in Paragraph 2.2.3 and 2.2.4
(whichever party first exercises such right), but not both.

 

2.3.          CONDITIONS PRECEDENT TO CLOSE OF ESCROW.

 

2.3.1.       Conditions to Buyer’s Obligations. The Close of Escrow and Buyer’s
obligation to purchase the Property, are subject to the satisfaction of the
following conditions or Buyer’s written waiver of such conditions on or before
the Closing Date. Buyer may waive in writing any or all of such conditions in
its sole and absolute discretion.

 

A)             BUYER SHALL HAVE ELECTED TO TIMELY DELIVER THE FEASIBILITY
APPROVAL NOTICE;

 

B)            SELLER SHALL HAVE PERFORMED, IN ALL MATERIAL RESPECTS, ALL
MATERIAL OBLIGATIONS TO BE PERFORMED BY SELLER PURSUANT TO THIS AGREEMENT;

 

C)             NO EVENT OR CIRCUMSTANCE SHALL HAVE OCCURRED WHICH WOULD MAKE ANY
OF SELLER’S REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH HEREIN UNTRUE IN
ANY MATERIAL RESPECT AS OF THE CLOSE OF ESCROW;

 

D)            THERE SHALL HAVE OCCURRED NO MATERIAL ADVERSE CHANGE IN THE
PHYSICAL CONDITION OF THE PROPERTY (SUCH AS THOSE CAUSED BY NATURAL DISASTERS)
WHICH WOULD RENDER THE PROPERTY UNSUITABLE FOR BUYER’S INTENDED USE FOR
DEVELOPMENT;

 

E)             THE APPROVED ENTITLEMENTS SHALL HAVE BEEN OBTAINED;

 

F)             THE ENVIRONMENTAL CONDITION SHALL HAVE BEEN SATISFIED;

 

G)            THERE SHALL NOT EXIST ANY ENACTED BUILDING OR UTILITY HOOK-UP
MORATORIA, ORDINANCES, LAWS OR REGULATIONS, WHICH WERE NOT EXISTING AND ENFORCED
AS OF THE DATE OF THIS AGREEMENT, THE EFFECT OF WHICH WOULD BE TO PRECLUDE THE
ISSUANCE OF BUILDING OR OCCUPANCY PERMITS FOR HOUSES TO BE CONSTRUCTED WITHIN
THE PROPERTY; AND

 

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H)            THE TITLE COMPANY SHALL BE COMMITTED TO ISSUE TO BUYER, AS OF THE
CLOSING DATE, A CLTA TITLE POLICY COVERING THE PROPERTY, SUBJECT ONLY TO THE
PERMITTED EXCEPTIONS (DEFINED BELOW); PROVIDED, HOWEVER, THE DISCLOSURE AT ANY
TIME OF ANY NEW OR ADDITIONAL EXCEPTIONS CAUSED SOLELY BY BUYER’S ACTS OR
OMISSIONS (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH THE APPROVED
ENTITLEMENTS) SHALL NOT CONSTITUTE A FAILURE BY SELLER OF THIS CONDITION.

 

2.3.2.       Conditions to Seller’s Obligations. The Close of Escrow and
Seller’s obligation to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the condition that Buyer shall have
performed all obligations to be performed by Buyer pursuant to this Agreement,
in all material respects, including, without limitation, those obligations set
forth in Paragraph 2.4.1 hereof, and no event or circumstance shall have
occurred which would make any of Buyer’s representations, warranties and
covenants set forth herein untrue in any material respect as of the Close of
Escrow.

 

2.4.          CLOSING DOCUMENTS. THE PARTIES SHALL DEPOSIT THE FOLLOWING WITH
ESCROW HOLDER PRIOR TO THE CLOSE OF ESCROW:

 

2.4.1.       Buyer shall deposit:

 

A)             THE PURCHASE PRICE BALANCE; AND

 

B)            BUYER’S ESCROW AND OTHER CASH CHARGES REQUIRED IN PARAGRAPHS 2.1.2
AND 2.5.2.

 

2.4.2.       Seller shall deposit:

 

A)             A GRANT DEED IN THE FORM OF EXHIBIT B ATTACHED HERETO (“GRANT
DEED”) CONVEYING FEE TITLE TO THE PROPERTY, SUBJECT ONLY TO THE PERMITTED
EXCEPTIONS, EXECUTED BY SELLER WITH SELLER’S SIGNATURE ACKNOWLEDGED;

 

B)            AN AFFIDAVIT OR QUALIFYING STATEMENT, WHICH SATISFIES THE
REQUIREMENTS OF SECTION 1445 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
AND THE REGULATIONS THEREUNDER IN THE FORM OF EXHIBIT C-1, AND A FORM 593(C) OR
593(W) (TO BE PROVIDED BY ESCROW HOLDER) TO SATISFY THE REQUIREMENTS OF
CALIFORNIA REVENUE AND TAXATION CODE SECTIONS 18662(E) AND 18668 (COLLECTIVELY,
THE “NON-FOREIGN AFFIDAVITS”) (PROVIDED, HOWEVER, IF SELLER DOES NOT DELIVER A
FORM 593(C)  OR 593(W) TO ESCROW HOLDER PRIOR TO THE CLOSE OF ESCROW, ESCROW
HOLDER IS HEREBY AUTHORIZED AND INSTRUCTED TO WITHHOLD FROM SELLER THREE AND
ONE-THIRD PERCENT (3-1/3%) OF THE PURCHASE PRICE (THE “WITHHOLDING AMOUNT”) AND
TRANSFER THE WITHHOLDING AMOUNT TO THE CALIFORNIA FRANCHISE TAX BOARD IN
COMPLIANCE WITH REVENUE AND TAXATION CODE SECTION 18662(E)); AND

 

C)             AN ASSIGNMENT AND BILL OF SALE (TO THE EXTENT ASSIGNABLE) OF ALL
OF SELLER’S RIGHT, TITLE AND INTEREST IN AND TO ANY AND ALL ENTITLEMENTS AND
PLANS PERTAINING TO THE PROPERTY AND ANY PERSONAL PROPERTY COMPRISING ANY PART
OF THE PROPERTY WHICH IS SOLELY USED FOR THE OPERATION OF THE PROPERTY (AS
OPPOSED TO THE

 

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OPERATION OF SELLER’S BUSINESS THEREIN), IN THE FORM ATTACHED HERETO AS
EXHIBIT C-2 (THE “ASSIGNMENT”).

 

2.4.3.       Additional Documents. Seller and Buyer shall each deposit such
other instruments as are reasonably required by Escrow Holder or otherwise
required to proceed to the Close of Escrow and consummate the sale of the
Property, in accordance with the terms of this Agreement.

 

2.5.          CLOSE OF ESCROW.

 

2.5.1.       On the Close of Escrow, Escrow Holder shall (a) record the Grant
Deed in the Office of the County Recorder of Santa Cruz County, (b) pay any
transfer taxes, (c) instruct the County Recorder to return the Grant Deed to
Buyer, (d) deliver to Seller the Purchase Price Balance, less Seller’s charges,
and (e) deliver to Buyer the Non-Foreign Affidavits, the Assignment and the
Title Policy covering the Property, subject only to the Permitted Exceptions.

 

2.5.2.       Real property taxes and assessments shall be prorated as of the
Close of Escrow on the basis of the most recent tax information. Said prorations
shall be based on the number of days in the calendar year and such proration
shall be final.

 

2.5.3.       Upon the Close of Escrow, title to the Property shall be conveyed
to Buyer, subject only to the Permitted Exceptions, free and clear of any rights
of parties in possession.

 

2.6.          FAILURE TO CLOSE; TERMINATION.

 

2.6.1.       Failure to Close Without Default. If the Close of Escrow does not
occur after Buyer has delivered the Title Approval Notice and the Feasibility
Approval Notice because (a) the Approved Entitlements have not been obtained, or
were not obtained for any reason other than a default by Buyer or Seller
hereunder, or (b) one or more conditions precedent to the Close of Escrow have
not been satisfied or waived, then (a) Escrow Holder shall automatically return
to Buyer the Deposit and all accrued interest thereon (and pay other sums
deposited by Buyer) by unilateral instruction from Buyer, (b) Seller shall
immediately pay to Buyer any portion of the Deposit and any Extension Payment
released to Seller at the time of such termination, (c) the Escrow shall be
automatically terminated and of no force and effect, (d) Buyer and Seller shall
each pay one-half (1/2) of any Escrow termination fees, (e) provided the Deposit
has been returned to Buyer, Buyer shall record in the Official Records of the
County Recorder of Santa Cruz County, at the request of and at no cost to
Seller, a Termination of Purchase Agreement setting forth that the Agreement (as
set forth in the Memorandum of Agreement) has been terminated and is of no
further force and effect; (f) Seller shall have no further obligation to sell to
Buyer, and Buyer shall have no further obligation to purchase, the Property, and
(g) this Agreement shall terminate and the parties shall have no further
obligations hereunder except as provided in Paragraphs 3.4, 6 and 8.14 of this
Agreement.

 

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2.6.2.       Buyer’s Default. In the event of Buyer’s default or breach of this
Agreement after Buyer has delivered the Feasibility Approval Notice where such
default or breach is not cured by Buyer within five (5) days of Buyer’s receipt
from Seller of written notice of such default or breach, the portion of the
Deposit which is required to have been released to Seller on or prior to the
date of such default (the “Liquidated Damages Amount”) shall constitute
liquidated damages as follows:

 

BY PLACING THEIR INITIALS HERE:  BUYER J.M. AND SELLER J.C. EACH AGREE THAT IN
THE EVENT OF A MATERIAL DEFAULT OR BREACH HEREUNDER BY BUYER, THE DAMAGES TO
SELLER WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN, AND THAT
THEREFORE, IN THE EVENT OF SUCH A MATERIAL DEFAULT OR BREACH BY BUYER, WHICH
DEFAULT OR BREACH IS NOT CURED WITHIN FIVE (5) DAYS AFTER WRITTEN NOTICE IS
GIVEN BY SELLER TO BUYER (WITH SUCH “MATERIAL DEFAULT” IN THIS PARAGRAPH TO
INCLUDE ANY FAILURE OF BUYER TO CLOSE ON THE CLOSING DATE BECAUSE OF ANY BREACH
OR DEFAULT OF BUYER), THE LIQUIDATED DAMAGES AMOUNT SHALL SERVE AS DAMAGES FOR
SUCH BREACH OR DEFAULT BY BUYER, AS A REASONABLE ESTIMATE OF THE DAMAGES TO
SELLER, INCLUDING COSTS OF NEGOTIATING AND DRAFTING THIS AGREEMENT, COSTS OF
COOPERATING IN SATISFYING CONDITIONS TO CLOSING, COSTS OF SEEKING ANOTHER BUYER,
OPPORTUNITY COSTS IN KEEPING THE PROPERTY OUT OF THE MARKETPLACE, AND OTHER
COSTS INCURRED IN CONNECTION HEREWITH. RETENTION OF THE LIQUIDATED DAMAGES
AMOUNT SHALL BE SELLER’S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER IN THE EVENT OF
A MATERIAL DEFAULT OR BREACH BY BUYER, AND SELLER WAIVES ANY AND ALL RIGHT TO
SEEK OTHER RIGHTS OR REMEDIES AGAINST BUYER, INCLUDING WITHOUT LIMITATION,
SPECIFIC PERFORMANCE (BUT EXCLUDING, HOWEVER, ANY RECOVERY FROM BUYER AVAILABLE
TO SELLER UNDER PARAGRAPHS 3.4 OR 8.14 HEREOF). THE PAYMENT AND RETENTION OF
SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY
WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS
INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL
CODE SECTIONS 1671, 1676 AND 1677. SELLER HEREBY WAIVES THE PROVISIONS OF
CALIFORNIA CIVIL CODE SECTION 3389. UPON ANY SUCH BREACH OR DEFAULT BY BUYER
HEREUNDER, THIS AGREEMENT SHALL BE TERMINATED AND NEITHER PARTY SHALL HAVE ANY
FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT FOR THE RIGHT
OF SELLER TO RETAIN SUCH LIQUIDATED DAMAGES

 

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AMOUNT AND EXCEPT FOR THE INDEMNITY OBLIGATIONS PROVIDED IN PARAGRAPHS 3.4 AND
8.14 AND BELOW.

 

In addition, Buyer shall upon request of and at no cost to Seller, record in the
Official Records of the County Recorder of Santa Cruz County, at no cost to
Seller, a Termination of Purchase Agreement setting forth that the Agreement (as
set forth in the Memorandum of Agreement) has been terminated and is of no
further force and effect.

 

2.6.3.       Seller’s Default. In the event that the Close of Escrow does not
occur due to a default under this Agreement by Seller, (a) this Agreement shall
not be terminated automatically, but only upon delivery to Escrow Holder and
Seller of written notice of termination from Buyer, in which event (i) Escrow
Holder shall automatically return to Buyer the Deposit and all accrued interest
thereon and any other sums deposited by Buyer, (ii) Seller shall immediately pay
to Buyer any portion of the Deposit and Extension Payment paid to Seller at the
time of such termination, and (iii) Buyer shall be entitled to recover
out-of-pocket costs and expenses it has sustained on account of Seller’s default
hereunder up to Five Hundred Thousand Dollars ($500,000) and recovery of any
fees, costs and expenses incurred by Buyer in pursuing such remedy, or (b) Buyer
shall be entitled to keep this Agreement in effect and pursue (i) any and all
other equitable remedies available to it against Seller, including, without
limitation, specific performance of this Agreement and (ii) recovery of any
fees, costs and expenses incurred by Buyer in pursuing such remedy, and Buyer
may record a notice of pendency of action against the Property.

 

2.6.4.       Escrow Fees on Default. If the failure to close is due to the
default of one of the parties, the defaulting party shall bear the sole and full
liability for paying any escrow cancellation fee.

 

3.             ACTIONS PENDING CLOSE OF ESCROW.

 

3.1.          INVESTIGATION OF THE PROPERTY.

 

3.1.1.       Delivery of Reports. Not later than the date five (5) days after
the Opening of Escrow, Seller shall deliver to, or make available to Buyer
during business hours, originals or complete copies of all material studies,
reports, agreements, documents, plans, permits, entitlements, correspondence
with governmental agencies; affordable housing agreements and materials, maps;
CC&Rs; homeowners’ association formation documents and entitlements in Seller’s
possession, custody or control pertinent to the Property (the “Reports”). The
Reports shall include, without limitation, copies of any and all environmental
reports and materials, if any, relating to the Property that are in Seller’s
possession, custody or control (“Existing Environmental Reports”). The Reports
shall not include: (i) documentation of appraisals or market studies, if any,
performed for Seller or on behalf of any other buyer, and (ii) any
attorney/client privileged documents.

 

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3.1.2.       Feasibility Period. With Seller’s reasonable cooperation, Buyer
shall have until 5:00 P.M. Pacific Time on the date which is ninety (90) days
after the Opening of Escrow (the “Feasibility Period”) to review the suitability
of the Property for Buyer’s use and development, including, without limitation,
any governmental land regulations, zoning ordinances, development costs,
financial and market feasibility, all covenants, conditions and restrictions and
other contracts, agreements or documents affecting the Property, the status of
the entitlement or development condition of the Property, the physical condition
of the Property, including soil and geological assessments, the Reports, the
Existing Environmental Reports and a Phase I environmental audit (the
“Feasibility Matters”), and to approve or disapprove of the Feasibility Matters
in Buyer’s sole and absolute discretion. On or prior to the expiration of the
Feasibility Period, Buyer shall deliver to Seller and Escrow Holder a written
notice indicating that Buyer is satisfied with the Feasibility Matters and/or is
waiving any dissatisfaction with such matters (the “Feasibility Approval
Notice”) or alternatively that Buyer disapproves of the Feasibility Matters.
Failure by Buyer to timely give notice of its approval or disapproval of the
Feasibility Matters shall be deemed disapproval thereof. If Buyer disapproves
(or is deemed to have disapproved) of the Feasibility Matters as provided herein
then this Agreement shall automatically terminate and the provisions of
Paragraph 2.6.1 shall apply.

 

3.2.          TITLE REVIEW.

 

3.2.1.       Title Report. As of the date of this Agreement, Seller has caused
First American Title Insurance Company (the “Title Company”) to furnish Buyer
with a copy of Preliminary Report No. 0131-614016ala dated as of January 23,
2006, which covers title to the Property, together with legible copies of all
documents referenced therein as exceptions to title (collectively, the “PTR”).
No later than ten (10) days following the date of this Agreement, Seller shall
provide Buyer an update of the PTR together with legible copies of all documents
referenced therein as exceptions to title (“Title Update”). As used in this
Agreement, “Permitted Exceptions” shall mean (a) the standard printed exceptions
in the Title Policy issued by the Title Company, (b) current general and special
real property taxes and assessments not delinquent, (c) all matters shown as
exceptions to the Title Update (excluding in all cases any monetary liens)
unless Buyer objects to such exceptions in writing no later than twenty (20)
days after the date of this Agreement and Seller agrees in writing and at its
sole discretion, by that date which is thirty (30) days following the date of
this Agreement, to remove such exception on or before the Closing Date or to
otherwise endorse over such exception in a manner approved by Buyer in writing;
and, (d) the Permitted Environmental Exceptions (as defined in Paragraph 3.6
below) and (e) the Approved Entitlements and matters associated therewith. All
of other exceptions shall be removed by Seller prior to the Close of Escrow.

 

3.2.2.       Seller’s Failure to Cure. If, despite Seller’s best efforts to
remove, or to cause the Title Company to endorse over an exception to the Title
Policy which Seller has previously agreed to remove or cause the Title Company
to endorse over (other than a monetary lien or encumbrance, or claim to fee
title to the Property or assertion of a leasehold interest in or to the
Property, as to which Seller’s obligation to

 

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remove and eliminate is absolute and a failure to do so is a breach of this
Agreement), Seller is unable to do so, Buyer shall have the option, on or before
the Closing Date, to:  (i) declare Seller in default hereunder and exercise
Buyer’s remedies pursuant to Paragraph 2.6.3, or (ii) waive its objection to
such exceptions in question by delivering notice of such waiver to Seller and
Escrow Holder, and proceed to the Close of Escrow. If Buyer fails to deliver the
waiver notice described in clause (ii) of the preceding sentence, Buyer shall be
deemed to have elected to declare Seller in default hereunder.

 

3.2.3.       New or Additional Exceptions. Following execution of this
Agreement, Seller shall not voluntarily place and shall use commercially
reasonable efforts not to allow to exist any additional liens or encumbrances
(other than those created solely by Buyer’s acts or omissions or as otherwise
arising in connection with the Entitlements) on the Property without the prior
written consent of Buyer, other than those which Seller commits to remove prior
to or at Closing. If any supplement to the PTR that may be issued from time to
time by the Title Company discloses any new or additional exceptions from the
exceptions shown on the PTR, other than liens or encumbrances placed or allowed
to exist by Seller which Seller shall be obligated to remove, Buyer shall
approve or disapprove, in its sole and absolute discretion, such new exceptions
within five (5) business days after Buyer receives written notice of such new
exception(s), unless such exception arises from the acts or omissions of Buyer,
in which case Buyer shall be responsible for removing such exception and/or
shall be required to take title subject to such exception. Buyer’s failure to
respond in such five (5) day period shall constitute disapproval of such new
exception(s). If Buyer disapproves or is deemed to disapprove any such new
exception(s), then the provisions of Paragraph 2.6.3 shall apply; unless such
new exception (i) is not an exception created by or caused by Seller or (ii) is
an exception which arises in connection with the Entitlements, in which case the
provisions of Paragraph 2.6.1 shall apply.

 

3.3.          TITLE POLICY. BUYER’S OBLIGATION TO PROCEED TO THE CLOSE OF ESCROW
SHALL BE CONDITIONED UPON THE COMMITMENT BY TITLE COMPANY TO ISSUE A CLTA
OWNER’S POLICY OF TITLE INSURANCE WITH A MECHANIC’S LIEN ENDORSEMENT NO. 101.4,
INSURING AGAINST MECHANIC’S LIENS ON ACCOUNT OF WORK PERFORMED BY OR FOR SELLER
(THE “CLTA POLICY”), SHOWING TITLE TO THE PROPERTY VESTED IN BUYER WITH
LIABILITY EQUAL TO THE PURCHASE PRICE, SUBJECT ONLY TO THE PERMITTED EXCEPTIONS.
AT BUYER’S OPTION, BUYER MAY REQUIRE AN ALTA OWNER’S POLICY INSTEAD OF THE CLTA
POLICY PROVIDED THAT BUYER PAYS ANY ADDITIONAL PREMIUM ON ACCOUNT THEREOF. THE
FORM OF TITLE POLICY SELECTED BY BUYER SHALL BE REFERRED TO HEREIN AS THE “TITLE
POLICY”.

 

3.4.          Access and Testing. At any time during the term of this Agreement
upon prior notice to Seller, Buyer, its agents and employees shall have the
right to enter the Property, for the purposes of conducting such investigations,
inspections and tests of the Property as Buyer deems necessary to obtain all
approvals and entitlements to enable Buyer to develop the Property for
unrestricted residential use as contemplated by Buyer and to determine the
condition and suitability of the Property including, but not limited to, the
Feasibility Matters. Buyer shall use care and consideration in connection with
all of its inspections or tests and shall not interfere with the ongoing
operations of Seller on

 

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the Property during such access. Buyer shall promptly restore the Property as
near as reasonably possible to its condition prior to any intrusive or invasive
tests and/or inspections. Prior to any entry on the Property by Buyer before the
Close of Escrow, Buyer shall secure and maintain and cause its agents entering
the Property to secure and maintain: (a) a comprehensive general liability and
property damage policy in an amount of not less than Two Million Dollars
($2,000,000) and, with a deductible (or self-insured retention) in an amount
reasonably acceptable to Seller, which will cover the activities of Buyer and
its agents and consultants on the Property and shall name Seller an additional
insured thereunder, and (b) workers’ compensation and employer’s liability
insurance in accordance with the provisions of California law. On request by
Seller, Buyer shall provide a certificate of insurance to Seller evidencing the
insurance required herein. Buyer hereby agrees to indemnify, defend (with
counsel reasonably satisfactory to Seller) and hold Seller harmless from and
against any and all loss, expense, claim, liability, damage and injury to person
or property resulting from the acts of Buyer, Buyer’s agents, contractors and/or
subcontractors and/or the contractors or subcontractors of such agents on the
Property in connection with the performance of any investigation or other
activities upon the Property as contemplated herein. The foregoing indemnity,
defense and hold harmless obligations do not apply to (a) any loss, liability
cost, claim, damage, injury or expense to the extent caused by Seller or
Seller’s agents, (b) any diminution in value in the Property arising from or
relating to matters discovered by Buyer during its investigation of the
Property, (c) any latent defects in the Property discovered by Buyer, and
(d) the discovery of any Hazardous Substances on or under the Property which are
not first released and deposited at the Property by Buyer. In the event that
Buyer determines to take any soil or groundwater tests or investigations on the
Property, such tests or investigations shall be performed in accordance with the
procedures set forth on Exhibit H attached hereto. The terms and conditions of
this Paragraph 3.4 shall survive the Close of Escrow.

 

3.5.          ENTITLEMENTS PROCESSING. PRIOR TO THE CLOSE OF ESCROW, BUYER SHALL
PROCESS, AT ITS SOLE COST AND EXPENSE, ALL APPLICATIONS, PLANS, MAPS,
AGREEMENTS, DOCUMENTS, AND OTHER INSTRUMENTS NECESSARY OR APPROPRIATE FOR THE
DEVELOPMENT OF THE PROPERTY AS CONTEMPLATED BY BUYER INCLUDING PROCESSING TO
COMPLETION THE APPROVED ENTITLEMENTS SUBDIVIDING THE PROPERTY INTO SINGLE FAMILY
DETACHED LOTS OR TOWNHOMES AND OTHERWISE IN FORM AND CONTENT SATISFACTORY TO
BUYER IN BUYER’S SOLE AND ABSOLUTE DISCRETION. IN CONNECTION THEREWITH, SELLER
AGREES TO COOPERATE WITH BUYER BY EXECUTING ALL SUCH APPLICATIONS FOR GOVERNMENT
PERMITS OR APPROVALS AFFECTING THE PROPERTY WHICH REQUIRE SELLER’S SIGNATURE
WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT OF BUYER’S WRITTEN REQUEST THEREFOR.

 

3.5.1.       Seller Approval. Buyer and Seller acknowledge that Close of Escrow
is subject to a number of conditions under this Agreement and that in the event
the Buyer does not purchase the Property, Seller may be subject to such
Entitlements (and any conditions placed thereon) as have been obtained prior to
the termination of this Agreement. As such, with respect to the Entitlements:
(x) Seller shall have the right to review and reasonably approve all such
applications and other submissions, and (y) Seller shall have the right to
review and reasonably approve all conditions of approval

 

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proposed by any governmental agency with respect to any Entitlements.
Notwithstanding the foregoing, Seller shall only have a right to withhold such
approvals in subparagraphs 3.5.1(x) or (y) if the Entitlements would materially
interfere with Seller’s ability to operate on the Property prior to the Close of
Escrow or would materially and adversely impact the value of the Property with
respect to a proposed residential development if Buyer fails to proceed to the
Close of Escrow.

 

If at any time after Buyer has approved the Feasibility Matters Buyer
determines, in its reasonable discretion, that Buyer will not be able to obtain
the Approved Entitlements under terms and conditions satisfactory to Buyer,
Buyer may terminate this Agreement by written notice to Seller and Escrow
Holder. Upon such termination (a) if such termination occurs during the first
twelve (12) months following the Agreement Seller shall return (or Escrow Holder
shall deliver) to Buyer the full amount of the Deposit, and if such termination
occurs after the date that is twelve (12) months following the Agreement Date,
Seller shall return (or Escrow Holder shall deliver to Buyer) the full amount of
the Deposit, less Fifty Thousand Dollars ($50,000), which amount Seller shall be
entitled to retain, (b) the Escrow shall be automatically terminated and of no
force and effect, (c) Buyer and Seller shall each pay one-half (1/2) of any
Escrow termination fees, (d) Seller shall have no further obligation to sell to
Buyer, and Buyer shall have no further obligation to purchase, the Property, and
(e) this Agreement shall terminate and the parties shall have no further
obligations hereunder except as provided in Paragraphs 3.4 and 6 of this
Agreement.

 

3.6.          Seller’s Pre-Closing Obligations; Condition of Property. Seller
has disclosed to Buyer that the Property is listed on the National Priorities
List (“NPL”) under the Comprehensive Environmental Response Compensation and
Liability Act, 42 USC 9601, et seq. (“CERCLA”) and is subject to a Consent
Decree filed on July 16, 1991 (“Consent Decree”) and a Record of Decision
(“ROD”) dated June 29, 1990 entered into by WJ Communications, Inc. (formerly
Watkins-Johnson Company, or “WJ”) and the Environmental Protection Agency
(“EPA”) pursuant to CERCLA. Seller represents and based on that representation,
Buyer acknowledges that the Property is undergoing remediation initially funded
by WJ pursuant to a Guaranteed Fixed Price Remediation Agreement dated June 25,
1999 by and between Aviza Technology, Inc. (as assignee of the rights and
obligations of Silicon Valley Group, Inc.), Arcadis Geraghty & Miller
(“Arcadis”) and WJ (“Remediation Agreement”). The Consent Decree, ROD and
Remediation Agreement are collectively referred to herein as the “Permitted
Environmental Exceptions”.

 

3.6.1.       Environmental Condition. Seller covenants in conjunction with its
execution of this Agreement that it shall use commercially reasonable efforts to
cause all of the following to occur on or before the Closing Date:  (i) the
performance of all remediation work necessary to remove the Property from the
NPL, (ii) the performance of all other investigation, characterization,
restoration, remedial work and/or other activities that may be required in
connection with such removal (including, without limitation, either abandonment
of wells on or relating to the Property in a manner acceptable to the EPA or the
removal of such wells as approved by the EPA), and

 

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(iii) to the extent required by Environmental Laws (as defined in Exhibit D
attached hereto) or any governmental agency asserting jurisdiction over the or
relating to the Property, to obtain a “no further action” letter, closure letter
or similar written determination from such governmental agency or agencies
(which may or may not include the California Department of Toxic Substances
Control, California Regional Water Quality Control Board or Santa Cruz County
Health Department) (“Agencies”) that no further investigation or remediation
and/or monitoring is required in connection with the Property and that the
Property is suitable for unrestricted residential use. The items set forth in
subparagraphs (i) to (iii) of this Paragraph 3.6.1 shall be referred to herein
as the “Environmental Condition”. As between Buyer and Seller, Seller shall be
solely responsible for satisfying the Environmental Condition and all
obligations related thereto regardless of whether Seller can complete such items
prior to the Closing Date. Seller shall defend (with counsel reasonably
acceptable to Buyer), indemnify and hold Buyer harmless from any and all
actions, costs, damages, expenses, liabilities, losses (including reasonable
attorneys’ and experts’ fees) relating to or arising in connection with Seller’s
failure to perform the Environmental Condition. Notwithstanding anything to the
contrary contained in this Agreement, the Environmental Condition shall not
require that all of the terms and conditions of the Consent Decree and ROD be
deemed satisfied by the EPA and the federal courts by the Closing Date, nor
shall it require that post-remediation monitoring be completed by the Closing
Date, provided the Environmental Condition is satisfied. WJ and its consultants
shall have access to the Property post-closing in order to perform any required
post-remediation monitoring or other activities to address any Hazardous
Materials pursuant to a separate license and indemnity agreement. All work
performed pursuant to this Paragraph 3.6 shall be completed in accordance with
all Environmental Laws and all other federal, state and local laws, statutes and
ordinances. The provisions of this Paragraph 3.6 shall survive the Close of
Escrow.

 

3.6.2.       Insurance. Prior to the Close of Escrow, Seller shall use its
commercially reasonable efforts to arrange (at Seller’s sole cost and expense)
for Buyer to be added as a named insured to all policies of insurance relating
to Hazardous Materials presently or formerly at, on, under or emanating from the
Property in form and substance reasonably satisfactory to Buyer.

 

3.6.3.       Other Environmental Matters. Seller and Buyer agree and acknowledge
that additional Hazardous Materials (as defined on Exhibit D attached hereto)
other than those identified or required to be addressed to satisfy the
Environmental Condition may be located on the physical improvements on the
Property (“Other Hazardous Materials”). Seller and Buyer agree that, in the
event of the Close of Escrow, Buyer and not Seller shall be responsible for the
lead paint and asbestos containing materials on the Property as part of the
demolition of those improvements.

 

3.6.4.       Access Agreement. Prior to Closing, Buyer and Seller shall
negotiate an access agreement in mutually acceptable form, permitting Seller,
Arcadis, WJ or any of their agents, representatives or consultants access to the
Property to perform work related to the Environmental Condition.

 

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3.7.          Construction License. Provided Buyer has delivered the Second
Deposit, Seller shall, in good faith, in its sole discretion, approve Buyer’s
request to enter into a Construction License and Indemnity Agreement (the
“License Agreement”)  in such form as may be mutually acceptable to Buyer and
Seller. Buyer’s indemnity obligations, and other obligations under the License
Agreement which state that they so survive, shall survive the termination of
this Agreement.

 

4.             REPRESENTATIONS, WARRANTIES AND COVENANTS.

 

4.1.          SELLER’S REPRESENTATIONS, WARRANTIES AND COVENANTS. IN ADDITION TO
THE REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER CONTAINED IN OTHER
PARAGRAPHS OF THIS AGREEMENT, SELLER HEREBY REPRESENTS, WARRANTS AND COVENANTS
TO BUYER AS FOLLOWS, ALL OF WHICH SHALL SURVIVE THE CLOSE OF ESCROW, AND ANY
INVESTIGATION OR KNOWLEDGE OF BUYER PRIOR TO THE CLOSE OF ESCROW:

 

4.1.1.       SELLER IS A DELAWARE CORPORATION, DULY ORGANIZED AND IN GOOD
STANDING UNDER THE LAWS OF THE STATE OF DELAWARE AND DULY AUTHORIZED TO DO
BUSINESS IN THE STATE OF CALIFORNIA. SELLER HAS THE FULL RIGHT, CAPACITY, POWER
AND AUTHORITY TO ENTER INTO AND CARRY OUT THE TERMS OF THIS AGREEMENT. THIS
AGREEMENT HAS BEEN DULY AUTHORIZED AND ENTERED INTO BY SELLER AND THE PARTIES
SIGNING ON BEHALF OF SELLER, AND UPON DELIVERY TO AND EXECUTION BY BUYER, SHALL
BE A VALID AND BINDING AGREEMENT OF SELLER. SELLER HAS NOT ALIENATED,
ENCUMBERED, TRANSFERRED, LEASED, ASSIGNED OR OTHERWISE CONVEYED ITS INTEREST IN
THE PROPERTY OR ANY PORTION THEREOF EXCEPT AS SET FORTH IN THE PTR, NOR ENTERED
INTO ANY AGREEMENT TO DO SO, NOR SHALL SELLER DO SO PRIOR TO THE CLOSE OF
ESCROW. THE ENTERING INTO AND PERFORMANCE BY SELLER OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT WILL NOT VIOLATE OR BREACH ANY AGREEMENT,
COVENANT OR OBLIGATION BINDING ON SELLER, AND THERE IS NO CONSENT REQUIRED FROM
ANY THIRD PARTY BEFORE THE PROPERTY MAY BE CONVEYED TO BUYER.

 

4.1.2.       TO SELLER’S KNOWLEDGE, THERE ARE NO MECHANIC’S OR MATERIALMAN’S
LIENS OR SIMILAR CLAIMS OR LIENS NOW ASSERTED AGAINST THE PROPERTY FOR WORK
PERFORMED OR COMMENCED PRIOR TO THE DATE HEREOF; AND SELLER SHALL TIMELY SATISFY
AND DISCHARGE ANY AND ALL OBLIGATIONS RELATING TO WORK PERFORMED ON OR CONDUCTED
AT OR MATERIALS DELIVERED TO THE PROPERTY FROM TIME TO TIME IN ORDER TO PREVENT
THE FILING OF ANY CLAIM OR MECHANIC’S LIEN WITH RESPECT THERETO.

 

4.1.3.       EXCEPT AS SET FORTH IN THE ENVIRONMENTAL REPORTS ATTACHED HERETO AS
EXHIBIT I SELLER HAS NOT AND, TO SELLER’S KNOWLEDGE, NO THIRD PARTY HAS USED,
GENERATED, TRANSPORTED, DISCHARGED, RELEASED, MANUFACTURED, STORED OR DISPOSED
OF ANY HAZARDOUS MATERIAL FROM, INTO, AT, ON, UNDER OR ABOUT THE PROPERTY IN
VIOLATION OF ANY ENVIRONMENTAL LAW. EXCEPT AS SET FORTH IN THE ENVIRONMENTAL
REPORTS ATTACHED HERETO AS EXHIBIT I, TO SELLER’S KNOWLEDGE, (A) THE PROPERTY IS
NOT IN VIOLATION, NOR HAS BEEN OR IS CURRENTLY UNDER INVESTIGATION FOR VIOLATION
OF ANY ENVIRONMENTAL LAW; (B) THERE HAS BEEN NO MIGRATION OF ANY HAZARDOUS
MATERIAL FROM, INTO, AT, ON, UNDER OR ABOUT THE PROPERTY IN VIOLATION OF ANY
ENVIRONMENTAL LAW; AND (C) THERE IS NOT NOW, NOR HAS THERE EVER BEEN ON OR IN
THE PROPERTY UNDERGROUND STORAGE TANKS OR SURFACE OR BELOW-GRADE IMPOUNDMENTS
USED TO STORE, TREAT OR HANDLE HAZARDOUS MATERIALS OR DEBRIS OR REFUSE

 

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BURIED IN, ON OR UNDER THE PROPERTY. FOR PURPOSES OF THIS AGREEMENT, THE TERM
“HAZARDOUS SUBSTANCE” SHALL BE DEFINED AS SET FORTH IN EXHIBIT D ATTACHED
HERETO.

 

4.1.4.       To Seller’s knowledge, other than the documents identified as the
Permitted Environmental Exceptions, there is no suit, action or arbitration, or
legal, administrative, or other proceeding or governmental investigation, formal
or informal, including but not limited to eminent domain, condemnation,
assessment district or zoning change proceeding, pending or threatened, or any
judgment or moratorium directly and adversely affecting the Property or Buyer’s
anticipated development of the Property, or which adversely affects Seller’s
ability to perform hereunder.

 

4.1.5.       Seller is not in default under the provisions of any deed of trust
or other encumbrance, lien or restriction on the Property which would permit
foreclosure on the Property by a third party.

 

4.1.6.       Other than commitments contained in the documents identified as the
Permitted Environmental Exceptions, Seller has not made any commitment or
representation to any government authority, or any adjoining or surrounding
property owner, which would in any way be binding on Buyer or would materially
interfere with Buyer’s ability to develop and improve the Property as a
residential development. Seller will not make any such commitment or
representation which would materially and adversely affect the Property or any
portion thereof prior to the Close of Escrow (other than such commitments that
shall terminate on or prior to Closing), without Buyer’s written consent, which
consent shall not be unreasonably withheld.

 

4.1.7.       SELLER AND ANY ENTITY OR PERSON THAT OWNS OR CONTROLS SELLER ARE
NOT BANKRUPT OR INSOLVENT UNDER ANY APPLICABLE FEDERAL OR STATE STANDARD, HAVE
NOT FILED FOR PROTECTION OR RELIEF UNDER ANY APPLICABLE BANKRUPTCY OR CREDITOR
PROTECTION STATUTE AND HAVE NOT BEEN THREATENED BY CREDITORS WITH AN INVOLUNTARY
APPLICATION OF ANY APPLICABLE BANKRUPTCY OR CREDITOR PROTECTION STATUTE. SELLER
IS NOT ENTERING INTO THE TRANSACTIONS DESCRIBED IN THIS AGREEMENT WITH AN INTENT
TO DEFRAUD ANY CREDITOR OR TO PREFER THE RIGHTS OF ONE CREDITOR OVER ANY OTHER.
SELLER AND BUYER HAVE NEGOTIATED THIS AGREEMENT AT ARMS LENGTH AND THE
CONSIDERATION PAID REPRESENTS FAIR VALUE FOR THE ASSETS TO BE TRANSFERRED.

 

4.1.8.       OTHER THAN DOCUMENTS IDENTIFIED AS THE PERMITTED ENVIRONMENTAL
EXCEPTIONS, THERE ARE NO LEASES, RENTAL AGREEMENTS NOR OTHER CONTRACTS OF ANY
KIND OR NATURE ENTERED INTO BY SELLER AFFECTING THE PROPERTY AND SELLER SHALL
NOT ENTER INTO ANY SUCH CONTRACTS DURING THE TERM OF THIS AGREEMENT WHICH CANNOT
BE TERMINATED ON OR PRIOR TO CLOSING, WITHOUT THE PRIOR WRITTEN CONSENT OF BUYER
WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.

 

Each of the representations and warranties made by Seller in this Agreement, or
in any Exhibit or on any document or instrument delivered pursuant hereto, shall
be true and correct in all material respects on the date hereof, and shall be
deemed to be made again as of the Close of Escrow, and shall then be true and
correct in all material respects; provided, however, that notwithstanding
anything to the contrary contained in

 

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this Agreement, in the event of any breach of Paragraphs 4.1.3 or 4.1.4 hereof
after the date hereof and prior to the Close of Escrow, Buyer’s sole recourse
shall be pursuant to Paragraphs 2.3.1c) and 2.6.1 above. Seller shall have the
right to update disclosures on Paragraphs 4.1.3 and 4.1.4 until that date which
is ten (10) days before the date of the Close of Escrow, including updating the
documents listed on Exhibit I attached hereto (“Diligence Update”), Seller
acting in good faith at all times prior to the Close of Escrow to provide prompt
disclosures; provided that any matter disclosed in a Diligence Update provided
on or after the date of expiration of the Feasibility Period and prior to the
Close of Escrow: (i) shall not be deemed a breach of representation for the
purposes of Paragraph 2.6.3 hereof, and (ii) shall be ignored for the purposes
of Buyer’s closing conditions and remedies set forth in Section 2.3.1c) and
2.6.1 above. The truth and accuracy of each of the representations and
warranties, and the performance of all covenants of Seller contained in this
Agreement, are conditions precedent to the release of the Deposits to Seller and
to the Close of Escrow. Seller shall notify Buyer immediately of any facts or
circumstances which are contrary to the foregoing representations and warranties
contained in this Paragraph 4.1. The representations and warranties set forth in
Paragraph 4.1 shall survive the Close of Escrow for a period of two (2) years.
For the purposes of this Paragraph 4.1 “to Seller’s knowledge” shall mean the
knowledge of Patrick O’Connor, Chief Financial Officer of the Seller and Dale
Spencer, Director of IT and Facilities of the Seller. Seller represents and
warrants that the individuals listed in the previous sentence have the most
knowledge about the Property.

 

4.2.          BUYER’S REPRESENTATIONS AND WARRANTIES. BUYER REPRESENTS AND
WARRANTS TO SELLER AS FOLLOWS, ALL OF WHICH SHALL SURVIVE THE CLOSE OF ESCROW
FOR A PERIOD OF TWO (2) YEARS:

 

4.2.1.       BUYER IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING IN THE STATE OF CALIFORNIA, AND HAS THE CAPACITY AND FULL POWER AND
AUTHORITY TO ENTER INTO AND CARRY OUT THE AGREEMENTS CONTAINED IN, AND THE
TRANSACTIONS CONTEMPLATED BY, THIS AGREEMENT, AND THAT THIS AGREEMENT HAS BEEN
DULY AUTHORIZED AND EXECUTED BY BUYER AND, UPON DELIVERY TO AND EXECUTION BY
SELLER, SHALL BE A VALID AND BINDING AGREEMENT OF BUYER.

 

4.2.2.       BUYER AND ANY ENTITY OR PERSON THAT OWNS OR CONTROLS BUYER ARE NOT
BANKRUPT OR INSOLVENT UNDER ANY APPLICABLE FEDERAL OR STATE STANDARD, HAVE NOT
FILED FOR PROTECTION OR RELIEF UNDER ANY APPLICABLE BANKRUPTCY OR CREDITOR
PROTECTION STATUTE AND HAVE NOT BEEN THREATENED BY CREDITORS WITH AN INVOLUNTARY
APPLICATION OF ANY APPLICABLE BANKRUPTCY OR CREDITOR PROTECTION STATUTE. BUYER
IS NOT ENTERING INTO THE TRANSACTIONS DESCRIBED IN THIS AGREEMENT WITH AN INTENT
TO DEFRAUD ANY CREDITOR OR TO PREFER THE RIGHTS OF ONE CREDITOR OVER ANY OTHER.
BUYER AND SELLER HAVE NEGOTIATED THIS AGREEMENT AT ARMS-LENGTH AND THE
CONSIDERATION PAID REPRESENTS FAIR VALUE FOR THE ASSETS TO BE TRANSFERRED.

 

Each of the representations and warranties made by Buyer in this Agreement,
shall be true and correct in all material respects on the date hereof, and shall
be deemed to be made again as of the Close of Escrow, and shall then be true and
correct

 

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in all material respects. The truth and accuracy of each of the representations
and warranties, and the performance of all covenants of Buyer contained in this
Agreement, are conditions precedent to the Close of Escrow. Buyer shall notify
Seller immediately of any facts or circumstances which are contrary to the
foregoing representations and warranties contained in this Paragraph 4.2.

 

5.             CONDEMNATION. IF PRIOR TO THE CLOSE OF ESCROW THE PROPERTY IS
TAKEN BY ANY ENTITY BY CONDEMNATION OR WITH THE POWER OF EMINENT DOMAIN, OR IF
THE ACCESS THERETO IS MATERIALLY REDUCED OR RESTRICTED THEREBY (OR IS THE
SUBJECT OF A PENDING TAKING WHICH HAS NOT YET BEEN CONSUMMATED), SELLER SHALL
IMMEDIATELY NOTIFY BUYER OF SUCH FACT. IN SUCH EVENT, BUYER SHALL HAVE THE
RIGHT, IN BUYER’S SOLE DISCRETION, TO (A) TERMINATE THIS AGREEMENT AND THE
ESCROW UPON WRITTEN NOTICE TO SELLER AND ESCROW HOLDER NOT LATER THAN SEVEN (7)
DAYS AFTER RECEIPT OF SELLER’S NOTICE THEREOF IN WHICH CASE THE PROVISIONS OF
PARAGRAPH 2.6.1 SHALL APPLY, OR (B) BUYER MAY PROCEED TO CONSUMMATE THE
TRANSACTION PROVIDED FOR HEREIN AT BUYER’S SOLE ELECTION, IN WHICH EVENT SELLER
SHALL ASSIGN AND TURN OVER, AND BUYER SHALL BE ENTITLED TO RECEIVE AND KEEP, ANY
AND ALL AWARDS MADE OR TO BE MADE IN CONNECTION WITH SUCH CONDEMNATION OR
EMINENT DOMAIN, AND THE PARTIES SHALL PROCEED TO THE CLOSE OF ESCROW PURSUANT TO
THE TERMS HEREOF, WITHOUT ANY REDUCTION IN THE PURCHASE PRICE.

 

6.             BROKERS. Buyer shall pay a brokerage commission to Borelli
Investment Company (“Buyer’s Broker”) arising out of this transaction at the
Close of Escrow, pursuant to a separate agreement between Buyer and Buyer’s
Broker.

 

6.1.          Buyer shall also pay a brokerage commission to CRESA Partners
(“Seller’s Broker”) arising out of this transaction at the Close of Escrow,
pursuant to a separate agreement between Buyer and Seller’s Broker (“Seller’s
Broker Agreement”).

 

6.2.          In the event of a transfer (as defined in Paragraph 7.12 below)
Buyer shall not have any obligation to pay any commission due hereunder, such
commission to be the sole obligation of Seller (subject to any further mutual,
written agreement between Buyer and Seller.

 

6.3.          Seller shall indemnify, defend and hold harmless Buyer against any
loss, liability, damage, cost, claim or expense (including reasonable attorneys’
fees) incurred by reason of any brokerage fee, commission or finder’s fee which
is payable hereunder or alleged to be payable to any broker or finder, by
Seller. In the event that the Close of Escrow fails to occur for any reason,
including, without limitation, a default by Buyer, Buyer shall be under no
obligation to pay any commission to the Broker or any other broker, or to
indemnify Seller in connection therewith Buyer shall indemnify, defend and hold
harmless Seller against any loss, liability, damage, cost, claim or expense
(including reasonable attorneys’ fees) incurred by reason of any brokerage fee,
commission or finder’s fee which is payable hereunder or alleged to be payable
to any broker or finder, by Buyer. Notwithstanding anything to the contrary
contained herein, the representations, warranties, indemnities and agreements
contained in this Paragraph 6 shall survive the Close of Escrow or earlier
termination of this Agreement.

 

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7.             GENERAL PROVISIONS.

 

7.1.          Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall, for all purposes, be deemed an original and
all such counterparts taken together, shall constitute one and the same
instrument. To facilitate execution of this Agreement, the parties may execute
and exchange by facsimile counterparts of the signature pages which shall be
deemed originals for the purpose of this Agreement.

 

7.2.          Further Assurances. Each of the parties agrees to use commercially
reasonable efforts (without the requirement of the payment of any money) to
execute and deliver such other instruments and perform such acts, in addition to
the matters herein specified, as may be appropriate or necessary to effectuate
the agreements of the parties, whether the same occurs before or after the Close
of Escrow.

 

7.3.          ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH ALL EXHIBITS
HERETO AND DOCUMENTS REFERRED TO HEREIN, IF ANY, CONSTITUTE THE ENTIRE AGREEMENT
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND
SUPERSEDE ALL PRIOR UNDERSTANDINGS OR AGREEMENTS. THIS AGREEMENT MAY BE MODIFIED
ONLY BY A WRITING SIGNED BY BOTH PARTIES. ALL EXHIBITS TO WHICH REFERENCE IS
MADE IN THIS AGREEMENT ARE DEEMED INCORPORATED IN THIS AGREEMENT WHETHER OR NOT
ACTUALLY ATTACHED.

 

7.4.          HEADINGS. HEADINGS USED IN THIS AGREEMENT ARE FOR CONVENIENCE OF
REFERENCE ONLY AND ARE NOT INTENDED TO GOVERN, LIMIT, OR AIDE IN THE
CONSTRUCTION OF ANY TERM OR PROVISION HEREOF.

 

7.5.          CHOICE OF LAW. THIS AGREEMENT AND EACH AND EVERY RELATED DOCUMENT
ARE TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF CALIFORNIA.

 

7.6.          SEVERABILITY. IF ANY TERM, COVENANT, CONDITION OR PROVISION OF
THIS AGREEMENT, OR THE APPLICATION THEREOF TO ANY PERSON OR CIRCUMSTANCE, SHALL
TO ANY EXTENT BE HELD BY A COURT OF COMPETENT JURISDICTION OR RENDERED BY THE
ADOPTION OF A STATUTE BY THE STATE OF CALIFORNIA OR THE UNITED STATES INVALID,
VOID OR UNENFORCEABLE, THE REMAINDER OF THE TERMS, COVENANTS, CONDITIONS OR
PROVISIONS OF THIS AGREEMENT, OR THE APPLICATION THEREOF TO ANY PERSON OR
CIRCUMSTANCE, SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL IN NO WAY BE
AFFECTED, IMPAIRED OR INVALIDATED THEREBY.

 

7.7.          WAIVER OF COVENANTS, CONDITIONS OR REMEDIES. THE WAIVER BY ONE
PARTY OF THE PERFORMANCE OF ANY COVENANT, CONDITION OR PROMISE, OR OF THE TIME
FOR PERFORMING ANY ACT, UNDER THIS AGREEMENT SHALL NOT INVALIDATE THIS AGREEMENT
NOR SHALL IT BE CONSIDERED A WAIVER BY SUCH PARTY OF ANY OTHER COVENANT,
CONDITION OR PROMISE, OR OF THE TIME FOR PERFORMING ANY OTHER ACT REQUIRED,
UNDER THIS AGREEMENT. THE EXERCISE OF ANY REMEDY PROVIDED IN THIS AGREEMENT
SHALL NOT BE A WAIVER OF ANY OTHER REMEDY PROVIDED BY LAW, AND THE PROVISIONS OF
THIS AGREEMENT FOR ANY REMEDY SHALL NOT EXCLUDE ANY OTHER REMEDIES UNLESS THEY
ARE EXPRESSLY EXCLUDED.

 

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7.8.          LEGAL ADVICE. EACH PARTY HAS RECEIVED INDEPENDENT LEGAL ADVICE
FROM ITS ATTORNEYS WITH RESPECT TO THE ADVISABILITY OF EXECUTING THIS AGREEMENT
AND THE MEANING OF THE PROVISIONS HEREOF. THE PROVISIONS OF THIS AGREEMENT SHALL
BE CONSTRUED AS TO THE FAIR MEANING AND NOT FOR OR AGAINST ANY PARTY BASED UPON
ANY ATTRIBUTION OF SUCH PARTY AS THE SOLE SOURCE OF THE LANGUAGE IN QUESTION.

 

7.9.          Time of the Essence. Time shall be of the essence as to all dates
and times of performance, whether they are contained herein or contained in any
escrow instructions to be executed pursuant to this Agreement, and all escrow
instructions shall contain a provision to this effect. Notwithstanding the
foregoing, in the event the date for the performance of an action or the giving
of a notice falls on a Saturday, Sunday or holiday (which shall be defined as
any day that banks in the State of California are closed), then the date for the
performance of such action or giving of such notice shall be automatically
extended to the next succeeding business day.

 

7.10.        RELATIONSHIP OF PARTIES. THE PARTIES AGREE THAT THEIR RELATIONSHIP
IS THAT OF SELLER AND BUYER, AND THAT NOTHING CONTAINED HEREIN SHALL CONSTITUTE
EITHER PARTY THE AGENT OR LEGAL REPRESENTATIVE OF THE OTHER FOR ANY PURPOSE
WHATSOEVER, NOR SHALL THIS AGREEMENT BE DEEMED TO CREATE ANY FORM OF BUSINESS
ORGANIZATION BETWEEN THE PARTIES HERETO, NOR IS EITHER PARTY GRANTED THE RIGHT
OR AUTHORITY TO ASSUME OR CREATE ANY OBLIGATION OR RESPONSIBILITY ON BEHALF OF
THE OTHER PARTY, NOR SHALL EITHER PARTY BE IN ANY WAY LIABLE FOR ANY DEBT OF THE
OTHER.

 

7.11.        ATTORNEYS’ FEES. IF ANY PARTY HERETO INSTITUTES AN ACTION OR
PROCEEDING FOR A DECLARATION OF THE RIGHTS OF THE PARTIES UNDER THIS AGREEMENT,
FOR INJUNCTIVE RELIEF, FOR AN ALLEGED BREACH OR DEFAULT OF, OR ANY OTHER ACTION
ARISING OUT OF, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR IF
ANY PARTY IS IN DEFAULT OF ITS OBLIGATIONS PURSUANT THERETO, WHETHER OR NOT SUIT
IS FILED OR PROSECUTED TO FINAL JUDGMENT, THE NON-DEFAULTING PARTY OR PREVAILING
PARTY SHALL BE ENTITLED TO ITS ACTUAL ATTORNEYS’ FEES AND TO ANY COURT COSTS
INCURRED, IN ADDITION TO ANY OTHER DAMAGES OR RELIEF AWARDED.

 

7.12.        ASSIGNMENT. BUYER MAY NOT ASSIGN ITS RIGHTS OR DELEGATE ITS
OBLIGATIONS HEREUNDER WITHOUT SELLER’S PRIOR WRITTEN CONSENT, WHICH CONSENT MAY
ONLY BE WITHHELD IN SELLER’S REASONABLE DISCRETION. SELLER MAY NOT ASSIGN ITS
RIGHTS OR DELEGATE ITS OBLIGATIONS HEREUNDER WITHOUT BUYER’S WRITTEN CONSENT,
WHICH CONSENT MAY ONLY BE WITHHELD IN BUYER’S REASONABLE DISCRETION.
NOTWITHSTANDING THE FOREGOING, SELLER SHALL HAVE A RIGHT TO SELL THE PROPERTY TO
A THIRD PARTY (“TRANSFER”) SUBJECT TO THE FOLLOWING:

 

7.12.1. BUYER SHALL HAVE NO OBLIGATION TO PAY ANY ESCROW COSTS, BROKERAGE
COMMISSIONS, TITLE CHARGES, SURVEY COSTS, RECORDING COSTS OR OTHER CHARGES
INCURRED WITH RESPECT TO ANY TRANSFER, AND SELLER SHALL REIMBURSE BUYER FOR ANY
REASONABLE PROFESSIONAL FEES, INCLUDING REASONABLE ATTORNEYS’ FEES, WHICH BUYER
MAY INCUR WITH RESPECT THERETO.

 

7.12.2. BUYER SHALL NOT BE REQUIRED TO (I) MAKE ANY REPRESENTATIONS OR
WARRANTIES REGARDING THE TRANSFER OR PROPERTY, (II) ASSUME ANY OBLIGATIONS
RELATING TO THE TRANSFER, INCLUDING, WITHOUT LIMITATION, ASSUME OR ALLOW ANY
DEBT

 

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secured by the Property except in an aggregate amount that is Thirteen Million
Dollars ($13,000,000) or less, or (iii) spend any sum or incur any personal
liability in connection with the Transfer. Buyer shall have no responsibility or
liability to any third party involved in the Transfer other than for such
responsibilities and liabilities to the transferee as “Buyer” hereunder.

 

7.12.3. THE CLOSE OF ESCROW SHALL NOT BE CONTINGENT OR OTHERWISE SUBJECT TO THE
CONSUMMATION OF TRANSFER AND CLOSE OF ESCROW SHALL OCCUR IN ACCORDANCE WITH THE
TERMS OF THIS AGREEMENT DESPITE ANY FAILURE TO COMPLETE SUCH TRANSFER FOR ANY
REASON WHATSOEVER;

 

7.12.4. SELLER SHALL ASSIGN AND TRANSFEREE SHALL ASSUME EACH AND EVERY
OBLIGATION OF THE SELLER SET FORTH IN THIS AGREEMENT, EXCEPT FOR THOSE
OBLIGATIONS SET FORTH IN PARAGRAPH 3.6 HEREOF WHICH SHALL REMAIN THE SOLE
OBLIGATION OF SELLER;

 

7.12.5. SELLER SHALL NOT BE RELEASED FROM ANY OF ITS OBLIGATIONS HEREUNDER, AND
SELLER SHALL REMAIN OBLIGATED TO PERFORM EACH AND EVERY OBLIGATION SET FORTH IN
THIS AGREEMENT BOTH BEFORE AND AFTER THE CLOSE OF ESCROW (INCLUDING WITHOUT
LIMITATION, THE OBLIGATIONS TO RETURN THE DEPOSITS, AS APPLICABLE, AND TRANSFER
FEE TITLE);

 

7.12.6. THE TRANSFEREE SHALL TAKE TITLE TO THE PROPERTY SUBJECT AND SUBORDINATE
TO THE TERMS OF THIS AGREEMENT;

 

7.12.7. SELLER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS BUYER AND ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, SHAREHOLDERS, ATTORNEYS AND THEIR RESPECTIVE
REPRESENTATIVES AND SUCCESSORS IN INTEREST (COLLECTIVELY, THE “INDEMNITEE”) FROM
ANY LIABILITY, LOSS, COST, DAMAGE OR EXPENSE, INCLUDING, WITHOUT LIMITATION,
COURT COSTS, EXPERT WITNESS FEES AND ATTORNEYS’ FEES, THAT INDEMNITEE MAY SUFFER
OR INCUR AS A RESULT OF ANY CLAIM, DEMAND, ACTION, COST OR JUDGMENT MADE OR
OBTAINED BY ANY INDIVIDUAL, PARTNERSHIP, CORPORATION, ENTITY, GOVERNMENTAL
AGENCY OR PERSON WHICH ARISES OUT OF OR RESULTS FROM THE ASSIGNMENT AND TRANSFER
OF THE PROPERTY, BUT IN NO EVENT IN AN AMOUNT GREATER THAN PROVIDED FOR IN
PARAGRAPH 2.6.3 HEREOF; AND

 

7.12.8. THE TRANSFEREE SHALL HAVE SUFFICIENT NET WORTH TO UNDERTAKE AND ASSUME
THE OBLIGATIONS HEREUNDER (NOTWITHSTANDING THAT SELLER SHALL NOT BE RELEASED) AS
DETERMINED IN BUYER’S REASONABLE DISCRETION.

 

7.12.9. IN ANY EVENT, THIS AGREEMENT SHALL BE BINDING UPON AND SHALL INURE TO
THE BENEFIT OF THE SUCCESSORS AND PERMITTED ASSIGNS OF THE PARTIES TO THIS
AGREEMENT.

 

7.13.        NOTICES. ALL NOTICES AND DEMANDS WHICH EITHER PARTY IS REQUIRED OR
DESIRES TO GIVE TO THE OTHER SHALL BE GIVEN IN WRITING BY U.S. CERTIFIED MAIL,
RETURN RECEIPT REQUESTED WITH APPROPRIATE POSTAGE PAID, BY PERSONAL DELIVERY, BY
FACSIMILE OR BY PRIVATE OVERNIGHT COURIER SERVICE TO THE ADDRESS OR FACSIMILE
NUMBER SET FORTH BELOW FOR THE RESPECTIVE PARTY, PROVIDED THAT IF ANY PARTY
GIVES NOTICE OF A CHANGE OF NAME OR ADDRESS

 

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OR NUMBER, NOTICES TO THAT PARTY SHALL THEREAFTER BE GIVEN AS DEMANDED IN THAT
NOTICE. ALL NOTICES AND DEMANDS SO GIVEN SHALL BE EFFECTIVE UPON RECEIPT BY THE
PARTY TO WHOM NOTICE OR DEMAND IS BEING GIVEN, EXCEPT THAT ANY NOTICE GIVEN BY
CERTIFIED MAIL SHALL BE DEEMED DELIVERED THREE (3) DAYS AFTER DEPOSIT IN THE
UNITED STATES MAILS.

 

If to Seller:

 

Aviza Technology, Inc.

 

 

440 Kings Village Road

 

 

Scotts Valley, CA 95066

 

 

Attn: Patrick O’Connor, Chief Financial Officer

 

 

Facsimile No.: (831) 439-6320

 

 

Telephone No.: (831) 439-6360

 

 

 

 

With a copy to:

 

Wilson Sonsini Goodrich & Rosati

 

 

650 Page Mill Road

 

 

Palo Alto, CA 94304

 

 

Attn: Marc Gottschalk, Esq.

 

 

Facsimile No.: 650-493-6811

 

 

Telephone No.: 650-354-4250

 

 

 

If to Buyer:

 

KB Home South Bay Inc.

 

 

6700 Koll Center Parkway, Suite 200

 

 

Pleasanton, CA 94566

 

 

Attn: Mr. Jeff McMullen

 

 

Facsimile No.: 925-750-1800

 

 

Telephone No.: 925-750-1700

 

 

 

 

with a copy to:

 

KB HOME

 

 

10990 Wilshire Boulevard

 

 

Los Angeles, CA 90024

 

 

Attn: Ross A. Kay, Esq.

 

 

Facsimile No.: 310/231-4280

 

 

Telephone No.: 310/231-4284

 

 

 

If to Escrow Holder:

 

First American Title Insurance Company

 

 

6665 Owens Drive

 

 

Pleasanton, CA 94588

 

 

Attention: Michelle Chan

 

 

Facsimile No.: (925) 463-9683

 

 

Telephone No.: (925) 460-8228

 

7.14.        CONFIDENTIALITY. SELLER ACKNOWLEDGES THAT BY REASON OF THIS
AGREEMENT, SELLER WILL BE GIVEN BY BUYER, INFORMATION INCLUDING, BUT NOT LIMITED
TO, BUSINESS PLANS; FINANCIAL INFORMATION; FORMULAS; METHODOLOGIES, THE CONTENTS
AND PROVISIONS OF CONTRACTS AND AGREEMENTS TO WHICH BUYER IS, WAS OR MAY BE A
PARTY; TECHNOLOGY; PROCESSES; AND METHODS OF OPERATION (COLLECTIVELY “BUSINESS
INFORMATION”). SELLER AGREES THAT DURING THE TERM HEREOF AND THEREAFTER, SELLER
WILL KEEP CONFIDENTIAL ALL SUCH BUSINESS INFORMATION

 

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and will not disclose to any person or entity any such Business Information,
except in connection with the evaluation of the transactions set forth in this
Agreement by its agents, representatives, attorneys, accountants and
consultants, or with a proposed transferree under a Transfer and its agents,
representatives, attorneys, accountants and consultants, provided such
transferee agrees to be bound in writing to the provisions of this Paragraph
7.14. Seller hereby further agrees that upon the termination or expiration of
this Agreement, Seller will return to Buyer all of the Business Information,
property and all copies and duplicates thereof. Seller understands and agrees
that this Paragraph is a material provision of this Agreement and that any
breach of this Paragraph shall be a material breach of this Agreement and
because the damages for a breach of this Paragraph would be substantial but
difficult to ascertain and would cause irreparable harm to Buyer, it is further
agreed that for each such breach by Seller, in addition to damages, Buyer will
be entitled to obtain injunctive relief against Seller. Buyer acknowledges that
by reason of this Agreement, Buyer will be given by Seller, information
including, but not limited to, the Reports (collectively “Property
Information”). Buyer agrees that during the term hereof, Buyer will keep
confidential all such Property Information and will not disclose to any person
or entity any such Property Information except as necessary for the evaluation
of the use, development and purchase of the Property. Buyer hereby further
agrees that upon the termination or expiration of this Agreement, Buyer will
return to Seller all of the Property Information. Buyer understands and agrees
that this Paragraph is a material provision of this Agreement and that any
breach of this Paragraph shall be a material breach of this Agreement and
because the damages for a breach of this Paragraph would be substantial but
difficult to ascertain and would cause irreparable harm to Seller, it is further
agreed that for each such breach by Buyer, in addition to damages, Seller will
be entitled to obtain injunctive relief against Buyer. Buyer’s obligation set
forth in this paragraph shall terminate on the Close of Escrow. This paragraph
will survive the expiration or termination of this Agreement.

 

7.15.        Buyer Milestones. Buyer hereby acknowledges that Seller has agreed
to enter into this Agreement based on an understanding that Buyer shall
diligently pursue the investigation of title and Feasibility Matters and
Approved Entitlements. As a condition to this Agreement, Buyer covenants and
agrees that it shall use commercially reasonable efforts in good faith to pursue
the investigation of title and Feasibility Matters and Approved Entitlements
(“Good Faith Pursuit”) and diligently pursue the following:

 

a. Buyer shall submit all documentation required for the Plan Amendments,
annexation of the Property, and for the re-zoning of the Property no later than
two hundred and forty (240) days following the Agreement Date.

 

b. Buyer shall submit to the City of Scotts Valley one draft of the Tentative
Map no later than fifteen (15) months days following the Agreement Date.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

BUYER:

 

SELLER:

 

 

 

 

 

 

KB HOME SOUTH BAY INC.,

 

AVIZA TECHNOLOGY, INC.

a California corporation

 

a Delaware corporation

 

 

 

 

 

 

By:

/s/ Jeffrey McMullen

 

 

By:

/s/ Jerauld J. Cutini

 

 

 

 

 

 

 

 

Title:

Senior Vice President,

 

Title:

 

Land Acquisitions

 

 

President and Chief Executive Officer

 

 

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