THIS DISPOSITION AND DEVELOPMENT AGREEMENT is dated this ______ day of _______, 1998 by and between the Sunnyvale Redevelopment Agency (the "Agency"), a public body, corporate and politic, and M-D Downtown Sunnyvale, LLC (the "Developer"), a Delaware limited liability company, with reference to the following facts:

A. Pursuant to its authority granted under California law, the Agency has the responsibility to carry out the Redevelopment Plan for the Downtown Sunnyvale Redevelopment Project, which was adopted by Ordinance No. 1796-75 of the City Council of the City of Sunnyvale on November 26, 1975. The redevelopment plan as described and as thereafter from time to time amended is referred to in this Agreement as the "Redevelopment Plan" and is incorporated into this Agreement by reference.

B. The City of Sunnyvale (the "City") and the Agency own certain real property within the City described in the attached Exhibit A (the "Agency Parcel") currently used primarily for public parking. The City has agreed to convey the portions of the Agency Parcel it owns to the Agency. The Agency has entered or will enter into an agreement to purchase from third parties certain real property within the City described in the attached Exhibit B (the "Acquisition Parcel") which parcel is adjacent to the Agency Parcel. The Agency Parcel and Acquisition Parcel are referred to in this Agreement collectively as the "Property." The City owns certain real property within the City described in the attached Exhibit C (the "Parking Parcel") which is adjacent to the Property.

C. The Property and the Parking Parcel are located in the area governed by the Redevelopment Plan. The Agency has determined that development of the Property in the manner contemplated by this Agreement will assist in the implementation of the Redevelopment Plan and the elimination of conditions of blight in the area governed by the Redevelopment Plan by providing for redevelopment of the currently underutilized Property for uses consistent with the Downtown Sunnyvale Specific Plan and replacement of the surface parking on the Property with a below-ground parking structure on the Parking Parcel and additional surface parking. A public plaza will be constructed above the below-ground parking structure on the Parking Parcel.

D. The purposes of this Agreement are to provide a mechanism whereby the Agency will convey the Property to the Developer, the Developer will redevelop the Property in accordance with this Agreement and the Redevelopment Plan and will construct the parking structure on the Parking Parcel.

E. The Agency has determined that is impractical from an architectural, engineering and construction standpoint to separately construct the Parking Improvements to be constructed on the Parking Parcel because of their physical interrelationship with the other Improvements to be constructed by the Developer, and that the construction of the Parking Improvements pursuant to this Agreement would result in a lower public cost and greater benefit than if such Parking Improvements were separately bid and constructed by the Agency.

F. The Agency has concluded that the Developer has the necessary capacity to carry out the commitments herein contained and that this Agreement is in the best interests and will materially contribute to the implementation of the Redevelopment Plan.

Section One: DEFINITIONS AND EXHIBITS

1.01 Definitions.

The following capitalized terms shall, for purposes of this Agreement, have the meanings set forth in this Section 1.01.

1. "Affiliate" means a person or entity which directly or indirectly controls, is controlled by or is under common control with the Developer or an entity at least a majority of whose economic interest is owned by the Developer.
2. "Acquisition Parcel" means the real property described in the attached Exhibit B.
3. "Agency" means the Sunnyvale Redevelopment Agency, a public body, corporate and politic, formed and existing under the Community Redevelopment Law.
4. "Agency Parcel" means, subject to the provisions of Section 2.01 below relating to subdivision of the Property, the real property described in the attached Exhibit A.
5. "Agreement" means this Disposition and Development Agreement between the Agency and Developer, as the same may be amended.
6. "Applicable Land Use Entitlements" means the City and any other governmental permits and approvals necessary to construct the Improvements and the Development Agreement but excluding building, grading or other ministerial construction permits.
7. "Arbitrator" is defined in Section 2.06 below.
8. "Certificate of Completion" means the certificate the Agency will provide pursuant to Section 4.06.
9. "City" means the City of Sunnyvale, a charter city.
10. "Closing" means the close of escrow for the conveyance of any portion of the Property from the Agency to Developer, and the recording of the Grant Deed in the Official Records of Santa Clara County, California.
11. "Conceptual Plan" means the conceptual drawings and plans for the Improvements attached as Exhibit E.
12. "Construction Plans" means the detailed plans, specifications, design drawings and plans, working drawings, elevations and other information on which Developer and its contractors and subcontractors will rely in obtaining required permits for and constructing the Improvements.
13. "Deposit" means the deposit in the amount of One Hundred Thousand Dollars ($100,000) which the Developer is to make pursuant to Section 7.05 below.
14. "Developer" means M-D Downtown Sunnyvale, LLC, a Delaware limited liability company, and its successors and assigns as permitted under this Agreement.
15. "Development Agreement" means a development agreement between the Developer and City pursuant to the provisions of Government Code Sections 65864 et. seq. providing Developer with a vested right to construct the Improvements in accordance with the Applicable Land Use Entitlements and the schedule established by this Agreement.
16. "Downtown Specific Plan" means the Downtown Sunnyvale Specific Plan adopted by the City and dated March 1993 and the provisions of Sunnyvale Municipal Code Chapter 19.30 implementing the Downtown Sunnyvale Specific Plan.
17. "Downtown Specific Plan Requirements" means the requirements for design of the Improvements derived from the Downtown Specific Plan which requirements are set forth in the attached Exhibit F.
18. "Escrow Holder" means First American Title Guaranty Company.
19. "Grant Deed" means the Grant Deed attached to this Agreement as Exhibit H pursuant to which the Agency will convey the Property or portions thereof to Developer.
20. "Hazardous Materials" means any substances:

(i) defined as or included, or which becomes defined or included, in the definition of "hazardous substance," "hazardous waste," "hazardous material," "extremely hazardous waste," "designated waste," "restricted hazardous waste," or "toxic substance," or similar term under any local, state, or federal law or under the regulations adopted or promulgated pursuant thereto, including but not limited to, the Clean Air Act, 42 USC §§ 7401 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act, 42 USC §§ 9601 et seq.; the Resource Conservation and Recovery Act, 42 USC §§ 6901 et seq.; the Toxic Substance Control Act, 15 USC §§ 2601 et seq.; the Hazardous Materials Transportation Act, 49 USC §§ 1801 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 USC §§ 135 et seq.; the Atomic Energy Act of 1954, 42 USC §§ 2014 et seq.; the Nuclear Waste Policy Act of 1982, 42 USC §§ 10101 et seq.; the California Hazardous Waste Control Law, California Health & Safety Code §§ 25100 et seq.; the Porter-Cologne Water Quality Control Act, California Water Code §§ 13000 et seq.; the Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health and Safety Code §§ 25300 et seq. and their associated regulations; or

(ii) which is explosive, corrosive, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is regulated by any appropriate governmental authority as a hazardous material; or

(iii) which is or contains oil, gasoline, diesel fuel or other petroleum hydrocarbons; or

(iv) which is or contains polychlorinated biphenyls, asbestos, urea formaldehyde foam insulation, radioactive materials; or

(v) which is radon gas.

The term "Hazardous Materials" may include without limitation raw materials, building components, wastes, and the products of any manufacturing or other activities on the Property.

21. "Hotel Improvements" means the improvements Developer will develop and construct on the Hotel Site which improvements are described in detail in Section 2.02 below.
22. "Hotel Site" means, subject to the provisions of Section 2.01 below relating to the subdivision approvals for the Property, the portion of the Property shown as the "Hotel Site" on Exhibit D-2, Development Sites Map, and on which Developer will develop Hotel Improvements.
23. "Improvements" means collectively the Hotel Improvements, Phase I Office Improvements, Phase II Office Improvements and the Parking Improvements.
24. "Parking Improvements" means the improvements Developer will develop and construct on the Parking Parcel which improvements are described in detail in Section 2.02 below.
25. "Parking Parcel" means, subject to the provisions of Section 2.01 below relating to the subdivision approvals for the Property, the real property described in the attached Exhibit C on which the Developer will develop the Parking Improvements and the Agency and/or City will develop the Plaza Improvements.
26. "Phase I Office Improvements" means the improvements Developer will develop and construct on the Phase I Office Site which improvements are described in detail in Section 2.02 below.
27. "Phase II Office Improvements" means the improvements Developer will develop and construct on the Phase II Office Site which improvements are described in detail in Section 2.02 below.
28. "Phase I Office Site" means, subject to the provisions of Section 2.01 below relating to subdivision approval for the Property, the portion of the Property shown as the "Phase I Office Site" on Exhibit D-2, Development Sites Map, and on which Developer will develop the Phase I Office Improvements.
29. "Phase II Office Site" means, subject to the provisions of Section 2.01 below relating to subdivision approval for the Property, the portion of the Property shown as the "Phase II Office Site" on Exhibit D-2, Development Sites Map, and on which Developer will develop the Phase II Office Improvements.
30. "Plaza Improvements" means the plaza improvements the Agency and/or City will construct on the Parking Parcel which improvements are described in detail in Section 4.11 below.
31. "Property" means the Agency Parcel and the Acquisition Parcel collectively.
32. "Redevelopment Plan" means the Redevelopment Plan for the Downtown Sunnyvale Redevelopment Project which was adopted by Ordinance No. 1796-75 of the City Council of the City on November 26, 1975, and any subsequent amendment to that plan.
33. "Structured Parking Account" is defined in Section 7.06 below.
34. "Transfer" has the meaning set forth in Section 5.01.

1.02 Exhibits.

The following exhibits are attached to this Agreement and are incorporated in this Agreement:

Exhibit A Agency Parcel

Exhibit B Acquisition Parcel

Exhibit C Parking Parcel

Exhibit D-1 Current Site Map

Exhibit D-2 Development Sites Map

Exhibit E Conceptual Plan

Exhibit F Specific Plan Requirements

Exhibit G Schedule of Performance

Exhibit H Grant Deed

Exhibit I-1 Title Exceptions for Phase I Office Site

Exhibit I-2 Title Exceptions for Hotel Site

Exhibit I-3 Title Exceptions for Phase II Office Site

1.03 Schedule of Performance.

Attached as Exhibit G is a schedule of performance setting forth the times for performance of various tasks pursuant to this Agreement. If there is any conflict between the schedule of performance attached as Exhibit G and the other provisions of this Agreement, the other provisions of this Agreement shall prevail.

2.01 Description of the Property/Subdivision.

The Property consists of the Agency Parcel and the Acquisition Parcel. The Parking Parcel is located adjacent to the Agency Parcel. The general location of those parcels is shown on the attached Exhibit D-1, the Current Site Map.

Pursuant to the provisions of this Agreement, the Agency will convey the Property to Developer and Developer will develop the Property in three phases. The sites for each phase are the Hotel Site of approximately 43,800 square feet, the Phase I Office Site of approximately 49,500 square feet and the Phase II Office Site of approximately 102,100 square feet. The general location of those sites and the Parking Parcel is shown on the attached Exhibit D-2, the Development Sites Map.

As part of its application for the Applicable Land Use Entitlements, Developer shall apply to the City for the subdivision, parcel map or lot line adjustment necessary to create the Hotel Site, the Phase I Office Site, the Phase II Office Site and the Parking Parcel each as a separate legal parcel, provided that Developer may subdivide the Phase II Office Site into two (2) parcels, one for each office building to be built on the Phase II Office Site. The applications for that approval with regard to the size and boundaries of each parcel shall substantially conform to the Development Sites Map. In preparing the applications, the Developer shall consult with the Agency staff. Upon approval of the subdivision, parcel map or lot line adjustment, the references in this Agreement to the Hotel Site, the Phase I Office Site, the Phase II Office Site and the Parking Parcel shall refer to those parcels as shown on the approved subdivision, parcel map or lot line adjustment.

2.02 Description of Improvements.

(a) Construction of Improvements. Pursuant to the provisions of this Agreement, Developer will develop and construct on the Property and the Parking Parcel the Improvements described in this Section 2.02. The conceptual plan for the Improvements (the "Conceptual Plan") is shown on Exhibit E attached hereto.

(b) Hotel Improvements. Developer will construct on the Hotel Site the Hotel Improvements consisting of a four story first class boutique hotel of approximately 120,000 square feet meeting the standards set forth in Section 5.05 below, underground parking with a minimum number of spaces equal to the number of guest rooms in the hotel, landscaping, walkways and other exterior improvements. The hotel building shall have approximately 150 rooms and 10,000 square feet of meeting and restaurant space. The Hotel Improvements will have high quality exterior finishes and articulation suitable for a first class boutique hotel and comparable to that of the Garden Court Hotel in Palo Alto. The interior finishes shall be comparable to the Stanford Park Hotel in Menlo Park and shall include at least $20,000 per hotel room in furniture, fixtures and equipment including restaurant and computer-related equipment.

(c) Phase I Office Improvements. Developer will construct on the Phase I Office Site the Phase I Office Improvements consisting of a Class A office building of up to 125,000 square feet with a height not to exceed 69 feet to the top of the useable space and five stories, underground parking with 3.2 parking spaces for each 1,000 square feet of building area, and landscaping, walkways and other exterior improvements consistent with the Downtown Specific Plan. The Phase I Office Improvements will have high quality exterior finishes and articulation suitable for a Class A office building. The office building on the Phase I Office Site shall have a unique architectural identity.

(d) Phase II Office Improvements. Developer will construct on the Phase II Office Site the Phase II Office Improvements consisting of two Class A office buildings, an underground parking structure with 3.2 parking spaces for each 1,000 square feet of building area, and landscaping, walkways and other exterior improvements consistent with the Downtown Specific Plan. The office building closest to Agena Way shall have a height not to exceed 83 feet to the top of the useable space and six stories and the other shall have a height not to exceed 69 feet to the top of the useable space and five stories. The total square footage in the two buildings shall be up to 325,000 square feet, provided, however, that the total building square footage may be increased by the amount that the total building square footage of the Phase I Office Improvements is less than 125,000 square feet but such increase shall not change the allowable height or number of stories of the buildings in the Phase II Office Improvements. At least 10,000 square feet of ground floor space in the Phase II Office Improvements shall be designed for retail uses. The majority of the retail space shall face the public plaza. The retail space shall be initially offered for rent for retail uses. If, despite good faith efforts, Developer is unable to rent that space for retail uses within six (6) months following issuance of a Certificate of Completion for the Phase II Office Improvements, then Developer may convert that space to office or other uses permitted by the City. The Phase II Office Improvements will have high quality exterior finishes and articulation suitable for Class A office building, with each of the two buildings having a unique and complementary architectural identity. The Phase II Office Improvements shall include a display case of approximately 100 square feet located on an exterior wall facing the public place or other outdoor public location. The Developer shall consult with the Agency as to the location of the display area. The Developer shall make that display space available to the City or its designee at no charge for the display of exhibits of historic, scientific or civic value.

(e) Parking Parcel Improvements. Developer shall develop on the Parking Parcel the parking structure described in Section 2.06 below.

(f) General Requirements. The Hotel Improvements, Phase I Office Improvements and Phase II Office Improvements shall be consistent with the Conceptual Plan attached as Exhibit E and the attached Downtown Specific Plan Requirements as Exhibit F. The ground floors of each building shall have clear exterior entries and the ground floor and outdoor plazas for each building shall be designed to create an attractive streetscape and a pedestrian oriented circulation and atmosphere. The Hotel Improvements, Phase I Office Improvements and Phase II Office Improvements shall include any off-site improvements Developer is required to construct as a condition of the Applicable Land Use Entitlements. Where height of buildings is specified in this Section 2.02 as "to the top of the useable space," that specification shall not prevent additional rooftop features as permitted by the Sunnyvale Municipal Code which specifies as follows: "Towers, spires, chimneys, machinery penthouses not exceeding 25% of the roof area on which the penthouse is located, scenery lofts, cupolas, water tanks, telecommunications facilities, high bay test facilities and similar architectural and utility structures, including equipment screening, and necessary mechanical appurtenances, may exceed the maximum building height in any zoning district by a maximum of 25%" except that the maximum allowable additional height shall be 20 feet.

2.03 Application for Applicable Land Use Entitlements.

Within one hundred twenty (120) days following the date of this Agreement, the Developer shall apply to the City and any other relevant government agency for the Applicable Land Use Entitlements for the Improvements and for the Development Agreement. All applications shall conform with the description of the Improvements set forth in Section 2.02, unless a variation is approved by the Agency. The applications shall include a site plan, elevations, finish boards, traffic study and such other information as the City or relevant government agency may require. Developer may request and the Agency shall not unreasonably withhold its consent to extensions of the time for submittal of the applications for Applicable Land Use Entitlements if such extensions are reasonably necessary for assembly and submission of the information to make such applications complete. The Agency shall assist Developer in the City permit and approval process by providing information concerning the contents of the applications and, if necessary, joining in the applications. In addition, the Agency shall arrange for pre-application review of Developer’s plans by the City staff. The Developer understands and acknowledges that this Agreement does not limit the discretion of the City in its determinations concerning Developer's applications for the Applicable Land Use Entitlements. The Developer may apply for the Applicable Land Use Entitlements for the Hotel Site earlier than making application for the rest of the Property. If such early application is made, the Agency shall cooperate with Developer in obtaining early review of the plans for the Hotel Site. However, the Developer recognizes that the final Applicable Land Use Entitlements might not be approved separately from the approvals for the rest of the Property.

2.04 Agency Review of Plans.

At the same time as or before Developer submits its application for the Applicable Land Use Entitlements to the City, it shall also submit the site and design plans that are part of that application to the Agency for review and approval. The Agency shall approve or disapprove the plans within thirty (30) days following submission, and, if not approved or disapproved within that thirty (30) day period, the plans shall be deemed approved. The Agency shall approve the plans if they are consistent with the description of the Improvements set forth in Section 2.02. If the Agency disapproves the submission, the Agency shall specify in writing the reasons for disapproval. Within thirty (30) days following notice of disapproval, the Developer shall thereafter revise the site and design plans so as to remove the reasons for disapproval and submit those revised site and design plans to the Agency for approval. The Agency shall approve or disapprove the revised plans within thirty (30) days following submission, and if not approved within that thirty (30) day period, the revised plans shall be deemed approved. The process for revision and review shall be repeated until the Agency has approved the site and design plans. Once the Agency has approved the site and design plans, the Developer shall revise its applications for the Applicable Land Use Entitlements to reflect the site and design plans approved by the Agency. The Agency review pursuant to this Section 2.04 shall be carried out by the Executive Director of the Agency or his or her designee.

2.05 Construction Plans.

The Developer shall prepare Construction Plans for the construction of the Improvements. The Construction Plans shall be completed in phases as follows:

(i) The Developer shall complete the Construction Plans for the Phase I Office Improvements within one hundred eighty (180) days following approval of the Applicable Land Use Entitlements.

(ii) The Developer shall complete the Construction Plans for the Hotel Improvements within two hundred seventy (270) days following final approval of the Applicable Land Use Entitlements.

(iii) The Developer shall complete the Construction Plans for the Phase II Office Improvements and the Parking Improvements within two hundred seventy (270) days following the final approval of the Applicable Land Use Entitlements.

For the purposes of this Section 2.05, the Applicable Land Use Entitlements shall be considered approved after all applicable City administrative appeal and referendum periods have expired and thirty (30) days have elapsed following the filing of a Notice of Determination for the Applicable Land Use Entitlements without a suit being filed to challenge the Applicable Land Use Entitlements. If such suit is filed, the Applicable Land Use Entitlements shall be considered approved upon entry of the trial court judgment upholding the Applicable Land Use Entitlements or dismissal of the suit. If a referendum election is held, the Applicable Land Use Entitlements shall be considered approved upon approval of the City actions at the referendum election.

2.06 Design and Construction Plans for the Parking Improvements.

During the preparation of the Construction Plans for the Parking Improvements, the Developer and its architects and engineers and other relevant consultants shall consult with the Agency and its consultants concerning the design of the Parking Improvements. The Parking Improvements shall be designed in accordance with criteria provided by the Agency to assure that the Parking Improvements (i) will contain at least 320 parking spaces or a greater number that can be obtained with efficient design without going more than two levels below grade and without materially increasing the costs to be borne by Developer; (ii) will be designed so as to allow efficient and cost-effective operation and maintenance upon completion; (iii) will have a watertight roof so as to permit construction of the Plaza Improvements above the Parking Improvements; and (iv) will be sufficient structurally to permit construction of the Plaza Improvements above the Parking Improvements.

Upon completion, the Developer shall submit the Construction Plans for the Parking Improvements to the Agency for review. The Agency shall either approve or disapprove the Construction Plans for the Parking Improvements. If the Agency disapproves the Construction Plans for the Parking Improvements, it shall specify in detail and in writing the reasons for disapproval. The Developer shall either revise the Construction Plans for the Parking Improvements so as to remove the basis for disapproval and submit the revised Construction Plans for the Parking Improvements to the Agency for approval or shall request consultation with the Agency. If the Developer requests consultation, the Agency and Developer shall make good faith efforts to agree on changes to the Construction Plans for the Parking Improvements satisfactory to both Developer and Agency. If Developer and Agency fail to reach agreement within thirty (30) days following Developer's request for consultation, the Agency and Developer shall submit the disputed issues concerning the Construction Plans for the Parking Improvements to an arbitrator mutually agreeable to the Agency and Developer (or if the Agency and Developer cannot agree on an arbitrator within sixty (60) days following the Developer’s consultation request, an arbitrator selected through the arbitrator selection process of the American Arbitration Association) (the "Arbitrator") for resolution in accordance with the criteria set forth in this Section 2.06. The decision of the Arbitrator shall be final and binding on the Agency and Developer.

2.07 Building Permits.

The Developer shall apply to the City, diligently pursue and obtain building and construction permits for construction of the Improvements. Developer shall apply for those permits on the following schedule:

(i) For the Phase I Office Improvements, by the date the Construction Plans for the Phase I Office Improvements are required to be completed pursuant to Section 2.05 above.

(ii) For the Hotel Improvements, by the date the Construction Plans for the Hotel Improvements are required to be completed pursuant to Section 2.05 above.

(iii) For the Phase II Office Improvements, by the date the Construction Plans for the Phase II Office Improvements are required to be completed pursuant to Section 2.05.

(iv) For the Parking Improvements, within ten (10) days following Agency approval of the Construction Plans for the Parking Improvements, provided, however, if disputes arise that are subject to arbitration pursuant to Section 2.06 above, such time period shall be extended to a date within thirty (30) days following the decision of the Arbitrator.

The applications for building and construction permits shall be consistent with and incorporate the approved Construction Plans.

2.08 Evidence of Financing.

At the time the Developer applies for building and construction permits for Improvements on a particular site, it shall also submit evidence of financing to the Agency which evidence shall show to the reasonable satisfaction of the Agency that the Developer has sufficient equity or loan financing committed to pay the costs indicated and, in the case of the Hotel Site, that there is a hotel operator committed and capable of operating the hotel in a manner similar to the hotel identified in Section 2.02(b) above, as follows:

(i) The evidence for the Phase I Office Site shall indicate that Developer has sufficient funds to pay the purchase price for the Phase I Office Site and to construct the Phase I Office Improvements.

(ii) The evidence for the Hotel Site shall indicate that Developer has sufficient funds to pay the purchase price for the Hotel Site, to construct the Hotel Improvements and furnish and equip the hotel building constructed as part of the Hotel Improvements. The evidence for the Hotel Site shall include an executed operating agreement with a hotel operator to operate the hotel in accordance with the standards for hotel operation set forth in Section 5.05 below. If the Agency approves a Transfer of the Hotel Site to an owner who will also be the hotel operator, no additional operating agreement with a hotel operator shall be required pursuant to this Section 2.08.

(iii) The evidence for the Phase II Office Site shall indicate that Developer has sufficient funds to construct the Phase II Office Improvements and the Parking Improvements.

At the Closing for a particular site the Agency may require Developer to confirm that the previously approved financing remains available by submitting available loan or equity participation documentation.

2.09 Evidence of Construction Contract.

At the time the Developer obtains building and construction permits for the Improvements on a particular site it shall also submit reasonably satisfactory evidence to the Agency that it has entered into contracts with reputable contractors for construction of the relevant Improvements at cost consistent with the evidence of financing availability as approved by the Agency pursuant to Section 2.08 above as follows:

(i) For the Phase I Office Site, it has entered into a construction contract to construct the Phase I Office Improvements.

(ii) For the Hotel Site, it has entered into a construction contract to construct the Hotel Improvements.

(iii) For the Phase II Office Site, it has entered into a construction contract to construct the Phase II Office Improvements and the Parking Improvements.

2.10 Inspection of Property.

Prior to the Closing, the Agency shall provide Developer access to the Agency Parcel and Parking Parcel, and shall use its best efforts to arrange for access to the Acquisition Parcel for the purposes of determining the condition of those parcels or preparing plans or other information for construction of the Improvements, including but not limited to environmental testing. Developer's obligations hereunder shall be conditioned upon being provided such access to the Acquisition Parcel.

Section Three: PROPERTY TRANSACTIONS

3.01 Sale of Property.

Subject to the terms and conditions of this Agreement, the Agency shall sell the Property to Developer and Developer shall purchase the Property from the Agency.

3.02 Opening Escrow.

To accomplish the conveyance of the Property, the parties shall promptly after the execution of this Agreement establish an escrow with the Escrow Holder. On or before the Closing for each portion of the Property, the parties shall execute and deliver to Escrow Holder written instructions consistent with this Agreement to consummate the conveyance of the portion of the Property to be conveyed at the Closing.

3.03 Purchase Price.

The purchase price or consideration for each portion of the Property shall be as follows:

(i) The purchase price for the Phase I Office Site shall be One Million One Hundred Thirty-eight Thousand Dollars ($1,138,000) plus (x) One Million Seventy-Seven Thousand Dollars ($1,077,000) or (y) if the Agency's cost of acquisition of the Acquisition Parcel is less than $1,077,000, the Agency's cost of acquisition of the Acquisition Parcel plus fifty percent (50%) of the difference between the Agency's cost of acquisition of the Acquisition Parcel and $1,077,000. The Agency's cost of acquisition for the Acquisition Parcel shall include the purchase price or value of the consideration the Agency provides to the owner of the Acquisition Parcel as well as closing, escrow and recording costs paid by the Agency. At the Closing $138,000 of the purchase price shall be paid into the Structured Parking Account and thereafter disbursed in accordance with the provisions of Section 7.06 below.

(ii) The purchase price for the Hotel Site shall be One Million Three Hundred Thousand Dollars ($1,300,000) which amount shall be paid into the Structured Parking Account at the Closing and thereafter disbursed in accordance with the provisions of Section 7.06 below.

(iii) The consideration for the Phase II Office Site shall be Developer's obligation under this Agreement to construct the Parking Improvements and convey them to the Agency upon their completion. The Agency's estimated value of these improvements is $8 million.

3.04 Closing Date.

The Closing with respect to the portions of the Property shall occur as follows:

(i) The Closing for the Phase I Office Site shall occur within thirty (30) days following the City's issuance of building and construction permits for the Phase I Office Improvements.

(ii) The Closing for the Hotel Site shall occur on or before the later of (x) fifteen (15) months following the date of this Agreement or (y) thirty (30) days following the City's issuance of building and construction permits for the Hotel Improvements.

(iii) The Closing for the Phase II Office Site shall occur on or before the later of (x) eighteen (18) months following the date of this Agreement or (y) thirty (30) days following the City's issuance of building permits for the Phase II Office Site Improvements and the Parking Improvements. Developer may obtain an extension of time for the Closing for the Phase II Office Site in one month increments up to a total of six (6) months by paying the Agency the sum of Fifty Thousand Dollars ($50,000) for each month of the extension.

At each Closing, the Agency shall convey to Developer the relevant portion of the Property pursuant to Grant Deed which shall be in substantially the form set forth in the attached Exhibit H which both parties shall execute. At the Closing set for the Phase II Office Parcel, the Agency shall also provide to Developer a right of entry for the Parking Parcel allowing Developer to enter and occupy that parcel for purposes of constructing the Parking Improvements.

3.05 Possession.

For each portion of the Property, the Agency shall deliver at the Closing possession of the portion of the Property conveyed at the Closing.

3.06 Condition of Title.

Upon the Closing for a portion of the Property, said portion shall be free and clear of all liens, encumbrances, clouds and conditions, rights of occupancy or possession, except:

(i) conditions, covenants, restrictions or easements of record approved by Developer in writing;

(ii) the exceptions noted in the attached Exhibit I; and.

(iii) easements for existing or relocated public utilities that the parties reasonably determine may remain on the Property following the Closing.

3.07 Condition of Property.

Except as provided otherwise in this Agreement, Developer acknowledges and agrees that it will purchase the Property and occupy the Parking Parcel in an "as is" condition and that Developer shall be solely responsible for and shall bear all the costs of demolition, construction, reconstruction, rehabilitation, site preparation, correction of any soils, subsurface or structural conditions on the Property and Parking Parcel (including, but not limited to removal, remediation, monitoring or mitigation of any Hazardous Materials) and for otherwise putting the Property and Parking Parcel in a condition suitable for use and development in accordance with this Agreement. Within thirty (30) days following the date of this Agreement, the Agency shall provide to Developer all the reports in its possession regarding the condition of the Property and Parking Parcel including public utility plans. The Agency represents and warrants to Developer that the reports provided pursuant to this Section 3.07 constitute all the reports regarding the condition of the Property and Parking Parcel in the possession of the Agency. With regard to the Parking Parcel, the Agency shall be responsible for paying for the reasonable costs of remediating any Hazardous Materials conditions encountered in the course of the construction of the Parking Improvements, provided such conditions do not arise from the actions of Developer, its contractors, subcontractors, agents or employees.

3.08 Costs of Escrow and Closing.

Ad valorem taxes, if any, shall be prorated as of the date of the Closing. The lien of any non-delinquent bond or assessment shall be assumed by Developer and assessments payable thereon shall be prorated as of the date of the conveyance. Developer shall bear the cost of title insurance for the conveyance of the Property and shall pay any transfer tax on the conveyance of the Property to Developer. The Agency shall bear the cost of title company document preparation and recordation fees. All other costs of escrow (including the fee of escrow holder), if any, shall be evenly borne by the parties.

3.09 Agency Conditions Precedent.

(a) Nature of Conditions. The obligations of the Agency under this Agreement to convey a portion of the Property to Developer at a Closing are subject to satisfaction of all relevant conditions set forth in this Section 3.09. The Agency may waive any or all of such conditions in whole or in part but any such waiver shall be effective only if made in writing. After a Closing, any such condition that has not been satisfied with respect to that Closing shall be treated as having been waived in writing, unless the parties agree otherwise at the time of the Closing.

(b) Conditions Applicable to All Closings. The conditions set forth in this subsection (b) shall be applicable to each Closing under this Agreement.

(i) At each Closing, Developer shall not be in default in the performance of any covenant or agreement to be performed by Developer under this Agreement.

(ii) At each Closing, all representations and warranties made by Developer in this Agreement shall be true and correct as if made on and as of such Closing.

(iii) At each Closing, no judicial or administrative suit, action, investigation, inquiry or other proceeding by any person shall have been instituted against the Agency which challenges the validity or legality of any of the transactions contemplated by this Agreement.

(c) Conditions Applicable to Closing for Phase I Office Site. The conditions set forth in this subsection (c) shall be applicable only to the Closing for the Phase I Office Site.

(i) Developer has obtained the Applicable Land Use Entitlements.

(ii) Developer has obtained the building and construction permits necessary to construct the Phase I Office Improvements.

(iii) The Agency has approved the Developer's evidence of financing and construction contracts for the Phase I Office Improvements pursuant to Sections 2.08 and 2.09 above.

(d) Conditions Applicable to Closing for Hotel Site. The conditions set forth in this subsection (d) shall be applicable only to the Closing for the Hotel Site.

(i) Developer has obtained the building and construction permits necessary to construct the Hotel Improvements.

(ii) The Agency has approved the Developer's evidence of financing, hotel operator and construction contracts for the Hotel Improvements pursuant to Sections 2.08 and 2.09 above.

(e) Conditions Applicable to Closing For Phase II Office Site. The conditions set forth in this subsection (e) shall be applicable only to the Closing for the Phase II Office Site.

(i) The Closings for the Phase I Office Site and Hotel Site have occurred, provided, however, that the Agency shall not unreasonably withhold its consent to waiver of this condition if Developer has a commitment from a single user or tenant to occupy all or a substantial portion of the buildings in both the Phase I Office Site and Phase II Office Site upon completion

(ii) Developer has obtained the building and construction permits necessary to construct the Phase II Office Improvements and Parking Improvements.

(iii) The Agency has approved the Developer's evidence of financing and construction contracts for the Phase II Office Improvements and Parking Improvements pursuant to Sections 2.08 and 2.09 above.

3.10 Developer Conditions Precedent.

The obligations of Developer under this Agreement to accept conveyance of a portion of the Property from the Agency at a Closing are subject to satisfaction of all of the relevant conditions set forth in this Section 3.10. Developer may waive any or all of such conditions in whole or in part but any such waiver shall be effective only if made in writing. After a Closing, any such condition that has not been satisfied with respect to that Closing shall be treated as having been waived in writing, unless the parties agree otherwise at the time of the Closing.

(i) At each Closing, the Agency shall not be in default in the performance of any covenant or agreement to be performed by the Agency under this Agreement.

(ii) At each Closing, all representations and warranties made by the Agency in this Agreement shall be true and correct as if made on and as of such Closing.

(iii) At each Closing, no judicial or administrative suit, action, investigation, inquiry or other proceeding by any person shall have been instituted against Developer which challenges the validity or legality of any of the transactions contemplated by this Agreement.

(iv) At each Closing, the Escrow Holder shall be unconditionally and irrevocably committed to issue an American Land Title Association Owner's Policy Form B-1970 (Amended 10/17/70) of title insurance, with liability of not less than the purchase price, containing such ALTA form endorsements as Developer may reasonably require, insuring that fee simple absolute title to the portion of the Property being conveyed is vested in Developer subject only to the exceptions permitted pursuant to Section 3.06 above. The Developer shall be responsible for obtaining the survey necessary to obtain an ALTA policy.

Section Four: CONSTRUCTION OF IMPROVEMENTS

4.01 Commencement of Construction.

Developer, for itself, its successors and assigns, hereby covenants and agrees to commence construction of the Improvements in each phase within forty-five (45) days following the date of the Closing for the portion of the Property to be developed in a particular phase. The Parking Improvements shall be constructed at the same time as the Phase II Office Improvements are constructed.

4.02 Completion of the Improvements.

The Developer, for itself, its successors and assigns, hereby covenants and agrees to complete the construction of the Improvements in each phase within twenty-four (24) months following the Closing for the portion of the Property to be developed in a particular phase.

4.03 Construction in Accordance with Plans, Minimizing Disruption.

Developer shall construct the Improvements substantially in accordance with the approved Construction Plans. The construction of the Improvements shall be carried out implementing customary construction practices for similar projects to minimize the disruption to surrounding businesses. Prior to commencement of construction of the Improvements in a phase, the Agency and Developer shall jointly devise and agree on a plan that will guide the Developer and its contractors and subcontractors in minimizing such disruption. Such plan shall include providing signs directing customers to available parking.

4.04 Change In Plans.

If Developer desires to make a material change in the approved Construction Plans, Developer shall submit the proposed change to the Agency for review. A material change shall be one requiring the exercise of discretion in connection with the Applicable Land Use Entitlements. The Agency shall approve or disapprove of the change within fifteen (15) days following submission of the proposed change. The Agency shall not unreasonably withhold approval of a requested change if it is consistent with this Agreement. For the purposes of this Section 4.04, a change shall be deemed material if it has a material effect on the size of the Improvements, the use of the Improvements or the exterior design of the Improvements. Any change in the Constructions Plans shall also be submitted to and approved by the City as required by applicable City codes.

4.05 Fair Employment Opportunity.

The Developer and its contractor(s) and their successors, assigns and subcontractors shall not discriminate against any employee or applicant for employment in connection with the construction of the Improvements because of race, color, religion, ethnic group identification, sex, marital status, ancestry or national origin. Each of the following activities shall be conducted in a non-discriminatory manner: hiring; upgrading; demotion and transfers; recruitment and recruitment advertising; layoff and termination; rate of pay and other forms of compensation; and selection for training including apprenticeship. Moreover, the Developer shall require the contractor(s) and the subcontractors to give preference, to the extent practicable, for employment to those individuals residing within the geographical area governed by the Redevelopment Plan as provided by relevant State law.

4.06 Certificate of Completion.

Promptly after completion of the construction of the Improvements in a phase in accordance with those provisions of this Agreement relating solely to the obligations of Developer to carry out the construction of the Improvements in that phase, the Agency will provide an instrument so certifying (the "Certificate of Completion"). For the third phase that includes the Phase II Office Improvements and the Parking Improvements, a Certificate of Completion will not be issued until the Agency has certified completion of the Parking Improvements pursuant to Section 4.10 below. The Certificate of Completion shall be conclusive determination that the covenants in this Agreement with respect to the obligations of Developer, its successors and assigns, to carry out the construction of the Improvements in that phase have been met. The Certificate of Completion for a phase shall be in such form as will enable it to be recorded among the official records of Santa Clara County. Such certification and determination shall not constitute evidence of compliance with or satisfaction of any obligation of Developer to any holder of a deed of trust and shall not be deemed a notice of completion under the California Civil Code.

4.07 Lien Free Construction.

During construction of the Parking Improvements, Developer shall take such steps as are necessary to keep the Parking Parcel free of liens or other encumbrances created in connection with Developer's possession of the Parking Parcel and construction of the Parking Improvements. If a lien or other encumbrance nevertheless attaches to the Parking Parcel, the Agency may require Developer to take such steps as the Agency determines are reasonably necessary to protect against such lien or encumbrance including, without limitation, requiring Developer to provide the Agency with a bond, letter of credit or other form of security in an amount equal to one hundred fifty percent (150%) of the amount of the lien or encumbrance.

4.08 Construction Bonds.

Developer shall or shall cause its contractors to obtain performance and payment bonds in conjunction with construction of the Parking Improvements. The required bonds shall be in the full amount of the cost of construction of the Parking Improvements and shall name the Agency as co-obligee.

4.09 Ownership and Transfer of Parking Improvements.

During construction of the Parking Improvements, said improvements shall be owned by Developer or an Affiliate, and Developer or the Affiliate shall be solely responsible for any taxes or charges arising from the ownership, existence or construction of the Parking Improvements or from possession or occupancy of the Parking Parcel during construction of the Parking Improvements. Upon completion of the Parking Improvements and Agency certification of completion in accordance with Section 4.10 below, the Developer or Affiliate shall transfer ownership of the Parking Improvements to the Agency by deed, bill of sale or other conveyance upon which the parties reasonably agree. The sole responsibility of the Developer and its Affiliate concerning the adequacy of construction of the Parking Improvements shall be to assign to the Agency all of Developer and its Affiliate's rights in and to any warranties obtained from or other rights in respect of the contractors, subcontractors and design professionals who constructed and designed the Parking Improvements. All of the contracts that Developer or its Affiliate enter into for design or construction of the Parking Structure shall contain customary warranties in a form approved by the Agency which approval shall not be unreasonably withheld.

4.10 Inspections and Certification of Completion of Parking Improvements.

During the course of construction of the Parking Improvements, the Developer shall permit Agency representatives to have access to the Parking Parcel for the purpose of inspecting the construction of the Parking Improvements. If, as a result of those inspections, the Agency determines that the Parking Improvements are not being constructed in accordance with the approved Construction Plans, the Agency shall notify Developer who shall correct, at Developer's sole cost, the work to make it conform to the Construction Plans. When the Parking Improvements are completed, the Agency shall make a final inspection and notify Developer of any items that have not been completed or have not been constructed in accordance with the approved Construction Plans. Developer shall thereafter complete and correct the work at Developer's sole cost. If there is any dispute between the Agency and Developer regarding completion of the Parking Improvements or whether the Parking Improvements have been constructed in accordance with the approved Construction Plans, the Agency and Developer shall make good faith efforts to resolve the dispute. If the dispute is not resolved within thirty (30) days, the dispute shall be submitted to the Arbitrator for resolution. The decision of the Arbitrator shall be final and binding on the Agency and Developer.

4.11 Construction of Plaza Improvements.

Upon completion and conveyance of the Parking Improvements to the Agency, the Agency shall use its reasonable efforts, subject to applicable governmental review, approval and permitting processes, to construct or to have the City construct at a cost of at least $1,000,000 the Plaza Improvements above the Parking Improvements. In the event the Plaza Improvements are not completed within three (3) years following completion of the Parking Improvements, the Agency shall pay to the Developer or its assigns a sum equal to One Million Dollars ($1,000,000) less the amount actually spent for design and construction of the Plaza Improvements prior to such date. The foregoing payment shall be the Developer's sole remedy for the failure of the Plaza Improvements to be commenced or constructed in a timely manner.

4.12 Contribution to Parking District.

Developer understands and agrees that the Property will be included in a downtown parking district pursuant to which an annual fee will be imposed on the Developer or its successors and assigns as owner of the Property. Developer shall consent to and cooperate in the formation of such district and/or inclusion of the Property in the District provided that (x) the maximum annual fee that may be imposed on the Developer does not exceed $75 (adjusted annually beginning July 1, 1999 by the increase in the Consumer Price Index for the U.S. and Selected Areas for Urban Wage Earners and Clerical Workers, all items (1982 - 1984 = 100) for the San Francisco/Oakland Consolidated Metropolitan Statistical Area, as published by the Department of Labor, Bureau of Labor Statistics) for each parking space deficit on the Property, as that deficit is determined by the City in its approval of the Applicable Land Use Entitlements (based upon a ratio of .3 parking spaces per 1000 square feet of gross building area); or (y) the Agency agrees to pay any fee in excess of the maximum annual fee specified in clause (x) of this sentence.

Section Five: CHANGES IN DEVELOPER

5.01 Prohibition on Transfers.

For the purposes of this Agreement, a "Transfer" means any voluntary or involuntary sale, transfer, conveyance, assignment or other disposition of fee title to the whole or any part of the Property or any assignment of the Development Agreement and this Agreement. Prior to issuance of a Certificate of Completion for a phase, the Developer shall not engage in a Transfer of the portion of the Property for the phase without the prior written approval of the Agency, which approval may be granted or withheld in the Agency's sole discretion; provided, however, that the Transfers described in to Section 5.02 shall be permitted for purposes of this Agreement.

5.02 Permitted Transfers Without Agency Approval.

Notwithstanding the provisions of Section 5.01, the following Transfers are permitted without the approval of the Agency:

(i) A Transfer to an Affiliate of M-D Downtown Sunnyvale LLC of the Phase I Office Site, Hotel Site and/or Phase II Office Site and only the rights and obligations under this Agreement with regard to the site or sites transferred.

(ii) Preleasing of space in the Improvements for occupancy upon completion of the relevant portion of the Improvements.

(iii) Presale of a portion of the Property and Improvements to a user pursuant to agreements whereby the portion of the Property and Improvements will be conveyed to the user upon completion of the relevant portion of the Improvements.

(iv) A Transfer of a security interest by way of deed of trust, mortgage or similar instrument in the Property or Improvements as part of the financing for construction, development and leasing of the Improvements.

5.03 Hotel Transfers.

5.04 Effectuation of Transfers.

A transfer approved by the Agency pursuant to Section 5.01 or Section 5.03 or permitted pursuant to Section 5.02 shall be accomplished pursuant to documentation reasonably approved by the Agency and providing for the transferee to undertake and assume the relevant rights and obligations under this Agreement, provided, however, that no such documentation shall be required for preleasing space in the Improvements in accordance with Section 5.02 above. Unless agreed to otherwise by the Agency, a Transfer shall not relieve Developer of its obligations under this Agreement.

Section 5.05 Transfer and Use of Hotel Site.

The grant deed for the Hotel Site shall contain a covenant regarding use and operation of the Hotel Site as set forth below. The covenant shall be effective for 22 years from the date of recording of the grant deed for the Hotel Site. The covenant shall provide as follows:

(a) The owner of the Hotel Site shall use the Hotel Site and the Hotel Improvements only for a first class boutique hotel and related restaurant, retail, conference, and event uses. For the purposes of this section, a first class boutique hotel means a full service hotel comparable to the Stanford Park Hotel in Menlo Park or the Garden Court Hotel in Palo Alto as they currently exist or any hotel in Northern California which is rated by the American Automobile Association with a minimum of four diamonds. The foregoing shall not obligate the owner of the Hotel Site to operate the Hotel Improvements if such operation is not financially feasible.

(b) There shall be no change in the operator of the hotel without the prior approval of the Agency which approval shall not be unreasonably withheld if the proposed new operator has the experience and capacity to operate the Hotel Improvements in accordance with the standards set forth in subsection (a). If the owner of the Hotel Site is the operator, any sale, lease or other transfer of the Hotel Site shall constitute a change in operator requiring Agency approval, unless the selling owner remains the operator. If the operator ceases operating the hotel or is displaced by a foreclosure, the owner shall obtain a new operator approved by the Agency within six (6) months following the termination of the previous operator or such longer period, not to exceed one (1) year reasonably necessary to obtain a new operator.

(c) The owner of the Hotel Site may request that the Agency approve a change in the use standards set forth in subsection (a) above and the Agency shall not unreasonably withhold its consent to such change if, because of the then-current market conditions, it is not financially feasible to operate the Hotel Improvements in the manner specified in subsection (a) and the proposed new use standards will permit operation of the Hotel Improvements at the highest level of service and quality that is financially feasible.

(d) At the request of the owner of the Hotel Site, the Agency shall provide to prospective lenders, equity investors or purchasers of the Hotel Site an estoppel letter stating the current status of the compliance of the owner of the Hotel Site with the requirements of subsection (a) above.

(e) The provisions of subsections (a) through (d) shall be enforceable only through injunctive or declaratory relief, and no remedy of damages, lien rights or forfeiture shall be available.

Section Six: REPRESENTATIONS, WARRANTIES, AND COVENANTS

6.01 Agency Representations and Warranties.

The representations and warranties of the Agency in this Section 6.01 are a material inducement for Developer to enter into this Agreement. Developer would not purchase the Property from the Agency without such representations and warranties of the Agency. Such representations and warranties shall survive the Closing on each portion of the Property and shall also be for the benefit of a transferee approved pursuant to Section 5.03. The Agency represents and warrants to Developer as of the date of this Agreement as follows:

(a) The Agency is a public body, corporate and politic, formed and existing under the Community Redevelopment Law. The Agency has full power and authority to enter into this Agreement and to perform this Agreement. The execution, delivery and performance of this Agreement by the Agency have been duly and validly authorized by all necessary action on the part of the Agency and all required consents and approvals have been duly obtained. This Agreement is a legal, valid and binding obligation of the Agency, enforceable against the Agency in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting the rights of creditors generally.

(b) Except for transient parking uses, there are no persons or entities leasing or occupying the Property or any part thereof and there are no persons or entities who have any right to occupy the Property or any part thereof after a Closing pursuant to any lease, license, rental agreement, encroachment permit or other document or instrument.

(c) The Agency is not a "foreign person" as defined in section 1445 of the Internal Revenue Code of 1986, as amended, and the Income Tax Regulations thereunder.

(d) No California withholding of tax or reporting pursuant to California Revenue and Taxation Code sections 18805, 18815 and 26131 will be required with respect to the sale of the Property, or any portion thereof, by the Agency.

6.02 Developer Representations and Warranties.

The representations and warranties of Developer in this Section 6.02 are a material inducement for the Agency to enter into this Agreement. The Agency would not sell the Property or any portion thereof to Developer without such representations and warranties of Developer. Such representations and warranties shall survive the Closings. Developer represents and warrants to the Agency as of the date of this Agreement as follows:

(a) Developer is a limited liability company duly organized and validly existing and in good standing under the laws of the State of California. Developer is duly qualified to do business and is in good standing in the State of California. Developer has full power and authority to enter into this Agreement and to perform this Agreement. The execution, delivery and performance of this Agreement by Developer have been duly and validly authorized by all necessary action on the part of Developer and all required consents and approvals have been duly obtained. This Agreement is a legal, valid and binding obligation of Developer, enforceable against Developer in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting the rights of creditors generally.

6.03 Agency Covenants.

The Agency covenants and agrees with Developer as follows:

(a) Between the date of this Agreement and the Closing for the Phase II Office Site, neither the Agency nor the City shall execute any lease, license agreement, rental agreement or other similar agreement affecting the Property and shall manage, operate, maintain and repair the Parking Parcel in the ordinary course of business in accordance with sound property management practice.

(b) All representations, warranties and other covenants made by the Agency in this Agreement shall survive the Closings. The Agency shall use its best efforts, in good faith and with diligence, to cause all of the representations and warranties made by the Agency in this Agreement to be true and correct on and as of each Closing.

(c) The Agency shall indemnify and defend Developer against and hold Developer harmless from all claims, demands, liabilities, losses, damages, costs, and expenses, including reasonable attorneys' fees and disbursements, that may be suffered or incurred by Developer if any representation or warranty made by the Agency in this Agreement was untrue or incorrect in any respect when made or that may be caused by any breach by the Agency of any such representation or warranty.

(d) Between the date of this Agreement and the Closing on the relevant portion of the Property, neither the Agency nor the City shall in any manner sell, convey, assign, transfer, encumber or otherwise dispose of the Property or any part thereof or interest herein.

(e) The Agency shall indemnify and defend the Developer against and hold the Developer harmless from all claims, demands, liabilities, losses, damages, costs and expenses in any way arising from, relating to or connected with any release or threatened release of any Hazardous Materials in, on or under the Property, or any portion thereof, or any violation of any laws, ordinances, rules, regulations, codes or orders concerning Hazardous Materials at the Property provided the Hazardous Materials in question were placed on the relevant portion of the Property prior to the Closing and during the time Agency or City owned the relevant portion of the Property.

6.04 Developer Covenants.

Developer covenants and agrees with the Agency as follows:

(a) All representations, warranties and other covenants made by Developer in this Agreement shall survive the Closings. Developer shall use its best efforts, in good faith and with diligence, to cause all of the representations and warranties made by Developer in this Agreement to be true and correct on and as of each Closing.

(b) Developer shall indemnify and defend the Agency against and hold the Agency harmless from all claims, demands, liabilities, losses, damages, costs and expenses, including reasonable attorneys' fees and disbursements, that may be suffered or incurred by the Agency if any representation or warranty made by Developer in this Agreement was untrue or incorrect in any respect when made or that may be caused by any breach of Developer of any such representation or warranty.

(c) Developer shall indemnify and defend the Agency against and hold the Agency harmless from all claims, demands, liabilities, losses, damages, costs and expenses in any way arising from, relating to or connected with any release or threatened release of any Hazardous Materials in, on or under the Property, or any portion thereof, or any violation of any laws, ordinances, rules, regulations, codes or orders concerning Hazardous Materials at the Property, provided the Hazardous Materials in question were placed on the relevant portion of the Property after the Closing for that portion of the Property and during the time Developer owns that portion of the Property.

Section Seven: PROVISIONS REGARDING REMEDIES

7.01 Scope of Section.

The provisions of this Section Seven shall govern the parties' remedies under this Agreement.

7.02 No Fault of Parties.

The following events shall constitute a basis for a party to terminate this Agreement:

(i) The Agency, despite good faith efforts, is unable to acquire the Acquisition Parcel, or obtain a City determination permitting the street abandonments contemplated by Section 2.11 by the time the City approves the Applicable Land Use Entitlements.

(ii) Within one hundred twenty (120) days following the date of this Agreement, the Developer determines that because of the condition of the Property, the Property is not suitable for development of the Improvements or it is not financially feasible to develop the Improvements on the Property.

(iii) Prior to the time the City approves the Applicable Land Use Entitlements, the Developer determines based on City and Agency reviews of submissions made pursuant to Sections 2.03 and 2.04 above that the Applicable Land Use Entitlements are not likely to be obtained, that the Applicable Land Use Entitlements will be conditioned on requirements that make development of the Improvements not financially feasible, or that a full environmental impact report will be required to be completed and certified prior to approval of the Applicable Land Use Entitlements.

(iv) The Developer, despite good faith efforts, cannot obtain the Applicable Land Use Entitlements.

(v) The Applicable Land Use Entitlements are conditioned on requirements for development of the Improvements in addition to those specified in this Agreement that make development of the Improvements as contemplated in this Agreement not financially feasible.

(vi) The Applicable Land Use Entitlements are conditioned on requirements for development of the Improvements in addition to those specified in this Agreement that are not approved by Developer.

Upon occurrence of any of the above described events, either party may terminate this Agreement by giving written notice to the other party, provided, however, that only the Developer may terminate this Agreement pursuant to clauses (ii), (iii), (v) and (vi) above. Developer may terminate this Agreement pursuant to clauses (v) and (vi) only if the written notice of termination is given within thirty (30) days following the date that all applicable City administrative appeal periods for the Applicable Land Use Entitlements have expired. No party may terminate this Agreement pursuant to clause (i) above because of failure to acquire the Acquisition Parcel unless at least one hundred eighty (180) days (or such longer period to which the parties agree is necessary to allow for acquisition of the Acquisition Parcel) have elapsed from the date of this Agreement. Upon termination pursuant to this Section 7.02, neither party shall have any rights or obligations under this Agreement except pursuant to Section 7.05 (relating to the deposit, liquidated damages and reimbursements) and Sections 9.05 and 9.09 (relating to indemnities).

7.03 Fault of Agency.

The following events shall entitle Developer to take action against the Agency:

(i) Except as provided in Section 7.02, the Agency fails to convey the Property or any portion thereof to Developer when Developer is otherwise entitled to such conveyance under this Agreement.

(ii) The Agency breaches any other material provision under this Agreement.

Upon occurrence of such an event, the Developer may give the Agency notice of default and an opportunity to cure the default. If, within sixty (60) days following receipt of the notice, the Agency fails to cure the default then the Developer may (i) seek any remedy available at law or equity, (ii) terminate this Agreement provided that no Closing has occurred or (iii) seek the remedies specified in Section 7.05 (return of deposits).

7.04 Fault of Developer.

The following events shall entitle the Agency to take action against the Developer:

(i) The Developer fails to apply for the Applicable Land Use Entitlements within the time specified in Section 2.03.

(ii) The Developer fails to complete the Construction Plans for a phase within the time specified in Section 2.05.

(iii) The Developer fails to apply for building and construction permits within the time specified in Section 2.07 or, having applied, fails to obtain those permits.

(iv) The Developer fails to submit evidence of financing, hotel operator and construction contracts within the time specified in Sections 2.08 and 2.09, or, having submitted evidence thereof, fails to obtain Agency approval of that evidence.

(v) The Developer fails to accept conveyance of any portion of the Property within the time specified in this Agreement.

(vi) The Developer fails to commence construction of the Improvements in a particular phase within the time specified in Section 4.01.

(vii) The Developer suspends construction of the Improvements in any phase for a period of more than thirty (30) days.

(viii) The Developer fails to complete construction of the Improvements in any phase within the time specified in Section 4.02.

(ix) The Developer breaches any other material provision of this Agreement.

Upon the occurrence of such an event, the Agency may give Developer notice of default and an opportunity to cure the default. If, within sixty (60) days following receipt of the notice, the Developer fails to cure the default, then the Agency may (i) seek any remedy available at law or equity including damages, (ii) terminate this Agreement, or (iii) if applicable, obtain the remedies specified in Sections 7.05 through 7.07, provided, however, in the event of an uncured default occurring prior to the Closing for the Phase I Office Site, the Agency's remedies shall be limited to liquidated damages as specified in Section 7.05, and further provided that any termination and or other remedy shall be effective and enforceable only with regard to the site or sites to which the default relates and any site for which the Closing has not yet occurred.

7.05 Deposit, Liquidated Damages and Reimbursements.

(a) Within five (5) business days of execution of this Agreement, the Developer shall deposit with the Escrow Holder the sum of Eighty Thousand Dollars ($80,000) and the Agency shall deposit the Twenty Thousand Dollars ($20,000) Developer previously deposited with the Agency for a total deposit of One Hundred Thousand Dollars ($100,000) (the "Deposit"). If this Agreement is terminated pursuant to Section 7.02 or 7.03 prior to the Closing for the Phase I Office Site, the Deposit and any interest earned thereon shall be paid to the Developer, provided, however, if the Agreement is terminated pursuant to clause (vi) of Section 7.02, the Deposit and any interest thereon shall be paid to the Agency as compensation to the Agency for its costs incurred under this Agreement. At the Closing for the Phase I Office Site, the Deposit and any interest earned thereon shall be credited against the purchase price for the Phase I Office Site.

(b) If this Agreement is terminated pursuant to Section 7.04 prior to the Closing for the Phase I Office Site, the Deposit and any interest earned thereon shall be paid to the Agency as liquidated damages. THE AGENCY AND DEVELOPER AGREE THAT, IF THE PURCHASE AND SALE OF THE PHASE I OFFICE SITE IS NOT COMPLETED AND THIS AGREEMENT TERMINATES BECAUSE DEVELOPER MATERIALLY DEFAULTS UNDER OR MATERIALLY BREACHES THIS AGREEMENT, THE DEPOSIT AND ALL INTEREST THEREON, SHALL BE PAID TO THE AGENCY UPON TERMINATION OF THIS AGREEMENT AND RETAINED BY THE AGENCY AS LIQUIDATED DAMAGES AND AS THE AGENCY'S SOLE REMEDY AT LAW OR IN EQUITY. THE AGENCY AND DEVELOPER AGREE THAT, UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT, ACTUAL DAMAGES MAY BE DIFFICULT TO ASCERTAIN AND THE DEPOSIT, AND ALL INTEREST THEREON, IS A REASONABLE ESTIMATE OF THE DAMAGES THAT WILL BE INCURRED BY THE AGENCY IF DEVELOPER MATERIALLY DEFAULTS UNDER OR MATERIALLY BREACHES THIS AGREEMENT AND FAILS TO PURCHASE THE PROPERTY.

AGENCY'S INITIALS:_____ DEVELOPER'S INITIALS:_____

(c) In the event this Agreement is terminated pursuant to clause (i) of Section 7.02, in addition to returning the Deposit, the Agency shall pay Developer an amount equal to the actual and reasonable out-of-pocket cost Developer has incurred in connection with negotiation, execution and performance of this Agreement, but in no event more than $200,000.

7.06 Structured Parking Account.

At the Closing for the Hotel Site, the Developer shall deposit the purchase price of One Million Three Hundred Thousand Dollars ($1,300,000) to an account with a responsible financial institution approved by the Agency (the "Structured Parking Account"). At the Closing for the Phase I Office Site, the Developer shall deposit One Hundred Thirty-Eight Thousand ($138,000) of the purchase price in the Structured Parking Account. The Structured Parking Account shall be a restricted interest-bearing account from which the Developer may draw only with the consent of the Agency in accordance with the provisions of this Section 7.06. If this Agreement is terminated with respect to the Phase II Office Site prior to the Closing for the Phase II Office Site, the funds in the Structured Parking Account shall be paid to the Agency. Following the Closing for the Phase II Office Site, the funds in the Structured Parking Account shall be used to pay the costs of constructing the Parking Improvements. Disbursements shall be made on a percentage of completion basis, for example 10% of the funds shall be disbursed when 10% of the costs of constructing the Parking Improvements have been incurred. If there is a default with respect to the Phase II Office Site or the Parking Improvements following the Closing for the Phase II Office Site which default has not been cured within the time for cure permitted pursuant to Section 7.04, and there are funds remaining in the Structured Parking Account, the funds (including any interest earned) remaining in the Structured Parking Account shall be paid to the Agency.

7.07 Right of Reverter.

(a) In the event that following Closing for the Phase I Office Site, there is an uncured default by Developer pursuant to Section 7.04 relating to completion of the Phase I Office Improvements in accordance with this Agreement, then the Agency shall have the right to reenter and take possession of the Phase I Office Site and all improvements thereon and to revest in the Agency the ownership of the Phase I Office Site.

(b) In the event that following the Closing for the Hotel Site, there is an uncured default pursuant to Section 7.04 relating to completion of the Hotel Improvements in accordance with this Agreement, then Agency shall have the right to reenter and take possession of the Hotel Site and all improvements thereon and revest in the Agency the ownership of the Hotel Site.

(c) In the event that following the Closing for the Phase II Office Site, there is an uncured default pursuant to Section 7.04 relating to completion of the Phase II Office Improvements or the Parking Improvements, then the Agency shall have the right to reenter and take possession of the Phase II Office Site and the Parking Parcel and all improvements thereon and revest in the Agency the ownership and right of possession of the Phase II Office Site and Parking Parcel.

(d) As a condition to revesting in the Agency of title to a portion of the Property pursuant to subsections (a), (b) or (c) above, the Agency shall pay to Developer the following amount:

(i) In the case of the Phase I Office Site, the amount of the purchase price of the Phase I Office Site paid by Developer, or, in the case of the Hotel Site, the amount of the purchase price for the Hotel Site paid by Developer reduced by Four Hundred Thousand Dollars ($400,000); plus

(ii) An amount equal to the reasonable costs expended by Developer in developing and constructing the improvements on the portion of the Property in question; less

(iii) Any amounts necessary to satisfy or discharge any liens or encumbrances on the portion of the Property in question arising from the acts of omissions of Developer.

The right of reverter contained in this Section 7.07 shall be set forth in the Grant Deed for each portion of the Property.

Section Eight: SECURITY FINANCING INTERESTS

8.01 Rights of Mortgagees.

Any rights of the Agency under Section 7.07 above shall not defeat, limit or render invalid any lease, mortgage, deed of trust or any other security interest encumbering the Property or any portion thereof and obtained for the purpose of acquiring the Property or constructing the Improvements.

8.02 Security Financing Interest.

The words "mortgage" and "deed of trust" as used in this Agreement include all other appropriate modes of financing real estate acquisition, construction, and land development. Mortgages, deeds of trust, and other reasonable methods of security are collectively referred to herein as a "Security Financing Interest."

8.03 Holder Not Obligated to Construct.

The holder of any Security Financing Interest is not obligated to construct or complete any improvements or to guarantee such construction or completion; nor shall any covenant or any other provision in conveyances of the Property or any part thereof from the Agency to Developer be construed so to obligate such holder. However, nothing in this Agreement shall be deemed to permit or authorize any such holder to devote the Property or any portion thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement.

8.04 Notice of Default and Right to Cure.

Whenever the Agency delivers any notice of default to the Developer under this Agreement, the Agency shall at the same time deliver to each holder of record of any Security Financing Interest a copy of such notice. Each such holder shall (insofar as the rights of the Agency are concerned) have the right, but not the obligation, at its option, within ninety (90) days after the receipt of the notice, to cure or remedy or commence to cure or remedy any such default.

Section Nine: GENERAL PROVISIONS

9.01 Notices.

All notices, demands, and communications between the Agency and the Developer shall be in writing and shall be sufficiently given if and shall not be deemed given unless dispatched by registered or certified mail, postage prepaid, return receipt requested, delivered personally, or sent by reputable overnight delivery service or sent by facsimile transmission with a copy mailed by first class United States mail to the principal office of the Agency and the Developer as follows:

With a

copy to: Ellman, Burke, Hoffman & Johnson

Once Ecker Square, Suite 200

San Francisco, California 94105

Attn: Jeffrey W. Johnson

Telephone: 415-777-2727

Facsimile: 415-495-7587

Any notice, demand or other communication under this Agreement may be given on behalf of a party by the attorney for such party.

Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected party may from time to time designate by notice as provided in this Section 9.01.

9.02 Conflict of Interests.

No member, official or employee of the Agency shall make any decision relating to the Agreement which affects his or her personal interests or the interests of any corporation, partnership, association or other entity in which he or she is directly or indirectly interested, except as may be required by law.

9.03 Non-Liability of Agency Officials, Employees and Agents.

No member, official, employee or agent of the Agency or City shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the Agency or for any amount which may become due to the Developer or successor or on any obligation under the terms of this Agreement.

9.04 Delay.

In addition to specific provisions of this Agreement, performance by either party hereunder (including but not limited to performance pursuant to Sections 4.01, 4.02 and 4.11) shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; legal proceeding (including litigation challenging this Agreement or the Applicable Land Use Entitlements or other permits or approvals for the Improvements) unusually severe weather or soils conditions which will necessitate delays; prolonged rain; inability to secure necessary labor, materials or tools; delays of any contractor, sub-contractor or supplier; acts of the other party; acts or failure to act of any public or governmental agency or entity (other than the acts or failure to act of the Agency or the City); or any other causes (other than lack of funds of Developer or Developer's inability to finance any obligation under this Agreement) beyond the reasonable control or without the fault of the party claiming an extension of time to perform. The party claiming such extension shall send written notice of the extension to the other within thirty (30) days from the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the Agency and the Developer. In addition, (x) if the Developer enters into agreement providing for development of the Hotel Site by a third party which is approved by the Agency pursuant to Section 5.03 and that agreement is terminated prior to the Closing for the Hotel Site for reasons other than default of Developer, the periods of time for performance under this Agreement shall be extended for a reasonable period of time not to exceed one hundred twenty (120) days to allow Developer to obtain a new hotel developer or to arrange to undertake the hotel development itself, and (y) if the Agency has not acquired the Acquisition Parcel within ninety (90) days following the date of this Agreement the periods of time for performance under this Agreement shall be extended for ninety (90) days or such longer period to which the parties agree is necessary for acquisition of the Acquisition Parcel.

9.05 Hold Harmless.

If any person shall assert any claim against the Agency or the City or their respective officers, employees, agents or contractors on account of injury to person or property alleged to have been caused by reason of the acts of Developer, its agents, employees, representatives, contractors or subcontractors, or with respect to Developer's construction on the Property or the Parking Parcel, use thereof, or inspection or investigation thereof, the Agency shall notify the Developer who shall defend at the Developer's own expense any suit based upon such claim; and if any judgment or claim against the Agency or City or their respective officers, employees, agents or contractors shall be allowed, the Developer shall pay or satisfy such judgment or claim and pay all reasonable costs and expenses in connection therewith. The foregoing indemnity shall not apply to any claim for injury to person or property arising from the gross negligence or willful misconduct of the Agency or City or their respective officers, employees, agents or contractors.

9.06 Insurance.

During the construction of the Improvements, Developer shall maintain comprehensive general liability insurance including UX coverage with limits of not less than $2,000,000 each occurrence and $4,000,000 combined single limit bodily injury and property damage. Such insurance shall name the Agency and the City as additional insureds, as respects the operations of the Developer. During the course of construction of the Parking Improvements, Developer shall maintain comprehensive all risk including builders risk insurance in the amount of the cost of construction of the Parking Improvements which insurance shall name the Agency and City as additional insureds.

9.07 Approvals and Consents.

All consents, approvals, notices or other communications between the parties required under this Agreement shall be given in writing. Any consents, extensions of times, implementation memos, approvals or actions of the Agency may be given or executed by the Executive Director of the Agency or the governing board of the Agency as determined by the Executive Director of the Agency, provided, however, that the review contemplated under Section 2.04 above shall, as specified in that Section, be by the Executive Director or his or her designee.

9.08 Rights and Remedies Cumulative.

The rights and remedies of the parties are cumulative, and the exercise or failure to exercise one or more of such rights or remedies by either party shall not preclude the exercise by it, at the same time or different times, of any right or remedy for the same default or any other default by the other party.

9.09 Real Estate Commissions.

Each party represents and warrants to the other party that it has not dealt with any investment advisor, real estate broker or finder, or incurred any liability for any commission or fee to any investment advisor, real estate broker or finder, in connection with the sale of the Property to Developer or this Agreement, and each party hereby agrees to indemnify, defend and hold harmless the other party from and against any and all claims, liabilities, losses, damages, costs and expenses (including, without limitation, attorneys' fees) arising out of or incurred in connection a party's breach of its representation and warranty under this Section 9.09.

9.10 Applicable Law.

This Agreement shall be interpreted under and pursuant to the laws of the State of California.

9.11 Severability.

If any term, provision, covenant or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall continue in full force and effect unless the rights and obligations of the parties have been materially altered or abridged by such invalidation, voiding or unenforceability.

9.12 Legal Actions.

In the event any legal action is commenced to interpret or to enforce the terms of this Agreement, to collect damages as a result of any breach thereof, or which arises out of this Agreement, the party prevailing in any such action shall be entitled to recover against the party not prevailing all reasonable attorney's fees and costs incurred in such action.

9.13 Binding Effect.

Except as otherwise provided in this Agreement including Sections 5.02 and 7.04, this Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors in interest and assigns of each of the parties hereto except that there shall be no transfer of any interest in this Agreement by any of the parties hereto except pursuant to the terms of this Agreement. Any reference in this Agreement to a specifically named party shall be deemed to apply to any successor, heir, administrator, executor or assign of such party who has acquired an interest in compliance with the terms of this Agreement, or under law.

9.14 Parties Not Co-Venturers.

Nothing in this Agreement is intended to or does establish the Agency and Developer as partners, co-venturers, or principal and agent with one another.

9.15 Time of the Essence.

In all matters under this Agreement, the parties agree that time is of the essence.

9.16 Complete Understanding of the Parties.

This Agreement consists of the text of the Agreement and the attached Exhibits and constitutes the entire understanding and agreement of the parties with respect to the subject matters of this Agreement. This Agreement supersedes all prior agreements, understandings, offers and negotiations, oral or written, with respect to the purchase and sale of the Property.

9.17 Construction.

The Agency and Developer acknowledge that each party and its counsel have reviewed and revised this Agreement and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any document executed and delivered by either party in connection with the transaction contemplated by this Agreement. The captions in this Agreement are for convenience of reference only and shall not be used to interpret this Agreement. The defined terms in this Agreement shall apply equally to both the singular and the plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.

9.18 Further Assurances.

From and after the date of this Agreement, the Agency and Developer agree to do such things, perform such acts, and make, execute, acknowledge and deliver such documents as may be reasonably necessary or proper and usual to complete the transactions contemplated by this Agreement and to carry out the purpose of this Agreement in accordance with this Agreement.

9.19 Waivers.

No waiver of any provision of this Agreement or any breach of this Agreement shall be effective unless such waiver is in writing and signed by the waiver party and any such waiver shall not be deemed a waiver of any other provision of this Agreement or any other or subsequent breach of this Agreement.

9.20 Amendments.

This Agreement may not be amended or modified except by a written instrument signed by the Agency and Developer.

9.21 Counterparts.

This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same Agreement.

WHEREFORE, the parties have executed this Agreement on the date first noted above.

Exhibit A

Legal Description of the Agency Parcel

Exhibit B

Legal Description of the Acquisition Parcel

Exhibit C

Legal Description of the Parking Parcel

Exhibit D-1

Current Site Map

Exhibit D-2

Development Sites Map

Exhibit E

Conceptual Plan including narrative description of Improvements

Exhibit F

Specific Plan Requirements

Exhibit G

Schedule of Performance

Exhibit H

Form of Grant Deed

RECORDING REQUESTED BY AND

WHEN RECORDED MAIL TO:

________________________________

________________________________

________________________________

________________________________

GRANT DEED

THE SUNNYVALE REDEVELOPMENT AGENCY, a public body, corporate and politic, herein called "Grantor", acting to carry out a redevelopment plan under the Community Redevelopment Law of California, hereby grants to ____________________________, a ___________________, herein called "Grantee", the real property situated in the City of Sunnyvale, County of Santa Clara, State of California, more particularly described in Exhibit A attached hereto (the "Site") subject to the conditions, covenants, and restrictions set forth below.

SUBJECT, however, to the matters set forth in the attached Exhibit B incorporated herein.

1. (a) Grantee herein covenants by and for itself, its successors and assigns that:

(i) There shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, ancestry, or national origin in the sale, lease, sublease, transfer, use occupancy, tenure or enjoyment of the Site nor shall the Grantee or any person claiming under or through the Grantee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Site. The foregoing covenant shall run with the land; and

(ii) In the sale, lease or occupancy of the Site, Grantee shall not effect or execute any agreement, lease, conveyance of other instrument whereby the Site, or any part thereof, is restricted upon the basis of race, color, creed, religion sex, sexual orientation, marital status, ancestry, or national origin. Grantee, its successors and assigns, shall comply with all state and local laws, in effect from time to time, prohibiting discrimination or segregation by reason of race, color, creed, religion, sex, sexual orientation, marital status, ancestry, or national origin.

2. In the event that following the Closing _____________________ (as defined in the Disposition and Development Agreement ("DDA") between Grantee and Grantor dated _______________, 1998) for the Site, there is an uncured default pursuant to Section 7.04 of the DDA relating to completion of the improvements on the Site in accordance with the DDA, then the Grantor shall have the right to reenter and take possession of the Site and all improvements thereon and to revest in the Grantor the ownership of the Site.

As a condition to revesting in the Grantor of title to the Site, the Grantor shall pay to the Grantee the following amount:

[(1) In the case of the Phase I Office Site, the amount of the purchase price of the Phase I Office Site paid by Grantee pursuant to the DDA or, in the case of the Hotel Site, the amount of the purchase price of the Hotel Site paid by the Grantee pursuant to the DDA reduced by Four Hundred Thousand Dollars ($400,000); plus]

(2) An amount equal to the reasonable costs expended by Grantee in developing and the constructing the improvements on the Site; less

(3) Any amounts necessary to satisfy or discharge any liens or encumbrances on the Site arising from the acts or omissions of Grantee.

3. It is intended and agreed that the agreement and covenants provided in Sections 1 and 2 above shall be covenants running with the land. In any event, and without regard to technical classification or designation, legal or otherwise, specifically provided in this Grant Deed, such agreement and covenants shall be, to the fullest extent permitted by law and equity, binding for the benefit and in favor of and enforceable by Grantor, its successors and assigns, and against the Grantee and successor in interest to the Grantee of the Site or any part thereof or any interest therein, and any party in possession or occupancy of any part thereof. It is intended and agreed that the Grantor shall be deemed a beneficiary of the agreements and covenants provided in Sections 1 and 2 above both for and in its own right and also for the purpose of protecting the interests of the community and such other parties, public or private, who benefit from such agreements and covenants. The agreements and covenants provided in Sections 1 and 2 above shall run in favor of Grantor for the entire period during which such agreements and covenants shall be in force and effect, without regard to whether Grantor has at any time been, remains, or is an owner of any land or interest therein to, or in favor of, which such agreements and covenants related. Grantor shall have the right, in the event of any breach of any such agreement or covenant, to exercise all the rights and remedies, and to maintain any actions at law or suits in equity or other proper proceedings to enforce the curing of such breach of agreement or covenant, to which it or other beneficiaries of such agreement or covenant may be entitled, either by operation of the Agreement or by operation of law or in equity.

4. It is intended and agreed that:

(a) The covenants and agreements set forth in Section 1 above shall remain in full force and effect in perpetuity.

(b) The covenants and agreements set forth in Section 2 above shall remain in full force and effect until such time as a Certificate of Completion (as defined in the DDA) has been issued pursuant to the DDA for the Site.

IN WITNESS WHEREOF, the parties hereto have executed this Grant Deed this ___ day of _______________, 199__.