Document:

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 

 

10

 

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 

 

11

 

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 

 

12

 

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

 

13

 

(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.

 

14

 

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 

 

15

 

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 

 

16

 

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 

 

17

 

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.

 

18

 

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.

 

19

 

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 

 

20

 

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 

 

21

 

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 

 

22

 

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.

 

23

 

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

  	
   

  
											

 

24Exhibit 10.20

 

FIRST
AMENDMENT TO

EMPLOYMENT AGREEMENT - JOHN J. DUPONT

 

Effective as of 12/10/04

 

This FIRST AMENDMENT TO
EMPLOYEE AGREEMENT - JOHN J. DUPONT (hereinafter, the “Amendment”), is made and
entered into this 22nd day of February, 2006, by and between Utilicraft
Aerospace Industries, Inc. (hereinafter, the “Corporation”), a corporation duly
organized and existing under the laws of the state of Nevada, and John J.
Dupont (hereinafter, “ Dupont ”). The Corporation and Dupont are
collectively referred to herein as the “Parties.”

 

WITNESSETH:

 

WHEREAS, on December 10,
2004, the Corporation and Dupont executed that certain EMPLOYMENT AGREEMENT –
JOHN J. DUPONT (the “Employment Agreement”) for the purpose of setting forth
the terms of the Corporation’s employment of Dupont as President and Chief
Executive Officer of the Corporation; and

 

WHEREAS, the Corporation has
filed a registration statement on Securities and Exchange Commission Form SB-2
to effect registration of certain shares of its common stock for sale by
certain shareholders of the Corporation thereby subjecting the Corporation to
certain rules and regulations applicable to issuers of publicly registered
securities including the Securities Exchange act of 1934 (the “Exchange Act”);
and

 

WHEREAS, Paragraph 5.2 and
the related subsections of the Employment Agreement provide for a loan from the
Corporation to Dupont for up to $500,000 subsequent to the Corporation
achieving “major start-up financing”; and

 

WHEREAS, Section 13(k) of
the Exchange Act prohibits personal loans to directors and executive officers
of issuers of publicly registered securities; and

 

WHEREAS, as of the date of
this Amendment, the Corporation as not achieved major start up financing, and
no amounts have been loaned by the Corporation to Dupont pursuant to Employment
Agreement Paragraph 5.2; and

 

WHEREAS, the Parties desire
to amend the Employment Agreement for the purpose of bringing its terms into
conformity with Exchange Act section 13(k);

 

NOW THEREFORE, for and in
consideration of the premises, the agreements that are set forth herein, and
other good and valuable consideration, the receipt, adequacy, and sufficiency
of which are hereby acknowledged, the Parties hereby agree that the Employment
Agreement is amended as follows:

 

 

1.             Recitals. The foregoing recitals are true, correct, and complete and constitute
the basis for this Amendment and they are incorporated herein for all purposes.

 

2.             Deletion of Employment Agreement Paragraph
5.2. The Parties hereby
agree that the Employment Agreement shall be amended to delete Paragraph 5.2
thereof in its entirety including all subsections of Paragraph 5.2, and that
the Corporation shall have no obligation to make any personal loan to Dupont
pursuant to the terms of the Employment Agreement as hereby amended.

 

This Amendment is executed
and entered into on the 22nd day of February, 2006, to be effective December
10, 2004.

 

 

	
  Utilicraft
  Aerospace Industries, Inc.

  
	
   

  
	
  By:

  	
  

  	
   

  
	
  Name:

  	
  Robert D. Boland

  	
   

  
	
  Title:

  	
  VP General Manager

  	
   

  
	
   

  	
   

  
	
  

  	
   

  
	
  John J.
  Dupont

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