Document:

exv10w1

 

Exhibit 10.1

CONTRIBUTION AGREEMENT

     THIS CONTRIBUTION AGREEMENT (this “Agreement”), dated as of December 13,
2004, is by and between ARCHSTONE-SMITH OPERATING TRUST, a Maryland real estate
investment trust (the “Trust”), for purposes of Section 3(a) only,
ARCHSTONE-SMITH TRUST, a Maryland real estate investment trust (“ASN”) and
EZRA MERSEY (the “Investor”).

     WHEREAS, the Trust desires to issue to the Investor one Series M Preferred
Unit of Beneficial Interest (the “Unit”) and the Investor desires to contribute
funds to the Trust on the terms and subject to the conditions described herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and warranties herein contained, the parties hereto agree
as follows:

1. Definitions. Capitalized terms that are not defined in the text of this
Agreement have the following meanings.

     “Advisor Fee” shall mean the Advisor Fee defined in the Development
Agreement.

     “Affiliate” shall mean, with respect to any specified Person, any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
for the purpose of this definition, a Person shall be deemed to control another
Person if the first Person owns or holds more than 50% of the voting power of
the second Person.

     “Articles Supplementary” shall mean, the Articles Supplementary to the
Declaration of Trust of the Trust relating to the Unit, in the form of Exhibit
A.

     “Business Day” shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York City,
New York are not required to be open.

     “Calculation Date” shall mean the earlier to occur of the first day of the
month following (a) the first anniversary of the Stabilization Date, and (b)
the month in which the date 30 months after initial occupancy of an apartment
unit in the Project occurs.

     “Cash Flows After Debt Service” shall have the meaning provided in Section
5(d).

     “City” shall mean the City and County of San Francisco.

     “Closing” shall mean the consummation of the transactions contemplated
herein.

     “Closing Date” shall mean the date of this Agreement.

     “Consulting Agreement” shall mean the Consulting Agreement, dated July 1,
2003, between Investor and the Trust.

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     “Consulting Fee” shall mean the fee payable to Investor pursuant to the
Consulting Agreement resulting from the transactions contemplated by the Land
Purchase Agreement.

     “Contribution Amount” shall have the meaning provided in Section 2(a).

     “Demolition Time” shall mean the time, determined by the records of the
Trust, that the Trust commences demolition of the existing improvements on the
Property.

     “Development Agreement” shall mean a development services agreement
between Investor and the Trust to be dated the Closing Date in the form
attached hereto as Exhibit B.

     “Entitlements” shall mean the receipt from the City of a Conditional Use
Permit for the Project, or similar approval that the City or such other
applicable agencies may designate, that enables the Project to be developed for
its intended use, subject to the later receipt of any required building permits
and payments of fees and other costs the City may require after receipt of
Entitlements but prior to construction and/or prior to occupancy of the
Project.

     “Entitlement Budget” shall mean the budget for expenditures for obtaining
all Entitlements, which shall be prepared pursuant to the Development
Agreement.

     “Entitlement Budget Amount” shall mean the total amount of expenditures
budgeted for Entitlements as set forth in the Entitlement Budget.

     “Governmental Authority” shall mean the government of the United States or
any foreign country or any state or political subdivision thereof and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.

     “Land Purchase Agreement” shall mean the Agreement of Purchase and Sale,
dated as of June 7, 2004, between Buyer, District No. 1 PCD, MEBA (AFL-CIO)
California Realty Corporation and Seafarers International Union of North
America, AGLIWD.

     “Land Purchase Closing” shall mean the closing of the transactions
contemplated by the Land Purchase Agreement.

     “Land Purchase Price” shall mean the purchase price for the Property paid
pursuant to the Land Purchase Agreement.

     “Law” shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Governmental Authority.

     “Lien” shall mean any mortgage, lien (except for any lien for taxes not
yet due and payable), charge, restriction, pledge, security interest, option,
lease or sublease, claim, right of any third party, easement, encroachment or
encumbrance.

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     “Material Adverse Effect” shall mean an effect on the business,
operations, assets, liabilities, results of operations, cash flows or condition
(financial or otherwise) of the ability of the parties to consummate the
transactions contemplated hereby, which is material and adverse.

     “Permits” shall mean the receipt from the City of any and all permits
required for the demolition of existing structures on the Property and the
commencement of construction of the proposed Project as described in the
Entitlements.

     “Permitting Date” shall mean the date on which all Permits required for
commencement of construction of the Project have been received. The Trust
shall inform Investor of such date promptly after it has occurred.

     “Person” shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, trust, association or other entity.

     “Project” shall mean a multifamily apartment complex, with related
commercial and/or retail space, which is planned to have approximately 325,000
gross building square feet, along with up to 325 parking spaces, to be located
at 340-350 Fremont Street, San Francisco, California and to be developed
pursuant to the Development Agreement and constructed on the property purchased
pursuant to the Land Purchase Agreement.

     “Property” shall mean the real property to be purchased pursuant to the
Land Purchase Agreement, as described therein.

     “Qualified Broker” shall mean a commercial real estate broker with at
least 10 years of investment grade apartment sales experience, familiar with
real estate assets similar to the Project and familiar with the San Francisco
real estate market for similar assets.

     “Qualified Sale” shall have the meaning provided in Section 5(c).

     “Redemption Price” shall mean the Redemption Price calculated pursuant to
Schedule 1 or Schedule 2, as the case may be.

     “Registration Rights Agreement” shall mean a registration rights agreement
between the Trust and Investor in the form of Exhibit C hereto to be entered
into at the Closing.

     “Related Agreements” shall mean, collectively, the Development Agreement
and the Registration Rights Agreement.

     “Securities Act” shall mean the Securities Act of 1933 as amended.

     “Stabilization Date” shall mean the first day of the month following the
second consecutive month in which 93% of the residential units within the
Project are occupied by tenants pursuant to written leases and who have
commenced payment of rent under such leases.

     “Stabilized Fair Market Value” shall mean the fair market value of the
Project determined as of the Calculation Date (a) by the mutual written
agreement of Investor and the Trust, or (b) if Investor and the Trust are
unable to agree upon such fair market value within 20

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Business Days after the Calculation Date, then the Stabilized Fair Market
Value shall be determined in accordance with Section 5(b) hereof.

2. Contribution and Issuance of Unit.

     (a) Contributions. Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Investor shall contribute $10,000 in cash (the
“Initial Contribution”) to the Trust. In addition, Investor shall make the
following contributions to the Trust:

               (i) Investor shall contribute to the Trust cash equal to 5% of the amount
required to be paid by the Trust for non-refundable deposits and fees pursuant
to the Land Purchase Agreement;

               (ii) following approval of the Entitlement Budget pursuant to the
Development Agreement, Investor shall contribute to the Trust cash equal to 5%
of the Entitlement Budget Amount;

               (iii) Investor shall contribute to the Trust 10% of the funds paid by the
Trust to obtain the Entitlements in excess of the Entitlement Budget Amount
(subject to the provisions of Section 4 of Exhibit A to the Development
Agreement);

               (iv) upon written notice to the Trust, Investor may elect, in its sole
discretion, to cause any amounts payable to Investor pursuant to the Consulting
Agreement that have not been paid by the Trust as of the date of the Land
Purchase Closing to be treated as a contribution pursuant hereto, in which
case, the Trust shall no longer be required to pay such amount to Investor; and

               (v) upon written notice to the Trust, Investor may elect, in its sole
discretion, to cause any then unpaid Advisor Fees payable by the Trust to
Investor to be treated as a contribution pursuant hereto, in which case, the
Trust shall no longer be required to pay such Advisor Fees to Investor.

The sum of the Initial Contribution and the amounts contributed as provided
above shall equal the “Contribution Amount”. The amounts to be contributed by
Investor pursuant to subsections 2(a)(i)-(iii) above shall, until paid in
full, be paid by Investor to the Trust quarterly, within ten (10) days of
Investor’s receipt of an invoice from the Trust for the respective amount or
amounts then due for the preceding quarter. If Investor fails to pay any
amount he is required to pay as provided above, the Trust shall notify Investor
and such amount shall be deemed to be a Default Contribution for purposes of
Schedule 1 hereof. Except as provided in this Section 2, Investor shall have
no obligation to make any contribution to the Trust with respect to the
Project.

     (b) Issuance of Unit. In consideration for the Initial Contribution and
the contributions described in subsections 2(a)(i)-(iii), subject to the terms
and conditions set forth in this Agreement, the Trust shall issue the Unit to
Investor at the Closing.

     (c) Closing. The Closing of the transactions described herein shall occur
on the Closing Date at a location mutually agreed upon by the parties.

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3. Representations and Warranties of the Trust.

     (a) Each of the Trust and ASN hereby represents and warrants to Investor:

               (i) Due Organization. Each of the Trust and ASN is duly organized,
validly existing and in good standing under the laws of Maryland, with all
requisite power and authority to own, lease and operate its properties and to
carry on its business as they are now being owned, leased, operated and
conducted.

               (ii) Due Authorization. The Trust and ASN have full power and authority
to enter into this Agreement and the Related Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Trust and ASN of this Agreement and
the Related Agreements to which it is a party have been duly and validly
approved by ASN for itself and as the Trustee of the Trust and no other actions
or proceedings on the part of ASN or the Trust are necessary to authorize this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby. Each of the Trust and ASN has duly and validly executed and delivered
this Agreement and duly and validly executed and delivered (or prior to or at
the Closing will duly and validly execute and deliver) the Related Agreements
to which it is a party. This Agreement constitutes legal, valid and binding
obligations of the Trust and ASN and, upon execution and delivery by each of
the Trust and ASN, as applicable, of the Related Agreements to which it is a
party will constitute legal, valid and binding obligations of each of the Trust
and ASN, as applicable, in each case, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors’ rights generally and by equitable
limitations on the availability of specific remedies.

               (iii) Consents and Approvals; Authority Relative to this Agreement.

                    (1) Except for the filing of the Articles Supplementary with the Maryland
Division of Taxation and Assessments; no consent, authorization or approval of,
filing or registration with, or cooperation from, any Governmental Authority or
any other Person not a party to this Agreement is necessary in connection with
the execution, delivery and performance by the Trust or ASN of this Agreement
and its respective Related Agreements or the consummation of the transactions
contemplated hereby or thereby.

                    (2) The execution, delivery and performance by each of the Trust and ASN
of this Agreement and the Related Agreements to which it is a party do not and
will not (i) violate any Law; (ii) violate or conflict with, result in a breach
or termination of, constitute a default or give any third party any additional
right (including a termination right) under, permit cancellation of, result in
the creation of any Lien upon any of the assets or properties of Trust under,
or result in or constitute a circumstance which, with or without notice or
lapse of time or both, would constitute any of the foregoing under, any
contract to which the Trust is a party or by which the Trust or any of its
assets or properties are bound; (iii) permit the acceleration of the maturity
of any indebtedness of the Trust or indebtedness secured by its assets or
properties; or (iv) violate or conflict with any provision of the Declaration
of Trust or similar organizational

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instruments of the Trust, except, in each case, where any such violation,
individually or in the aggregate, would not have a Material Adverse Effect.

     (b) The Trust hereby represents and warrants to Investor:

               (i) Offering of Unit. Neither the Trust nor any Person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of any securities of the Trust under circumstances which would
require, under the Securities Act, the integration of such offering with the
offering and sale of the Unit) which might reasonably be expected to subject
the offering, issuance or sale of the Unit to the registration requirements of
the Securities Act.

               (ii) Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission from any party in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Trust.

4. Representations and Warranties of Investor. Investor hereby represents and
warrants to the Trust as follows:

     (a) Capacity. Investor has the legal capacity to enter into this
Agreement and the Related Agreements.

     (b) Due Execution; Binding Effect. Investor has validly executed and
delivered this Agreement and has duly and validly executed and delivered (or
prior to or at the Closing will duly and validly execute and deliver) the
Related Agreements. This Agreement constitutes legal, valid and binding
obligations of Investor and the Related Agreements, upon execution and delivery
by Investor, will constitute legal, valid and binding obligations of Investor,
in each case, enforceable in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors’ rights generally and by equitable limitations on the
availability of specific remedies.

     (c) Consents and Approvals; Authority Relative to this Agreement.

               (i) No consent, authorization or approval of, filing or registration with,
or cooperation from, any Governmental Authority or any other Person not a party
to this Agreement is necessary in connection with the execution, delivery and
performance by Investor of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby.

               (ii) The execution, delivery and performance by Investor of this Agreement
and the Related Agreements do not and will not (i) violate any Law; (ii)
violate or conflict with, result in a breach or termination of, constitute a
default or give any third party any additional right (including a termination
right) under, permit cancellation of, result in the creation of any Lien upon
any of the assets or properties of Investor under, or result in or constitute a
circumstance which, with or without notice or lapse of time or both, would
constitute any of the foregoing under, any contract to which Investor is a
party or by which Investor or any of his assets or properties are bound; and
(iii) permit the acceleration of the maturity of any

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indebtedness of Investor or indebtedness secured by his assets or
properties, except, in each case, where any such violation, individually or in
the aggregate, would not be reasonably likely to have a Material Adverse
Effect.

     (d) Brokers. No broker, lender or investment banker is entitled to any
brokerage, lender’s or other fee or commission from any party in connection
with the transactions contemplated by this Agreement based on arrangements made
by or on behalf of Investor.

     (e) Purchase for Investment. Investor is purchasing the Unit hereunder
for investment without any intent of the distribution thereof within the
meaning of the Securities Act.

     (f) Accredited Investor. Investor is an “accredited investor” within the
meaning of Regulation 501(a) under the Securities Act. Investor is able to
bear the economic risk of the contributions to be made to the Trust and the
acquisition of the Unit, can afford to sustain a total loss on such investment
and has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risk of the proposed investment.
Investor has been furnished the opportunity to ask questions of and receive
answers from representatives of the Trust concerning the business and financial
affairs of the Trust.

5. Covenants.

     (a) Articles Supplementary. The Trust shall, prior to or concurrently with
the Closing, cause the Articles Supplementary to be filed with the Maryland
Division of Assessments and Taxation.

     (b) Determination of Redemption Price. Except as set forth in Section
5(c) (which applies in the event of a Qualified Sale), the Redemption Price
shall be calculated pursuant to this Section 5(b).

               (i) The Trust and Investor shall use commercially reasonably efforts to
agree upon the Stabilized Fair Market Value on or before the 20th Business Day
after the Calculation Date. If the Trust and Investor do not agree upon the
Stabilized Fair Market Value of the Project on or before the 20th Business Day
after the Calculation Date (the “Broker Trigger Date”), then each of them shall
select one Qualified Broker within three Business Days after the Broker Trigger
Date. The two selected Qualified Brokers shall mutually agree upon a third
Qualified Broker within ten Business Days after the Broker Trigger Date. The
date on which the third Qualified Broker is selected shall be referred to as
the “Broker Panel Selection Date.” Within 20 Business Days after the Broker
Panel Selection Date, each of the three selected Qualified Brokers shall
provide its estimate of the fair market value of the Project as of the
Calculation Date, reduced by costs determined by such Qualified Broker that
would be normally incurred in connection with a sale of the Project, such as
brokerage commissions, title costs and fees, transfer taxes and fees, and other
closing costs. The Trust shall provide such Qualified Brokers with reasonable
access to the Project and to information and records regarding the Project, as
requested by the Qualified Brokers. On such 20th Business Day after the Broker
Panel Selection Date, the Stabilized Fair Market Value to be used hereunder
shall be calculated to equal the arithmetic average of the estimates made by
the two of the three Qualified Brokers that are

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closest to each other in amount (it being agreed that if one of the three
estimates is exactly in the middle of all three estimates, then such middle
estimate shall be the Stabilized Fair Market Value used hereunder). Such
determinations shall be final and binding on the parties. Notwithstanding the
foregoing, if on or before the Broker Trigger Date, the Trust and Investor
agree upon a single Qualified Broker to determine the Stabilized Fair Market
Value, then such single Qualified Broker shall determine the fair market value
and costs as described above and such determination shall be final and binding
on the parties. The parties shall bear the costs of the Qualified Brokers
equally.

               (ii) Immediately upon the determination of the Stabilized Fair Market
Value, the Trust shall calculate the Redemption Price in accordance with
Schedule 1 hereto. Absent manifest error, such calculation shall be final and
binding.

     (c) Determination of Redemption Price if Property is Sold. If, prior to
the date that the Trust commences construction of the Project, the Trust sells
all or substantially all the Property in one or more transactions and the Trust
determines not to construct the Project (a “Qualified Sale”), then,
notwithstanding Section 5(b), the Redemption Price shall be determined as
provided on Schedule 2.

     (d) Cash Flows.

               (i) Promptly after the end of the first calendar quarter in which the
Project receives any rental income (the “First Quarter of Operations”), the
Trust shall calculate, based upon its books and records, the net cash flows of
the Project for such calendar quarter (which may be positive or negative),
taking into account all receipts and expenditures of the Project (and, for the
avoidance of doubt, such net cash flows shall include a provision for amounts
required to be paid to the Trust, including the Management Fee and the Trust
Fee, even if not actually paid in cash), but without taking into account any
Default Contribution Interest or Default Contribution Amount (the “Pre Default
Cash Flows”).

               (ii) If the Pre Default Cash Flows for any calendar quarter are negative,
then such amount shall be added to the Total Project Cost as of the end of such
quarter.

               (iii) If the Pre Default Cash Flows for any calendar quarter are positive
then the Pre Return Cash Flows shall be applied as follows:

                    (1) there shall be subtracted from the Pre Default Cash Flows the balance
of the Default Contribution Interest as of the end of such quarter and (x) if
such number is positive, the balance of the Default Contribution Interest shall
be zero as of the end of such calendar quarter and the calculation in clause
(2) shall be made or (y) if such number is zero or negative, the balance of the
Default Contribution Interest shall be reduced by the Pre Default Cash Flows,
no further calculation shall be made and there shall be no Cash Flows After
Debt Service for such quarter.

                    (2) there shall be subtracted from the number calculated in clause (1) the
balance of the Default Contribution Amount as of the end of such quarter and
(x) if such amount is positive, the balance of the Default Contribution Amount
shall be zero as of the end of such calendar quarter and the calculation in
clause (3) shall be made or (y) if such amount is zero

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or negative, the balance of the Default Contribution Amount shall be
reduced by the number calculated in clause (1) and there shall be no Cash Flows
After Debt Service for such quarter.

                    (3) The number calculated pursuant to clause (2) (the “Cash Flows After
Debt Service”) shall be retained by the Trust and subtracted from the Total
Project Cost as of the end of such calendar quarter.

6. Termination of Land Purchase Agreement. Nothing herein shall limit in any
manner the right of the Trust to terminate the Land Purchase Agreement prior to
the Land Purchase Closing pursuant to the terms thereof. Subject to the
provisions on Sections 7.3 and 7.4 of the Development Agreement, in the event
of a termination of the Land Purchase Agreement prior to the Land Purchase
Closing, the Trust shall thereupon repurchase the Unit from Investor, and
Investor shall sell the Unit to the Trust for a cash purchase price equal to
the Contribution Amount as of such time, without interest.

7. Restrictive Legends. No Unit or securities issuable upon the redemption
thereof may be transferred without registration under the Securities Act and
applicable state securities laws unless counsel to the Trust shall advise the
Trust that such transfer may be effected without such registration. Each
certificate representing any of the foregoing shall bear legends in
substantially the following form:

	 	 	THE SECURITY REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON REDEMPTION HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR UNDER
ANY APPLICABLE STATE LAWS. THE SECURITY REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES ISSUABLE UPON REDEMPTION HEREOF
HAVE BEEN ACQUIRED BY THE REGISTERED OWNER HEREOF FOR INVESTMENT
AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE 1933 ACT. SUCH
SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED
EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A
TRANSACTION OTHERWISE IN COMPLIANCE WITH APPLICABLE FEDERAL AND
STATE SECURITIES LAWS.

8. Successors and Assigns. This Agreement shall bind and inure to the benefit
of the Trust and Investor and the respective successors, permitted assigns,
heirs and personal representatives of the Trust and Investor, provided that
neither party may assign its rights or obligations under this Agreement to any
Person without the prior written consent of the other party, except that
Investor may, without the prior consent of the Trust, assign its rights under
this Agreement to any entity wholly owned by Investor; provided, that (i)
Investor remain primarily liable for any obligations hereunder and (ii) such
entity remain wholly owned by Investor at all times while this Agreement
remains in force.

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9. Notices. Any notice or other communication provided for herein or given
hereunder to a party hereto shall be in writing and shall be given to the
respective parties as follows:

	 	 	If to the Trust:

	 	 	Archstone-Smith Operating Trust

9700 East Panorama Circle – Suite 400

Englewood, Colorado 80112

Attn: Thomas S. Reif

Facsimile: (303) 708-6954

	 	 	With a copy to:

	 	 	Mayer, Brown, Rowe & Maw LLP

190 S. LaSalle Street

Chicago, Illinois 60603

Attention: John W. Noell Jr.

Facsimile: (312) 701-7711

	 	 	If to Investor:

	 	 	Ezra Mersey

c/o Jackson Pacific Ventures

2443 Fillmore Street #373

San Francisco, CA 94115

Facsimile: (415) 564-3778

	 	 	With a copy to:

	 	 	Orrick, Herrington & Sutcliffe LLP

405 Howard Street

San Francisco, CA 94105-2669

Attention: Noel W. Nellis

Facsimile: (415) 773-5759

Any such notices shall be either (a) sent by overnight delivery using a
nationally-recognized overnight courier, in which case notice shall be deemed
delivered one Business Day after deposit with such courier, (b) sent by
facsimile, in which case notice shall be deemed delivered upon transmission of
such notice, or (c) sent by certified or registered mail, postage prepaid,
return receipt requested, in which case notice shall be deemed delivered three
Business Days after deposit in the U.S. mails. A party’s address may be
changed by written notice to the other party; provided, however, that no notice
of a change of address shall be effective until actual receipt of such notice.
Copies of notices are for informational purposes only, and a failure to give or
receive copies of any notice shall not be deemed a failure to give notice.
Notices given by counsel to the Trust shall be deemed given by the Trust and
notices given by counsel to Investor shall be deemed given by Investor.

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10. Public Disclosure. Except as required by Law or the rules of any stock
exchange, no public announcement or other publicity regarding the transactions
referred to herein shall be made by the Trust or Investor or any of their
respective Affiliates, officers, directors, employees, representatives or
agents, without the prior written agreement of Trust and Investor, in any case,
as to form, content, timing and manner of distribution or publication.

11. Waiver. No party may waive any of the terms or conditions of this
Agreement except by a duly signed writing referring to the specific provision
to be waived.

12. Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and
oral, among the parties hereto and their affiliates with respect to the matters
set forth herein.

13. Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable, the validity, legality or enforceability of the other
provisions hereof shall not be affected thereby, and there shall be deemed
substituted for the provision at issue a valid, legal and enforceable provision
as similar as possible to the provision at issue.

14. Captions. The Section references herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.

15. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.

16. Limitation of Liability. Trust is a Maryland real estate investment trust,
and, in accordance with the declaration of trust of Trust, notice is hereby
given that none of the trustees, officers, employees or shareholders of Trust
assume any personal liability for obligations entered into by or on behalf of
Trust.

17. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.

18. Attorneys’ Fees. In the event of any litigation between the parties hereto
concerning the interpretation or enforcement of the provisions of this
Agreement, the substantially prevailing party shall be entitled to recover
reasonable attorneys’ fees and court costs from the other party.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first written above.

	 	 	 	 	 
	 	 	ARCHSTONE-SMITH OPERATING TRUST
	 
	 	 	 	 
	

	 	By:
	 	/s/ Archstone-Smith Operating Trust
	

	 	 	 	

	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	 	 	ARCHSTONE-SMITH TRUST
	 
	 	 	 	 
	

	 	By:
	 	/s/ Archstone-Smith Trust
	

	 	 	 	

	

	 	Name:	 	 
	

	 	Title:	 	 
	 
	 	 	 	 
	 	 	/s/ Ezra Mersey
	 	 	

	 	 	EZRA MERSEY

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Schedule 1

Provisions for Determination of Redemption Price if Project is Developed

     For purposes of this Schedule 1, the following capitalized terms have the
following meanings:

     “Debt Service Amount” shall mean interest accruing on the average daily
balance of the Deemed Debt Amount from the Demolition Time to the Calculation
Date, compounded monthly at a rate per annum equal to the LIBOR Rate plus 200
basis points, assuming a 360 day year consisting of 12 30-day months; provided,
that at the end of each calendar month, the balance of the Debt Service Amount
as of the end of such month shall be applied to increase the Total Project Cost
as of the end of such month and the balance of the Debt Service Amount shall be
reduced as of the end of such month to the extent so applied.

     “Deemed Debt Amount” shall mean at any time from and after the Demolition
Time, the amount, if any, by which the Total Project Cost at such time exceeds
30% of the Development Budget Amount; provided, however, that if the Total
Project Cost exceeds the Development Budget Amount, then the Deemed Debt Amount
shall equal 70% of the Total Project Cost.

     “Default Contribution Amount” shall mean the total balance of payments
relating to the Project made by Trust treated as Default Contributions under
this Agreement or the Development Agreement. Such balance shall take into
account any reduction in accordance with Section 5(d).

     “Default Contribution Interest” shall mean interest accruing on the
average daily balance of the Default Contribution Amount, compounded quarterly,
at a rate per annum equal to the Prime Rate plus 14%, assuming a 360 day year
consisting of 12 30-day months. Such balance shall take into account any
reduction in accordance with Section 5(d).

     “Development Budget” shall mean a budget for expenditures relating to the
Project to be prepared and agreed upon pursuant to the Development Agreement.

     “Development Budget Amount” shall mean the total amount budgeted for
Project expenditures as set forth in the Development Budget.

     “Holder Contribution” shall mean the Holder Senior Equity Amount plus the
Holder Junior Equity Amount.

     “Holder Junior Equity Amount” shall mean 0.25% of the Development Budget
Amount.

     “Holder Return on Junior Equity” shall mean interest accruing from the
date of the Land Purchase Closing to the Calculation Date on the Holder Junior
Equity Amount, compounded quarterly at a rate per annum equal to the Treasury
Rate plus 400 basis points, assuming a 360 day year consisting of 12 30-day
months.

     “Holder Return on Senior Equity” shall mean interest accruing on the
average daily balance of the Holder Senior Equity Amount, compounded quarterly
at a rate per annum equal to

A-1

 

the Treasury Rate plus 400 basis points, assuming a 360 day year
consisting of 12 30-day months. For the avoidance of doubt, the balance of the
Holder Senior Equity Amount shall be increased at any time Holder makes a
payment of a Contribution Amount (other than the Initial Contribution) and the
portion of the Holder Senior Equity Amount described in clause (ii) of the
definition thereof shall be deemed to have been made on the date of the Land
Purchase Closing.

     “Holder Senior Equity Amount” shall mean, as of any time, (i) the
Contribution Amount as of such time; plus (ii) 0.50% of the Development Budget
Amount; less (iii) the Initial Contribution.

     “LIBOR Rate” shall mean the three-month LIBOR interest rate published in
the Wall Street Journal on the Closing Date. The LIBOR Rate will be reset
every three months until the Calculation Date to equal the three-month LIBOR
interest rate published in the Wall Street Journal on such date.

     “Management Fee” shall mean the management fee payable to the Trust
pursuant to the Development Agreement and defined as the “Management Fee” in
the Development Budget.

     “Prime Rate” shall mean the prime rate of interest announced by JPMorgan
Chase Bank from time to time. The Prime Rate will be reset with each change in
the Price Rate announced by JPMorgan Chase Bank until the Calculation Date to
equal the prime rate of interest announced by JPMorgan Chase Bank on such date.

     “Return on Senior Equity” shall mean interest accruing on the average
daily balance of the Total Senior Equity Amount, compounded quarterly at a rate
per annum equal to the Treasury Rate plus 400 basis points, assuming a 360 day
year consisting of 12 30-day months.

     “Total Equity Contribution” means the Total Senior Equity Amount plus the
Holder Junior Equity Amount.

     “Total Project Cost” shall mean the total actual cost of acquiring,
entitling, permitting, developing and operating the Project through the
Calculation Date, as determined pursuant to the books and records of the Trust;
provided, however, that from and after the end of the First Quarter of
Operations, such costs shall be included in the cash flows of the Project as
provided in Section 5(d) and the Total Project Cost shall be increased or
decreased as provided by Section 5(d). The Total Project Cost shall not
include any amounts for Default Contribution Interest, Total Return on Senior
Equity and Holder Return on Junior Equity, but shall include the Debt Service
Amount and, even if not actually paid in cash, the Trust Fee and the Advisor
Fee.

     “Total Senior Equity Amount” shall mean the sum of the Holder Senior
Equity Amount and the Trust Deemed Senior Equity Amount.

     “Treasury Rate” shall mean the yield on a 10-year U.S. Treasury Note
(expressed as a percentage) published in the Wall Street Journal (the “Base
Treasury Rate”). On each anniversary of the date of the Land Purchase
Agreement (a “Reset Date”) until the Calculation Date, the Treasury Rate shall
be reset to equal (i) the Treasury Rate in effect immediately prior to such
Reset Date plus or minus, as the case may be, (ii) 50% of the difference
between the Base

A-2

 

Treasury Rate on such Reset Date and the Base Treasury Rate on the
immediately preceding Reset Date or, if the Treasury Rate has not been
previously reset, the initial Treasury Rate.

     “Trust Deemed Senior Equity Amount” shall mean, as of any time, (i) the
Total Project Cost as of such time; plus (ii) if such time is on or after the
date of the Land Purchase Closing, 0.50% of the Development Budget Amount; less
(iii) the Deemed Debt Amount as of such time; less (iv) the Holder Senior
Equity Amount as of such time.

     “Trust Fee” shall mean the fee payable to the Trust pursuant to the
Development Agreement defined as the “ASOT Fee” in the Development Budget.

     The Redemption Price shall be calculated as follows:

1. Debt Service. There shall be subtracted from the Stabilized Fair Market
Value the balance of the Debt Service Amount on the Calculation Date.

     (a) If the balance calculated above is positive, then the calculation in
Section 2 shall be made.

     (b) If the balance calculated above is zero or negative, then the
Redemption Price shall be zero and no further calculation shall be made.

2. Deemed Debt Amount. There shall be subtracted from the Section 1 balance,
the balance of the Deemed Debt Amount on the Calculation Date.

     (a) If the balance calculated above is positive, then the calculation in
Section 3 shall be made.

     (b) If the balance calculated above is zero or negative, then the
Redemption Price shall be zero and no further calculation shall be made.

3. Unpaid Default Contribution Interest. There shall be subtracted from the
Section 2 balance, the balance of the amount of Default Contribution Interest
on the Calculation Date.

     (a) If the balance calculated above is positive, then the calculation in
Section 4 shall be made.

     (b) If the balance calculated above is zero or negative, then the
Redemption Price shall be zero and no further calculation shall be made.

4. Unpaid Default Contributions. There shall be subtracted from the Section 3
balance the balance of the Default Contribution Amount on the Calculation Date.

     (a) If the balance calculated above is positive, then the calculation in
Section 5 shall be made.

     (b) If the balance calculated above is zero or negative, then the
Redemption Price shall be zero and no further calculation shall be made.

A-3

 

5. Return on Senior Equity. The Return on Senior Equity shall be calculated.
The balance of the Return on Senior Equity on the Calculation Date shall be
subtracted from the Section 4 balance.

     (a) If the balance calculated above is positive, then the calculation in
Section 6 shall be made.

     (b) If the balance calculated above is zero or negative, then the
Redemption Price shall equal the Section 4 balance multiplied by the percentage
equal to the Holder Return on Senior Equity divided by the Return on Senior
Equity, and no further calculation shall be made.

6. Return on Junior Equity. The Return on Junior Equity shall be calculated.
The balance of the Return on Junior Equity on the Calculation Date shall be
subtracted from the Section 5 balance.

     (a) If the balance calculated above is positive, then the calculation in
Section 7 shall be made.

     (b) If the balance calculated above is zero or negative, the Section 5
balance shall be added to the Holder Return on Senior Equity, such sum shall
equal the Redemption Price and no further calculation shall be made.

7. Senior Equity. The balance of the Total Senior Equity Amount on the
Calculation Date shall be subtracted from the Section 6 balance.

     (a) If the number calculated above is positive, then the calculation in
Section 8 shall be made.

     (b) If number calculated above is zero or negative, then the Section 6
balance shall be multiplied by the percentage equal to the Holder Senior Equity
Amount divided by the Total Senior Equity Amount. Such product shall be added
to the Holder Return on Senior Equity and the Holder Return on Junior Equity
and such sum shall equal the Redemption Price. No further calculation shall be
made.

8. Junior Equity. The balance of the Holder Junior Equity Amount on the
Calculation Date shall be subtracted from the Section 7 balance.

     (a) If the balance calculated above is positive, then the calculation in
Section 9 shall be made.

     (b) If the balance calculated above is zero or negative, then the Section
7 balance shall be added to the Holder Return on Senior Equity, the Holder
Return on Junior Equity and the Holder Senior Equity Amount and such sum shall
equal the Redemption Price. No further calculation shall be made.

9. Residual. The Section 8 balance shall be multiplied by a percentage equal
to the Holder Contribution divided by the Total Equity Contribution. Such
product shall be added to the

A-4

 

Holder Return on Senior Equity, the Holder Return on Junior Equity, the Holder
Senior Equity Amount and the Holder Junior Equity Amount and such sum shall
equal the Redemption Price.

For illustrative purposes only, the following table sets forth two examples of
the calculation of the Redemption Price. Important assumptions made in the
following examples are stated below the examples.

RESIDUAL CALCULATION IN
CONTRIBUTION AGMT - TABLE 1

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Illustrative Examples	 	One	 	Two	 	Note
	 
	 	Total Project Cost	 	 	115,000,000	 	 	 	115,000,000	 	 	 	 	 
	 
	 	Stabilized Fair Market Value	 	 	149,500,000	 	 	 	138,000,000	 	 	 	 	 
	TIER
	 	Total Payouts	 	 	 	 	 	 	 	 	 	 	 	 
	1
	 	Debt Service Amount	 	 	—	 	 	 	—	 	 	See Assumption 2
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	70% of Total
	2
	 	Deemed Debt Amount	 	 	80,500,000	 	 	 	80,500,000	 	 	Project Cost
	3
	 	Interest on Default Loan	 	 	—	 	 	 	—	 	 	See Assumption 2
	4
	 	Default Loan	 	 	—	 	 	 	—	 	 	See Assumption 2
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Assumptions 3
	5
	 	Return on Senior Equity	 	 	10,348,142	 	 	 	10,348,142	 	 	and 4
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Assumptions 3
	6
	 	Return on Junior Equity	 	 	84,821	 	 	 	84,821	 	 	and 4
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Capital Account
	7
	 	Total Senior Equity Amount	 	 	35,075,000	 	 	 	35,075,000	 	 	Calculations
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Capital Account
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Calculations and
	8
	 	Holder Junior Equity Amount	 	 	287,500	 	 	 	287,500	 	 	Assumption 7
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	 	 
	 
	 	Remaining Proceeds	 	 	23,204,537	 	 	 	11,704,537	 	 	 	 	 
	9
	 	Residual (Based on Relative Equity Contributions)	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	ASOT has 94.31% of
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	the total equity
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	contributions.  See
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Capital Account
	 
	 	ASOT	 	 	21,883,422	 	 	 	11,038,157	 	 	Calculations.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Ezra has 5.69% of
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	the total equity
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	contributions.  See
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Capital Account
	 
	 	Ezra	 	 	1,321,115	 	 	 	666,380	 	 	Calculations.
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	 	 
	 
	 	Remaining Proceeds	 	 	—	 	 	 	—	 	 	 	 	 
	 
	 	CAPITAL ACCOUNTS	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Trust Deemed Senior Equity	 	 	33,349,190	 	 	 	33,349,190	 	 	See calculation below

A-5

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Illustrative Examples	 	One	 	Two	 	Note
	 
	 	Ezra actual contribution of	 	 	1,150,810	 	 	 	1,150,810	 	 	See Assumption 5
	 
	 	senior equity]	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Assumption 6.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Ezra’s Holder
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Senior Equity
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Amount is the sum
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	of actual and
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	deemed
	 
	 	Ezra deemed contribution of	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	senior equity	 	 	575,000	 	 	 	575,000	 	 	contributions, or $1,725,810
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	 	 
	 
	 	Total Senior Equity	 	 	35,075,000	 	 	 	35,075,000	 	 	 	 	 
	 
	 	Ezra deemed contribution of	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	junior equity	 	 	287,500	 	 	 	287,500	 	 	See Assumption 7.
	 
	 	Total Junior Equity	 	 	287,500	 	 	 	287,500	 	 	 	 	 
	 
	 	ASOT Total Equity	 	 	33,349,190	 	 	 	33,349,190	 	 	Equal to Trust Deemed Senior Equity Amount
	 
	 	Ezra Total Equity	 	 	2,013,310	 	 	 	2,013,310	 	 	Sum of Ezra’s Holder Senior Equity Amount and Holder Junior Equity Amount
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	 	 
	 
	 	Total Equity	 	 	35,362,500	 	 	 	35,362,500	 	 	 	 	 
	 
	 	ASOT % of Equity	 		94.31	%	 	 	94.31	%	 	 	 	 
	 
	 	Ezra’s % of Equity	 		5.69	%	 	 	5.69	%	 	 	 	 
	 
	 	Calculation of Trust Deemed	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Senior Equity Amount	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Total Project Cost	 	 	115,000,000	 	 	 	 	 	 	 	 	 
	 
	 	Add: Ezra deemed senior equity	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	contribution (0.50% of	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Development Budget Amount)	 	 	575,000	 	 	 	 	 	 	 	 	 
	 
	 	Less:  Deemed Debt Amount	 	 	(80,500,000	)	 	 	 	 	 	 	 	 
	 
	 	Less: Holder Senior Equity Amount	 	 	(1,725,810	)	 	 	 	 	 	 	 	 
	 
	 	Total	 	 	33,349,190	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 
	 
	 	Ezra’s Contribution and Redemption Price	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Contributions	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Ezra’s actual contribution of	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	senior equity	 	 	1,150,810	 	 	 	1,150,810	 	 	See Assumption 5
	 
	 	Ezra deemed contribution of	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	senior equity	 	 	575,000	 	 	 	575,000	 	 	See Assumption 6
	 
	 	Ezra deemed contribution of	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	junior equity	 	 	287,500	 	 	 	287,500	 	 	See Assumption 7
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	 	 
	 
	 	Total Ezra Contribution	 	 	2,013,310	 	 	 	2,013,310	 	 	 	 	 

A-6

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TIER	 	Redemption Price	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Assumption 4.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Calculated on the
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Holder Senior
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Equity Amount
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	balance of
	5
	 	Holder Return on Senior Equity	 	 	509,164	 	 	 	509,164	 	 	$	1,725,810	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	See Assumption 4.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Calculated on the
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Holder Junior
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Equity Amount
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	balance of
	6
	 	Holder Return on Junior Equity	 	 	84,821	 	 	 	84,821	 	 	$	287,500.	 
	 
	 	Return of Holder Senior Equity	 	 	 	 	 	 	 	 	 	 	 	 
	7
	 	Amount	 	 	1,725,810	 	 	 	1,725,810	 	 	 	 	 
	 
	 	Return of Holder Junior Equity	 	 	 	 	 	 	 	 	 	 	 	 
	8
	 	Amount	 	 	287,500	 	 	 	287,500	 	 	 	 	 
	9
	 	Residual	 	 	1,321,115	 	 	 	666,380	 	 	 	 	 
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	 	 
	 
	 	Redemption Price	 	 	3,928,409	 	 	 	3,273,674	 	 	 	 	 

The following assumptions are made for purposes of each of the examples.

1. The Development Budget Amount is equal to the Total Project Cost of
$115,000,000.

2. There is no balance of the Debt Service Amount as of the Calculation Date.
There are no Default Contributions.

3. Only for purposes of these examples, for simplicity’s sake, all equity
(actual and deemed) is assumed to have been contributed as of the Demolition
Time. In practice, the returns on the equity balances will be calculated on
the average daily balances of those equity balances, which will depend on when
the equity contributions were actually made or deemed to have been made.

4. For purposes of calculating returns on equity, the Calculation Date is
assumed to be the third anniversary of the Demolition Time. During the period
between the Demolition Time and the Calculation Date, the Treasury Rate is
assumed to equal 5% at all times. In practice, the Treasury Rate will float as
provided in the definition thereof. Only for purposes of these examples, for
simplicity’s sake, the returns on equity will be calculated assuming annual
compounding.

To illustrate the calculation of the Return on Senior Equity in the example:

Total Senior Equity Amount= 35,075,000

	 	 	 	 	 
	Year 1 Return

	 	 	X 1.09	 
	Year 2 Return

	 	 	X 1.09	 
	Year 3 Return

	 	 	X 1.09	 
	Product

	 	 	45,423,142	 
	Less: Senior Equity

	 	 	(35,075,000	)
	Return on Senior Equity:

	 	 	10,348,142	 

A-7

 

A similar calculation would made on the Holder Junior Equity Amount to obtain
the Return on Junior Equity

5. Ezra Mersey makes actual contributions equal to $1,150,810, calculated as
follows:

               (a) Cash contributions of $183,250 pursuant to Sections 2(a)(i) and (ii),
equal to 5% of assumed Entitlements and deposits expenditure amounts of
$3,665,000 (and no contributions pursuant to Section 2(a)(iii), assuming no
overruns in excess of the Entitlements Budget);

               (b) Ezra elects to treat unpaid consulting fees, assumed to be $220,000,
as a contribution pursuant to Section 2(a)(iv); and

               (c) Ezra
elects to treat unpaid Advisor Fees, assumed to be $747,560, as
of the Calculation Date as a contribution pursuant to Section 2(a)(v).

6. Ezra has a deemed senior equity contribution equal to 0.50% of the
Development Budget Amount of $115,000,000, or $575,000. When added to Ezra’s
actual senior equity contributions described above, Ezra’s Holder Senior Equity
Amount is equal to $1,725,810.

7. Ezra has a deemed junior equity contribution equal to 0.25% of the
Development Budget Amount of $115,000,000, or $287,500. Ezra’s Holder Junior
Equity Amount is $287,500.

A-8

 

Schedule 2

Calculation of Redemption Price upon Qualified Sale

     For purposes of this Schedule 2, the following capitalized terms have the
following meanings.

     “Holder Cash Payments” shall mean, as of any time, the amounts contributed
to the Trust in cash by Investor pursuant to Sections 2(a)(i), (ii) and (iii)
hereof as of such time.

     “Holder Proportion of Invested Capital” shall mean (i) the Holder Cash
Payments divided by (ii) Invested Capital.

     “Invested Capital” shall mean all costs to acquire, entitle, permit and
develop the Project (including costs of sale of the Property and any option
payments under the Land Purchase Agreement), other than the Land Purchase
Price, as determined pursuant to the books and records of the Trust.

     “Invested Capital Preferential Return” shall mean interest, calculated at
a rate of 20% per annum, compounded annually on a principal amount equal to the
average daily balance of the Invested Capital, which shall accrue from each
time the Trust expends Invested Capital through the closing of the Qualified
Sale.

     “Net Advisor Fee” shall mean any unpaid Advisor Fee as of the time of
closing of the Qualified Sale.

     “Property Sale Price” shall mean the aggregate gross sale price received
by the Trust in connection with the Qualified Sale.

     1. Calculations. Promptly upon the sale of the Property, the Trust shall
calculate the Invested Capital, the Invested Capital Preferential Return, and
the Net Advisor Fee.

     2. Land Purchase Price. There shall be deducted from the Property Sale
Price the Land Purchase Price.

     (a) If such balance is positive, the calculation in Section 3 shall be
made.

     (b) If such balance is zero or negative, then the Redemption Price shall
be zero and no further calculation shall be made.

     3. Deduction of Preferential Return. There shall be deducted from the
Section 2 balance the Invested Capital Preferential Return.

         (a) If such balance is positive, the calculation in Section 4 shall
be made.

         (b) If such balance calculated above is zero or negative, then the
Redemption Price shall equal the product of (i) the Holder Proportion of
Invested Capital multiplied by (ii) the Section 2 balance, and no further
calculation shall be made.

Therefore, in the case of (b), the Redemption Price = (Holder Proportion of
Invested Capital) x (Section 2 balance)

     4. Deduction of Invested Capital. There shall be deducted from the
Section 3 balance the Invested Capital.

         (a) If such balance is positive, the calculation in Section 5 shall
be made.

B-1

 

         (b) If such balance is zero or negative, then the Redemption Price
shall equal the product of (i) the Holder Proportion of Invested Capital
and (ii) the sum of (A) the Section 3 balance, and (b) the Invested
Capital Preferential Return, and no further calculation shall be made.

Therefore, in the case of (b), the Redemption Price = (Holder Proportion of
Invested Capital) x ( [Section 3 balance] + [Invested Capital Preferential
Return] )

     5. Deduction of Net Advisor Fee. There shall be subtracted from the
Section 4 balance 50% of the Net Advisor Fee.

               (a) If the balance calculated above is positive, then the calculation in
Section 6 shall be made.

               (b) If the balance calculated above is zero or negative, then the
Redemption Price shall equal the sum of (i) the product of (A) the Holder
Proportion of Invested Capital multiplied by (B) the sum of the Invested
Capital and the Invested Capital Preferential Return and (ii) the Section 4
balance, and no further calculation shall be made.

RP = ( [Holder
Proportion of Invested Capital] x [(Invested Capital) + (Invested
Capital Preferential Return)]) + (the Section 4 balance)

     6. Residual. The Redemption Price shall equal the sum of (i) the product
of (A) the Holder Proportion of Invested Capital and (B) the sum of the
Invested Capital and the Invested Capital Preferential Return, (ii) 50% of the
Net Advisor Fee and (iii) 35% of the Section 5 balance.

Therefore, the Redemption
Price = [(Holder Proportion of Invested Capital) x
([Invested Capital] + [Invested Capital
Preferential Return])] + (50% of the
Net Advisor Fee) + (35% of the Section 5 balance) .

     For illustrative purposes only, examples of the calculations of the
Redemption Price in the event of a Qualified Sale at various Property Sales
Prices follow. The following assumptions are made for purposes of the
examples.

17. Land Purchase Price of $16,000,000.

18. Invested Capital balance is $2,500,000 on the date of the Qualified Sale.
For purposes of calculating the Invested Capital Preferential Return, for
simplicity’s sake, the weighted average balance of the Invested Capital during
the relevant period is 65% of the final balance, or $1,625,000. The start date
is assumed to be 30 months before the date of the Qualified Sale.

19. Holder Cash Payments of $125,000. The Holder Proportion of Invested Capital
is equal to 5% ($125,000/$2,500,000).

20. Net Advisor Fee of $897,560.

B-2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Section of	 	 	 	 	 	 	 	 
	EXAMPLES
	 	Schedule 2
	 	1
	 	2
	 	3
	 	Note

	Property Sales Price
	 	 	 	 	 	 	25,757,576	 	 	 	22,727,273	 	 	 	19,696,970	 	 	 	 	 
	Land Purchase Price
	 	 	2	 	 	 	(16,000,000	)	 	 	(16,000,000	)	 	 	(16,000,000	)	 	See Assumption 1
	Subtotal
	 	 	 	 	 	 	9,757,576	 	 	 	6,727,273	 	 	 	3,696,970	 	 	 	 	 
	Less: Invested
Capital
Preferential Return
	 	 	3	 	 	 	(812,500	)	 	 	(812,500	)	 	 	(812,500	)	 	See Assumption 2
	Subtotal
	 	 	 	 	 	 	8,945,076	 	 	 	5,914,773	 	 	 	2,884,470	 	 	 	 	 
	Less: Invested
Capital
	 	 	4	 	 	 	(2,500,000	)	 	 	(2,500,000	)	 	 	(2,500,000	)	 	See Assumption 2
	Subtotal
	 	 	 	 	 	 	6,445,076	 	 	 	3,414,737	 	 	 	384,470	 	 	 	 	 
	Less: 50% of Net
Advisor Fee
	 	 	5	 	 	 	(448,780	)	 	 	(448,780	)	 	 	(384,470	)	 	See Assumption 4
	Subtotal
	 	 	 	 	 	 	5,996,296	 	 	 	2,965,993	 	 	 	—	 	 	 	 	 
	Less: Investor
Share 35%
	 	 	6	 	 	 	(2,098,704	)	 	 	(1,038,097	)	 	NA-	 	 	 	 	 
	Less Trust Share 65%
	 	 	 	 	 	 	(3,897,592	)	 	 	(1,927,895	)	 	 	—	 	 	 	 	 
	Calculation of
Redemption Price
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5% of total
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Invested Capital
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Preferential
	Investor share of
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Return.  See
	Preferential Return
	 	 	3	 	 	 	40,625	 	 	 	40,625	 	 	 	40,625	 	 	Assumption 3.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5% of Invested
	Investor Share of
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Capital.  See
	Invested Capital
	 	 	4	 	 	 	125,000	 	 	 	125,000	 	 	 	125,000	 	 	Assumption 3.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	In Example 3 the
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	payout was limited
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	to the remaining
	50% of Net Advisor
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	amount available to
	Fee
	 	 	5	 	 	 	448,780	 	 	 	448,780	 	 	 	384,470	 	 	be allocated.

B-3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Section of	 	 	 	 	 	 	 	 
	EXAMPLES
	 	Schedule 2
	 	1
	 	2
	 	3
	 	Note

	Residual
	 	 	6	 	 	 	2,098,704	 	 	 	1,038,097	 	 	 	—	 	 	 	 	 
	Redemption Price
	 	 	 	 	 	 	2,713,109	 	 	 	1,652,502	 	 	 	550,095	 	 	 	 	 
	Calculation of Net Advisor Fee
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Advisor Fee Total
	 	 	 	 	 	 	 	 	 	 	1,647,560	 	 	 	 	 	 	 	 	 
	Paid through Sale date
	 	 	 	 	 	 	 	 	 	 	(750,000	)	 	 	 	 	 	 	 	 
	Net Advisor Fee
	 	 	 	 	 	 	 	 	 	 	897,560	 	 	 	 	 	 	 	 	 

B-4EXHIBIT 10.1

                                 AMENDMENT NO. 5
               TO AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

                  AMENDMENT NO. 5 TO AMENDED AND RESTATED MASTER REPURCHASE
AGREEMENT, dated as of December 10, 2004, (the Amendment") by and between
Merrill Lynch Mortgage Capital Inc. (the "Buyer"), and MortgageIT, Inc. ("MIT"
and a "Seller") and MortgageIT Holdings, Inc. ("Holdings" and a "Seller" and
together with MIT the "Sellers"):

                  The Buyer and the Sellers are parties to that certain Amended
and Restated Master Repurchase Agreement, dated as of August 4, 2004, as amended
by Amendment No. 1, dated as of September 21, 2004, Amendment No. 2, dated as of
November 11, 2004, Amendment No. 3, dated as of November 18, 2004 and Amendment
No. 4, dated as of December 8, 2004 (the "Existing Repurchase Agreement"; as
amended by this Amendment, the "Repurchase Agreement"). Capitalized terms used
but not otherwise defined herein shall have the meanings given to them in the
Existing Repurchase Agreement.

                  The Buyer and the Seller have agreed, subject to the terms and
conditions of this Amendment, that the Existing Repurchase Agreement be amended
to reflect certain agreed upon revisions to the terms of the Existing Repurchase
Agreement.

                  Accordingly, the Buyer and the Seller hereby agree, in
consideration of the mutual premises and mutual obligations set forth herein,
that the Existing Repurchase Agreement is hereby amended as follows:

                  Section 1. Definitions. Section 2 of the Existing Repurchase
Agreement is hereby amended by:

                  1.1 deleting the definition of "Maximum Purchase Price" in its
entirety and replacing it with the following language:

                  "Maximum Purchase Price" shall mean $500,000,000.

                  1.2 deleting the definition of "Market Value" in its entirety
and replacing it with the following language:

                  "Market Value" shall mean, as of any date with respect to any
Purchased Mortgage Loan, the price at which such Mortgage Loan could readily be
sold as determined by the Buyer in its sole good-faith discretion. Without
limiting the generality of the foregoing, the Sellers acknowledge that the
Market Value of a Purchased Mortgage Loan may be reduced to zero by Buyer if:

                  (a) such Purchased Mortgage Loan ceases to be an Eligible
         Mortgage Loan;

                  (b) the Purchased Mortgage Loan has been released from the
         possession of the Custodian under the Custodial Agreement (other than
         to a Take-out Investor pursuant to a Bailee Letter) for a period in
         excess of 10 Business Days;

                  (c) the Purchased Mortgage Loan is a Wet-Ink Mortgage Loan for
         which the related Mortgage File has not been received and certified by
         the Custodian by the seventh Business Day following the related
         Purchase Date;

                  (d) such Purchased Mortgage Loan is a Delinquent Mortgage
         Loan;

                  (e) such Purchased Mortgage Loan is rejected by the related
         Takeout Investor;

                  (f) such Purchased Mortgage Loan has been subject to a
         Transaction hereunder for period of greater than 120 days, unless such
         Purchased Mortgage Loan is an Aged Mortgage Loan;

                  (g) a First Payment Default occurs with respect to such
         Purchased Mortgage Loan;

                  (h) the Buyer has determined in its sole good-faith discretion
         that the Purchased Mortgage Loan is not eligible for whole loan sale or
         securitization in a transaction consistent with the prevailing sale and
         securitization industry with respect to substantially similar Mortgage
         Loans;

                  (i) such Purchased Mortgage Loan contains a material breach of
         a representation or warranty made by a Seller in this Repurchase
         Agreement or the Custodial Agreement;

                  (j) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Aged Mortgage Loans exceeds
         5% of the Maximum Purchase Price;

                  (k) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all HELOCs exceeds $100,000,000;

                  (l) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all HELOCs that have a FICO
         score of 680 or less exceeds $35,000,000;

                  (m) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Closed End Second Lien
         Mortgage Loans exceeds 5% of the Maximum Purchase Price;

                  (n) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Super Jumbo Mortgage Loans
         exceeds 7.5% of the Maximum Purchase Price;

                                      -2-

                  (o) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all EC Mortgage Loans exceeds 5%
         of the aggregate Purchase Price of all Purchased Mortgage Loans;

                  (p) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Wet-Ink Mortgage Loans
         exceeds (i) with respect to the first five (5) Business Days of a month
         and the last five (5) Business Days of a month, 25% of the Maximum
         Purchase Price or (ii) with respect to all other times, 15% of the
         Maximum Purchase Price;

                  (q) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Sub-prime Mortgage Loans
         exceeds 20% of the Maximum Purchase Price;

                  (r) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Wet-Ink Mortgage Loans that
         are Sub-prime Mortgage Loans exceeds 4% of the Maximum Purchase Price;
         and

                  (s) when the Purchase Price for such Purchased Mortgage Loan
         is added to the aggregate Purchase Price of other Purchased Mortgage
         Loans, the aggregate Purchase Price of all Co-op Loans exceeds 5% of
         the aggregate Purchase Price of all Purchased Mortgage Loans.

                  Section 2. Temporary Amendment. For purposes of this
Amendment, this Section 2 will be effective only during the period beginning on
the date hereof through and including December 31, 2004 (the "Increased Maximum
Purchase Price Period").

                  (a) Definitions. Section 2 of the Existing Repurchase
         Agreement is hereby temporarily amended, which amendment shall be
         effective solely during the Increased Maximum Purchase Price Period, by
         deleting the definition of "Maximum Purchase Price" in its entirety and
         replacing it with the following language:

                  "Maximum Purchase Price" shall mean $750,000,000.

                  Section 3. Conditions Precedent. This Amendment shall become
effective on the date hereof (the "Amendment Effective Date") subject to the
satisfaction of the following conditions precedent:

                  3.1 Delivered Documents. On the Amendment Effective Date, the
Buyer shall have received the following documents, each of which shall be
satisfactory to the Buyer in form and substance:

                  (a) this Amendment, executed and delivered by a duly
         authorized officer of each of the Buyer and the Seller; and

                                      -3-

                  (b) such other documents as the Buyer or counsel to the Buyer
         may reasonably request.

                  Section 4. Fees. The Seller agrees to pay as and when billed
by the Buyer all of the reasonable fees, disbursements and expenses of counsel
to the Buyer in connection with the development, preparation and execution of,
this Amendment or any other documents prepared in connection herewith and
receipt of payment thereof shall be a condition precedent to the Buyer entering
into any Transaction pursuant hereto.

                  Section 5. Confidentiality. The parties hereto acknowledge
that this Amendment, the Existing Repurchase Agreement, and all drafts thereof,
documents relating thereto and transactions contemplated thereby are
confidential in nature and the Seller agrees that, unless otherwise directed by
a court of competent jurisdiction, it shall limit the distribution of such
documents and the discussion of such transactions to such of its officers,
employees, attorneys, accountants and agents as is required in order to fulfill
its obligations under such documents and with respect to such transactions.

                  Section 6. Limited Effect. Except as expressly amended and
modified by this Amendment, the Existing Repurchase Agreement shall continue to
be, and shall remain, in full force and effect in accordance with its terms.

                  Section 7. Counterparts. This Amendment may be executed in one
or more counterparts and by different parties hereto on separate counterparts,
each of which, when so executed, shall constitute one and the same agreement.

                  SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.

                  Section 9. Conflicts. The parties hereto agree that in the
event there is any conflict between the terms of this Amendment, and the terms
of the Existing Repurchase Agreement, the provisions of this Amendment shall
control.

                            [SIGNATURE PAGE FOLLOWS]

                                      -4-

                  IN WITNESS WHEREOF, the parties have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.

Buyer:                                MERRILL LYNCH MORTGAGE CAPITAL INC.

                                      By: /s/ JOHN WINCHESTER
                                          -------------------
                                          Name:  John Winchester
                                          Title: Vice President

Seller:                               MORTGAGEIT, INC.

                                      By: /s/ JOHN R. CUTI
                                         -----------------
                                          Name:  John R. Cuti
                                          Title: General Counsel and Secretary

Seller:                               MORTGAGEIT HOLDINGS, INC.

                                      By: /s/ JOHN R. CUTI
                                         -----------------
                                          Name:  John R. Cuti
                                          Title: General Counsel and Secretary

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