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EXECUTION COPY

AMENDED AND RESTATED DEVELOPMENT AGREEMENT

AND

LAND DISPOSITION AGREEMENT

by

and

bet~veen the

DISTRICT OF COLUMBIA

and

OCC MASTER DEVELOPER, LLC

Dated: December 14, 2007

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TABLE OF CONTENTS

I. Interpretation

1.1

Definitions

1.2

Governing Law

1.3

Severability

! .4

No Oral Modifications or Waivers

1.5

Schedules and Exhibits

1.6

Including

1.7

No Construction Against Drafter

II.Transfers

2.1

Reliance on Developer and Guarantors

2.2

Restrictions on Transfer

2.3

District

IlI. Relationship of Parties

3.1 Covenants as to Developer

3.2 Developer Safety

3.3 Indemnity

3.4 Authorized Representatives

3.5 District Liability

3.6 Anti-Deficiency Provision

3.7 District Delay

3.8 Limited Recourse to District

IV.

Master Plan

4.1

General

4.2

Master Plan Costs

4.3

Updates to Financial Information

4.4

District Improvements

4.5

B Parcels

V. Financial Consideration to District

5.1 Components of Consideration

5.2 Determination of Net Parcel Value

5.3 Intentionally deleted

5.4 Base Rent

5.5 Participating Rent

5.6 Intentionally deleted

5.7 For Sale Residential Payments

5.8 Participation in Sales Proceeds

5.9 Contribution for Common Areas

5.10 Public Library Fund

5.11 Real Estate Taxes

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5.12 B Parcels

5.13 Permitted Expenses and Fees

5.14

5.15 Allocation of Costs

Site Costs

V1. Performance Guaranties

::

6.1 Guaranty through Zoning Approvals

6.2 Guaranty through Plans and Specifications

6.3 Guaranty of Construction Commencement

6.4 Additional Guaranty Obligations

6.5 Development Guaranty

6.6 Completion and Lease Guaranty

VII. 5’Iilestone Events and Performance

7.1 Schedule for Milestone Events

7.2 Adjustment to Certain Dates

7.3 Zoning Approvals

7.4 Design of Improvements

7.5 Preparation Of Construction Drawings

7.6 Timing of Approvals

7.7 Significant Changes

7.8 Permits

7.9 Construction of Improvements

7.10 Site Preparation

7.11 District Inspections

7.12 Construction Manager

7.13 Progress Reports

7.14 Submissions

7.15

7.16 Environmental Covenants

7.17 Environmental Indemnification

7.18 District Signage

7.19 Developer’s Right to Terminate

Audit

7.20 Performance of Article VII Obligations

VIII. Commitments to Community

8.1 LSDBE Commitment

8.2 First Source Commitment

8.3 Community Involvement Plan

IX. Preparation and Execution of Documentation

9. !

Ground Lease

9.2

For Sale Covenants

9.3

ClosingAgreement

9.4

Closing

9.5

Closing Agreement

9.6

Concurrent Activity

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9.7 OtherLegalDocuments

9.8 Recordation

9.9 Right of First Offer

9.10 174 License

X. Representations and Warranties

10.1

Developer

10.2

Restatement

! 0.3

District

XI. Site Pending Escrow Release Date

11.1

Temporary Use of Site

11.2

Developer’s Right to Investigate Site

11.3

Confidentiality

11.4

Demolition of Existing Improvements

11.5

Removal of Hazardous Materials

11.6

Soil Characteristics

11.7

Underground Storage Tanks

11.8

11.9

Title

11.10

Notice of Condemnation

11. t I Termination

XII. Insurance Policies

12.1 Coverages; Form of Policy

12.2 Casualty

XIII. Events of Default

13.1 Events of Default

13.2 District Remedies under Various Agreements

13.3 No Waiver by Delay

XIV. Miscellaneous

14.1 Binding Effect

14.2 Duration of this Agreement

14.3 [Intentionally Deleted]

14.4 Approvals by District

14.5 No Public Subsidies

14.6 [intentionally Deleted]

14.7 Waiver of Jury Trial; Jurisdiction

14.8 Notices

14.9 Force Majeure

14.10 Time of Essence

14.11 Amendments

14.12 Generally Applicable District Law

14.13 No Third Party Beneficiaries

14.14 Waivers

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14.15

Agents and Representatives

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14.16 Further Assurances

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14.17 Exclusivity

90

14.18 Exclusivity Period

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14.19 Statement of Stockholders, Managers, Members or Partners

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14.20 Separate Books and Accounts

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14.21 Conflict of Interests; District Representatives Not Individually Liable

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14.22 Provisions Not Merged With Deed

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14.23 Titles of Articles and Sections

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14.24 Singular and Plural Usage, Gender

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14.25 Entire Agreement

14.26 Counterparts

92

14.27 Time of Performance

92

14.28 AttorneysFees

92

14.29 Rights and Remedies Cumulative

92

14.30 Release

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14.31 Estoppels

93

Schedules:

Schedule 1:

Key Personnel and Professionals

Schedule 2:

Ownership Percentages

Schedule 3:

Master Plau

Schedule 4:

Description of B Parcels

Schedule 5:

Arbitration Procedures

Schedule 6:

Intentionally Deleted

Schedule 7:

Intentionally Deleted

Schedule 8:

Intentionally Deleted

Schedule 9:

Form of Amended and Restated Development Guaranty

Schedule 10:

Intentionally Deleted

Schedule 11 :

Intentionally Deleted

Schedule 12:

List of Design Professionals

Schedule 13:

Intentionally Deleted

Schedule 14:

Intentionally Deleted

Schedule 15:

Intentionally Deleted

Schedule 16:

Copy of First Source Agreement and LSDBE MOU

Schedule 17:

Intentionally Deleted

Schedule 18:

Intentionally Deleted

Schedule 19

Intentionally Deleted

Schedule 20:

Title Commitment

Schedule 21 :

Copy of Legal Sufficiency Memorandum

Schedule 22:

Intentionally Deleted

Schedule 23:

Intentionally Deleted

Schedule 24:

Intentionally Deleted

Schedule 25:

Underground Storage Form

Schedule 26:

Statement of Stockholders, Managers, Members or Partners

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Schedule 27:

Contractor’s Certificate on Final Completion

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AMENDED AND RESTATED DEVELOPMENT AGREEMENT

AND

LAND DISPOSITION AGREEMENT

THIS AMENDED AND RESTATED DEVELOPMENT AGREEMENT AND LAND DISPOSITION AGREEMENT ("Agreement") is dated December/.~.? 2007, between (i) the District of Columbia, a municipal corporation ("District"), and 0i) OCC Master Developer, I,LC, a Delaware limited liability company ("Developer").

Recitals

1. District currently owns or by agreement controls the Site and desires to

provide for the disposition, ground lease and development of a portion of the Site in accordance with applicable provisions oftbderal and District laws.

2. In November, 2003, District selected !lines Interests Limited Partnership,

a Delaware limited partnership ("Hines") and Archstone-Smith Operating Trust, a Maryland real estate investment trust ("Smith," and collectively xvith Hines, "Original Developer"), for the negotiation of an exclusive rights agreement, and District and the Original Developer entered into that certain Exclusive Rights Agreement and Land Disposition Agreement ("Exclusive Rights Agreement") dated May 12, 2005.

3. City Council approved the Exclusive Rights Agreement on June 7, 2005

pursuant to that certain Revised Old Convention Center Site Disposition Approval Resolution of 2005.

4. By that certain Assignment and Assumption of Exclusive Rights

Agreement and [,and Disposition Agreement, dated December 15, 2006, Original Developer assigned all of its rights, title, and interests in and to the Exclusive Rights Agreement to Developer and Developer assumed all obligations of the Original Developer thereunder.

5. District and Developer entered into that certain Development Agreement

and Land Disposition Agreement, dated December 15, 2006 (together with all Exhibits and Schedules thereto and as amended by that certain First Amendment to Development Agreement and Land Disposition Agree~nent, dated June 29, 2007, the "Original Development Agreement"), which constituted the "Development Agreement" defined in and contemplated by the Exclusive Rights Agreement and which superseded in all respects such Exclusive Rights Agreement.

6. The parties wish to amend and restate the Original Development

Agreement in its entirety as set forth in this Agreement (which will supersede the Original Development Agreement).

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Agreement

NOW, THEREFORE, in consideration of tire mutual covenants and agreements contained herein, and for other good and valuable consideration the sufficiency of which the parties acknowledge, the parties agree to amend and restate the Original Development Agreement in its entirety as follows:

I. Interpretation

1.1 Definitions. When used in this Agreement, the following capitalized

terms shall have the meanings indicated:

A Parcel(s): each Leased Parcel and each For Sale Residential Parcel.

Above-Grade Improvements: the vertical Improvements on the A Parcels, including building shell, and Common Areas, substantially initiated after Pad Completion (it being understood that construction of the Above-Grade Improvements on a portion of the Site may commence prior to Pad Completion).

Accounting Principles: GAAP or such other accounting principles for real estate transactions Developer and District may mutually approve.

ADU: a residential rental unit located in a Leased Residential Parcel or For Sale Residential Parcel that will be subject to the Affordability Covenants.

Affiliate: a person who directly or indirectly through one or more intermediaries (a) is owned or Controlled by a Developer Party, (b) owns or Controls a Developer Party or (c) is under subst,’mtially common Control with a Developer Party.

Affordability Covenants: affordability covenants that will bind the For-Sale Residential Parcels and Leased Residential Parcels generally on the terms set forth in the Master Plan and such other terms reasonably required by District, all as more particularly set forth in recordable covenants that will mn with the land.

Allocable Site Costs: for a given Leased Parcel or a For Sale Residential Parcel, (i) the Site Costs multiplied by (ii) a fraction the numerator of which is the gross square footage of Improvements (exclusive of subgrade parking and service areas) of such Leased Parcel or For Sale Residential Parcel and the denominator of which is the aggregate gross square footage of Improvements of all such Leased Parcels and For Sale Residential Parcels (exclusive of subgyade parking and service areas) or as allocated in such other manner mutually agreed upon by Developer and District in writing.

Amortized Capital Expenditures: the amortization of capital expenditures incurred after the Stabilization Date over the useful life (determined in accordance with the Accounting Principles) of the improvements to which such capital expenditures relate (or over the lease term in the case of leasing commissions and tenant improvements), with such amortization to be at the 10 year treasury rate as of the first day of the month in

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which such capital expenditure is incurred plus 200 basis points. Such capital expenditures shall not include any expenditures made out of any Reserve.

Annual Base Return: for a given Leased Parcel and a given calendar year (or portion thereof) commencing on or a~er the Stabilization Date, an amount equal to the Total Costs for such Leased Parcel multiplied by the Participation Return Rate for such Leased Parcel; provided that in the case of a partial calendar year, such amount shall further be multiplied by a fraction the numerator of which is the number of days in such partial calendar year and the denominator of which is the number of days in the full calendar year.

Approved Architect: any Design Professional listed as "Architect of Record" in Schedule 12.

Approved Mortgagee: an Institutional Lender providing Construction Financing (or a take-out thereof) for all or part of the Project.

B

Parcel Restrictions: as defined in Section 7.14(b).

B

Parcels: the Parcels so designated in the Master Plan and described on

Schedule 4.

Base Rent: the base rent payable by each Ground Lessee to District under each Ground Lease, as described in Section 5.4°

Beneficial Interest: as defined in Section 5.8.3.

Beneficial Interest Sale: as defined in Section 5.8.3.

Building COREA: as defined in Section 7.14(b).

Business Day: Monday through Friday, inclusive, other than (i) holidays recognized by District or the federal gover~maent and (ii) days on which District or federal government closes for business as a result of severe inclement weather or a declared national emergency which is given legal effect in the District of Columbia. If any item must be accomplished or delivered under this Agreement on a day that is not a Business Day, then it shall be deemed to have been timely accomplished or delivered if accomplished or delivered on the next following Business Day. Any time period that ends on other than a Business Day shall be deemed to have been extended to the next

Business Day; p_ro

Exclusivity Period or any Outside Date.

vide

~d,

however, that the foregoing shall in no event extend the

Certificate of Occupancy: a certificate of occupancy or similar document or Permit (whether conditional, unconditional, temporary or permanent) that must be obtained from the appropriate Governmental Authority as a condition to the lawful occupancy of the Improvements, or any phase, component or portion thereof, to be located on the Site.

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City Council: the Council of the District of Columbia.

Closing: as defined in Section 9A.

Closing Agreement: as defined in Section 9.3.

Closing Developer Cost Budget: as defined in Section 5.2.1.

Closing Proforma: as defined in Section 5.2.1.

Closing Site Cost Budget: as defined in Section 5.2.1.

Closing Sales Projection: as defined in Section 5.2.1.

Commercially Reasonable Business Efforts: that, as and when required under this Agreement, the Person charged with making such effort is timely and diligently taking, or causing to be taken, in good faith the steps usually and customarily taken by an experienced real estate lessee or owner, as applicable, seeking with reasonable due diligence to lawfully achieve the objective to which the particular effort pertains.

Commitmen! Letter: as defined in Section 4.5.

Common Areas: all of the on grade streets, alleys, sidewalks, open space, parks, plazas and the remainder of space, land and improvements within the Site but outside the t3 Parcels, all of which are identified in Section 4.1.9 of the Master Plan. Common Areas include Reservation ! 74 so long as the 174 License Agreement remains in effect, but Reservation 174 is excluded from Common Areas upon expiration or earlier termination of the 174 License Agreement. Common Areas shall not include the Interim 13 Parcel Improvements or any areas or Improvements with in the Site aider dedication or acceptance thereof by a Governmental Authority.

Common Area Association: as described in Section 5.9.

Community Involvement Plan: as described in Section 8.3.

Completion: the Substantial Completion of all Improvements, including (i) issuance of Certificates of Occupancy (for office, retail, residential and subgrade parking and concourse only, a partial (or temporary) Certificate of Occupancy, including lobbies and public spaces, to the extent such partial (or temporary) Certificates of Occupancy are generally issued by the Governmental Authorities), (it) issuance by the applicable Approved Architect of a certificate of Substantial Completion in form reasonably approved by District, (iii) a certification by Developer that Substantial Completion has occurred, (iv) confirmation by the District that the streets and rights of way, as shown on the Master Plan, can be used by the public for vehicular and pedestrian purposes as shown on the Master Plan, and (v) copies of the items referenced in clause (i) through (iii) delivered to District. District hereby approves the A1A Forrn G-704 as a form satisfying the requirements of clause (it). Completion of subgrade parking and concourse Improvements and Completion of Common Areas shall be required for

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Completion of the Improvements on each Leased Parcel and For Sale Residential Parcel only to the extent required to obtain a Certificate of Occupancy for the Above-Grade Improvements on each Parcel and to satisfy the terms of (i) through (v) of the definition of "Substantial Completion".

Completion Bond: a one hundred percent (100%) completion bond in accordance with the Ground Leases and the For Sale Covenants ensuring the completion of the Improvements (including the parking) under the Construction Contract, with District named as the direct co-obligee with Developer’s Approved Mortgagees.

Completion and Lease Guaranty: as defined in Section 6.6.

Construction Commencement: the time at which the applicable Developer Party has (i) executed the Construction Contract with the General Contractor for the construction of the subgrade parking and concourse portion of the Project, (it) given such General Contractor notice to proceed for excavation, sheeting and shoring under the Construction Contract(s) for the subgrade parking and concourse portion of the Project and (iii) obtained all Permits required to commence such excavation, sheeting and shoring; provided, howeve_r, that any B Parcel as to which the District does not exercise its exclusion right under Section 4.5 shall be excluded from the determination of Construction Commencement to the extent provided in the Master Plan and provided any site work prior to the issuance of a Permit for site excavation shall not constitute Construction Commencement, including, but not limited to, installation of fencing and on-site electricity lines, and/or any demolition work by or on behalf of Developer or any Ground Lessee or For Sate Residential Owner.

Construction Contract: each contract with a General Contractor for the construction of all or any part of the Improvements (excluding tenant improvements for office or retail), as approved by District pursuant to Section 9.5.1.

Construction Documents: all Plans and Specifications, Construction Contracts, Completion Bonds, Performance Bonds, and Permits.

Construction Financing: means financing obtained by one or more Developer Parties from Institutional Lender(s) and used solely for (i) Developer Costs and Site Costs (exclusive of the Imputed Development Period Return) and for payment of interest accruing during the construction, sale, and lease-up periods, as applicable or (ii) restoration costs (including payment of interest) following a casualty or condemnation.

Consumer Price Index: the Consumer Price lndex for All Urban Consumers (CPI-U) for the U.S. City Average for All Items, 1982-84=100, issued from time to time by the Bureau of Labor Statistics of the United States Department of Labor.

Control: means the possession, directly or indirectly, of the power to direct, or cause the direction of, the day-to-day operations or the management and policies of a Person, whether through ownership of voting securities, membership interests or partnership interests, by contract or otherwise, or the power to elect at least fifty percent (50%) of the directors, managers, partners or Persons exercising similar authority with

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respect to the subject Person. The terms "Control," "Controlling," "Controlled by" or "under common Control with" shall have meanings correlative thereto.

Cumulative Base Return: for a given Leased Parcel as of the beginning of a calendar year (or portion thereof), (i) the aggregate Annual Base Returns for a!l years prior to such calendar year (or portion) for such Leased Parcel minus (ii) the excess of the aggregate NOI for all years prior to such calendar year (or portion) for such Leased Parcel over the aggregate Participating Rent paid for all years prior to such calendar year (or portion) for such Leased Parcel. To the extent that for any calendar year (or portion thereof) the amount in the foregoing clause (i) is less than the amount in the foregoing clause (ii), the shortfall shall earn a return, which shall be added to the amount in the foregoing clause (i), at the applicable Participation Return Rate for the such Leased Parcel.

Demolition Loan: as defined in Section 11.4.4.

Design Development Drawings: as defined in Section 7.4.4.

Design Professionals: as defined in Section 7.4.1.

Developer: as defined in the introductory paragraph.

Developer Costs: for a given Parcel that is within the Leased Parcels or is a For Sale Residential Parcel (other than any Common Areas), all commercially reasonable out-of-pocket costs that are not Site Costs and that are incurred by Developer or applicable Developer Parties during the Development Period and actually paid for the acquisition of such Parcel and the design, development, construction, marketing and leasing, ownership, operation, maintenance, repair and restoration of the Developer Improvements on such Parcel through the Stabilization Date, plus the Imputed Development Period Return on all such costs. Subject to the foregoing sentence, Developer Costs shall include: (i) all legal, architectural and other professional fees related to the foregoing (other than any legal fees expressly excluded from Developer Costs or Site Costs, it being understood that legal fees incident to negotiation and formation of Developer and the Developer Parties shall be included), and the all out-of- pocket costs incurred in monitoring Developer’s satisfaction of the LSDBE Requirements and compliance with the First Source Agreement program; and (ii) the costs of obtaining construction mortgage debt financing to pay Developer Costs or Site Costs (including commitment fees, origination fees, interest rate protection costs, recordation taxes, appraisals, all reasonable attorneys’ fees and the like), but not payments of principal, interest or other charges in respect of such financing or costs of obtaining, or payments in respect of, any other debt or equity financing. Developer Costs shall exclude (a) Excluded Payments, (b) any costs incurred by Developer in connection with the RFP prior to November 6, 2003, (c) the sum of $1,000,000 paid by Developer to The Related Companies, L.P. prior to the date of this Agreement in connection with the settlement of the Related Suit, (d) any and all costs of any nature whatsoever related to the formation, operation and overhead of any and all Developer Parties and their respective Affiliates, including tax liabilities, franchise taxes, income taxes, excise taxes, and other business

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taxes imposed upon Developers, any other Developer Party (unless expressly included above or in Section 5.13.1 below), (e) any fee or charge in the nature of interest, damages or a penalty incurred as a result of a Developer Party or their Affiligtes failing to timely perform or pay an obligation in connection with the Project (unless such failure is a result of the action or inaction of the District), including but not limited to any fee, charge, damage or increased rent payable or paid pursuant to Section 5.4.5 and (f) and costs or expenses advanced by District pursuant to this Agreement. Developer Costs shall be reduced by any Gross Revenues received prior to the Stabilization Date. The reimbursements and fees to Developer and its Affiliates permitted pursuant to Section 5.13 shall be treated as Developer Costs whether or not paid out-of-pocket. Developer Costs shall be determined without any duplication in such costs so that each is counted only once.

Developer Improvements: all improvements to be located on the Site, other than any (i) District Improvements and (ii) Interim B Parcel Improvements.

Developer Party: the Original Developer, Developer, each Ground Lessee, each For Sale Residential Owner, and each of the Guarantors.

Development Guaranty: as defined in Section 6.5.

Development Period: for each Parcel that is within the Leased Parcels or is a For Sale Residential Parcel, the period conmaencing on November 6, 2003 and ending on the Stabilization Date for such Parcel.

Development Work Product: as defined in Section 7.4.7.

District: as defined in the introductory paragraph.

District Consultants: means any construction consultant(s), architect(s), engineer(s), appraiser(s), accountant(s), environmental consultant(s), and other Persons hired, retained, or otherwise engaged by or for the benefit of District, at District’s cost, from time to time and at any time.

District Delay: as defined in Section 3.7.

District Improvements: if the District exercises its right to exclude any B Parcel (or portion thereof) from the Leased Parcels, the buildings and other improvements within such B Parcel (or portion thereof) that are intended as a permanent use.

District’s Percentage: as defined in Section 5.6.1.

District’s Share of Excess Refinancing Proceeds: as defined in Section 5.8.10.1.

DMPED: the Deputy Mayor for Planning and Economic Development, its designees, successors and assigns, or any other agency or Person under the Mayor’s

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executive control that the Mayor authorizes or otherwise delegates to administer this Agreement.

DOES: the Department of Employment Services.

DSLBD: the Department of Small and Local Business Development.

Environmental Law: any federal, District, state, or law, statute, code, ordinance, rule, regulation, requirement, permit, license, approval, policy or guidance, resolution, or judicial or administrative decision, order, judgment, injunction, award, decree, writ, or similar item (including without limitation consent decrees) relating to environmental matters, the protection of the environment or the protection of human health and safety from environmental concerns, including without limitation all those relating to or regulating the presence, use, generation, handling, storage, treatment, transportation, decontamination, processing, clean-up, removal, encapsulation, enclosure, abatement, disposal, reporting, licensing, permitting, monitoring, investigation, remediation, or Release (including, without limitation, to ambient air, surface water, ground water, land surface or subsurface strata) of any Hazardous Material, pollutant, contaminant, or other substance or waste, including without limitation:

(i) the Comprehensive Environmental Response, Compensation and

Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Sections 2601, et seq., the Clean Water Act, 33 U.S.C. Sections 1251 et seq., the Clean Air Act, 42 U.S.C. Sections 7401, et seq., and their District and local counterparts and related regulations; and

(ii) any other legal requirement, legal rule, or order regulating, relating to, imposing standards of conduct for, or imposing or allocating any liability concerning any Hazardous Material, pollutant, or contamination.

Environmental Liabilities and Costs: any and all Losses (including, without limitation, those related to remedial action, personal injuries, property damage, natural resource damages on or off the Site, and costs reasonably necessary to ensure full value or use of the Site) and causes of action of any nature whatsoever incurred by or asserted against any Indemnified Party in connection with, arising out of, in response to, or in any manner relating to (i) the violation at any time, past, present, or future, of any Environmental Law by the Developer, any Developer Party, or any of their respective agents, officers, employees, representatives, licensees, invitees, affiliates, contractors (including, without limitation, a General Contractor), or subcontractors, or (ii) any past, present, or future Release or threatened Release of any Hazardous Material on, under, about, or from the Site by Developer, any Developer Party, or by any of their agents, officers, employees, representatives, licensees, invitees, affiliates, contractors (including, without limitation, a General Contractor), or subcontractor or any other Person (excluding the Indemnified Parties), or (iii) any past, present, or future condition of pollution, contamination, or presence of Hazardous Material on, under, about, or from the Site by Developer, any Developer Party, or by any of their agents, officers, employees,

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representatives, licensees, invitees, affiliates, contractors (including, without limitation, a General Contractor), or subcontractor or any other Person (excluding the Indemnified Parties), regardless of how or when such violation, Release or threatened Release, or condition occurred, was caused, or discovered.

Equity: means the equity funding provided by Developer and its Members which is required for the development and construction of the Project as measured by funding to cover the difference between: (a) the amount of all Construction Financing; and (b) the Total Costs.

Escrow Release Conditions: as defined in Section 9.5.

Escrow Release Date: the date on which District and the Developer Parties shall meet at a mutually convenient time and place to execute and deliver each Ground Lease, each Memorandum of Ground Lease, the For Sale Deeds, the For Sale Covenants, the Completion and Lease Guaranty and the other documents covered by the Closing Agreement.

Escrow Release Developer Cost Budget: as defined in Section 5.2.4.

Escrow Release Prot’orma: as defined in Section 5.2.4.

Escrow Release Site Cost Budget: as defined in Section 5.2.4.

Escrow Release Sales Projection: as defined in Section 5.2.4.

Eurodollar Rate: the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the offered quotation for deposits in U.S. Dollars for a ninety (90) day period (or as close to a ninety (90) day period as is possible) which appears on Telerate page 3750 at or about 11:00 a.m. (London time) on the second Business Day preceding the Escrow Release Date. For this purpose, "Telerate page 3750" means the display designated as page 3750 on the Dow Jones Telerate service (or such other service as may be nominated by British Bankers’ Association as the information vendor for the purpose of displaying British Bankers’ Association interest settlement rates for U.S. Dollars).

Event of Default: as defined in Section 13.1.1.

Excess Financing Proceeds: as defined in Section 5.8.5.1.

Excess Remediation Costs: as defined in Section 11.4.2.

Excluded Payments: fees, compensation, reimbursements, overhead and other payments to Developer or any affiliate of Developer specifically excluded or in excess of the fees and reimbursements specifically authorized in Section 5.13.

Exclusion Fee: as defined in Section 4.5.

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Exclusive Rights Agreement: as defined in the Recitals.

Extraordinary Force Majeure: a Force Majeure Event that would prevent the planning, approval, development and construction of the Improvements by a first class developer experienced in the development of complex commercial projects in downtown Washington, D.C.

Final Completion: following Completion (i) the completion of all punchlist work relating to the Improvements, (ii) the close-out of all Construction Contracts for such Improvements, (iii) the payment of all costs of constructing such Improvements, and receipt by applicable Developer Parties of fully executed and notarized valid releases of liens from a!l General Contractors and first-tier subcontractors with a subcontract value in excess of $1,000,000, (iv) the performance of all other construction related obligations of Developer, Ground Lessees under the Ground Leases or For Sale Residential Owners under the For Sale Covenants, as applicable, in connection with the Improvements; provided that as to (ii), (iii) and (iv) of this definition, Final Completion shall be deemed to be achieved even if (A) liens remain so long as the same have been bonded (or otherwise provided for to the reasonable satisfaction of District), (B) genuine disputes or unresolved issues remain as to costs which remain unpaid, or (C) disputes or claims exist as to warranties with purchasers of units from a For Sale Residential Owner so long as the Developer Party responsible for Final Completion diligently pursues resolution of (A)-(C); (v) delivery of all warranties and guaranties under the Construction Contracts; (vi) the receipt by District of a certification by the applicable Developer Parties of the items in clauses (i) through (v) of this definition, and (vii) the receipt by the applicable Developer Parties and District of a certification from each Genera! Contractor, the form of which is attached hereto as Schedule 271 Final Completion of the subgrade parking, concourse Improvements and Common Areas shall each be determined separately from Final Completion of the Above-Grade Improvements; provided, however that the Outside Date for Final Completion of the Above-Grade Improvements shall not be extended even if Final Completion of the subgrade parking, concourse improvements and Common Areas has not been achieved; and recourse for failure to timely achieve Final Completion of the concourse improvements and Common Areas at or before the time of Final Completion of the Above-Grade Improvements shall be through enforcement of the Completion and Lease Guaranty with respect thereto (the same not to be deemed a breach under any Ground Lease or For Sale Covenants).

Financial Statements: in the case of the Smith Guarantor, The Estimated Consolidated Post-Merger Balance Sheet of Archstone-Smith Operating Trust as of October 5, 2007; and in the case of Hines Guarantor, Consolidated Current Value Balance Sheet as of June 30, 2007 and December 31, 2006.

First Source Agreement: as defined in Section 8.2.

For Sale Covenants: as defined in Section 9.2.

For Sale Deed: a special warranty deed, in customary form, for the transfer of each For Sale Residential Parcel by District to Developer.

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10

For Sale Participation Payment: as defined in Section 5.7.2.

For Sale Residential Owner: a Person granted fee simplex title to a For Sale Residential Parcel pursuant to a For Sale Deed.

For Sale Residential Parcel(s): the Parcels designated as Parcels 5 and 6 on page 52 of the Design Guidelines of the Master Plan for development and sale of residential units to individual unit purchasers (whether through a condominium, cooperative or other form of individual unit ownership).

Force Majeure Event: any act or event, including, as applicable, an act of God, fire, earthquake, flood, explosion, war, invasion, insurrection, riot, mob violence, sabotage, inability to procure or a general shortage of labor, equipment, facilities, materials or supplies in the open market, failure or unavailability of transportation, strike, lockout, actions of labor unions, a taking by eminent domain, requisition, laws or orders of government or of civil, military or naval authorities or any other cause, whether similar or dissimilar to the foregoing that is not within the reasonable control of Developer Parties, Guarantors or District, as applicable, but specifically excluding shortage or unavailability of funds or financial condition.

GAAP: generally accepted accounting principles consistently applied.

General Contractor: as defined in Section 7.9.2.

Governing Documents: the documents, as amended from time to time, that govern the formation, ownership and operation of any Person (for example, the articles of organization and operating agreement of a limited liability company, and any other agreement between the members of such company that relate to the formation, ownership and operation of such company).

Governmental Authority: any and all federal, District of Columbia, state, county, city, town, other municipal corporation, governmental or quasi-governmental board, agency, authority, department or body having jurisdiction over the Site or the Project.

Governmental Requirement: building, zoning, subdivision, traffic, parking, land use, environmental, occupancy, health, accessibility for disabled and other applicable laws, statutes, codes, ordinances, rules, regulations, requirements, and decrees, of any federal, District of Columbia, state, county, municipal or other governmental or quasi-govermnental authority or agency pertaining (i) to the Improvements, Project or Site, (ii) to the use and operation of the Site for its intended purpose, or (iii) if the context of the applicable sentence of this Agreement establishes this term is being used in connection with a different subject than those described in clauses (i) or (ii), then to the subject matter described in the paragraph of this Agreement in which the term is used.

Gross Parcel Value: for each For Sale Residential Parcel, (i) the gross sale proceeds from the sale of all residential units in such For Sale Residential Parcel, less (ii) the Developer Costs related to such For Sale Residential Parcel, less (iii) an amount

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equal to twenty-five percent (25%) of the Total Costs of such For Sale Residential Parcel; and for each Leased Parcel, (a) the NO1 for such Leased Parcel for the first twelve (12) months after Stabilized Occupancy divided by the applicable Land ~Value Return Rate, minus (b) the Developer Costs for such Leased Parcel; all as estimated or determined pursuant to this Agreement.

Gross Revenues: for a given Leased Parcel, all income, receipts and revenues of whatever nature and from whatever source received by Developer or Ground Lessees in connection with the ownership or operation of such Leased Parcel, other than the proceeds of any sale, financing (unless and to the extent that District exercises its option to participate in financing proceeds as provided for in Section 5.8), or other capital event. Gross Revenues shall be calculated on a cash and not accrual basis.

Ground Lease: as defined in Section 9.1.

Ground Lessee: the tenant under any Ground Lease.

Guarantors: collectively, the Hines Guarantor and the Smith Guarantor.

Hazardous Materials: any substance or material:

(i) the presence or suspected presence of which requires or may

require investigation, response, clean-up, remediation, or monitoring, or may result in liability, under any Governmental Requirement; or

(ii) that is or contains a hazardous substance, waste, extremely

hazardous substance, hazardous material, hazardous waste, hazardous constituent, solid waste, special waste, toxic substance, pollutant, contaminant, petroleum or petroleum derived substance or waste, and related materials, including without limitation, any such materials defined, listed, identified under or described in any Environmental Law; or

(iii) which is flammable, explosive, radioactive, reactive, toxic,

corrosive, infectious, carcinogenic, mutagenic, or otherwise hazardous, or is or becomes regulated under any Environmental Law; or

(iv) which is or contains asbestos (whether friable or non-friable), any

polychlorinated biphenyls or compounds or equipment containing polychlorinated biphenyls, or medical waste; or

(v) without limitation, which is or contains or once contained gasoline,

diesel fuel, oil, diesel and gasoline range organics (TPH-DRO / GRO), or any other petroleum products or petroleum hydrocarbons, or additives to petroleum products, or any breakdown products or compounds of any of the foregoing; or

(vi) without limitation, radon gas.

Hines Group: as defined in Section 2.2.4.

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Hines Guarantor: Hines Real Estate Holdings Limited Partnership, a Texas limited partnership.

HUD: United States Department of Housing and Urban Development, its successors and assigns.

Improvements: the Developer Improvements, the Common Areas, the Interim B Parcel Improvements, and all other buildings and improvements contemplated by the Master Plan, excluding only the District Improvements.

Imputed Development Period Return: an amount calculated on all Site Costs and Developer Costs, from the date actually paid through the Stabilization Date, calculated on the basis of a 365-day year, actual days elapsed, compounding annually, at an annual rate determined as follows: (i) from November 6, 2003 to the Escrow Release Date, seven percent (7%), and (ii) from the Escrow Release Date through the Stabilization Date, the average of (x) nine percent (9%) and (y) the sum of Eurodollar Rate plus 275 basis points.

Indemnified Parties: District and its respective agencies, directors, officers and employees.

Institutional Investor: means a lender or equity investor in real estate that is not a Prohibited Person but is: (i) a commercial bank, investment bank, investment company, savings and loan association, trust company or national banking association, acting for its own account, (ii) a finance company principally engaged in the origination of commercial mortgage loans or any financing-related subsidiary of a Fortune 500 company (such as AT&T Capital Corporation or General Electric Capital Corporation), (iii) an insurance company, acting for its own account or for special accounts maintained by it or as agent or manager or advisor for other entities covered by any of clauses (i)-(xi) hereof, (iv) a public employees’ pension or retirement system, (v) a pension, retirement, or profit sharing, or commingled trust or fund for which any bank, trust company, national banking association or investment adviser registered under the Investment Advisors Act of 1940, as amended, is acting as trustee or agent, (vi) a real estate investment trust (or umbrella partnership or other entity of which a real estate investment trust is the majority owner), real estate mortgage investment conduit or securitization trust or similar investment entity, (vii) any federal, state, or District agency regularly making, purchasing or guaranteeing mortgage loans, or any governmental agency supervising the investment of public funds, (viii) a profit-sharing or commingled trust or fund, the majority of equity investors in which are pension funds having in the aggregate no less than $1,000,000,000.00 in assets; (ix) any entity of any kind actively engaged in commercial real estate financing and having total assets (on the date when its interest in this Project, or any portion thereof, is obtained) of at least $1,000,000,000.00, (x) a corporation, other entity or joint venture that is a wholly owned subsidiary or combination of any one or more of the foregoing entities (including, without limitation, any of the foregoing entities described in clauses (i)-(i×) when acting as trustee or manager for other lender(s) or investor(s), whether or not such other lender(s) or investor(s) are themselves Institutional Investors) or (xi) such other lender or equity investor which at the time of making the

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investment is of a type which may customarily be utilized as an investor or lender on projects like the portion of the Project upon which such financing is placed. It is understood that Hines and Smith and Affiliates thereof qualify as Institutional Investors (and Institutional Lenders).

Institutional Lender: has the same meaning as Institutional investor.

Interest Rate: the annual rate equal to (i) the Prime Rate plus (ii) two percent (2%), adjusted on a daily basis, based on such Prime Rate in effect at the time in question, and shall be calculated on the basis of a 365-day year.

Interim B Parcel Improvements: if District exercises its option to exclude any B Parcel from the Leased Parcels under Section 4.5, the landscaping and hardscaping within such B Parcel that are intended to integrate such B Parcels within the overall Site as an interim use pending the design, development and construction of any District Improvements.

IRR: an annual aggregate rate of return, compounded annually, that takes into account the date of actual payment by Developer of each item of Total Costs and the date of receipt by Developer of each item of revenue, and that is calculated through the date of calculation thereof.

Key Personnel: as defined in Section 2.2.2.

Key Professionals: as defined in Section 7.4.!.

Land Value Return Rate: for a given Leased Parcel, the following percentages next to the use category of such Leased Parcel:

Retail 7.8%;

Residential Rental 6.6%;

Hotel 11.0%;

Office 6.9%.

Leased Parcel(s): the Parcels to be leased by District to a Ground Lessee as set forth in the Master Plan and which consists generally of the Site less (i) Reservation 174, (ii) any B Parcels which are excluded from the Leased Parcels pursuant to Section 4.5, and (iii) the For Sale Residential Parcels.

Leased Residential Parcel: the Parcels designated as Parcel 3 and as Parcel 4 on page 52 of the Design Guidelines of the Master Plan for development and rental of residential units.

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Leased Retail Parcel: the space on the ground level, level 2 and the concourse level of each building that will eventually be dedicated to retail at Closing as set forth in the Master Plan.

Legal Documents: each Ground Lease, For Sale Covenants, Affordability Covenants, Closing Agreement, Site COREA, Building COREA, Parcel B Restrictions, 174 License, ROFO, Completion and Lease Guaranty, Common Area Association documentation and any memoranda thereof.

Liquidated Damages: as defined in Section 13.2.1.

Loan Commitment Letter: means, any letter(s) of commitment for the Construction Financing.

Loss or Losses: shall mean any losses, liabilities, damages, deficiencies, demands, claims, judgments, assessments, fines, penalties, monetary sanctions, costs, expenses (including, without limitation, interest, penalties, amounts paid in settlement, and reasonable fees and disbursements of legal counsel, costs of collection, engineering and other consultants, contractors, experts, laboratories, and other expenses), including, without limitation, those related to Remedial Actions, personal injuries, property damage, natural resource damages on or off the Site, and costs reasonably necessary to ensure full value and/or use of the Site, expressly excluding in all instances punitive, consequential, and treble damages.

Lot 47 Single Lot Covenant: shall mean the Declaration of Covenants, Conditions and Restrictions Related to the Development of Lot 47 in Square 374 by and among the Ground Lessees of the Leased Residential Parcel and the Leased Retail Parcel, the For Sale Residential Owner and the District.

LSDBE: a business that is currently certified by DSLBD as a local, small or

disadvantaged business enterprise pursuant to D.C. Code §§ 2-217.01 e_t se

LSDBE MOU: the LSDBE Memorandum of Understanding between the Government of the District of Columbia Office of Local Business Development and Hines Interests Limited Partnership and Archstone-Smith Operating Trust, dated June 8, 2005, as same may be amended from time to time.

Master Plan: as defined in Section 4.1, as the same may be amended from time to time.

q.

Master Plan Developer Cost Budget: as defined in Section 4.1.

Master Plan Proforma: as defined in Section 4.1.

Master Plan Site Cost Budget: as defined in Section 4.1.

Master Plan Sales Projection: as defined in Section 4.1.

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Mayor: the Mayor of the District

Member: any Person with a direct ownership interest irr~ Deve!oper or any Developer Party, whether as a member of a limited liability company, a shareholder in a corporation, a partner in a partnership, a beneficiary under a trust or otherwise. In the case of Developer, the Members shall be the Persons identified in Schedule 2 or their permitted assigns under Article II of this Agreement.

Memorandum of Ground Lease: a short form memorandum giving notice of each Ground Lease, to be recorded in the Land Records of the District of Columbia.

Milestone Events: as defined in Section 7.1.

Net Pared Value: for a given Parcel, (i) the Gross Parcel Value of such Parcel minus (ii) the Allocable Site Costs for such Parcel.

NOI: for a given calendar year (or portion thereof) commencing on or after the Stabilization Date, Gross Revenues for such year (or portion) minus the following for such year (or portion): Operating Expenses, payments into Reserves and Amortized Capital Expenditures. Notwithstanding the foregoing, any payments or any release of any fi~nds from any Reserve to a Developer Party (e.g. in connection with a Transfer) shall be included in Gross Revenues for the purposes of the NOI calculation.

OAG: the Office of the Attorney General for the District of Columbia.

174

Conditions: as defined in Section 9.10.

174

License: as defined in Section 9.10.

Operating Expenses: for a given Leased Parcel, all non-capital costs and expenses actually incurred by a Ground Lessee in connection with its operation of such Leased Parcel and the Developer Improvements thereon, including management, leasing, operation, maintenance, repair and restoration. Operating Expenses shall not include any costs included in Total Costs, rent (other than Base Rent) payable under a Ground Lease, costs of sale, financing or other capital event, payments in respect of any financing (unless and to the extent that District exercises its option to participate in financing proceeds as provided for in Section 5.8), Excluded Payments, payments into or from any Reserves, capital expenditures, costs of maintaining or operating Developer’s organization, and income, transfer, and similar entity level taxes imposed upon Developer, any fee or charge in the nature of interest, damages or a penalty incurred as a result of a Developer Party or their Affiliates failing to timely perform or pay an obligation in connection with the Project (unless such failure is a result of action or inaction of the District), and costs or expenses advanced by District pursuant to this Agreement. Operating Expenses shall be calculated on a cash and not accrual basis.

Original Developer: as defined in the Recitals.

Outside Dates: as defined in Section 7.1.

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Pad Completion: means Completion of the shell of the subgrade parking and concourse portion of the Improvements and Project sufficient to provide structural support to the balance of the Improvements, all in accordance with the Plans and Specifications attached to the Construction Contract therefor.

Parcel: a parcel of land, or a three-dimensional space consisting of land, air rights and/or improvements, located within the Site, with boundaries generally as described in the Master Plan.

Participating Rent: the participating rent payable by Developer to the District under the Ground Lease, as described in Section 5.5.

Participation Return Rate: for a given Leased Parcel, the following percentage next to the use category of such Leased Parcel:

Retail

9.85%

Residential Rental

8.75%

Hotel

11.00%

Office

9.50%

Performance Bond: a performance bond or bonds in an amount equal to one hundred percent (100%) of all contracted costs of construction of the Improvements under the Construction Contracts naming District and the Developer’s Approved Mortgagee(s) as co-obligees in accordance with the Ground Leases and the For Sale Covenants.

Permits: all demolition, site, building, construction, and other permits, approvals, licenses and!or rights required to be obtained from the District of Columbia government or other of the Goverlmaental Authorities having jurisdiction over the Site (including, without limitation, any utility company) necessary to commence and complete construction of, and operate and maintain, the Improvements in accordance with the Plans and Specifications and this Agreement.

Permitted Transfer: as defined in Section 2.2.4.

Person: any individual or entity.

Plans and Specifications: District approved plans and specifications for the Improvements sufficient to obtain bids for a fixed price or guaranteed maximum price construction contract for such Improvements, without material allowances, as further described in Section 7.4.2(e).

Primary Member: Hines and Smith.

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Prime Rate: the prime rate of interest as published or announced in the Money Rates Section of The Wall Street Journal, from time to time or, if such index ceases to be published, any comparable successor thereto from time to time.

Programming Payment: as defined in Section 5.9.1.

Prohibited Person: means (at the time any such Person becomes an owner in a Developer Party in any relevant tier of ownership thereof or enters into the applicable contract or agreement) any Person that is in any tier of membership, partnership, or ownership that is not more than two (2) tiers removed from Developer or the relevant contract party (exclusive of holders of interests in a public company) and (a) has been convicted of a felony for one or more of the following: (i) fraud, (ii)intentional misappropriation of funds, (iii)bribery, (iv)perjury, (v) conspiracy to commit a crime, (vi) making false statements to a government agency, (vii) improperly influencing a government official, and (viii) extortion; (b) who or which is in default of any contractual obligation to District, beyond any applicable notice and/or cure periods afforded to such Person by District or afforded to such Person pursuant to applicable Laws; (c) is on the District’s list of debarred, suspended or ineligible Persons; or (d) is a Restricted Person. In no event shall Hines or Smith or any Affiliate thereof (or other person hereunder subject to such requirement) be deemed a Prohibited Person unless it otherwise qualifies as a Prohibited Person as of the time it becomes a direct or indirect owner of any portion of the Project or enters into a contract in connection with the Project. In addition, District shall not unreasonably withhold its approval under this Agreement of any Person that is a Prohibited Person solely as a result of subparagraph (a) of this definition. With respect to Institutional Investors, Key Professionals, General Contractors or potential transferees in connection with a Transfer, Developer may rely on written representations from such parties that they are not in violation of subparagraph (a) or subparagraph (b) of this definition, so long as no Developer Party has actual knowledge to the contrary.

Project: the implementation of all design, pre-development and development activities contemplated by the Master Plan for the Improvements, and the construction of all Improvements through Final Completion.

Project Documents: each Ground Lease, Development Guaranty, Completion and Lease Guaranty, the Closing Agreement, the Master Plan, For Sale Covenants, each For Sale Deed, Affordability Covenants, the Site COREA, the Building COREA, all architectural documents and drawings, and any other documents contemplated by this Agreement or a Project Document.

Public Library Fund: as defined in Section 5.10.

Refinancing: as defined in Section 5.8.5.

Related Suit: a suit against District, in an action entitled The Related Companies, L.P.v. Government of the District of Columbia, Civil Action No. 03-7469.

Release: any release, spill, emission, leaking, pumping, pouring, emptying, discharge, injection, escape, leaching, dumping, disposal, dispersal, abandonment, or

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migration into or through the environment or out of any portion of the Site, including movement through or in the air, soil, surface water, or ground water (including without limitation the abandonment or cessation of continuous active use of any underground storage tank, barrel, container, and other closed or unclosed receptacle that contains or once contained any Hazardous Materials).

Remaining Net Value: for a given Leased Parcel, the Net Parcel Value of such Leased Parcel.

Remedial Action: all steps to: (a) clean up, abate, take corrective action,

remove, treat or in any other way remediate any Hazardous Materials or contamination;

(b)

prevent or address the Release or threatened Release of Hazardous Materials;

(c)

reduce the risk that any Hazardous Materials may migrate or endanger or threaten to

endanger human health or welfare or the environment; or (d) perform feasibility or other studies, investigations, monitoring, or care related to any Hazardous Materials.

Reservation 174: the portion of the Site owned by the federal government.

Reserves: reasonable, market rate reserves established by a Ground Lessee and approved by District (such approval not to be unreasonably withheld) from and after the Stabilization Date for working capital or capital expenditures.

Restricted Person: as defined in Section 10.1.14.

Return Threshold: where Developer or Ground Lessee is projected to receive an aggregate return for the Leased Parcels of not less than twenty-five basis points (25 bp) less than the blended Land Value Return Rate (based on a weighted average of Total Costs for all Leased Parcels) for such Leased Parcel during the first twelve (12) months after Stabilized Occupancy.

RFP: Request for Proposals for a Development Partner prepared by the Office of the Deputy Mayor of Planning and Econo~nic Development and the Office of Planning of District, dated July 2, 2002, as amended.

Sale: A sale shall mean any sale, assignment, transfer or conveyance of a Ground Lease to a Person other than a Permitted Transferee or to a leasehold mortgagee as security for a leasehold mortgage.

Sale Participation Payment: as defined in Section 5.8.1.

Schematic Drawings: as defined in Section 7.4.3.

Significant Changes: (i) a change in any material respect in size or design, affecting exterior walls and elevations, building bulk, coverage or floor area ratio or number of floors from the last approved conceptual design, schematic design, design development, construction drawings, Plans and Specifications, or any other drawings

described in Section 7.4.2, as applicable, or otherwise previously approved by District;

(ii) a change in any material respect in colors, size or design or use of exterior finishing

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materials substantially affecting architectural appearance from those shown and specified in the last District approved conceptual design, schematic design, design development, construction drawings or Plans and Specifications, as applicable, or 6therwise previously approved by District; (iii) a change in any material respect in the functional use and operation of the Improvements from those shown and specified in the District approved Plans and Specifications or otherwise previously approved by District (including, without limitation, any change inconsistent with the Master Plan); (iv) a change in the design and construction of the Project requiring approval of, or any changes required by, any District of Columbia agency, body, commission or officer (other than District and other than those required by Governmental Requirements) only if the change constitutes a "Significant Change" under another subsection of this definition; (v) a change in any material respect in landscape design or plantings from the last District approved conceptual design, schematic design, design development, construction drawings or Plans and Specifications, as applicable, or otherwise previously approved by District; (vi) a change in any material respect in size or quality of exterior pavement, pedestrian malls, plazas, retaining walls, pools and fountains, exterior lighting, public art and other site features related to the development of the Site from the last District approved conceptual design, schematic design, design development, construction drawings or Plans and Specifications, as applicable, or otherwise previously approved by District; (vii) a change in any material respect in the placement or size of service facilities or in the number of elevators, stairs or ramps or changes in general pedestrian or vehicular circulation in, around or through the Improvements from the last District approved conceptual design, schematic design, design development, construction drawings or Plans and Specifications, as applicable, or otherwise previously approved by District; (viii) a change to the Master Plan from that last approved by District (except to the extent that the substance of such change has already been approved by District in another context, i.e., approval of changes to the Plans and Specifications); and (ix) any single change or related group of changes to the Plans and Specifications which result in an increase in any Escrow Release Developer Cost Budget for a Parcel or the Escrow Release Site Cost Budget by 5% or more. Upon the earlier of the date this Agreement terminates in accordance with its terms, subsections (viii) and (ix) of the definition in the preceding sentence shall no longer constitute Significant Changes. Any Significant Changes shall require the prior written approval of the Landlord, which shall not be unreasonably withheld.

Site: the area bounded by 9th, H and 1 lth Streets, and New York Avenue, N.W. all in the District of Columbia.

Site COREA: as defined in Section 7.14(b).

Site Costs: the following commercially reasonable out of pocket costs that are incurred by Developer during the Development Period (subject to the qualification in clause (iv)) and actually paid: (i) costs of satisfying and!or purchasing any Demolition Loan encumbering the Site on the Escrow Release Date, (ii) any costs of demolition of any improvements existing on the Site on the Escrow Release Date, (iii) except as set forth in Section 11.4, costs of Remedial Action, if any, required under applicable law regarding Hazardous Materials existing on the Site as of the Escrow Release Date,

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(iv) costs of the design, development, and construction of Common Areas and any Interim B Parcel Improvements (even if after the Development Period but prior to Final Completion of the Common Areas), (v) the sum of $3,000,000 paid 15y Developer Parties to The Related Companies, L.P. with respect to the Related Suit, and (vi) costs of preparing the Master Plan, plus (vii) the Imputed Development Period Return on all of the costs described in the foregoing clauses (i) through (vi). Site Costs shall exclude Excluded Payments, any costs incurred by Developer in connection with the RFP prior to November 6, 2003, and the sum of $1,000,000 paid by Developer to The Related Companies L.P. prior to the date of this Agreement in connection with the settlement of the Related Suit.

Smith Group: as defined in Section 2.2.5.

Smith Guarantor: Archstone-Smith Operating Trust, a Maryland rea! estate investment trust.

Stabilization Date: for each For Sale Residential Parcel, the date on which the initial sales of all residential units within such For Sale Residential Parcel have been completed; and for each other Parcel, the earlier to occur of (i) the date of Stabilized Occupancy of such Parcel and (ii) the date that is three (3) years after the date of Completion of the Developer Improvements on such Parcel.

Stabilized Occupancy: for each Leased Parcel on which the principal use category is hotel, 12 months after the first date on which such hotel shall open for business to the general public; and for each other Leased Parcel, the first date on which execution of leases and the commencement of payment of rent thereunder has occurred with respect to the applicable percentage of leasable space for the principal use category on such Parcel:

Retail

97.0%

Residential Rental

95.0%

Office

97.0%

Substantial Completion: completion of all Improvements (exclusive of occupancy tenant improvements) in accordance with and to the extent required by the certification given by the applicable Approved Architect in AIA Form G-704, with the Plans and Specifications and with all Governmental Requirements to the point where only items of work necessary to complete the Improvements that will not materially interfere with the use and occupancy of the Improvements for their intended purposes and that are otherwise of the scope and nature as this term is commonly understood in the construction industry, including but not limited to,

(i) with respect to subgrade parking and concourse Improvements,

construction and delivery of the loading dock(s) (if applicable), the parking garage (to the

extent applicable), and other portions of such Improvements (with sufficient foundation to support the Above-Grade Improvements) in accordance with the Plans and Specifications such that such work meets all Governmental Requirements necessary for

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issuance by the applicable Governmental Authority of a Certificate of Occupancy, broom-clean and free from debris caused or created by a Developer Party, and its respective agents, employees, contractors, and subcontractors;

(ii) completion of the areas referred to in (i) in a manner accessible and usable by the purchasers, subtenants, and retail customers for loading and parking purposes;

(iii) solely with respect to the For Sale Residential Parcel and the Leased Residential Parcel, completion of each such building’s ground floor lobby, public areas on the ground floor, elevator cabs, and all other common areas to be used by the purchasers or residential tenants, as applicable, and the rendering of such areas broom- clean and free from debris caused or created by Developer, a Ground Lessee or For Sale Residential Owner and its respective agents, employees, contractors, subcontractors, and other tenants;

(iv) with respect only to the Leased Residential Parcel, completion of at least two (2) contiguous floors with building standard finishes, fixtures, and accessories of all dwelling units and on such contiguous floors, the completion of all associated mechanical rooms, electrical closets, janitor closets, freight elevator anterooms, the lobby, and the stairways; and

(v) with respect only to the For Sale Residential Parcel, completion of at least two (2) contiguous floors with finishes, fixtures and accessories except for those finishes, fixtures and accessories to be completed after contracting for the sale of the units (such as countertops, cabinets and flooring), and on such contiguous floors, the completion of all associated mechanical rooms, electrical closets, janitor closets, freight elevator anterooms, the lobby and stairways.

Target Dates: as defined in Section 7.1.

Threshold Amount: as defined in Section 5.7.2.

Total Costs: for a given Parcel, the sum of (i) the Allocable Site Costs for such Parcel plus (ii) the Developer Costs for such Parcel.

Transfer: any sale, transfer, assignment, conveyance, lease, trust, pledge, encumbrance or hypothecations of this Agreement; it being agreed that a Transfer shall expressly also include the following:

(a) any direct interest in Developer is sold or transferred to any Person other

than any current Member as of the date of this Agreement; or

(b) in a single transaction or a series of transactions (including, without

limitation, increased capitalization, merger with another entity, combination with another entity, or other amendments, issuance of additional or new stock, partnership interests or membership interests, reclassification thereof or otherwise), whether related or unrelated, stock, membership interests, limited partnership interests or beneficial

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interests at any ownership tier of, or a Controlling interest in, Developer is sold, transferred, diluted, reduced or otherwise affected (whether directly or indirectly); or

(c) in a single transaction or series of transactions, whether related or

unrelated, any general partnership interest or managing member interest in Developer or in any general partner or managing member of Developer is sold, transferred, diluted, reduced or otherwise affected (whether directly or indirectly) with the result that the present general partners or managing or Controlling members of Developer are no longer general partners or managing or Controlling Members or that the present holders or owners of each such general partner, manager, or managing or Controlling Member no longer Controls such general partners, managers, or managing or Controlling Members; or

(d) in a single transaction or series of transactions, whether related or

unrelated, interests in any of the stock, membership interest, partnership interest or beneficial interests in Developer is redistributed among the current stockholders, members, partners or owners, the affect of which is to make Schedule 2 inaccurate; or

(e) any assignment of the economic incidents of ownership of interests

(either directly or indirectly) in Developer occurs that, if such assignment were of the

Equity or of other Controlling interests in Developer would constitute a Transfer under any of clauses (a) through (d) above; or

(t’) an assignment or transfer described in any of clauses (a) through (f)

above occurs by operation of law.

Unsold Percentage: as defined in Section 5.8.2.

WCCA: the Washington Convention Center Authority.

Zoning Approvals: any zoning, land use, subdivision single lot of record agreements, street dedication agreements or other agreements with the District Department of Transportation, or similar consent or approval of any governmental or quasi-governmental authority (including, to the extent applicable, the Zoning Commission, the Board of Zoning Adjustment, the Commission of Fine Arts and the National Capital Planning Commission) that may be required under applicable law to construct the Improvements in accordance with the Master Plan, and the lapse of any periods for the administrative or judicial appeal thereof, and shall include planned unit development approvals, rezonings, text amendments, variances, special exceptions, but excluding building and related permits required for demolition, excavation, sheeting and shoring or construction.

1.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the District of Columbia (without reference to conflicts of laws principles).

1.3 Severability. In the event that one or more of the provisions of this Agreement shall be held to be illegal, invalid or unenforceable, each such provision shall

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23

be deemed severable and the remaining provisions of this Agreement shall continue in full force and effect, unless this construction would operate as an undue hardship on District or Developer or would constitute a substantial deviation frofia the general intent of the parties as reflected in this Agreement.

1.4 No Oral Modifications or Waivers. No modification of this

Agreement shall be valid or effective unless the same is in writing and signed by District,

Developer and Guarantors. No purported waiver of any of the provisions of this Agreement shall be valid or effective unless the same is in writing and signed by the party against whom it is sought to be enforced.

1.5 Schedules and Exhibits. All Schedules and Exhibits referenced in this

Agreement are incorporated by this reference as if fully set forth in this Agreement.

1.6 Including. The word "including," and variations thereof, shall mean

"including without limitation."

1.7 No Construction Against Drafter. This Agreement has been

negotiated and prepared by District and Developer and their respective attorneys and, should any provision of this Agreement require judicial interpretation, the court interpreting or construing such provision shall not apply the rule of construction that a document is to be construed more strictly against one party.

II. Transfers

2.1 Reliance on Developer and Guarantors.

recognizes and acknowledges that:

Developer hereby

(a) The development and construction of Improvements on the Site in

accordance with the Master Plan and Plans and Specifications is critical to District’s

goals.

(b) The qualifications and identity of Developer and its respective Members, partners, and of every Person having any interest, directly or indirectly, in Developer (i.e., in any sub-tier Person), regardless of whether or not such Person is an Affiliate or has Control, are of particular concern to District.

(c) District is entering into this Agreement with Developer because of the

qualifications and identity of Developer and its Members, partners and other owners of interests and in so entering into this Agreement, is willing to accept and rely on the obligations of Developer for the faithful performance of all undertakings and covenants in this Agreement.

(d) District is also relying on the qualifications and identity of the

Guarantors as set forth in the guaranties of the Guarantors.

2.2 Restrictions on Transfer.

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2.2.1

Except as set forth in Section 2.2.4, Developer agrees that it

shall not, directly or indirectly sell, pledge, hypothecate or assign its rights under this Agreement, or otherwise permit a Transfer without the written gpproval of District except as permitted under Section 2.2.4. However, District understands and agrees as follows: (i) various entities organized by the Developer will own the lessees’ interests in the Ground Leases and initially own fee title to the For Sale Residential Parcels, (ii) whenever this Agreement provides for an act to be done (or not done) or an action to be taken (or not taken) by the Developer, such act shall be deemed done (or not done) or action taken (or not taken) if the same is done (or not done) or taken (or not taken) by any Developer Party, and (iii) any costs expended by any Developer Party with respect to the Project shall be deemed expended by Developer for all purposes of this Agreement, including, but not limited to, the definitions of Developer Cost and Site Costs (and subject to District approval to the extent expressly provided in this Agreement).

2.2.2 Developer agrees that the personnel ("Key Personnel")

identified on Schedule 1 shall dedicate to the Project the approximate time set tbrth on Schedule 1 and shall attend the meetings identified on Schedule t during the period from the date hereof through Final Completion (or such shorter period as specified on Schedule 1). Developer may from time to time propose to District new Key Personnel to substitute for the Key Personnel identified on Schedule 1, and such new Key Personnel shall be subject to the approval of District, such approval not to be unreasonably withheld.

2.2.3 Set forth on Schedule 2 are the parties selected by Developer

to be the beneficial owners of each Parcel, the percentage of ownership for each such owner in each Parcel, and the identity and percentage of ownership interest of such Person for all tiers until the tier including only individuals. On or before April 1, 2008, Developer shall (i) identify for District each Person who shall execute each Ground Lease as a Ground Lessee, which Person shall, as of the Escrow Release Date, be owned as set forth on Schedule 2 and as otherwise required by this Agreement, and (ii) provide to District for its approval (such approval not to be unreasonably withheld) the Governing Documents of each Ground Lessee and For Sale Residential Owner and such other documents as may be reasonably required by District to show how such Ground Lessee and For Sale Residential Owner, as of the Escrow Release Date, meets the requirements set forth on Schedule 2. Any changes to the information and documentation provided in clauses (i) or (ii) of the preceding sentence shall be subject to District’s prior written approval, and Developer shall provide District with copies of any material changes no later than thirty (30) days prior to the Escrow Release Date. All ownership interests in the Person that shall execute each Ground Lease as Ground Lessee or For Sale Residential Owner, as applicable (other than the ownership interests held by Developer and any LSDBE) shall be held by (A) the Persons as set forth in Schedule 2 and in such percentage and (B) one or more Institutional Investors, provided that Developer shall Control such Person (it being understood that the definition of Control shall not preclude the Institutional Investor having major decision rights), and/or (C) one or more non-Institutional Investors, provided that Developer shall Control such Person, and in the case of this clause (C) if the investor is in the real estate

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business such investor (other than a Member of the Hines Group and Smith or an Affiliate thereof) shall be subject to the approval of District, such approval not to be unreasonably withheld. It is understood that the LSDBE’s and others may not enter into the Governing Documents until after Closing but in any event shall enter into the Governing Documents prior to the Escrow Release Date.

2.2.4 The following Transfers of interests in Developer shall be

permitted without notice to or approval from District (each, a "Permitted Transfer"):

(a) any, direct or indirect, transfer of the Hines interest in Developer to any Person belonging to the Hines Group (or to any Person that is both advised by a Person belonging to the Hines Group and Controlled by the Hines Group) shall be permitted so long as such Person is not a Prohibited Person at the time of such Transfer, and following any such transfer, such Person shall be deemed Hines for all purposes hereunder. For purposes of this Agreement, "Hines Group" shall mean:

(i) Hines REIT Operating Partnership, L.P. and all and any

partnerships, legal entities, companies, trusts and other Persons (including any fund of which the general partner, that is to say the Person charged with the management thereof, belongs to "Hines Group" as defined herein) of which actual Control is entrusted directly or indirectly to one of the persons designated hereinafter: Gerald D. Hines and/or Jeffrey C. Hines, and their parents, brothers and sisters, in addition to their respective spouses and children (including adopted children), the descendants of any of the above persons, and the trustee of any trust of which the beneficiaries (the designated beneficiaries) are one or more of those same individuals; and

(ii) any and all partnerships, legal entities, and other entities under the Control, whether direct or indirect, of (A) the persons designated in paragraph 2.2.4(i) hereinabove, their descendants or their trustees or (B) the Persons to which reference is made in paragraph 2.2.4(iii) hereinbelow; and

(iii) any and all partnerships, legal entities, companies, trusts and other entities under the Control, whether direct or indirect, of any current or future employee (but only so long as such Person is an employee) of any partnership, legal entity, company or other Person belonging to the "Hines Group" as this term is defined in paragraphs 2.2.4(i) and (ii) above; and Hines Interests Limited Partnership and any successor to substantially all of the business of Hines Interests Limited Partnership.

(b) (i) any direct or indirect transfer of the Smith interest in Developer to

any Person belonging to the Smith Group shall be permitted, and following any such transfer, such Person shall be deemed Smith for all purposes hereunder. For purposes of this Agreement, "Smith Group" shall mean all and any partnerships, legal entities, companies, trusts, limited liability companies and other Persons directly or indirectly Controlled by or under common Control with, Smith or the Archstone-Smith Operating

Trust or any of their successors and assigns by merger, consolidation, acquisition or other form of reorganization.

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(ii) any direct or indirect transfer of any interest in Smith or the Archstone-Smith Trust.

(iii) Transfers of shares of stock, non-managing membership interests, limited partnership interests and other interests in the indirect holders of the beneficial interests in Developer; ~, however, following any such transfer, a Hines controlled entity and a Smith controlled entity shall continue to control Developer.

2.3 District.

2.3.1 To the extent permitted by law and without diminishing the

benefits afforded to Developer hereunder, District shall have the fight to assign this Agreement, or delegate any of its rights hereunder, to any agency or instrumentality of District or to any other Person.

2.3.2 Subject to Section 3.4, all rights of District under this

Agreement shall be exercised by the Mayor or by such Persons as the Mayor may designate from time to time.

2.3.3 For the purposes of this Agreement, all references to

"District" shall mean the District solely in its capacity as a contract party to the Agreement and the documents expressly contemplated to be signed in this Agreement, acting through DMPED, and not any other governmental or quasi-governmental agency of the District of Columbia, such that the acts or omissions of any governmental or quasi-governmental agency of the District of Columbia, other than District solely in its capacity as a contract party to the Agreement and the documents expressly contemplated to be signed in this Agreement (acting through DMPED), shall not constitute the acts or omissions of "District" for the purposes of this Agreement.

III. Relationship of Parties

3,1 Covenants as to Developer.

3.1.1 Subject to the terms and conditions of this Agreement, District

agrees (i) to permit Developer to undertake and perform the duties referenced in this Agreement, (ii) to enter into or cause to be entered into by another Developer Party, the Ground Leases and (iii) to accept or cause to be accepted by other Developer Parties, the For Sale Deeds.

3.1.2 Developer agrees to perform or cause to be performed the

duties and obligations imposed upon or assumed by Developer in this Agreement.

3.1.3 Developer is an independent party and not an agent, partner or

joint venturer of or with District. Nothing contained in this Agreement shall be deemed or construed by any Person as creating a relationship of principal and agent or of partnership or joint venture between Developer or any other Developer Party and District. Developer is not authorized to sign on behalf of District.

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3.1.4 [intentionally deleted]

3.1.5 It shall be a condition to Closing that°’the documentation

required as a condition to Closing under Section 9.4.1.13 (and approved by District as herein provided) shall ensure that all Ground Leases, For Sale Covenants and Memoranda of Lease operate as a unified whole (it being understood, however, that except as expressly provided herein, the Ground Leases, the For Sale Covenants and this Agreement shall not be cross-defaulted and shall be separately financeable and marketable).

3.2 Developer Safety. Prior to the Escrow Release Date, Developer and, thereafter, the applicable Developer Parties under the Ground Leases and the For Sale Residential Owner(s) under the For Sale Covenants shall be solely responsible for the health and safety of its Affiliates, employees, consultants, contractors, subcontractors, agents, and business invitees, and for compliance with all Governmental Requirements and requirements relating to same, and under no circumstances shall District be liable for the health and safety of such Developer Parties, Affiliates, employees, consultants, contractors, subcontractors, agents, and business invitees (except in the case of any liability District would have as a Governmental Authority separate from this Agreement).

3.3 Indenmity. Prior to the Escrow Release Date, Developer and, thereafter, the applicable Ground Lessees under the Ground Leases and the For Sale Residential Owner(s) under the For Sale Covenants shall indemnify, defend and hold harmless District, its employees, representatives and officers from any and all Loss, cost, liability, claim or suit in connection with the design of the Improvements, except for (i) the cost of District Consultants engaged by District and (ii) any liability, claim or suit arising from the gross negligence or willful misconduct of District and/or its employees or officers.

3.4 Authorized Representatives.

3.4.1 For the purposes of administering this Agreement, Developer

hereby appoints William B. Alsup, III and Alfred G. Neely as its sole and exclusive representatives either of whose authority shall be binding upon Developer, and upon written notice to District each may delegate his authority to another person in writing in which case that person’s authority shall be binding upon Developer. Developer shall appoint a single officer or other position to act as its day-to-day single point of communication, which person shall initially be Howard Riker.

3.4.2 For the purposes of administering this Agreement, the

DMPED shall be the sole and exclusive agency whose authority shall be binding upon District. The DMPED shall appoint a single officer or other position to act as its day- to-day single point of communication.

3.4.3 Each party to this Agreement may change its identified

authorized representative from time to time upon delivery of written notice thereof to the other party.

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3.5 District Liability. Any review, analysis, examination, investigation or approval or consent by District pursuant to the terms of this Agreement or otherwise in connection with the Site is solely for the benefit of District and shall ffot be relied upon or construed by Developer or any other Person as acceptance by District of any responsibility or liability therefor as to completeness or sufficiency thereof for any particular purpose or compliance with Governmental Requirements. In furtherance of the foregoing, the grant of consent or approval by District under this Agreement shall be intended solely to satisfy District’s rights under this Agreement and for no other purposes and shall not be binding upon any particular Governmental Authority having jurisdiction over the Site.

3.6 Anti-Deficiency Provision.

3.6.1 District and Developer acknowledge and agree that the

obligations of District to fulfill financial obligations of any kind pursuant to any and all provisions of this Agreement, or any subsequent agreement entered into pursuant to this Agreement or referenced herein to which District is a party, are and shall remain subject to the provisions of(i) the federal Anti-Deficiency Act, 31 U.S.C. §§134!, 1342, 1349, 1351, (ii) the D.C. Official Code 47-105, (iii) the District of Columbia Anti-Deficiency Act, D.C. Official Code §§ 47-355.01 - 355.08, as the foregoing statutes may be amended from time to time, and (iv) Section 446 of the District of Columbia Home Rule Act, regardless of whether a particular obligation has been expressly so conditioned. District agrees to exercise all lawful and available authority to satisfy any financial obligations of District that may arise under this Agreement; however, since funds are appropriated annually by Congress on a fiscal year basis, and since funds have not yet been appropriated for the undertakings contemplated herein, District’s legal liability for the payment of any costs shall not arise unless and until appropriations for such costs are approved for the applicable fiscal year by Congress (nor shall such liability arise if, despite District’s compliance with Section 3.6.2, a request for such appropriations is excluded from the budget approved by the City Council and submitted to Congress for the applicable fiscal year). District makes no representation or assurance that Congress will grant the authorizations and appropriations necessary for District to perform its financial obligations under this Agreement.

3.6.2 During the term of this Agreement, the Mayor or other

appropriate official shall for each fiscal period include in the budget application submitted to the City Council the amount necessary to fund District’s obligations hereunder for such fiscal period. Notwithstanding the foregoing, no officer, employee, director, member or other natural person or agent of District shall have any personal liability in connection with the breach of the provisions of this Section 3.6.2 or in the event of a default by District under this Section 3.6.2.

3.6.3 This Agreement shall not constitute an indebtedness of

District nor shall it constitute an obligation for which District is obligated to levy or pledge any form of taxation or for which District has levied or pledged any form of taxation.

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3.6.4

In accordance with §446 of the Home Rule Act, D.C. Official

Code § 1-204.46, no District official is authorized to obligate or expend any amount under this Agreement unless such amount is lawfully available antihas been approved and appropriated by Act of Congress.

3.6.5 If any provision of this Agreement would require an

expenditure by District in excess of $1,000,000.00 during a 12-month period, such expenditure shall be subject to City Council approval pursuant to D.C. Code § 1-

204.51.

3.7 District Delay.

3.7.1 For purposes of this Section 3.7, "District Delay" shall mean

the occurrence of all of the following: (i) (a) with respect to any matter that requires the consent or approval of District under this Agreement, if District unreasonably withholds its consent or approval of such matter (if District’s consent or approval is not to be unreasonably withheld according to this Agreement) or fails to specify in reasonable detail the reason for District’s disapproval or rejection of such matter or (b) if District fails to take any other action required of District under this Agreement by the date such action is required; (ii) Developer shall notify District in writing of the potential District Delay and that District has five (5) Business Days after the date of such notice to cure the potential District Delay; and (iii) District does not cure such potential District Delay within such five (5) Business Day period. If no date is specified in this Agreement for an action required of District, and the failure to take such action will materially and

adversely affect Developer’s ability to achieve a Milestone Event by the applicable Target Date or Outside Date, Developer may by written notice to District specify a date (in no event less than fifteen (15) Business Days from the date of such notice) by which such action must be taken, and such notice shall state clearly that a District Delay shall result if District fails to take such action by such date, and in such event, any failure of District to take such action by such specified date shall constitute a District Delay; provided, however, this sentence shall in no event serve to shorten any specific period of time that the District has under this Agreement in order to render a consent, approval or disapproval of a particular matter under this Agreement.

3.7.2 If there shall occur a District Delay, and such District Delay

shall delay or prevent Developer from performing any obligation under this Agreement, then the required date for the performance of such obligation (including any applicable Target Dates or Outside Dates) shall be extended on a day-for-day basis.

3.8 Limited Recourse to District. Subject to the additional limitations on liability in Section 3.6, District’s liability under this Agreement for any and all claims and counterclaims, including without limitation, breach of this Agreement, shall be limited to its interest in the Site and to all sums payable or paid to District under this Agreement.

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IV. Master Plan

4.1 General. Developer has prepared a master plan ("’Master Plan") for

the development of the Site and the design and construction of the Improvements as described in and contemplated by the Exclusive Rights Agreement, and District has approved the Master Plan. Developer shall comply and perform in accordance with the terms of the Master Plan. The Master Plan is described on Schedule 3. Any changes to the Master Plan shall be subject to District’s and Developer’s prior written approval, with the Developer’s approval not being unreasonably withheld, and with the standard for District’s approval set forth in the definition of "Significant Changes". Notwithstanding the foregoing, District shall have the sole authority (without the necessity of obtaining the consent of any Developer Party) to waive any provisions of the Master Plan as they relate

to the B Parcels, other than as set forth on Schedule 15. The Master Plan includes a proforma projection of the NOI for the first twelve (12) months after Stabilized Occupancy for each Leased Parcel ("Master Plan Proforma"), a proforma projection of sales proceeds for each For Sale Residential Parcel ("Master Plan Sales Projection"), and a determination of Gross Parcel Value and Net Parcel Value, as well as a budget of all Site Costs ("Master Plan Site Cost Budget") and a budget of all Developer Costs for each Parcel ("Master Plan Developer Cost Budget"). Such projections shall also include projected returns to District and Developer, revenues and expenditures before and after Construction Commencement, and Developer’s IRR upon sale. Provided, however, the parties acknowledge that Developer and District have approved only the format of the Master Plan Proforma, Master Plan Sales Projection, Master Plan Site Cost Budget and Master Plan Developer Cost Budget, and not any of the substance thereof, and as such none of the financial projections, conclusions or determinations therein shall serve to establish any limits, baseline, or parameters for the determinations to be made under 5.2 of this Agreement, whether by the parties, any arbitrator or otherwise. Matters approved by District pursuant to this Agreement, to the extent the same modify or change the Master Plan, shall be deemed amendments to the Master Plan approved by the District provided that the notice approving the same so states.

4.2 Master Plan Costs. Developer shall pay or cause to be paid all costs

incurred by it and the other Developer Parties in connection with the preparation of the Master Plan, including the fees and expenses of all architects, planners, engineers, landscape architects, attorneys and other professionals or consultants.

4.3 Updates to Financial Information. Developer shall submit to

District, no less than quarterly, updates to the Master Plan Site Cost Budget, the Master

Plan Developer Cost Budget, the Master Plan Proforma and the Master Plan Sales Projections, and the Gross Parcel Value and Net Parcel Value, based upon the best information then known to Developer.

4.4 District Improvements. Any delay on the part of District in

connection with the pla~ming, developing, failure to fund construction of, or constructing

the District Improvements shall not affect Developer’s rights and obligations to proceed with the planning, approvals, development and construction of the Improvements as described in this Agreement.

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4.5

B Parcels. District reserves the right to exclude the B Parcels

described on Schedule 4 from the Leased Parcels. Developer shall provide District with proposed terms in writing for the potential leasing of the B Parcels’~by Developer or a Developer Party no later than March 31, 2008. In the event that Developer and District have not agreed in writing on all of the terms and conditions for the leasing of the B Parcels by June 30, 2008, District shall automatically be deemed to have elected to exclude the B Parcels from the Leased Parcels.

V. Financial Consideration to District

5.1 Components of Consideration. Developer or the applicable

Developer Party, as described below, shall provide to District the financial consideration in the forms and amounts summarized in this Article V. For purposes of this Agreement, any Developer expenditure that results in an "offset" or "deduction" in accordance with Section 11.4, Schedule 5 or this Article V, from the amounts otherwise payable to District pursuant to this Article V is a component of the formula for determining the value of the property hereby disposed of and is an integral part of the determination of financial consideration owed to District.

5.2 Determination of Net Parcel Value.

5.2.1 At least ninety (90) days prior to Closing, Developer shall

submit to District proposed updates to the Master Plan Site Cost Budget, the Master Plan Developer Cost Budget, the Master Plan Proforma and the Master Plan Sales Projections, including proforma returns to District and Developer. Developer and District shall work cooperatively and in good faith to revise such updates to reflect the reasonably anticipated costs and revenues (with a reasonable budget contingency for unanticipated costs). The final updates, as approved by Developer and District, shall be the "Closing Developer Cost Budget", the "Closing Site Cost Budget", the "Closing Proforma" and the "Closing Sales Projection", respectively.

5.2.2 If by the date that is thirty (30) days prior to Closing,

Developer and District shall not have approved the Closing Developer Cost Budget, the Closing Site Cost Budget, the Closing Proforma and the Closing Sales Projections, then any issue or issues related thereto, subject to any limitations imposed upon District by Governmental Requirements regarding its use of alternative dispute resolution in this context, shall be submitted to binding expedited arbitration in accordance with the procedure described in Schedule 5. Closing may be delayed to the date that is thirty (30) days from and after the date the decision of the arbitrator is issued. In the event that District cannot legally submit to such binding expedited arbitration, and District and Developer cannot resolve any material dispute regarding the foregoing costs, the parties shall file a civil action in the Superior Court of the District of Columbia and the parties shall jointly request that the Court direct the parties to submit the dispute to the Multi-Door Dispute Resolution Division prior to commencing any discovery authorized under the Superior Court Rules of Civil Procedure. In all events, District and Developer will use best efforts to reach a resolution (judicial or otherwise) as expeditiously as possible and without any procedural delays.

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5.2.3

At Closing, the Gross Parcel Value and Net Parcel Value of

each Parcel that is within the Leased Parcels or that is a For Sale Residential Parcel shall be calculated based upon (i) in the case of each For Sale Regidential Parcel, the gross sales proceeds as set forth in the Closing Sales Projection, (ii) in the case of each Leased Parcel, the NOl for the first twelve (12) months after Stabilized Occupancy for such Leased Parcel as set forth in the Closing Proforma, (iii) the Developer Costs for such Parcel as set forth in the Closing Developer Cost Budget, and (iv) the Site Costs as set forth in the Closing Site Cost Budget. The calculation of Gross Parcel Value and Net Parcel Value described in this Section 5.2.3 shall be final.

5.2.4 No earlier than ninety (90) and no later than sixty (60) days

prior to the Escrow Release Date, Developer shall submit to District proposed updates to the Closing Site Cost Budget, the Closing Developer Cost Budget, the Closing Proforma and the Closing Sales Projections, including proforma returns to District and Developer, and reflecting fully negotiated bids (with commercially reasonable allowances) from general contractor(s) and subcontractors to achieve Pad Completion based on the Plans and Specifications. Developer and District shall work cooperatively and in good faith to revise such updates to reflect the reasonably anticipated costs and revenues (with a reasonable budget contingency for unanticipated costs), and shall mutually agree upon the same prior to the Escrow Release Date. The final updates, as approved by Developer and District, shall be the "Escrow Release Developer Cost Budget", the "Escrow Release Site Cost Budget", the "Escrow Release Proforma" and the "Escrow Release Sales Projection", respectively. Any disputes regarding such updates shall not be settled by arbitration.

5.3 Intentionally deleted.

5.4 Base Rent

5.4.1 Beginning on the date of the Closing and ending on the day

immediately preceding the Escrow Release Date, Developer shall pay Base Rent per calendar year, prorated for any partial calendar year, for each Leased Parcel equal to three and one-half percent (3.5%) of the Remaining Net Value of such Leased Parcel. Developer’s obligation to pay Base Rent shall not be conditioned on the execution of any Ground Lease pursuant to the Closing Agreement. Base Rent shall be paid in immediately available funds in equal monthly installments in advance on the first day of each calendar month commencing on the date of Closing and continuing until the Escrow Release Date, prorated for any partial month, at the address District may from time to time designate, without setoff, abatement or deduction of any kind except as set forth in Section 5.1, Section 5.4.2, Section 11.4 or Schedule 5 and thereafter as may be

expressly set forth in any Ground Lease. The first installment of Base Rent shall be paid on the date of Closing.

5.4.2 Each Ground Lease shall provide that, beginning on the

Escrow Release Date and ending on the last day of the term of the Ground Lease, the Ground Lessee shall pay Base Rent per calendar year, prorated for any partial calendar year, for each Leased Parcel equal to seven percent (7%) of the Remaining Net Value of

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such Leased Parcel. To the extent that one or more District Delays occur prior to the Escrow Release Date and are a proximate cause of an actual delay in achieving the Escrow Release Date by the date provided in the Project schedu[b (in existence and approved by District in writing as of Closing), or to the extent that one or more District Delays occur after the Escrow Release Date and are a proximate cause of an actual delay in achieving Substantial Completion, then the District shall provide a per diem credit against Base Rent for each day of such actual delay, which credit shall be applied at such time as the Escrow Release Date or Substantial Completion, as applicable, is actually achieved. Notwithstanding the foregoing, the same District Delay may not create a Base Rent abatement with respect to both the Escrow Release Date and Substantial Completion.

5.4.3 Notwithstanding Sections 5.4.1 and 5.4.2, aggregate Base

Rent for all Leased Parcels per calendar year shall not be less than (i) $1,000,000 (or $500,000 if no use category consists of office use) during the period described in Section 5.4.1 and (ii) $2,000,000 (or $1,000,000 if no use category consists of office use) during the period described in Section 5.4.2. Base Rent shall be allocated among the Leased Parcels as follows: $1,500,000 for the office parcel, $250,000 for the residential rental parcel and $250,000 for the retail parcel or as District and the Developer Parties may otherwise agree. The Guarantors under the Completion and Lease Guaranty shall guaranty, jointly and severally, the payment of all of the above minimum Base Rent (to a maximum of the amounts specified in (i) or (ii) above, as applicable) to the District for the period of sixty (60) months commencing on the Completion of Improvements located on a particular Leased Parcel, such minimum rent as may be increased pursuant to Section 5.4.5 below. Nothing in this Section 5.4.3 shall limit the obligations of the Guarantors under the Completion and Lease Guaranty to guarantee payments described in Section 5.4.5.

5.4.4 Notwithstanding Section 5.4.2, beginning immediately after

such calendar year as District may designate (but in no event later than the third ful! calendar year after Final Completion) (such designated year, ’°Stabilized Year"), Base Rent shall be increased by an amount per calendar year equal to fifty percent (50%) of the excess of NOI for such Stabilized Year over the Annual Base Return calculated for such Stabilized Year, provided that in calculating NOI, any free rent or similar concessions payable during or after such Stabilized Year under any space lease shall be amortized at a rate of nine percent (9%) per annum over the initial term of such lease. The adjustment described in this Section 5.4.4 shall be calculated separately with respect to each Leased Parcel. The amount of such adjustment shall be a one-time calculation after the Stabilized Year, but the same amount shall thereafter be added to Base Rent for each calendar year in the term of the applicable Ground Lease.

5.4.5 Notwithstanding any other provisions of this Agreement, if

Completion of Improvements on a particular Parcel shall not have occurred by the Outside Date for Completion of all of the Improvements, then for the first six (6) months period following the Outside Date for Completion, and for each six (6) month period or partial period thereafter until Completion of such Improvements, (i) as to a Leased Parcel, Base Rent due under the applicable Ground Lease shall be increased by

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an amount equal to fifty percent (50%) of the Base Rent then in effect and (ii) as to a For Sate Residential Parcel, Developer shall pay or cause to be paid a fee in the initial amount of $250,000 (or $125,000 for each For Sale Residential Parcel which is delayed if there are two For Sale Residential Parcels) which shall be increased by an amount equal to fifty percent (50%) for each six (6) month period or partial period after the first six (6) months; ~, however, (a) the Base Rent under such Ground Lease shall be increased to no more than three hundred percent (300%) of the Base Rent that otherwise would have been due had the Improvements been Completed by the Outside Date and (b) the amount due with respect to a For Sale Residential Parcel shall not exceed $750,000 (or $375,000 for each For Sale Residential Parcel which is delayed, if there are two For Sale Residential Parcels). Developer acknowledges that for the purposes of this Section 5.4.5 only, if the Base Rent for the Ground Lease for retail use in the Master Plan is less than $250,000, the Base Rent shall be deemed to be $250,000 (pro- rated amongst the portions thereof included in Improvements with other uses to the end that the payment shall be made only with respect to the portion delayed).

5.5 Participating Rent.

5.5.1 Each Ground Lease shall provide that beginning on the

Stabilization Date and ending on the last day of the term of the Ground Lease, each Ground Lessee shall pay Participating Rent each year for its Leased Parcel equal to (i) twenty five percent (25%) multiplied by (ii) the excess, if any, of NOI for such year (or portion) over the sum of Cumulative Base Return as of the beginning of such year (or portion) and Annual Base Return calculated for such year (or portion). Participating Rent shall be calculated and paid separately for each Leased Parcel.

5.5.2 Each Ground Lessee pay estimated installments of

Participating Rent in arrears on or before the thirtieth (30th) day after the last day of each calendar quarter and shall provide a report to District and detailing the calculation of estimated Participating Rent. Within one hundred twenty (120) days after the end of each calendar year, each Ground Lessee shall (i) provide financial statements that have been audited by a certified public accountant that include a year end reconciliation and detailed calculation of Participating Rent for such calendar year and (ii) deliver to District any underpayment of Participating Rent revealed by such reconciliation. If such year end reconciliation reflects that a Ground Lessee overpaid Participating Rent for such year, then such Ground Lessee may thereafter set off any overpayment of Participating Rent against Rent thereafter due, unless, at District’s election, District elects to refund same to Ground Lessee.

5.5.3 Participating Rent shall be paid in immediately available funds without setoff, abatement or deduction of any kind whatsoever, except as set forth in Section 5.5.2 and the Ground Lease, at the address the District may from time to time designate.

5.6 Intentionally deleted.

5.7 For Sale Residential Payments.

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5.7.1 Intentionally deleted.

5.7.2 For Sale Residential Owner shall make or’cause to be made a

payment to District ("For Sale Participation Payment") in the amount of 25% of the Threshold Amount. "Threshold Amount" means the excess of gross sale proceeds received by the For Sale Residential Owner with respect to the initial sale of all of the units (and for such purposes, any amounts paid to District under the Affordability Covenants in the event of the sale of an ADU in excess of the maximum sales price established therefor as provided in the Affordability Covenant shall not be deemed to have been received by For Sale Residential Owner), or, if earlier, with respect to the sale of the For Sale Residential Parcel in its entirety (including all revenue derived from

the sale of a residential unit, commercial unit, upgrades or options, storage units and parking spaces located within the For Sale Residential Parcel or otherwise being sold to owners of units within the For Sale Residential Parcel), over 125% of the Total Costs of such For Sale Residential Parcel. For Sale Residential Owner shall not make, permit or suffer to be made any distribution of the Threshold Amount to any partner, member or other beneficial owner of such For Sale Residential Owner, other than a return of capital (without any return thereon) actually contributed and as confirmed by District until such For Sale Residential Owner commences or causes the payment to District of the For Sale Participation Payment. For Sale Residential Owner shall (i.e., after the Threshold Amount is reached) cause estimated payments of the For Sale Participation Payment to be paid pail passu with any distributions thereafter to any partner, member or other beneficial owner of such For Sale Residential Owner until the For Sale Participation Payment is paid in full; provided that the estimated payments owed to District shall be placed in escrow, which payments shall be released from escrow at the time of final adjustment of Total Costs between the parties and the sale of all the units. Periodic adjustments shall be made in payments, with a final reconciliation upon sale of all units and a final determination of Total Costs. The For Sale Participation Payment attributable to each For Sale Residential Parcel is a one time obligation, and shall not apply to any sale of any portion of the For Sale Residential Parcel after the initial sale of units within such For Sale Residential Parcel or after the sale of the For Sale Residential Parcel in its entirety; provided, however, in order to extinguish the obligation to make a For Sale Participation Payment with respect to a unit, the initial sale of such unit shall be to a Person (i) who satisfies the ADU requirements set forth in the Affordability Covenants, to the extent applicable or (ii) who is otherwise a bona fide third party purchaser (who cannot be an Affiliate of Developer or any other Developer Party or an employee of any of the same if such party pays less than full value), and who has paid ful! value in connection with such purchase.

5.7.3 No less frequently than annually, For Sale Residential Owner

shall provide or cause to be provided to District updates to the budgets for Site Costs and Total Costs. "Total Costs," as used in this Section 5.7 for the purpose of calculating the For Sale Participation Payment, shall be based upon Tota! Costs reflected in such budget(s) as updated from time to time. It is understood that payments toward the Sale Participation Payment cannot be finalized until Total Costs are finally determined and all units sold. The parties shall make adjustments among themselves as to estimated payments made pursuant to Section 5.7.2 within thirty (30) days after the

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Total Cost budget(s) is updated from time to time, with a final adjustment between the parties at the time Total Costs are finally determined and all units sold.

5.8 Participation in Sales Proceeds

5.8.1 Each Ground Lease shall provide that each time that a Ground

Lessee completes the initial sale of Ground Lessee’s interest in the Ground Lease that is not a Permitted Transfer and that occurs prior to any Beneficial Interest Sale for which a Sale Participation Payment is due to District pursuant to Section 5.8.3 hereof, then contemporaneous with such initial sale, Ground Lessee shall pay to District an additional payment ("Sale Participation Payment") as described in this Section 5.8.

5.8.2 In the event the initial sale of Ground Lessee’s interest in a

Ground Lease that is not a Permitted Transfer occurs after the effective date of the Ground Lease but subsequent to one or more Beneficial Interest Sales which was subject to Section 5.8.3, even if no Sale Participation Payment was made as a result thereof, then contemporaneous with such initial sale, Ground Lessee shall pay District an amount equal to (a) the Sale Participation Payment multiplied by (b) the Unsold Percentage. "Unsold Percentage" means, as applicable, one hundred percent (100%) less the portion of the Ground Lessee’s direct interest (expressed as a percentage) and/or the Beneficial Interests the sale of which was subject to Section 5.8.3, even if no Sale Participation Payment was made as a result thereof (i.e., the IRR threshold was not reached).

5.8.3 In the event any Beneficial Interest Sale occurs prior to the

earlier of the initial sale or the payment of Sale Participation Payments, if any, with respect to the sale in the aggregate of one hundred percent (100%) of the Beneficial Interests (but after the effective date), then contemporaneous with such Beneficial Interest Sale, Ground Lessee shall pay to District an amount equal to the Sale Participation Payment multiplied by the Beneficial Interest that is the subject of such Beneficial Interest Sale. For the purpose of calculating the Sale Participation Payment pursuant to this Section 5.8.3, the net sales proceeds from the sale shall be calculated by (1) dividing (a) the actual net sales proceeds from such Beneficial Interest Sale by (b) the Beneficial Interest that is the subject of such Beneficial Interest Sale and (2) adding to such quotient the then outstanding principal balance of all secured and unsecured indebtedness owed by Ground Lessee (excluding from such indebtedness any member loans the value of which was included as part of the assets purchased in connection with the Beneficial Interest) which survives the Sale. "Beneficial Interest Sale" means the sale of any interest in the Ground Lessee other than a Permitted Transfer (and not a sale

of the Ground Lessee’s interest in its Ground Lease). "Beneficial Interest" means the interest, expressed as a percentage of the overall ownership interest in Ground Lessee, which is the subject of a Beneficial Interest Sale.

5.8.4 The Sale Participation Payment shall be the amount equal to

(i) twenty five percent (25%) multiplied by (ii) the excess of (a) the net sales proceeds from the Sale over (b) the net sales proceeds that would have to be received by such Ground Lessee on the date of such Sale in order to give such Ground Lessee an IRR on

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Total Costs paid with respect to such Leased Parcel equal to fourteen percent (14%) (or, where the principal use of such Leased Parcel is hotel, seventeen percent (17%)), taking into account all other revenues received by such Ground Lessee~in respect of such Leased Parcel through the date of such Sale. For purposes of this Section 5.8.4, the IRR shall be calculated on an "unleveraged" basis, that is, the IRR shall be calculated without taking into account (A) the receipt of proceeds of any indebtedness by a Ground Lessee, or (B) the payment by a Ground Lessee of any principal, interest or other charges in connection with any indebtedness (other than those expressly included in the definitions of Site Costs and/or Developer Costs). For purposes of this Section 5.8.4, the term "net sales proceeds" means the gross proceeds from the sale minus the costs of sale, but such costs shall not include any Excluded Payments or any payoff of financing or any costs associated with such payoff.

5.8.5 Subject to Section 5.8.6 hereof and the further provisions of

this Section 5.8.5, payment of the Sale Participation Payment, if any, shall be a condition precedent to the consummation of the initial Sale and any Beneficial Interest Sale. No later than thirty (30) days prior to a Sale or Beneficial Interest Sale where a Sale Participation Payment is due, Ground Lessee shall deliver to District its calculations with respect to the Sale Participation Payment (based on and including calculations of the components thereof in the definition of Sale Participation Payment in Section 5.8.4 hereof.) District and Ground Lessee shall cooperate in good faith to agree upon any Sale Participation Payment within the thirty (30) days prior to the Sale or Beneficial Interest Sale. If the parties are unable to agree, the Sale or Beneficial Interest Sale may be consummated, free and clear of any continuing encumbrance on the interest being transferred or on the Ground Lessee’s interest hereunder so long as the seller (a) escrows with the settlement agent conducting the sate an amount equal to the greater of (i) Ground Lessee’s calculation of the amount of the Sales Participation Payment or (ii) District’s calculation of the amount of the Sale Participation Payment or (b) provides credit support for payment of the Sale Participation Payment reasonably acceptable to District.

5.8.6 Subject to compliance by Tenant with Section 5.8.5 hereof,

the Sale Participation Payment shall not apply to any Sale or Beneficial Interest Sale after the earlier of (a) a Sale of Ground Lessee’s interest in the Lease or (b) the Sale in the aggregate of one hundred percent (100%) of the Beneficial Interests.

5.8.7 The Sale Participation Payment shall not apply to a Beneficial

Interest Sale if there was a previous sale of the Beneficial Interest that is the subject of such Beneficial Interest Sale, which previous sale was subject to Section 5.8.3, even if no Sale Participation Paymentwas made as a result thereof (i.e., the IRR threshold was

not reached).

5.8.8 If the transfer of a Beneficial Interest shall occur pursuant to

Section 5.8.3 between a member of the Hines Group and a member of the Smith Group and such transfer is not an "all cash" transfer, the same shall not be deemed a Beneficial Interest Sale subject to the provisions of this Article V unless within thirty (30) days of notice to District of such proposed transfer, District and Ground Lessee are able to

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agree (acting in good faith) on the amount of net sales proceeds that will be used to calculate the Sale Participation Payment pursuant to Section 5.8.4 hereof.

5.8.9 The provisions of this Section 5.8 shall not apply to any

Leased Parcel following any foreclosure or sale in lieu of foreclosure of such Leased Parcel.

5.8.10 If a Ground Lessee obtains from time to time any mortgage debt financing with respect to any Leased Parcel (other than any For Sale Residential Parcel) prior to the date on which a Sale Participation Payment is payable with respect to such Leased Parcel pursuant to Section 5.8.1 (a "Refinancing"), District shall have the option to receive a portion of the proceeds of such Refinancing. Each Ground Lessee shall provide the District with prior written notice of any Refinancing, including the material terms thereof and the estimated Excess Refinancing Proceeds, and such notice shall state that District’s option under this Section 5.8.10 shall apply to such Refinancing. District shall exercise such option within thirty (30) days of its receipt of such notice. If and only if District exercises such option, then:

5.8.10.1. District shall receive twenty-five percent (25%) of (I) the excess ("Excess Refinancing Proceeds") of (i) the principal amount of such Refinancing actually disbursed to the Ground Lessee over (ii) the sum of (a) all costs incurred by the Ground Lessee in obtaining and closing on such Refinancing; (b) all amounts paid by the Ground Lessee out of the proceeds of such Refinancing to satisfy and release any other then-outstanding debt financing (including any prepayment penalties and charges); (c) all amounts paid, or to be paid, by the Ground Lessee for capital expenditures out of the proceeds with respect to such Leased Parcel; and (d) any return of equity equal to what the Ground Lessee invested to pay Site Costs and Developer Costs with respect to such Leased Parcel multiplied by (II) the then Unsold Percentage. The amount that District receives under this Section 5.8.10.1 shall be referred to as "District’s Share of Excess Refinancing Proceeds".

5.8.10.2. From the date District receives District’s Share of Excess Refinancing Proceeds until the date that the Sale Participation Payment is no longer applicable with respect to the applicable Leased Parcel, the following shall be treated as an Operating Expense of the applicable Leased Parcel: an amount equal to (A) the interest and principal paid pursuant to a leasehold mortgage granted in connection with the Refinancing that is attributable to a portion of such debt equal to District’s Share of Excess Refinancing Proceeds, multiplied by (B) the then Unsold Percentage at the time of any of the particular payments described in Section 5.8.10.1 divided by the Unsold Percentage at the time of the Refinancing.

5.8.10.3. The Sale Participation Payment for each Leased Parcel shall be reduced by an amount equal to (A) District’s Share of Excess Refinancing Proceeds minus (B) the amount of twenty-five percent (25%)

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of any principal described in Section 5.8.10.1 that has been paid by the Ground Lessee.

5.9 Contribution for Common Areas. The parties shall agree upon pursuant to the Closing Agreement at the Closing the final forms of the documents which provide for (i) the formation of a non-profit association ("Common Area Association") that shall be owned by the owners (or Ground Lessees) from time to time of the Site, that shall include such public participation as District and Developer may determine pursuant to the Master Plan, and that has as its sole purpose the maintenance and programming of the Common Areas, and, under certain circumstances, programming of the streets and sidewalks, (ii) the approval by District of the Governing Documents of the Common Area Association, (iii) the means by which the Common Area Association shall control the Common Areas (which may include a lease or license from District), and (iv) District’s approval of the Common Area Association’s annual plan for staffing decisions, program planning and maintenance, to ensure that the Common Areas serve as a one-of-a-kind pedestrian friendly destination with public gathering spaces and performance venues.

5.9.1 To promote the programming of the Common Areas,

beginning on the date that is estimated in the Project schedule, as of the Escrow Release

Date, to be one year prior to the first occupancy of leasable space within the Improvements under the Ground Lease for the retail component of the Project, and ending on the last day of the term of each Ground Lease, each Ground Lessee shall make or cause to be made its proportionate share of a payment ("Programming Payment") to the Common Area Association each calendar year, prorated for any partial year. The Programming Payment shall be used solely for purposes of funding programming and staffing for programming and similar programming-related costs for the Common Areas (the "Programming Activities"), and not for maintenance or repair of the Common Areas. The Guarantors under the Completion and Lease Guaranty shall guaranty, jointly and severally, the payment of entirety of the Programming Payment for the period of sixty (60) months after commencing on Final Completion of Improvements.

5.9.2 The annual Programming Payment shall initially be the

greater of $1,500,000 and the actual reasonably estimated annual cost of providing the Programming Activities, as determined in Section 4.2(e) of the Site COREA. Such amount shall increase (but not decrease) each year to retlect annual increases in the Consumer Price Index. In addition, beginning with the year that is the earlier of (i) the calendar year in which the 20th anniversary of the Stabilization Date for the Retail Ground Lease occurs or (ii) the calendar year in which the 30th anniversary of the Escrow Release Date occurs, and each 20th year thereafter, District shall have the option of invoking an arbitration procedure to be set forth in the Ground Leases under which the annual payment would be increased (but not decreased) to the actual cost as of such year of the Programming Activities, provided that the scope and definition of Programming Activities shall be updated to the then-current reasonable standard for similar public spaces in major cities similar to District. The allocation of the Programming Payment among the Parcels within the Leased Parcels and the For Sale Residential Parcels shall be set forth in the Site COREA.

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5.10

Public Library Fund. In the event that the City Council establishes

an enterprise fund (as defined in D.C. Official Code §§ 47-373(1)(B)(i) and 47-373(2)(d) (2001)) for the purpose of maintaining, restoring, constructing and ilrlproving District of Columbia Public Library branch facilities (the "Public Library Fund"), District may dedicate a portion of the yearly Base Rent or Alternative Rent payable under a Ground Lease (as applicable) to such Public Library Fund in accordance with the terms upon which such Public Library Fund is established.

5.11 Real Estate Taxes. Beginning on the date first required by law, the

Ground Leases and For Sale Covenants shall provide for payment of all real property taxes and assessments (i) against the Leased Parcels, and (ii) until District shall receive all sums due under this Article V with respect to all For Sale Residential Parcels, against the For Sale Residential Parcels.

5.12 B Parcels. District shall retain the right to develop all or any portion

of the B Parcel(s) shown as "B Parcel, Lot 111,460 SF" in the zoning diagram on page 92 of the Design Guidelines of the Master Plan subject to the requirement that until the Completion of the initial District Improvements on each such B Parcel, the development of each such B Parcel shall be in accordance with the Master Plan. All gross floor area of the Site not utilized in connection with the construction of the Developer Improvements and Common Areas (including bonus FAR and transferable development rights) shall, to

the maximum extent permitted under the Zoning Regulations of the District of Columbia, be reserved by District and excluded from the demise and conveyances under the Ground Leases and For Sale Deed, and may be transferred or conveyed by District without requiring the consent of, or any notice to, any Developer Party.

5.13 Permitted Expenses and Fees. Developer (or the applicable Ground

Lessee or For Sale Residential Owner after the Escrow Release Date) may pay the following reimbursements and fees to Developer, any Person that directly or indirectly owns an interest in any Ground Lessee, and their respective Affiliates:

5.13.1 As Developer Costs or Site Costs, as applicable, the direct

cost of staffing for the Project at or below the level of "Project Officer" (such as Howard Riker and Daryl South), customary out-of-pocket expenses incurred in connection with the Project, including travel, and the reasonable cost of operating on- site project, construction and leasing/sales offices related to the Project. Notwithstanding the foregoing, the aggregate amount of such reimbursements shall not exceed 3% of the Adjusted Total Cost. For this purpose, "Adjusted Total Cost" shall mean the Total Cost less (i) the cost of any fees or reimbursements described in this Section 5.13, (ii) taxes payable to District that are included in Total Costs, and (iii) amounts payable to District pursuant to this Article V that are included in Total Costs.

5.13.2 As Developer Costs or Site Costs, as applicable, a central

project administration fee of 2% of the Adjusted Total Cost to cover personnel and overhead costs not reimbursed pursuant to Section 5.13.1 (such as Bill Alsup, Ken Hubbard, Ken Miller and AI Neely).

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5.13.3 As an Operating Expense, a property management fee not to exceed three percent (3%) of Gross Revenues plus reimbursement of customary expenses (including non-executive direct property management persbnnel costs).

5.13.4 As Developer Costs or as an Operating Expense, as

applicable, leasing commissions in connection with the leasing of any office, retail, residential or other space in the Developer Improvements and sales commissions upon a sale of any unit included within the For Sale Residential Parcel, in amounts not to exceed market rates as reasonably approved by District.

5.14 Site Costs. Notwithstanding any other provision of this Agreement to the contrary (but subject to Section 3.6), District reserves the right to pay for any Site Costs, in which event the costs paid or reimbursed shall no longer constitute Site Costs, and, from and after such payment, shall not be included in Total Costs, and shall not be used to determine Net Parcel Value. The extent to which District shall pay Site Costs in accordance with this Section 5.14 shall be determined by District prior to the Escrow Release Date.

5.15 Allocation of Costs. Costs of the type described in the definitions of Site Costs and/or Developer Costs and allocable to more than one Parcel within the Site shall be allocated among various Parcels within the Site in a manner reasonably selected by Developer prior to Closing and approved by District in writing, which approval shall not be ultreasonably withheld, conditioned or delayed.

VI. Performance Guaranties

6.1 Guaranty through Zoning Approvals. As evidence of its commitment to the Project, Developer shall incur and shall have paid in full not less than $8,000,000.00 in Site Costs and Developer Costs through completion of the Zoning Approvals in performing its obligations under this Agreement through completion of Zoning Approvals.

6.2 Guaranty through Plans and Specifications.

6.2.1 If Zoning Approvals shall be achieved, and if based on the

Closing Site Cost Budget, the Closing Developer Cost Budget, and the Closing Proforma, the Return Threshold is achieved, then Developer agrees to proceed to Closing subject to the satisfaction of the conditions for Closing, and upon Closing, to cause the Plans and Specifications to be completed prior to the applicable Outside Dates. As evidence of its commitment to the Project, Developer shall incur and have paid in full not less than $20,000,000.00 in Site Costs and Developer Costs in performing its obligations under this Agreement through completion of Plans and Specifications and shall certify the same to District in writing, on the earlier of (i) acceptance of the completed Plans and Specifications by District or (ii) the Outside Date established for Completion of the Plans and Specifications.

6.2.2 If Zoning Approvals shall be achieved, but based on the

materials described in Section 6.2.1, the Return Threshold is not achieved, then

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Developer shall so notify District in writing. During the sixty (60) day period following such notice, District and Developer shall each have the option to extend the Target Dates and Outside Dates for Closing and the completion of Plans an~l Specifications for up to a one (1) year period. District and Developer shall each exercise such option by written notice to the other given prior to the applicable Outside Dates (as the same may be extended pursuant to this Section 6.2.2). During such extension period, Developer shall work diligently using Commercially Reasonable Business Efforts and present to District alternative solutions to achieve the Return Threshold, including re-engineering, redesign and changes to the Development Program and!or Master Plan. At any time during such extension period, District may require Developer to submit to District updates to the Closing Site Cost Budget, the Closing Developer Cost Budget, and the Closing Proforma, based upon the best information then known to Developer using Commercially Reasonable Business Efforts. If, based on such materials, the Return Threshold is achieved, then prior to then applicable Outside Dates, Developer shall proceed to Closing and cause the Plans and Specifications to be completed. If District disputes any provision of the proposed updates to the Closing Site Cost Budget, the Closing Developer Cost Budget, or the Closing Proforma, then such dispute shall be settled in accordance with Section 5.2.2.

6.3 Guaranty of Construction Commencement.

6.3.1 If the Escrow Release Conditions have been met or waived by

District and, based on the Escrow Release Site Cost Budget, the Escrow Release Developer Cost Budget, and the Escrow Release Proforma, the Return Threshold is achieved, then prior to the applicable Outside Dates, Developer shall cause Construction Commencement to occur.

6.3.2 If, based on the materials described in Section 6.3.1, the

Return Threshold is not achieved, then Developer shall so notify District in writing. During the sixty (60) day period following such notice, District and Developer shall each have the option to extend the Target Dates and Outside Dates for the satisfaction of the Escrow Release Conditions and Construction Commencement for a total of three (3) consecutive one (1) year periods (or for a total of two (2) years if District or the Developer shall have elected the extension described in Section 6.2.2). District and Developer shall each exercise such options by written notice to the other given prior to the applicable Outside Dates (as the same may be extended pursuant to this Section 6.3.2). During such extension periods, Developer shall work diligently using Commercially Reasonable Business Efforts present to District alternative solutions to achieve the Return Threshold, including re-engineering, redesign and changes to the Development Program and/or Master Plan. At any time during such extension periods, but no later than one hundred twenty (120) days before the end of the last such extension period, District may require Developer to submit to District updates to the Escrow Release Site Cost Budget, the Escrow Release Developer Cost Budget, and the Escrow Release Proforma, based upon the best information then known to Developer using Commercially Reasonable Business Efforts. If, based on such materials, the Return Threshold is achieved, then prior to then current Outside Dates, Developer shall cause Construction Commencement to occur. Any disputes regarding such updates to

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the Escrow Release Site Cost Budget, the Escrow Release Developer Cost Budget, and the Escrow Release Proforma, shall not be settled by arbitration, the parties reserving such fights and remedies as may be available to them under applicable law. During each such extension period, Developer shall pay Base Rent as calculated pursuant to Section 5.4.2.

6.4 Additional Guaranty Obligations.

6.4.1 Developer acknowledges that large mixed-use projects have

significant lead times prior to opening and that it may be difficult to receive significant, or any, pre-leasing commitments from retailers, renters or tenants in advance of Construction Commencement, and that Developer’s obligation to proceed with Construction Commencement in accordance with this Agreement is not in any way conditioned or contingent upon pre-leasing any portion of the Improvements.

6.4.2 Developer acknowledges that financing sources may require

certain minimum levels of pre-leasing and pre-sales. Prior to the Escrow Release Date Developer and, thereafter, each Ground Lessee and For Sale Residential Owner shall cause the Guarantors to provide such guaranties as may be required to obtain debt and/or equity financing without pre-leasing or pre-sales, and agree that obtaining such financing shall not be a contingency to Construction Commencement.

6.5 Development Guaranty. Guarantors have executed a joint and several

guaranty of all obligations of Developer under this Agreement ("Development Guaranty"), in the form contained in Schedule 9.

6.6 Completion and Lease Guaranty. On the Escrow Release Date, Guarantors shall execute a joint and several guaranty of lien free Completion and Final Completion of all Improvements, in a form reasonably acceptable to District and a joint and several guaranty of all obligations of each tenant under its Ground Lease through Final Completion and certain financial obligations thereafter for a period of sixty (60) months following Final Completion ("Completion and Lease Guaranty").

VII. Milestone Events and Performance

7.1 Schedule for Milestone Events. Set forth below are (i) the dates

("Target Dates") by which Developer will endeavor, using Commercially Reasonable Business Efforts, on and prior to the Escrow Release Date to achieve and, after the Escrow Release Date, to coordinate the Ground Lessees and the For Sale Residential Owners to achieve, certain critical events ("Milestone Events"), and (ii) the latest dates ("Outside Dates") by which such Milestone Events must occur (regardless of Force Majeure Events, except to the extent otherwise expressly stated below), time being of the essence. Other than with respect to the initial two (2) Milestone Events, each Target Date (and corresponding Outside Date) shall be determined by the date on which the immediately preceding Milestone Event is actually achieved. The Target Dates and

Outside Dates are subject in all cases to Extraordinary Force Majeure.

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Milestone Event

Target Date

1. Completion of Ground Leases,

Completion and Lease Guaranty and For

Sale Covenants

2. All Zoning Approvals

3 months from the date of this Agreement

13 months after the date of this Agreement (subject to Section 7.2 below)

3. Closing

4. Completion of Bid documents per

Section 7.4.2(d) and completion of negotiation of bids from general contractor(s) and all subcontractors to achieve Pad Completion

5. Escrow Release Date

1 month after all Zoning Approvals

16 months after Milestone #3

3 months after Milestone /4

Same day as Milestone #5

6. Construction Commencement

34 months after Milestone #6

8. Final Completion 0’f Common Areas 12 months after Milestone #7

7. Completion

and all other Improvements that are for use by general public

Milestone Event

1. Completion of Ground Leases,

Completion and Lease Guaranty and For

Sale Covenants

2. All Zoning Approvals

3. Closing

4. Completion of Bid documents per

Outside Date

July 31, 2007

20 months after the date of this Agreement (subject to Section 7.2 below)

3 months after all Zoning Approvals

20 months after Milestone #3 subject to-

Section 7.4.2(d) and completion of Force Majeure Events (not to exceed 120

negotiation of bids from general days in the aggregate) contractor(s) and all subcontractors to achieve Pad Completion

5. Escrow Release Date

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6 months after ’Milestone #4, subject to Force Majeure Events (not to exceed 120 days in the aggregate), and subject to an extension of 3 additional months provided that during such 3 month period Developer increases payments of Base Rent under this Agreement to the level required under Section 5.4.2

-6. Construction Commencement

7. Completion

8. Final Completion of Common Areas

and all other Improvements that are for use by general public

1 month after Milestone #5

40 months after Milestone4 6, subject to’ Force Majeure Events (not to exceed 120 days in the aggregate), and subject to an extension of 12 additional months so tong as Developer is using all Commercially Reasonable Business Efforts to diligently and continuously achieve Completion, and subject to payments of Base Rent being increased as required in Section 5.4.5

24 months after Milestone #7

7.2 Adjustment to Certain Dates. In the event that Developer has not

secured the items listed in Section 7.3.1(i) and 7.3. l(ii) below after using Commercially Reasonable Business Efforts with respect thereto, or if achieving the Zoning Approvals actually requires the adoption and approval of a planned unit development or requires the approval of the District of Columbia Board of Zoning Adjustment, then, with respect to the Milestone Events described in Section 7.1 of this Agreement, an additional six (6) months shall be added to the Target Date and an additional eight (8) months shall be added to the Outside Date for obtaining Zoning Approvals.

7.3 Zoning Approvals.

7.3.1 District and Developer shall mutually determine what Zoning

Approvals, if any, are required for the A Parcels and Common Areas in order to construct and use them in accordance with the Master Plan, and Developer acknowledges that the input of District in such determination shall not constitute the provision of legal advice. Developer, at its cost, shall initiate all proceedings reasonably necessary to obtain the Zoning Approvals, and using Commercially Reasonable Business Efforts, shall diligently prosecute the same to completion (including appeals if necessary). Developer shall use diligent and Commercially Reasonable Business Efforts to obtain a final decision with respect to all Zoning Approvals on or before the Target Date therefor set forth in Section 7.1. In order to facilitate Developer’s efforts in this regard, Developer agrees to use commercially reasonable efforts to secure the following, it being understood that (i) and (ii) below constitute part of the Zoning Approvals:

(i) written statements from the Director of the Department of

Consumer and Regulatory Affairs to Developer that (a) the Commission of Fine Arts and the National Capital Planning Commission do not have jurisdiction over the plans for development of the Project by Developer and therefore there will not be any referral to the Commission of Fine Arts and National Capital Planning Commission for review m~d (b) it will not be required that the Commission of Fine Arts and National Capital Planning Commission formally review and approve building permits for Improvements on the A Parcels and Common Areas; and

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(ii) A written statement from the Director of the Department of Consumer and Regulatory Affairs that the Improvements on the A Parcels will utilize the rights-of-way for Tenth and I Streets for permitting purposes, and thfit the streets, which are presently closed, will be opened and reused in coordination with the proposed development.

7.3.2 If any Zoning Approval is denied by the applicable

Governmental Authority, Developer and District shall modify the Master Plan as promptly as possible so as to facilitate Developer obtaining all Zoning Approvals, and any dates and time periods set forth in the Project Documents that depend upon the issuance of all Zoning Approvals shall be extended by a reasonable period of time, as mutually agreed by District and Developer, to reflect the delay in obtaining such approvals.

7.4 Design of Improvements.

7.4.1 Attached hereto as Schedule 12 is a list of approved architects

and other design professionals (as so designated, "Design Professionals"). All other architects and design professionals and consultants selected by Developer or other Developer Parties to be involved in the design of any part of the Improvements (in the role specified on Schedule 12) shall be approved by District in writing, which approval shall not be unreasonably withheld. When so approved, such architects and/or other design professionals or consultants shall be deemed Approved Architects and/or Design Professionals for the purpose of this Agreement. At the request of the District, the agreement (including the scope of work) with any such Design Professional shall be provided to District. The Design Professionals shall be referenced to as the "Key Professionals!’. All fees and charges of such Key Professionals shall be included in the applicable budget (i.e., Master Plan Developer Cost Budget, Closing Developer Cost Budget, Escrow Release Date Developer Cost Budget). No Key Professionals may be a Prohibited Person at the time of execution of its contract.

7.4.2 Developer, at its costs, shall cause all Improvements to be

designed. All such designs shall be in conformity with the Master Plan, Governmental Requirements and this Agreement. All design documents described in (a)-(e) in the sentence below shall be subject to the written approval of District or its design review committee, if established, subject to the parameters set forth in the definition of Significant Change. The timetable for submission and approval by District of the design documents for all Improvements shall be as follows:

(a) Schematic Drawings, as described below -6 months from the date of this

Agreement;

(b) Design Development Drawings, as described below - 5 months from approval of Schematic Drawings;

(c) Construction drawings (80% complete and suitable to obtain Permits), -

9 months from approval by District of Design Development Drawings;

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(d)

Bid documents (100% architectural drawings and construction

drawings), - 2 months after approval by District of construction drawings;

(e) Pre-approved for-construction Plans and Specifications - 1 month from

District approval of the documents referenced in 7.4.2(d) above.

Developer and District shall work cooperatively and in good faith to achieve the submission and approval of the design documents within the timetable outlined above; and to this end, Developer agrees that District shall participate in monthly meetings with Developer during preparation thereof.

7.4.3 For the purpose hereof, "Schematic Drawings" shall

adequately describe how the Site is to be developed in order that the proposed development may be adequately evaluated, and which shall include the following (subject to modifications as may be mutually agreed upon) (collectively, the "Schematic Drawings"):

(a) Site plans (1"=30 ’) showing location and type of all buildings and

structures, location of loading and parking, and location and type of Site amenities and community space, treatment of open space areas, conceptual landscaping design, and location of adjacent buildings, structures, driveways, access roads, street and curb lines,

and pedestrian structures;

(b) Landscape plan (1"=30’) showing the proposed location of plantings, including trees and shrubs;

(c) Schematic building plans, inclusive of underground garage facility

(1/20"=1 ’);

(d) Typical floors plans, inclusive of underground garage facility

0/20"=1’);

(e) Elevations and Cross Sections of proposed Improvements, inclusive of

underground garage facility (1/20"=1 ’);

(f) A chart showing floor area, floor area ratio, building coverage of the

Site, building height, number of parking spaces, area dedicated to pedestrian and recreational uses, and loading docks; and

(g) Topographic survey.

7.4.4 For the purposes hereof, "Design Development Drawings"

shall include a level of detail generally consistent with sixty percent (60%) complete construction drawings. Such Design Development Drawings shall be in conformity with the Zoning Approvals, the Master Plan and the approved Schematic Drawings. Such Design Development Drawings shall be at the indicated scale or other scale satisfactory to District, and shall include the following:

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(a) Site Plans (1"=30’) showing lot lines and dimensions, location and type

of all buildings and structures (including building footprint), location of loading and parking, location and type of site amenities and community spacd~ treatment of open space areas, utilities, landscaping, schematic indication of surface drainage, and adjacent buildings, structures, driveways, access roads, street and curb lines, and pedestrian structures

(b) A summary chart showing floor area, building coverage of the Site,

building height, floor area ratio, and number of parking spaces, area dedicated to pedestrian uses, and loading docks;

(c) Lower level, first floor and typical floor plan (1/8" equals 1’) showing:

(i)

Building entrances

(ii)

Service/loading

(iii)

Lobbies, public areas

(iv)

Elevators, stairs, other circulation

(v)

Common spaces, toilets, ducts, etc.

(vi)

Structural system;

(d) Front, back and side elevations (1/8" equals 1’) showing:

(i)

Roof lines

(ii)

Proposed building materials

(iii)

Floor to floor dimensions

(iv)

Building heights

(v)

Elevations of surrounding buildings;

(e)

Typical sections of buildings (1/8" equals 1’) showing:

(i)

Floor to ceiling dimensions

(ii)

Footings, structural system and floor thickness

(iii)

Relation to existing grades;

(f)

Garage plans;

(g)

Description and samples of final building materials; and

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(h) All appropriate details, including the location and description of mechanical/electrical and plumbing systems

7.4.5 District approved "for construction" plans and specifications

described in Section 7.4.2(e) shall be deemed the "Plans and Specifications". Each set of drawings referenced above shall be in conformity with the Master Plan, Governmental Requirements, and this Agreement and Developer shall not permit or suffer any Significant Changes in any of the foregoing drawings, including the Plans and Specifications, without the written approval of District, which approval shall not be u~easonably withheld (except as otherwise set forth in the definition of "Significant Changes").

7.4.6 District’s review and approval or disapproval of submissions

as heretofore provided shall be final and conclusive. District will not disapprove or require changes subsequently (except by mutual agreement or as required by Governmental Requirements) in, or in a manner which is inconsistent with, matters which it has previously approved.

7.4.7 Developer grants and hereby collaterally assigns to the

District all drawings and specifications, including the Plans and Specifications, in connection with the Project and the potential development of the Site, now or hereafter existing (collectively, "Development Work Product"), effective automatically and without further action, provided that Developer shall have a license to use the Development Work Product until any termination of this Agreement pursuant to Article XIII at which time such license shall automatically terminate without further action. District’s rights shall under this Section 7.4.7 be subject to prior or superior rights in favor of any Institutiona! Lender. Developer shall cause all Development Work Product expressly to provide that Developer shall have the right to so assign the Development Work Product to the District and that from and after the effective date of the termination of this Agreement, the District shall have the right to use such Development Work Product and rely thereon to the same extent as Developer. Promptly upon request of the District from time to time, Developer shall execute such assignments and assurances as the District may request to perfect the assignment of the Development Work Product to the District. Developer will indemnify, defend and hold harmless the District from and against any and all costs, claims or liabilities, including mechanic’s and materialmen’s liens and, caused by the failure of Developer to fully pay for all Development Work Product or any adverse claim to or lien upon the Development Work Product. Developer’s obligations pursuant to this Section 7.4.7 shall survive termination of this Agreement and shall not be subject to Liquidated Damages. The Development Work Product shall be assigned to and allocated among appropriate Ground Lessees and For Sale Residential Owners at the Escrow Release Date, at which time the interest of Developer in the Development Work Product shall cease. Accordingly, the Ground Leases and For Sale Covenants shall contain provisions similar to this Section 7.4.7.

The Approved Architects agree to make no further use of the Development Work Product, except for such drawings, specifications, and products of service which are

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proprietary to the Approved Architects or their subconsultants or subcontractors being part of their respective stock in trade or which are general in nature (which shall not include the Plans and Specifications).

7.5 Preparation Of Construction Drawings.

7.5.1 The Plans and Specifications shall be signed by the applicable

Approved Architect, who shall be licensed to practice architecture in and by the District. A District licensed structural, geotechnical, and/or civil engineer, as applicable, shall review and certify all final foundation and grading designs. In accordance with the applicable standard of care, the Approved Architect shall coordinate the work of its consultants and shall coordinate its services with any other design professionals (such as engineers and landscape architects) performing services on the Site. Upon Developer’s submission of the Plans and Specifications to District for approval in accordance with Section 7.4, the applicable Approved Architect shall further certify that the Improvements have been designed in accordance with all Governmental Requirements as those Governmental Requirements exist as of the date the Plans and Specifications were sealed by the Approved Architect.

Promptly after Final Completion, Developer shall coordinate the delivery by the Ground Lessees and For Sale Residential Owners to District of two (2) complete sets of "as-built" drawings (including all field notations and corrections) for such phase, component, or portion of the Improvements (each in two formats, hard copy and digital), Auto Cad Version :2004 (non-revisable) or more recent or in such other electronic, non-revisable format. For a period of five (5) years from Final Completion, the Ground Leases and For Sale Covenants shal! provide for each Ground Lessee and each For Sale Residential Owner to retain in its records a copy of all design materials with regard to the Improvements, including plans and specifications and contract specifications prepared by it for, or as a basis for, the submission of Plans and Specifications in accordance with Section 7.4.2 or otherwise used by the Ground Lessees or For Sale Residential Owners, as applicable, for the construction of the Improvements. At each such Ground Lessee’s or For Sale Residential Owner’s expense, copies of such materials shall be made available to District upon its request during the five (5) year period if such materials are different from the "as-built" drawings delivered to District.

7.6 Timing of Approvals. Developer agrees timely to prepare and submit

all applications and related materials relating to the Permits to the appropriate Governmental Authorities. Developer shall diligently pursue such applications using its Commercially Reasonable Business Efforts in order to receive timely and expeditious approval of such applications from all required Governmental Authorities so as to achieve Construction Commencement in accordance with Section 7.1. Developer agrees to provide District a copy of its applications for the Permits and to provide District a copy of such Permits when obtained.

7.7 Significant Changes.

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7.7.1

No Significant Changes to Plans and Specifications or Permits

agreements approved by District pursuant to this Agreement shall be made without District’s prior written approval. If on or prior to the Escrow Release Date, Developer and, after the Escrow Release Date, any Ground Lessee or For Sale Residential Owner desires to make any Significant Changes in the Plans and Specifications after the Plans and Specifications have been approved by District in accordance with Section 7.4.5, Developer (on its own behalf on or prior to the Escrow Release Date and as coordinator for all Ground Lessees and For Sale Residential Owners after the Escrow Release Date) shall submit the proposed changes to District for approval. The standard for District’s approval over Significant Changes is set forth in the definition of that term in this Agreement. District shall have no approval over changes to the approved Escrow Release Site Cost Budget and Escrow Release Development Cost Budget, it being understood, however, that District shall continue to have approval over Significant Changes to Plans and Specifications as set forth in the definition thereof. Developer (on its own behalf or as coordinator as aforesaid) shall provide District with reasonable written substantiation of any change to enable District to determine whether such change is a Significant Change.

7.7.2 Notwithstanding any other provisions of this Agreement,

District shall grant its approval of those elements of the Plans and Specifications and those changes in the Plans and Specifications which are required by any Governmental Authority; ~, however, that (i) District shall have been afforded a reasonable opportunity to discuss such element of, or change in, the Plans and Specifications with the Governmental Authority requiring such element or change and with the Approved Architect; and (ii) the Approved Architect shall have cooperated with District and such Governmental Authority in seeking such reasonable modifications of the required element or change as District may deem necessary or desirable. Developer and District each agree to use Commercially Reasonable Business Efforts to resolve District’s approval of such elements or changes, and District’s request for reasonable modifications to such required elements or changes, as soon as reasonably possible. Developer shall promptly notify District in writing of any changes requested by the District of Columbia government’s building inspectors during the permitting and construction phase.

7.7.3 District’s review and approval or disapproval in accordance

with this Agreement of any matter submitted to District shall be final and conclusive.

7.8 Permits. Developer agrees, at its expense, to proceed using Commercially Reasonable Business Efforts to pursue with the appropriate Governmental Authorities all Permits required to develop the Site in accordance with this Amendment. District shall be obligated to cooperate with Developer, in seeking such Permits and other approvals, to the extent necessary to enable Developer to achieve the same.

7.9 Construction of Improvements.

7.9.1 Developer agrees that Construction Commencement shall be

achieved by the date required in Section 7.1; and the Ground Leases and For Sale

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Covenants shall provide that the appropriate Developer Parties shall prosecute and diligently pursue the development and construction of the Improvements in accordance with the Master Plan, Construction Documents, and Govemmental~Requirements, and this Agreement, such that Completion shall occur by no later than the dates required in Section 7.1. The covenant to develop and construct contained in the Ground Leases and For Sale Covenants shall run with the land and otherwise remain in effect until Final Completion, at which time such agreements and covenants to develop and construct shall terminate. The Ground Leases and For Sale Covenants shall provide that all Improvements shall be constructed using new first-class quality materials in compliance with all Permits and in a first-class and diligent manner in accordance with the highest industry standards.

7.9.2 District shall have the right to review and approve (a) the

identity of each general contractor for the office and residential components of the Project, the Common Areas, and the subgrade parking and concourse Improvements, it being understood that District does not have approval of contractors or contracts for tenant improvement construction or retail improvement construction and (b) the general construction contract(s) for such Improvements (such approval under (a) and (b) not to be unreasonably withheld), including the allocation of costs thereunder between Site Costs and Developer Costs. The District shall have the right to review and approve all Significant Changes with respect to such General Contract(s), such approval not to be unreasonably withheld. Each general contractor so approved by District shall be a "General Contractor". No General Contractor may be a Prohibited Person at the time of entering into the applicable Construction Contract.

7.9.3 Developer shall provide to the District copies of all

Construction Contracts entered into by or on behalf of the Ground Lessees and For Sale

Residential Owners relating to the construction of the Improvements. Developer shall provide or coordinate the provision of to District copies of such other contracts, engineering studies, investigations and reports relating to the Site and the Improvements, as District shall request. All Plans and Specifications, engineering studies, investigations and reports for the Common Areas and the Interim B Parcel Improvements shall be owned by the applicable Developer Party subject to the provisions of Section 7.4.7.

7.9.4 Developer shall cause the streets and rights of way shown on

the Master Plan to be designed, constructed and completed in accordance with all Governmental Requirements. Such agreement with the District of Columbia Department of Transportation shall be subject to District’s approval which shall not be unreasonably withheld.

7.10 Site Preparation. The appropriate Developer Parties, as set forth in the Ground Leases and For Sale Covenants, shall be responsible for all preparation of the A Parcels and Reservation 174 for development in accordance with the Master Plan, Construction Documents, Governmental Requirements and this Agreement, including costs associated with demolition, construction of site improvements, utility relocation and abandonment, relocation and rearrangement of water and sewer lines and hook ups, and

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construction or repair of alley ways and abutting public property necessary for the Improvements. Prior to Escrow Release Date, District will remove any improvements on the Site it wishes to retain (otherwise, the Developer Parties may di’~pose of or use the

same, as they see fit). All such work, including but not limited to, excavation, backfill, and upgrading of the lighting and drainage, shall be performed under all required Permits and in accordance with all appropriate Governmental Authorities and Governmental Requirements. The Developer Parties shall enter into such agreements as are reasonably necessary with adjacent property owners such as, but not limited to, agreements for underpinning, tiebacks, and the operation of tower cranes, and air space agreements. The

B Parcel Restrictions shall contain such agreements as described in the preceding

sentence with respect to the B Parcels and Reservation 174, which shall be binding on successors and assigns. The Ground Lessees and For Sale Residential Owners shall be solely responsible, at its sole cost and expense, for providing appropriate construction barriers and construction signs during the period of construction and any subsequent renovation. It is understood that the rights-of-way for 10th and I Streets and associated sidewalks shall be included initially in the A Parcels, and that the Ground Lessees and

For Sale Residential Owners shall have exclusive rights to use such rights-of-way for construction and development.

7.11 District Inspections. After the Escrow Release Date, District shall

reserve for itself and its representatives in the Ground Leases and For Sale Covenants, the right to enter the Site upon two (2) Business Days’ advance notice, (i) during customary business hours from time to time for the purpose of performing routine inspections in connection with the development and construction of the Improvements, and (ii) at any time and from time to time after an Event of Default by the applicable Developer Party, which remains uncured or in the case of emergency as determined by District in its sole discretion. If, during such hours, admission to the Site for the purpose aforesaid cannot be obtained, or if at any time by reason of an emergency condition an entry shall be deemed necessary for the protection of the Site or Improvements, whether for the benefit

of any Developer Party or not, District, or District’s agents or representatives, may (after

exercising reasonable effbrts to provide advance notice to any Developer Party, which in emergencies may be by telephone, email or any other advance method convenient and available under the circumstances) enter the Site or Improvements and accomplish such purpose. Developer Parties understand that District or its representatives will enter the Site from time to time for the sole purpose of undertaking the inspection of the Improvements to determine conformance to the Master Plan, the Construction Documents, and this Agreement. Developer waives any claim that it may have against

District, its officers, directors or employees arising out of any such entry upon the Site except for any claim arising from the gross negligence or willful misconduct of District,

its officers, directors or employees. Any inspection of the Improvements or access of the

Site by District under this Agreement or under any Ground Lease or For Sale Covenants

shall not be deemed an approval, warranty or other certification as to the compliance of the Improvements or Site with the any building codes, regulations or standards, including, without limitation, building engineering and structural design, or other Governmental Requirements. District shall use reasonable efforts to minimize disruption

or inconvenience to Developer in connection with its exercise of any of its rights

described in this Section 7.11. District and its agents, contractors, and representatives

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sha!l have the authority to take such materials and equipment onto the Site as may be necessary for accomplishing the purposes set forth in this Section 7.11.

7,12 Construction Manager. District shall have the fight, at District’s expense, to utilize a construction manager or other consultant to assist District in the review of the materials pursuant to this Article VII and its inspection of the development and construction of the Improvements pursuant to this Article VII.

7.13 Progress Reports. After the Escrow Release Date, and until Final

Completion, Developer shall make written reports to District, no less frequently than monthly, as to the progress of the construction of the Improvements, in such form and detail as may reasonably be requested by District, and shall include a reasonable number of construction photographs taken since the last report submitted by Developer. Developer will also contemporaneously submit to District any progress reports (including requisitions) it submits to any Approved Mortgagee. At least monthly Developer shall convene a meeting with District to analyze the progress of construction of the Improvements. District’s staff and Developer shall further communicate and consult informally as frequently as necessary to ensure that any construction issues receive prompt and speedy consideration. Such meetings are intended to facilitate the review process described above and to establish a single point of responsibility for review and approval. Developer shall deliver or cause to be delivered reasonably detailed minutes of each such progress report meeting to District within five (5) Business Days thereafter.

7.14 Submissions. In addition to the other submissions required by this

Article 7, Developer shall deliver the following to District:

(a) Developer shall prepare and submit to District copies of applications for

all Permits no later than the later of the next monthly meeting or five (5) Business Days after filing with the Governmental Authorities.

(b) Developer shall deliver to District for its review and approval draft

(i) master Declaration of Covenants and Reciprocal Easement Agreement ("Site COREA") for the A Parcels; (ii) agreement for each portion of Improvements in the A Parcels where there exists a primary use and a retail use in the same Improvements (the "Building COREA"); and (iii) a restrictive covenant and easement agreement in favor of the A Parcels and binding upon the B Parcels (the "B Parcel Restrictions") which have been recorded among the land records of the District of Columbia on November 1, 2007 as Instrument No. 2007139044; provided, however, that to the extent that any provisions or components of the Master Plan other than as set forth in the B Parcel Restrictions affect or apply to the B Parcels, District shall have the authority, exercisable in its sole discretion, to waive any such provisions or components without obtaining the consent or approval of any Developer Party. Prior to Closing, District and Developer shall work together in good faith to reach agreement on such documents and the terms upon which District shall agree to be bound by same.

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(c)

At least thirty (30) days but no more than sixty (60) prior to the Escrow

Release Date, Developer shall provide to District an updated statement of sources and "

uses of all funds.

(d) Contemporaneously with delivery of a draw request to an Approved

Mortgagee, Developer shall coordinate the delivery by the appropriate Ground Lessees and For Sale Residential Owners of a copy of each such draw request to District.

(e) The Ground Leases and For Sale Covenants shall provide that promptly

upon receipt, such Developer Party shall deliver, or cause to be delivered to District

copies of all notices of default or similar written notices by Approved Mortgagees and notices of violation issued by Governmental Authorities.

(f) On or before October 1 of each year following the Escrow Release Date

(ending on Final Completion), Developer shall coordinate the delivery to District of an updated proposed Site Costs budget and Developer Costs budget, allocated for each Parcel for the next calendar year. Additionally, on the thirtieth day of each calendar quarter, Developer shall deliver to District quarterly updates (through the immediately preceding quarter) of the Escrow Release Site Cost Budget, Escrow Release Developer Cost Budget and Escrow Release Proforma with a comparative statement showing actual expenditures and, if applicable, projected modifications to proforma calculations. In no event shall District have the right to approve changes in any budget after the Escrow Release Date, it being understood that District’s sole approval right shall be with respect to Significant Changes.

7.15 Audit.

7.15.1 Developer shall cooperate, at Developer’s sole cost and expense, with District in providing District and its designees reasonable access to Developer Parties’ books and records for the Project during normal business hours for these purposes. Developer shall, at Developer’s cost and expense provide any assistance to District which is reasonably necessary in connection therewith, including reasonable incidental copying and instructing its staff to answer questions and copy documents for District or its examiner; provided, however, any copy request by District that shall require a third party copier (i.e., large copy jobs) shall be paid by District at its sole cost and expense. Developer shall maintain its books and records in accordance with GAAP.

7.15.2 If District inspects or audits, or causes the inspection or audit of such books and records, District shall cause the audit or inspection to be completed with reasonable diligence and the results of such inspection or audit, including a copy of the inspection or audit report, to be communicated in writing to Developer and the appropriate Ground Lessee or For Sale Residential Owner within two (2) months thereafter. If such inspection or audit shows any material errors in such books and records, the appropriate Ground Lessee or For Sale Residential Owner pursuant to its Ground Lease or For Sale Covenants shall correct all such errors and inaccuracies and cause all financial statements related thereto to be corrected and re-issued. District shall

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bear its own costs and expenses of any such inspection or audit; provided, however, if calculation of the total relevant costs (i.e., Developer Costs and Site Costs, including Imputed Return) is incorrect by four percent (4%) or more, the Grcmnd Leases and For Sale Residential Covenants shall provide for the appropriate Ground Lessee or For Sale Residential Owner to reimburse District for all of its costs and expenses incurred in conducting such an inspection or audit (but not in excess of an amount equal to the error) within thirty (30) days of District’s notice of its reimbursement request accompanied by reasonably supporting documentation. Any inspection or audit performed pursuant to the terms of this Section 7.15 may be conducted by one or more certified public accountants employed by District or by independent, certified public accountants who are members of the American Institute of Certified Public Accountants that are not engaged on a contingent fee or share of return basis. District may audit the books and records of Ground Lessees or For Sale Residential Owners (including those maintained by Developer) no more frequently than once in any 12-month period. A final audit under this Development Agreement may be conducted at any time within eighteen (18) months following the Stabilization Date.

7.16 Environmental Covenants. The Ground Leases and For Sale Covenants shall provide that from and after Construction Commencement, each such Developer Party shall comply in all respects with all applicable Environmental Laws

pertaining to Parcel A and Reservation 174 and to all improvements and appurtenances, including without limitation all uses, activities, and conditions on, under, or about Parcel

A and Reservation 174, and shall perform all Remedial Actions and other remediation-

related activities (whether due to existing or future contamination or conditions) as may

be required pursuant to any Environmenta! Law, provided, however, the foregoing shall

not affect the inclusion of certain remediation costs in Site Costs pursuant to

Section 11.4.2.

7.17 Environmental Indemnification.

7.17.1 Subject to Section 11.4, the Ground Leases and For Sale

Covenants shall provide that each Ground Lessee and For Sale Residentia! Owner shall promptly indemnify, defend and hold harmless the Indemnified Parties from and against any and all Environmental Liabilities and Costs, known or unknown, and the Ground Leases and For Sale Covenants shall provide that each Ground Lessee and For Sale Residential Owner shall expressly assume any and all Environmental Liabilities and Costs, known or unknown.

7.17.2 Developer hereby covenants not to sue and forever releases

and discharges all its present, former and future parent, subsidiary and related entities and all its and their respective present, former and future officers, directors, agents and employees, and each of its and their heirs, personal representatives, successors and assigns, of and from any and all Environmental Liabilities and Costs. The provisions of this Section 7.17 shall survive termination of this Agreement. Similar provisions shall

be inserted in the Ground Lease and For Sale Covenants.

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7.18

District Signage. At all times during the development of the Site,

there shall be in place at the Site at least one sign identifying District in a manner reasonably satisfactory to District, and identifying the Project "as a development undertaken in cooperation with District and shall so identify the Project on all other signs placed on the Site (the same being a Developer Cost). These signs shall be designed in accordance with the terms of this Agreement and erected within ninety (90) days after the Escrow Release Date. Notwithstanding the foregoing, Developer must additionally comply with all Governmental Requirements regarding the installation of signage at the Property.

7.19 Developer’s Right to Terminate. If, after the Escrow Release Date,

(a) Developer discovers a below-grade condition on the site (i.e. a pre-historic burial ground), and the incremental cost of addressing or remediating such condition exceeds Thirty Million and no!100 dollars ($30,000,000.00) (as mutually determined by District and Developer), or (ii) Developer discovers that the actual cost of addressing or remediating any below-grade condition on the Site that existed as of the Escrow Release Date exceeds Developer’s budgeted costs (as set forth in the Escrow Release Site Cost Budget and Escrow Release Developer Cost Budget) for addressing or remediating such condition by more than Thirty Million and no/100 dollars ($30,000,000.00), then Developer shall have the right to terminate this Agreement. From and after the date that Developer terminates this Agreement pursuant to this Section 7.19 and returns such possession and control to District in accordance with the preceding sentence, the parties shall have no further obligations or liabilities under this Agreement.

7.20 Performance of Article VII Obligations. It is understood that after

the Escrow Release Date, Developer’s obligations with respect to the matters covered in this Article VII shall be that of coordination of the matters herein described for the Ground Lessees and the For Sale Residential Owners (so as to provide a single coordinating point for District).

VIII. Commitments to Community

8.1 LSDBE Commitment.

8.1.1 Developer has executed and delivered to District the LSDBE

MOU.

8.1.2 In addition to its obligations under the MOU, Developer

agrees to cause one or more LSDBEs (other than Developer) to (i) at the time the LSDBE is admitted as an owner in Ground Lessee or For Sale Residential Owner, own a beneficial own.ership interest in each Parcel that is within the Leased Parcels or is a For Sale Residential Parcel, that is not less than twenty percent (20%) of the aggregate beneficial ownership interests in such Parcel that are owned by Developer, each Primary Member and any LSDBEs (it being understood that any such LSDBE may have investors as non-managing members or limited partners with fights typical of institutional investors)(collectively, together with the obligations under the LSDBE MOU, the "LSDBE Requirements"). The beneficial ownership described in the

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foregoing clause (i) shall be determined with reference to the capital and profits of the Person that owns the applicable Parcel, and the terms of ownership, including the returns payable in respect such beneficial ownership interest, shall°’be pari passu with the terms of ownership by Developer or its Affiliates owning the beneficial interests in such Person, other than the LSDBEs (other than investment by Developer or its Affiliates as an Institutional Investor or Institutional Lender).

8.1.3 In the event that the LSDBE Requirements are not satisfied as

of the scheduled Target Date (or the corresponding Outside Date) for the Escrow Release Date (as determined by Section 7.1), District agrees to extend the Target Date (and the corresponding Outside Date) for the Escrow Release Date for a period not to exceed one hundred eighty (180) days so long as Developer has satisfied all of the other Escrow Release Conditions and is using Commercially Reasonable Business Efforts to satisfy the LSDBE Requirements. After such one hundred and eighty (180) day period, and provided all of the other Escrow Release Conditions remain satisfied, District shall permit Developer to proceed to the Escrow Release Date notwithstanding that the LSDBE Requirements are not satisfied, in which event the Ground Lessees (and Guarantors under the Completion and Lease Guaranty) shall be jointly and severally liable for a payment of $200,000 to District, and for an additional $200,000 payment for each additional 30 day period that the LSDBE Requirements remain unsatisfied beyond the Escrow Release Date (any of such payments under this Section 8.1 being "LSDBE Payments").

8.1.4 If any LSDBE defaults in the payment of the capital required

hereby, beyond all notice and cure periods in the applicable Governing Documents (a "LSDBE Default") then Developer and its Affiliates shall use "best efforts" to remove the defaulting LSDBEs from the applicable ownership structure and find one or more replacement LSDBEs to make the investment that was to have been made by the defaulting LSDBE (provided, however, Developer’s use of "best efforts" shall not require Developer to pay the defaulting LSDBE more than the fair market value of the ownership interest of the defaulting LSDBE). In lieu of removing the defaulting LSDBEs, the Developer and its Affiliates may use "best efforts" to limit the defaulting LSDBE’s ability to make any further investments and to find one or more additiona! LSDBEs to make the investment that was to have been made by the defaulting LSDBE. If Developer cannot cure the LSDBE Default within 180 days of the occurrence of same, then the Ground Lessees and For Sale Residential Owners shall be jointly and severally liable for a LSDBE Payment in the amount of $200,000 in the aggregate, and shall be jointly and severally liable for an additional $200,000 payment in the aggregate for each additional thirty (30) day period that the LSDBE Requirements remain unsatisfied. For the purposes of clarity, for any thirty (30) day period during which any or all Developer Party or Parties does not satisfy the LSDBE requirement, only $200,000 in the aggregate shall be due as an LSDBE Payment; provided, however, that after Pad Completion, the Ground Lessees and For Sale Residential Owners shall no longer be joint and severally liable but rather each Ground Lessee and For Sale Residential Owner shall be liable for its pro rata share of the LSDBE Payments solely as to an LSDBE Default with respect to such Ground Lessee or For Sale Residential Owner, which pro rata share is set forth in the Ground Leases and For Sale Covenants.

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Any successor to a defaulting LSDBE during the period the LSDBE Requirements are in effect shall be an LSDBE at the time of admission and shall be subject to District’s prior approval, which approval shall not be unreasonably withheld, conditional or delayed.

8.1.5 In no event shall any LSDBE Payments be included in Total

Costs or Developer Costs.

8.1.6 Notwithstanding anything in this Section 8.1 to the contrary,

until Pad Completion, it shall be an Event of Default under this Agreement and after Pad Completion, it shall be an Event of Default under the applicable Ground Lease or For Sale Covenant: (i) if at any time the LSDBE Requirements are not satisfied and Developer is not using Commercially Reasonable Business Efforts to satisfy such LSDBE Requirements, or is not using "best efforts" if required to do so under Section 8.1.4, (ii) or if, for any reason, the LSDBE Requirements are not satisfied within one (1) year of the scheduled Outside Date for the Escrow Release Date (as determined by Section 7.1), irrespective of any Commercially Reasonable Business Efforts or ’best efforts" being used by any Developer Party.

8.1.7 It is understood that the transfer Restrictions in the Ground

Leases and For Sale Covenants shall allow the LSDBEs to transfer their respective interests at the time a transfer is permitted by the respective Developer Party to a third party under the applicable Ground Lease or For Sale Covenants, and the LSDBE Requirements shall expire with respect to such Ground Lease or For Sale Covenant on the date any such transfer is permitted. The LSDBE Requirements shall be obligations of the Developer Lessees and For Sale Residential Owners only as of and after the Escrow Release Date, and accordingly, shall be incorporated in the Ground Leases and For Sale Covenants.

8.2 First Source Commitment. Developer has executed and delivered to

District the First Source Agreement with DOES in a form approved by District and attached as Schedule 16 hereto ("First Source Agreement"). As provided in the First Source Agreement, Developer shall be relieved of liability thereunder upon assignment to and assumption by the Ground Lessees and For Sale Residential Owners.

8.3 Community Involvement Plan. Developer has prepared, a specific

plan and program for providing the community that is impacted by the Project with information about, and input into, the Project as it is designed, developed, constructed and operated ("Community Involvement Plan"), a copy of such Community Involvement Plan being included in the Master Plan. Prior to the Escrow Release Date, Developer shall comply with the terms of the Community Involvement Plan and thereat~er shall coordinate compliance by the Ground Lessees and For Sale Residential Owners.

IX. Preparation and Execution of Documentation

9.1 Ground Lease. Within the time flame stated in the chart set forth in

Section 7.1, Developer and District shall negotiate in good faith the form of a ground

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lease ("Ground Lease") between District and Developer. Notwithstanding references in this Agreement to a single Ground Lease, Developer and District agree that each use category shall be subject to a separate Ground Lease and Memorandum of Lease (all such separate Ground Leases are herein called the "Ground Leases"), separately assignable and financeable, provided that in no event shall less than all of such separate Ground Leases and Memoranda of Lease be executed and delivered on the Escrow Release Date. Each such Ground Lease shall not be cross-defaulted except as expressly provided herein.

9.2 For Sale Covenants. Within the time frame stated in the chart set

forth in Section 7.1, Developer and District shall negotiate in good faith the form of use

covenants and restrictions ("For Sale Covenants"). The For Sale Covenants shall include such terms as may be required or contemplated by this Agreement. In addition, the For Sale Covenants shall provide that the For Sale Residential Owner(s) shall use Commercially Reasonable Business Efforts to obtain presales for residential units.

9.3 Closing Agreement. No later than Closing, Developer and District

shall negotiate in good faith the form of closing agreement ("Closing Agreement"). The Closing Agreement shall be executed at the Closing.

9.4 Closing. Closing ("Closing") shall occur prior to the Outside Date for

Closing, subject to the satisfaction of the conditions set forth in Sections 9.4.1 and 9.4.2.

9.4.1 District’s obligation to proceed to Closing shall be

conditioned on the satisfaction of each of the following conditions, any of which may be waived by District in writing:

9.4.1.1. There shall exist no uncured Event of Default on the part of Developer or Guarantors of any of their material obligations under this Agreement or the Development Guaranty.

9.4.1.2. All representations and warranties of Developer and Guarantors under this Agreement and the Development Guaranty shall be correct in all material respects as of the date of Closing.

9.4.1.3. Intentionally Deleted.

9.4.1.4. Intentionally Deleted.

9.4.1.5. There shall have occurred no material adverse

change in financial condition of either Developer or any Guarantor from the date

of the Financial Statements.

9.4.1.6. There shall exist no order of any court that is binding upon District and that prohibits District from consummating Closing under this Agreement.

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9.4.1.7.

All Zoning Approvals, including with respect

to Parcel A, Reservation 174 (if same remains in the Project) and the Common "

Areas shall have been obtained.

9.4.1.8. The Gross Parcel Value and Net Parcel Value

of each Parcel shall have been calculated pursuant to Section 5.2.3.

9.4.1.9. Developer shall have timely performed all of

its obligations under Article VII.

9.4.1.10. Developer and Guarantors shall have delivered

to District their respective Governing Documents, certified as correct and complete.

9.4.1.11. Intentionally Deleted.

9.4.1.12. District shall have approved the Closing Developer Cost Budget, Closing Site Cost Budget, Closing Proforma and Closing Sales Projections and the allocation of costs described in Section 5.13 of this Agreement.

9.4.1.13. District and Developer shall have agreed upon

the form and substance of each Ground Lease, the For Sale Covenants, the For Sale Deed, Affordability Covenants, Closing Agreement, Site COREA, Building COREA, Parcel B Restrictions, 174 License, ROFO, Completion and Lease Guaranty, Common Area Association documentation, Lot 47 Single Lot Covenant and any memoranda thereof.

9.4.2 Developer’s obligation to proceed to Closing shall be

conditioned on the satisfaction of each of the fol!owing conditions, any of which may be waived by Developer in writing:

9.4.2.1. Title to the Leased Parcels shall be in substantially the same condition as set forth on Schedule 20.

9.4.2.2. All representations and warranties of District

under this Agreement shall be correct in all material respects as of the date of Closing.

9.4.2.3. There shall exist no uncured default on the part

of District of any of its material obligations under this Agreement.

9.4.2.4. There shall exist no order of any court that is

binding upon Developer or any Guarantor and that prohibits Developer or such Guarantor(s) from consummating Closing under this Agreement.

9.4.2.5. All Zoning Approvals shall have been

obtained.

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9.4.2.6.

The Gross Parcel Value and the Net Parcel

Value of each Parcel shall have been calculated pursuant to Section 5.2.3.

9.4.2.7. District shall deliver to Developer and Guarantors the legal sufficiency memorandum of OAG described in Section 9.4.3.6 below.

9.4.2.8. Developer shall have approved the Closing

Developer Cost Budget, Closing Site Cost Budget, Closing Proforrna and Closing Sales Projections and the allocation of costs described in Section 5.15 of this Agreement.

9.4.2.9. District and Developer shall have agreed upon the form and substance of the agreements referenced in Section 9.4.1.13 and any memoranda thereof.

9.4.3 At Closing, District and Developer shall proceed as follows:

9.4.3.1. District and Developer shall execute and

deliver to each other the Closing Agreement.

9.4.3.2. District and Developer shall agree upon

pursuant to the Closing Agreement: (i) the final agreed-upon form of each of the Ground Leases, the Memorandum of Ground Lease, the For Sale Deed, the For Sale Covenants and Affordability Covenants, (ii) the Completion and Lease Guaranty and (iii) the other agreements described in Section 9.4.1.13.

9.4.3.3. Developer and Guarantors shall execute and

deliver to District a certificate certifying that the conditions set forth in Sections 9.4.1.1 through 9.4.1.10 have been satisfied.

9.4.3.4. Developer and Guarantors shall provide copies of their respective Governing Documents, certified as correct and complete.

9.4.3.5. Intentionally Deleted.

9.4.3.6. District shall deliver to Developer and

Guarantors the legal sufficiency memorandum of OAG in substantially the form attached hereto as Schedule 21, addressing the Closing Agreement and the form of the Project Documents that are agreed upon at Closing.

9.4.3.7. Developer, Guarantors and District shall

execute and deliver such other documents as may be necessary or customary.

9.5 Closing Agreement. The final form of each of the Ground Lease, each Memorandum of Ground Lease, the For Sale Deed, and the For Sale Covenants, the Completion and Lease Guaranty, the Site COREA, the Building COREA, the Affordability Covenants, the 174 License (and memorandum thereof), the Common Area

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Association documentation and the Lot 47 Single Lot Covenant shall be agreed upon pursuant to the Closing Agreement. The Closing Agreement shall provide that the final form of each of the foregoing shall be executed by District and Developer upon the satisfaction of all of the following conditions ("Escrow Release Conditions"):

9.5.1 District (or such design review committee as District shall

approve) shall have approved the Construction Documents for all Improvements, such approval not to be unreasonably withheld (except as set forth in the definition of "Significant Changes") so long as such Construction Documents are consistent with design documents previously approved.

9.5.2 Developer shall have obtained all Permits required for any

Remedial Action and Construction Commencement, and all other Permits required for the prosecution and completion of construction of the Improvements shall be obtainable as a matter-of-fight so long as such Improvements are constructed in accordance with Construction Documents approved by District.

9.5.3 Developer shall have certified and demonstrated to District

(i) the availability of sufficient funds to pay all costs set forth on the Escrow Release Site Cost Budget and Escrow Release Developer Cost Budget (and delivered to District a copy of each Loan Commitment Letter, if any, evidencing any Approved Mortgagee’s intent to provide Construction Financing in connection with any portion of the Project, and (ii) that Developer shall have incurred and paid at least $20,000,000 in Equity toward Site Costs and Development Costs, and (iii) that there have been no Significant Changes that have not been approved by District to the Constructions Documents.

9.5.4 District and Developer shall have approved the Escrow

Release Developer Cost Budget, Escrow Release Site Cost Budget, Escrow Release Proforma and Escrow Release Sales Projection pursuant to Section 5.2.4.

9.5.5 The applicable Developer Party shall have entered into the

Construction Contract for the below-grade concourse and parking Improvements and shall have given notice to proceed to the General Contractor thereunder for excavation, sheeting and shoring, and any Performance Bonds and Completion Bonds required by District under this Agreement for the Construction Contract for subgrade parking and concourse Improvements shall have been provided to District.

9.5.6 Developer and Guarantors shall have delivered to District

their certificate that Construction Commencement will occur on the Escrow Release Date.

9.5.7 Developer shall have paid to District all amounts that are then

due and payable under this Agreement and each Ground Lease, and there shall exist no material default on the part of Developer or Guarantors under any Project Document as of the Escrow Release Date.

9.5.8 Developer shall have made the submission described under

Section 7.14(c).

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9.5.9

Developer shall have furnished or caused to be furnished to

District certificates of insurance or duplicate originals of insurance policies required of Developer under Article 12 below with respect to the subgrade parking and concourse Improvements.

9.5.10 Developer shall have provided the Governing Documents and

organization chart (each of which shall be satisfactory to District in its reasonable

discretion) for each Developer Party and satisfactory evidence of the applicable Developer Party’s authority to acquire and perform its obligations under this Agreement.

9.5.11 Developer shall have delivered, for each Developer Party and

each of their respective Members, original good standing or equivalent certificates, each recently issued by the appropriate governmental body of the jurisdiction of incorporation or formation of such Person, and if required in order to do business in District as a foreign corporation or limited liability company, original certificates of qualification to do business as a foreign entity, for such Person, each recently issued by the appropriate governmental body of District.

9.5.12 There shall have occurred no material adverse change in the

financial condition of either Developer or any Guarantor from the date of the Financial Statements.

9.5.13 All Construction Contracts for the Project to achieve Pad

Completion (and, if requested by Developer, the Construction Contracts for any other Improvements) shall have been approved by District in writing.

9.5.14 There shall exist no uncured default on the part of Developer or

Guarantors of any of their material obligations under the Completion and Lease Guaranty upon its execution.

9.5.15 All representations and warranties of Guarantors under the

Completion and Lease Guaranty shall be correct in all material respects upon its execution.

9.5.16 Developer and Guarantor shall have caused their respective legal counsel to deliver to District such legal opinions as are reasonably satisfactory to District.

9.5.17 There shall have been no modifications, changes or additions to

any of the documents referenced in Section 9.4.l.13 except as approved by District in writing.

9.6 Concurrent Activity.

9.6.1 Concurrently with the execution of the Closing Documents,

District shall deliver to Developer and Guarantors the legal sufficiency memorandum of OAG in substantially the form attached hereto as Schedule 21, addressing the executed Project Documents being executed on the Escrow Release Date.

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9.6.2

Concurrently with the execution of the Closing Documents,

Developer shall pay or cause to be paid each payment of Base Rent due under the Ground Leases, and District and the applicable Developer Parties shall execute the Memorandum of Development Agreement in the form attached hereto as Schedule 22, the COREA and the documents referenced in Section 9.4.1.13 to the extent not theretofore executed pursuant to the terms hereof.

9.7 Other Legal Documents. Within the time frame stated in the chart set

forth in Section 7.1, Developer and District shall negotiate in good faith the form of Completion and Lease Guaranty, For Sale Deed and Affordability Covenants; and by Closing, Developer and District shall negotiate in good faith the form of the Memorandum of Ground Lease, the Site COREA, the Building COREA, the Parcel B Restrictions, the 174 License and the Common Area Association documentation, all in conformance with the terms of this Agreement, as applicable. The Completion and Lease Guaranty, Ground Leases and For Sale Covenants shall include terms that are consistent with the Development Guaranty and this Development Agreement. The Ground Leases and For Sale Covenants shall include the failure to achieve Milestone Event No. 7 by the applicable Outside Date as an Event of Default (with cure rights commensurate with those under Section 13.1.2(ii)). Remedies for failure to meet Milestone Event No. 8 by the applicable Outside Date shall be as set forth in the definition of Final Completion and in the Completion and Lease Guaranty. District and Developer will work together diligently and in good faith to prepare, negotiate and complete the documents required for the first Milestone Event set forth in Section 7.1 and the other documents listed in this Section 9.7 in order to satisfy the applicable Target Dates and Outside Dates set forth in the chart in Section 7.1.

9.8 Reeordation. Following their execution, the Memorandum of Development Agreement, each Memorandum of Ground Lease, the For Sale Deed and the For Sale Covenants, the Site COREA, the Building COREA, the Parcel B Restrictions, Affordability Covenants, the Lot 47 Single Lot Covenant, the memorandum of the 174 License, and the memorandum of the ROFO shall be promptly recorded by Developer in the Land Records of the District of Columbia prior to any security instrument. Provided, however, prior to the Escrow Release Date, Developer shall present to District a form of memorandum of For Sale Covenants to be recorded in lieu of the full document, such form to be subject to District’s approval.

9.9 Right of First Offer. Ninety (90) days prior to the Closing, Developer shall deliver to District for its review and approval (and negotiation) a form of an agreement (the "ROFO"), to be executed an in effect at the Closing, that contains the following terms:

9.9.1 If District has excluded from this Agreement any B Parcel as

described in Section 4.5 of this Agreement, and, at any time prior to the date that is the earliest of (i) either a Ground Lease or the For Sale Covenants shall terminate or expire

by its respective terms, (ii) a Person belonging to the Hines Group or a Person belonging to the Smith Group shall no longer "Control" the initial tenant under a Ground Lease or (iii) the date that is five (5) years after Completion, District shall

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determine to (i) allow all or substantially all of any subdivided or other legally transferable portion of the B Parcel to be used for private office, residential, retail or hotel uses that are not normally considered ancillary to a civic, cultural, governmental or other public use, and (ii) sell, lease or otherwise transfer such B Parcel for such use, then so long as neither Developer nor any Developer Party is in default beyond any applicable cure period, under the Development Agreement, any Ground Lease or any For Sale Covenants, Developer or its designee (which, unless District shall otherwise approve, must be a party which meets the qualifications for Permitted Transfer) shall have a priority right to enter into such sale, lease or transfer transaction, generally as follows:

9.9.2 District shall notify Developer that District desires to sell,

lease or transfer such B Parcel and may designate in such notice the terms and requirements, if any, of the District with respect thereto ("Transaction Notice"). During the thirty (30) day period following Developer’s receipt of the Transaction Notice ("Response Period"), Developer may notify District of the terms ("Developer’s Terms") on which it is willing to purchase, lease or take transfer of such B Parcel ("Terms Notice"); provided that, whether such Terms Notice shall offer to purchase or lease or take by other transfer (or impose such other requirements) shall be determined by District’s Transaction Notice.

9.9.3 If Developer fails to provide a Terms Notice within the

Response Period, District may market and sell, lease or transfer such B Parcel to such Person and on such terms as District may determine during the one (1) year following the expiration of the Response Period in accordance with the terms and requirements, if any, specified in its Transaction Notice. If District shall not have sold, leased or transferred such B Parcel, or entered into a contract (which has been approved by City Council) to sell, lease or transfer such B Parcel, within such one (1) year period, then District shall initiate the process described in Section 9.9.2 prior to entering into any sale, lease or transfer or contract to sell, lease or transfer such B Parcel to any Person.

9.9.4 If Developer provides a Terms Notice, then during the thirty

(30) day period ("Negotiation Period") following Developer’s Terms Notice, Developer and District shall negotiate in good faith the terms upon which District would sell, lease or transfer, as applicable, such B Parcel to Developer or its designee (which must be a party which meets the qualifications for Permitted Transfer). District shall use good faith efforts to obtain City Council’s approval of the terms agreed upon by Developer and District in writing during the six (6) month period after the terms of the right of first offer have been reached. If by expiration of the Negotiation Period, District and Developer shall not have agreed in writing on all terms of the sale, lease or transfer of such B Parcel to Developer or the parties shall so agree but City Council shall not thereafter approve the terms, District may market and sell, lease or transfer such B Parcel to any Person on such terms as District may determine. Notwithstanding the foregoing, if (i) District elects to proceed with a transaction in which the net present value of the consideration payable to District is less than 95% of the net present value of the Developer’s Terms or on terms different in any material respect from the Developer’s Terms as specified in the Transaction Notice (Developer’s Terms, for this

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purpose, means the last written offer which is captioned ’°OFFER" in twelve point type made by Developer with respect to the purchase of such B Parcel or, if rejected by City Council, the terms of the offer so rejected by City Council), then Developer (on its own behalf or on behalf of a nominee as aforesaid) shall have the fight, within thirty (30) days of written notice from District, to purchase, lease or obtain such B Parcel at such lower consideration and on all of the other terms and conditions of such transaction set forth in the Developer’s Terms, and (ii) if District shall not have sold, leased or transferred such B Parcel, or entered into a contract to sell, lease or transfer such B Parcel, within one (1) year of expiration of the Negotiation Period, then District shall initiate the process described in Section 9.9.2 prior to entering into any sale, lease or transfer or contract to sell, lease or transfer such B Parcel to any Person.

9.9.5 Notwithstanding the foregoing, if District and Developer shall

agree upon terms as provided in Section 9.9.4 above and City Council fails to approve such agreement within the aforementioned six (6) month period or City Council denies such approval, then District shall not be obligated thereafter to offer to sell, lease or transfer the portion of the B Parcel that was the subject of the terms, and this Section 9.9 thereafter shall not be binding upon such portion of the B Parcel, unless and to the extent District determines within the five (5) year period referenced in Section 9.9.1 above to sell, lease or transfer such portion of the B Parcel for a different use in which case the provisions of this Section 9.9 shall apply to any proposed sale, leases or transfer of the portion of the B Parcel for such different use.

9.9.6 Notwithstanding the foregoing, the rights of Developer

described in this Section 9.9 (i) shall not restrict any transfer or lease to any governmental or quasi-governmental authority, or in connection with any transaction that involves material assets or liabilities not limited to a B Parcel, (ii) shall terminate as to any B Parcel upon the initial sale, lease or transfer by District of its interest in such B Parcel (but such sale shall not release District for any previous non-compliance with this Section 9.9) and shall not be binding upon any transferee of such B Parcel, (iii) shall not apply to any space lease for a portion of the District Improvements, (iv) shall not apply to any partial commercial use that is normally considered ancillary to a civic, cultural, governmental or other public use, (v) shall not apply to any sale, lease or transfer to a Person intending to own and occupy substantially all of the space to be constructed on such Parcel, and (vi) shall not apply to an exchange by District of a B Parcel for a parcel of land that is outside the Site (an "Exchanged Parcel"), if at the time of such exchange, District, acting through the individual serving as the Deputy Mayor for Planning and Economic Development, certifies to Developer that District (as of such date) intends to construct or cause or permit to be constructed on the Exchanged

Parcel a hotel.

9.9.7 In the event of a transfer, lease or exchange of a B Parcel

described in this Section 9.9, the development of such B Parcel shall be in accordance with the Master Plan (provided that District may waive the applicability of the Master Plan to the B Parcels except as set forth in the B Parcel Restrictions). District agrees that in the case of any sale, lease or transfer to a Person for use described in section 9.9.5 (v), District shall recommend to such Person that such Person engage Developer

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to act as development manager for the development of the B Parcel (or applicable portion thereof) on market terms and conditions.

9.9.8 The foregoing agreement and respective rights of Developer

shall be subject to all Governmental Requirements governing the sale, lease or transfer of District real property, including without limitation City Council approval, as applicable.

9.9.9 A memorandum of the agreement setting forth the terms in

this Section 9.9 shall be recorded in the Land Records of the District of Columbia on or about the Escrow Release Date. The Developer may assign its rights under such agreement to any Affiliate of Developer.

9.10 1"/4 License. No later than Closing, the Parties shall negotiate a form of license with respect to Reservation 174 (the "174 License"), so that Developer Parties may integrate and use such Reservation 174 for the purposes set forth in the Master Plan. Notwithstanding the foregoing, the parties understand that a condition precedent to entering into the 174 License (and to construction, maintenance and programming of Reservation 174 as part of the Common Area) is an agreement between District and the National Park Service either (i) conveying Reservation 174 to District or (ii) amending the Transfer of Jurisdiction plats. If any such agreement with the National Park Service and the 174 License is not negotiated and completed prior to the later of Closing or April 15, 2008 (the "174 Conditions"), Reservation 174 shall not be deemed part of Common Area or the Project for the purposes of this Agreement or any agreement entered into pursuant hereto. Furthermore, Developer shall be obligated to complete the Schematic Drawings for Reservation 174 but shall not be obligated to proceed further with design of Improvements on Reservation 174 unless the 174 Conditions are met. Costs incurred with respect to Reservation 174 prior to elimination of the same from the Project shall constitute Site Costs and!or Developer Costs, as applicable.

X. Representations and Warranties

10.1 Developer. Developer hereby represents and warrants to District as

follows:

10.1.1 (i) Developer is a limited liability company duly organized,

validly existing and in good standing under the laws of the State of Delaware, (ii) Developer is duly qualified to conduct business in the District of Columbia, and (iii) Developer has the power and authority to conduct the business in which it is currently engaged.

10.1.2 Developer (i) has the power and authority to execute, deliver

and perform its obligations under this Agreement, and (ii) has taken all necessary action to authorize the execution, delivery and performance of this Agreement.

10.1.3 No cons,e.ot, or authorization of, or filing with, any Person

(including any Governmental Autfiority), Which has not been obtained, is required in

connection with the execution, delivery and performance of this Agreement by

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Developer, except for (i) the Zoning Approvals and (ii) permits and approvals from Governmental Authorities required to construct the Improvements.

10.1.4 "lqais Agreement has been duly executed and delivered by

Developer, and constitutes the legal, valid and binding obligation of Developer,

enforceable against Developer in accordance with its terms.

10.1.5 The execution, delivery and performance by Developer of this

Agreement will not violate any Governmental Requirement or result in a breach of any contractual obligation to which Developer is a party.

10.1.6 Developer’s execution, delivery and performance of this

Agreement and the transactions contemplated hereby shall not: (i) to the best of Developer’s knowledge, violate any judgment, order, injunction, decree, regulation or ruling of any court or Governmental Authority with proper jurisdiction that is binding on Developer; or (ii) result in a breach or default under any provision of the organizational documents of Developer.

10.1.7 No litigation, investigation or proceeding of or before any

arbitrator or Governmental Authority is pending or, to the best knowledge of Developer, threatened by or against Developer which, if adversely determined, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Developer and its ability to perform its obligations under this Agreement;

10.1.8 No agent, broker or other Person acting pursuant to express or

implied authority of Developer is entitled to any commission or finder’s fee in connection with the transactions contemplated by this Agreement or will be entitled to make any claim against District for a commission or finder’s fee. Developer has not dealt with any agent or broker in connection with the acquisition or ground leasing of the Site.

10.1.9 The Site will be acquired, and/or leased and used by

Developer and the other Developer Parties for the purpose of constructing the Project in

accordance with the Master Plan and this Agreement, and not for any other purpose.

10.1.10 By Developer’s execution of this Agreement, each initial Member of Developer has represented to Developer with respect to itself only that there are no actions, suits, arbitrations or investigations, pending against it which might adversely affect Developer’s ability to enter into or perform its obligations under this Agreement or such Member’s ability to enter into or perform its obligations under Developer’s Governing Documents, including Developer’s operating agreement.

10.1.11 Developer has been formed for the sole purpose of entering

into this Agreement, and other related agreements for the development, financing, construction, leasing, subleasing, management, and operation of the Improvements on the Site.

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10.1.12 In no event shall Developer, or any of its employees, contractors, subcontractors, agents, servants, beneficial owner of Developer, or any Member, partner, or principal of any beneficial owner of Develop6i- assert for its own benefit, or attempt to assert, an exemption (including from sales taxes) or immunity available to District, if any, under Government Requirements on the basis of the District’s involvement in the transaction contemplated by this Agreement.

10.1.13 The Financial Statements are complete and accurate as of the

dates thereof. There has been no material adverse change in the financial condition of any Guarantor since the date of such Financial Statements.

10.1.14 Neither Developer nor any Person controlling Developer or

owning directly or indirectly any interest of ten percent (10%) or greater in Developer has engaged in any dealings or transactions (i) in contravention of the applicable anti- money laundering laws or regulations or orders, including without limitation, money laundering prohibitions, if any, set forth in the Bank Secrecy Act (12 U.S.C. Sections 1818(s), 1829(b) and 1951-1959 and 31 U.S.C. Sections 5311-5330), the USA Patriot Act of 2001, Pub. L. No. 107-56, and the sanction regulations promulgated pursuant thereto by U.S. Treasury Department Office of Foreign Assets Control, (collectively, together with regulations promulgated with respect thereto, the "Anti- Money Laundering Acts"), (ii) in contravention of Executive Order No. 13224 dated September 24, 2001 issued by the President of the United States (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), as may be amended or supplemented from time to time ("Anti-Terrorism Order"), (iii) in contravention of the provisions set forth in 31 C.F.R. Part 103, the Trading with the Enemy Act, 50 U.S.C. Appx. Section 1 et seq. or the International Emergency Economics Powers Act, 50 U.S.C. Section 1701 et seq. (together with the Anti-Money Laundering Acts, the "Terrorist Acts") or (iv) is named in the Annex to the Anti-Terrorism Order or any terrorist list published and maintained by the Federal Bureau of Investigation and/or the U.S. Department of Homeland Security, as may exist from time to time. Neither Developer nor any Person controlling Developer or owning directly or indirectly any interest of ten percent (10%) or greater in Developer (a) is conducting any business or engaging in any transaction with any person appearing on the list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control located at 31 C.F.R., Chapter V, Appendix A, or is named in the Annex to the Anti-Terrorism Order or any terrorist list published and maintained by the Federal Bureau of Investigation and/or the U.S. Department of Homeland Security, as may exist from time to time, or (b) is a Person described in section 1 of the Anti- Terrorism Order (a "Restricted Person"). Developer shall not be in breach of this Section 10.1.14 as a result of the act or omission of any Person who is not otherwise an Affiliate of Developer and whose only connection to Developer is ownership of less than five percent (5%) in a company that itself has a direct or indirect interest in the Developer and is traded on a U.S. national exchange unless such Person has the power to direct the management or operations of Developer, in which case there shall be no threshold percentage applicable to such inquiry, or unless Developer has actual knowledge that such Person is listed on one of the aforementioned lists or has or is in

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violation of the Terrorist Acts, or the Anti-Terrorism Order or their respective regulations.

10.1.15 Beneficial ownership of each Parcel that is within the Leased

Parcels or is a For Sale Residential Parcel shall be in accordance with the percentages set forth on Schedule 2.

10.1.16 Developer is comprised of the following entities shown on

Schedule 2.

10.1.17 As of the date hereof, Developer has incurred not less than

$7,000,000 in Developer Costs and Site Costs.

10.1.18 The conditions set forth in Sections 8.6.1.1, 8.6.1.6 and 8.6.2

of the Exclusive Rights Agreement have been satisfied (other than Section 8.6.2.8 and

8.6.2.9).

10.2 Restatement. The foregoing representations and warranties set forth

in Section 10.1 (and those of District pursuant to Section 10.3) shall be updated and restated as of Closing and, again, as of the Escrow Release Date. Developer and District shall disclose in writing to the other any change to the representations and warranties in Section 10.1 or 10.3 after the party giving such representation and warranty becomes aware thereof.

10.3 District. District hereby represents and warrants to Developer as

follows:

10.3.1 District (i) has the power and authority to execute, deliver and

perform its obligations under this Agreement, and (ii) subject to Section 3.6 has taken all necessary action to authorize the execution, delivery and performance of this Agreement.

10.3.2 No consent or authorization of, or filing with, any Person

(including any governmental authority), which has not been obtained, is required in connection with the execution and delivery of this Agreement by District.

10.3.3 This Agreement has been duly executed and delivered by

District, and constitutes the legal, valid and binding obligation of District, enforceable against it in accordance with its terms.

10.3.4 The execution, delivery and performance by District of this

Agreement will not violate any Governmental Requirement or result in a breach of any contractual obligation to which District is a party.

10.3.5 District’s execution, delivery and performance of this

Agreement and the transactions contemplated hereby shall not: (i) to the best of District’s knowledge, violate any judgment, order, injunction, decree, regulation or ruling of any court or Governmental Authority with proper jurisdiction that is binding

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on District; or (ii) result in a breach or default under any provision of the organizational documents of District.

10.3.6 No litigation, investigation or proceeding of or before any

arbitrator or Governmental authority is pending or, to the best knowledge of District, threatened by or against District which, if adversely determined, individually or in the aggregate, could reasonably be expected to have a material adverse effect on District’s ability to perform its obligations under this Agreement.

10.3.7 Except as otherwise set forth in this Agreement, and subject to Section 3.6.1, no consent or authorization of, or filing with, any Person (including any governmental authority), which has not been obtained, is required in connection with the performance of this Agreement by District.

10.3.8 No agent, broker or other Person acting pursuant to express or implied authority of District is entitled to any commission or finder’s fee in connection with the transactions contemplated by this Agreement or will be entitled to make any claim against Developer for a commission or finder’s fee. District has not dealt with any agent or broker in connection with the acquisition or ground leasing of the Site.

10.3.9 The underground storage tank removed from the Site in

connection with demolition of the old Convention Center was removed in accordance with all Governmental Requirements.

XI. Site Pending Escrow Release Date

11.1 Temporary Use of Site. Developer acknowledges that prior to the Escrow Release Date, District reserves the following fights: (i) to use the Site for such purpose or purposes as District may determine, including without limitation parking (collectively, "Temporary Uses"), and (ii) to enter into leases, licenses and other agreements affecting all or any portion of the Site (collectively, "Temporary Agreements"). District agrees that it shall terminate (and cause to be removed from the Site) all Temporary Uses and Temporary Agreements on or before the Escrow Release Date, provided, however, District shall have received not less than one hundred twenty (120) days written notice from Developer of the estimated Escrow Release Date. Notwithstanding anything herein contained to the contrary, all Temporary Uses must be terminated (and shall have abandoned the Site) within 120 days after notice from Developer. The foregoing shall be an Escrow Release Condition, and if such termination of the Temporary Uses and abandonment of the Site by such Temporary Uses is not achieved by the Target Date for Escrow Release Date, the same shall be extended (with an adjustment of all Target Dates and Outside Dates to accord with the period of extension of the Target Date for the Escrow Release Date).

11.2 Developer’s Right to Investigate Site.

11.2.1 Developer hereby acknowledges that, prior to the date of this

Agreement, it has had the right to perform feasibility studies on the Site using experts of its own choosing and to access the Site for the purposes of performing any and all

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feasibility studies in accordance with the Exclusive Rights Agreement or otherwise. Prior to the Escrow Release Date, District shall permit Developer, its agents, employees and contractors, to continue to have access to the Site at reasonable times and upon reasonable notice to District for the purpose of performing additional feasibility studies; provided, however, that Developer shall not have the right to object to any condition that may be discovered or to terminate this Agreement as a result of such additional feasibility studies except as expressly provided herein to the contrary in Section 7.19. Developer shall notify District, in writing, at least two (2) Business Days in advance of beginning of any such feasibility studies. To the extent Developer has actual knowledge thereof, such notification shall state in reasonable detail the scope of the feasibility studies to be undertaken by or on behalf of Developer at the Site, and the identity of each Person performing such feasibility studies. Developer agrees that such feasibility studies shall not unreasonably interfere with the use of the Site by District, WCCA or its tenants or licensees, require the closing of any access route to the Site or violate any Governmental Requirements. Developer shall promptly provide to District a copy of all results or reports of any study, investigation or other due diligence activity related to the Site.

11.2.2 Developer shall pay for all feasibility studies of the Site, for

labor performed on the Site and for all materials furnished to the Site in connection with any feasibility studies done on the Site by or for Developer. Developer agrees, and will require its agents, consultants, employees and contractors to agree, to comply with all Governmental Requirements pertaining to such feasibility studies performed in, at, or under the Site by or for Developer, including, but not limited to, all Environmental Laws, and all applicable Governmental Requirements. In the event Developer desires to conduct any physically intrusive due diligence such as sampling of soils or drilling wells, Developer shall request District’s prior consent thereto, which consent shall not be unreasonably withheld.

11.2.3 Prior to entry onto the Site, Developer shall provide District

with a certificate of insurance evidencing that Developer maintains a commercial general liability policy that names District as an additional insured, in such reasonable amounts as District shall approve, such approval not to be unreasonably withheld. At District’s option, Developer and its agents, employees and contractors shall be accompanied by a representative of District during any such entry.

11.2.4 Developer hereby indemnifies and holds District, its employees, agents, representatives, tenants, licensees and invitees harmless and shall defend District (with counsel reasonably satisfactory to District) from and against any and all direct, out-of-pocket Losses, costs, liabilities, damages, expenses, mechanic’s liens, claims, fines, penalties, settlements and judgments (including, without limitation, reasonable attorneys’ fees and court costs) incurred or suffered by or asserted against District in connection with or arising from Developer’s, any Developer Party’s or their respective agents’, employees’ or contractors’ feasibility studies, remediations, UST- related activities, and any other acts or omissions of Developer, any Developer Party or their respective agents, employees or contractors at, under, or about the Site except to the extent the same are incurred or suffered by District as a result of the gross

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negligence or willfu! misconduct of District or any of its employees, agents or contractors. In no event shall District have any liability to Developer for any damages, including without limitation, direct or indirect losses or consequential or punitive damages. Any access to the Site by Developer pursuant to this Article 11 shall additionally be subject to all of Developer’s insurance obligations contained in this Agreement and in Article 12 below and to Developer’s obligation to restore the Site to its condition as existed prior to the date of such access. All such obligations shall survive the termination of this Agreement.

11.2.5 Developer’s obligations pursuant to this Section 11.2 shall

survive the Escrow Release Date or earlier termination of this Agreement.

11.3 Confidentiality. Developer covenants and agrees that Developer shall prior to the Escrow Release Date keep confidential all information obtained by Developer in accordance with Section 11.2 (which for purposes of this provision shall be deemed to include information obtained by Developer under the ERA); provided, however, that Developer may disclose such information to its attorneys, consultants, title company, potential investors and potential lenders or if required by any Governmental Requirements or pursuant to a subpoena or request for information pursuant to the Freedom of Information Act, then so long as Developer directs such parties to maintain such information as confidential. In the event that such Persons fail to so keep such information confidential, Developer shall be liable for all Losses, costs, liabilities, damages, expenses, mechanic’s liens, claims, settlements, and judgments (including, without limitation, reasonable attorney’s fees and court costs) incurred or suffered by District in connection with or arising directly from such breach of this covenant by such Persons. If Developer is required by law or in any civil or criminal legal proceeding or any regulatory proceeding or similar process, to disclose any part of the confidential information, then Developer shall give District prompt written notice of such request so that District may seek an appropriate protective order and/or waive the compliance with the provisions of this Section 11.3; provided, however, that if Developer is nonetheless, in the written opinion of its counse!, which shall be provided to District, compelled to disclose confidential information in connection with any such proceeding or else stand liable for contempt or suffer other censure or penalty, then Developer may disclosure such information in connection with such proceeding without liability under this Agreement. The obligations of Developer under this Section 11.3 shall survive termination of this Agreement for a period of one (1) year, provided that such obligations shall not survive the Escrow Release Date if the Escrow Release Conditions have been satisfied. The obligation of confidentiality under this Section 11.3 shall exclude all information in the public domain for any reason other than a breach by Developer of its obligations under this Section 11.3.

11.4 Demolition of Existing Improvements.

11.4.1 District has caused the existing improvements on the Site to

be demolished. The scope of such demolition includes the following: (i) demolition of all above-grade structures, (ii) removal of any Hazardous Materials contained in the above-grade structures, and (iii) demolition of slabs and foundations on the Site, which

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Site was left at grade that is the same elevation as the top of slab on grade (and includes demolition of the foundations with the piles to be cut off below footing). Such demolition did not include demolition or removal of any other below-grade structures, or removal of any Hazardous Materials (including petroleum) on the Site that are not contained in any above-grade structures on or prior to the Escrow Release Date except the removal of an underground storage tank, which was accomplished by District in accordance with applicable Governmental Requirements.

!1.4.2 Developer has caused a Phase II environmental site assessment ("Phase II Assessment") of the Site to be conducted. Developer, shall take or cause to be taken all appropriate Remedial Action in accordance with all Governmental Requirements with respect to Hazardous Materials currently located on the Site. Such Remedial Action shall be performed as part of the excavation of the Site and wil! be included in Developer’s construction schedule, and the costs of which are included in the Master Plan Development Budget as Site Costs. Prior to the commencement of any Remedial Action, the name and qualifications of an environmental consultant proposed by Developer to oversee such Remedial Action and with which Developer shall contract shall be submitted and approved by District, such approval not to be unreasonably withheld.

11.4.3 If, as a result of the presence of Hazardous Materials, the cost

of remediatior~, or removing, transporting and disposing of soils and other materials from the Site are in excess of the cost of removing, transporting and disposing of such soils in the absence of any such Hazardous Materials, then (i) the appropriate Ground Lessee and For Sale Residential Owners pursuant to their respective Ground Leases and For Sale Covenants shall have the fight to offset such incremental cost (together with interest at the Imputed Development Period Return prior to the Stabilization Date and thereafter at the blended Participation Return Rate, based on a weighted average of Total Costs of each Leased Parcel and For Sale Residential Parcel) against the amounts payable to the District pursuant to Sections 5.3 and 5.6.1, and (ii) to the extent of the amounts payable by Developer, Developer shall have the right to offset such incremental cost against the next payment(s) of Base Rent and For Sale Participation Payment otherwise payable. Any amounts so offset by Developer pursuant to the foregoing clauses (i) or (ii) shall thereupon cease to be Site Costs. If the District and the appropriate Developer Parties, each acting reasonably and in good faith, agree that the remediation and/or removal of Hazardous Materials from the Site is reasonably expected to delay achievement of any Target Date and Outside Date, then the affected Target Date(s) and Outside Date(s) will be extended by the estimated period of such delay.

11.4.4 District has permitted WCCA to obtain a loan ("Demolition

Loan"), which is secured by a mortgage or deed of trust on the Site, to pay costs in connection with the demolition described in Section 11.4.1, grading, the development of a surface parking lot and other amenities on the Site, and related costs. On or before the Escrow Release Date, Developer and District shall cooperate to cause the payment of any portion of the principal amount of such Demolition Loan that remains outstanding. In the event that the Developer pays any amount of the Demolition Loan

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prior to termination of the WCCA Lease and in accordance with all applicable laws, such payment shall be a Site Cost. To the extent that including the principal amount of such Demolition Loan as a Site Cost would, but for the minimum Base Rent described in Section 5.4.3, cause Base Rent to be reduced below such minimum, Developer shall have the right to offset such portion of the Demolition Loan (together with interest at the Imputed Development Period Return prior to the Stabilization Date and thereafter at the blended Participation Return Rate, based on a weighted average of Total Costs of each Leased Parcel) against the next payment(s) of Base Rent otherwise payable. Notwithstanding anything to the contrary in this Section 11.4.4, any amounts offset from Site Costs by Developer shall thereupon cease to be Site Costs.

11.5 Removal of Hazardous Materials. District shall not first introduce Hazardous Materials (including petroleum) to the Site after July 1, 2004 and prior to the Escrow Release Date (and for this purpose paving materials shall not be considered a hazardous substance). Prior to the Escrow Release Date, Developer and, thereafter, the applicable Ground Lessees and For Sale Residential Owners shall have the option (but not the obligation) to offset any out-of-pocket costs incurred by any such party as a result of the breach of the foregoing covenant (together with interest at the Imputed Development Period Return prior to the Stabilization Date and thereafter at the blended Participation Return Rate, based on a weighted average of Total Costs of each Leased Parcel) against the next payment(s) of Base Rent or For Sale Participation Payment otherwise payable.

11.6 Soil Characteristics. District hereby acknowledges to Developer that, to the best of its knowledge, the soil on the Site has been described by the Soil Conservation Service of the United States Department of Agriculture in the Soil Survey of the District of Columbia and as shown on the Soil Maps as "urban land." Developer acknowledges that, for further soil information, Developer may contact a soil testing laboratory, the D.C. Department of Environmental Services, or the Soil Conservation Service.

11.7 Underground Storage Tanks. Developer hereby acknowledges receipt, prior to entering into this Agreement, of a disclosure by District in the form attached to this Agreement as Schedule 25 attached to this Agreement and incorporated in this Agreement by this reference as to whether District is aware of any underground storage tanks located on the Site or the removal of any underground storage tanks during the time District has owned the Site. Developer acknowledges that such disclosure has been provided in compliance with the District of Columbia Underground Storage Tank Management Act of 1990, as amended. District has removed a single underground storage tank in accordance with all Governmental Requirements.

11.8 "As-ls". DISTRICT FOR ITSELF AND EACH OF THE DEVELOPER PARTIES SHALL CONVEY THE FOR SALE RESIDENTIAL PARCELS, THE LEASE PARCELS AND/OR GROUND LEASE TO DEVELOPER, GROUND LESSEES AND FOR SALE RESIDENTIAL OWNERS, AS APPLICABLE, IN "AS IS" CONDITION AND, EXCEPT FOR THE EXPRESS REPRESENTATIONS OF DISTRICT EXPRESSLY SET FORTH IN THIS AGREEMENT, DISTRICT

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MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO THE CONDITION OF THE SITE OR ANY IMPROVEMENTS THEREON, AS TO THE SUITABILITY OR FITNESS OF TH’E SITE OR ANY IMPROVEMENTS THEREON, AS TO ANY ENVIRONMENTAL LAW, OTHER LAW OR ANY OTHER MATTER AFFECTING THE USE, VALUE, OCCUPANCY OR ENJOYMENT OF THE SITE, OR AS TO ANY OTHER MATTER WHATSOEVER. DISTRICT SHALL HAVE NO RESPONSIBILITY TO PREPARE THE SITE IN ANY WAY FOR DEVELOPMENT AT ANY TIME. DEVELOPER FOR ITSELF AND EACH OF THE DEVELOPER PARTIES ACKNOWLEDGES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS OF DISTRICT SET FORTH IN THIS AGREEMENT, NEITHER DISTRICT NOR ANY EMPLOYEE, REPRESENTATIVE OR AGENT OF DISTRICT HAS MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE SITE OR ANY IMPROVEMENTS THEREON. THE PROVISIONS HEREOF SHALL SURVIVE TERMINATION OF THIS AGREEMENT AND SHALL NOT BE DEEMED MERGED INTO ANY DEED OF CONVEYANCE OR GROUND LEASE, OR OTHERWISE EXTINGUISHED THEREBY.

11.9 Title. Developer for itself and each Developer Party hereby acknowledges that title to the Site has been investigated by Developer and subject to the next succeeding sentence is deemed acceptable, effective as of the date of this Agreement. At the Escrow Release Date, District shall lease the Leased Parcels and convey title to the For Sale Residential Parcels "AS IS" and subject to (i) all encumbrances identified in Schedule B of the Title Commitment attached to this Agreement as Schedule20 (except Schedule B- Section I Items 9-11, !5-17 and 19 (subject to Section 9.10 hereof) and Schedule B- Section II Items 1-3) and (ii) in a form and substance reasonably acceptable to the Developer, a covenant recorded against the A th

Parcels providing that 10

the Developer and made available for public use to the extent provided in the Master Plan. During the term of this Agreement, District agrees not to take any action that would cause additional encumbrances, rights of way or easements to change the status of title to the Site existing as of the date of this Agreement, except as required by Governmental Requirements or any Governmental Authority or as expressly permitted in this Agreement. Notwithstanding the foregoing, District reserves the right to subdivide the Site so as to create separate assessment and taxation and/or record lots for Parcel B, and District agrees to cooperate with Developer to create separate assessment and taxation lots for each of the Leased Parcels and the For Sale Residential Parcels, at no liability or out-of pocket cost to District.

11.10 Notice of Condenmation. If, prior to Escrow Release Date, any condemnation or eminent domain proceedings shall be commenced by any competent public authority against the Site (excluding the B Parcels), District shall promptly give Developer written notice thereof. If the proposed condemnation shall physically or economically affect a particular Parcel within the Project in any material respect, either party may elect to terminate this Agreement with respect to such Parcel within thirty (30) days of the conclusion of any such proceedings; provided such termination shall not preclude Developer from making any claims for damages against the condemning

and I Streets as depicted in the Master Plan are constructed by

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authority as if this Agreement remained in effect. If Developer or District does not elect to terminate, then this Agreement shall continue in full force and effect and the parties shall cooperate with one another in good faith to make such revisior~ to the Project, the schedule (including the Target Dates and Outside Dates) and the economics as shall be reasonably required as a result of the condemnation. Any condemnation after the Escrow Release Date shall be governed by the terms of the Ground Leases.

11.11 Termination. If Developer elects to terminate this Agreement pursuant to Section 11.10, then the parties shall be released fiom any further liability or obligation under this Agreement, except as otherwise provided in this Agreement. Any condemnation proceeds actually received by District with respect to the Site shall be retained by District, and no Developer Party shall have any right thereto.

XII. Insurance Policies

12.1 Coverages; Form of Policy. The Ground Leases and the For Sale Covenants shall require the Ground Lessees and the For Sale Residential Owner to maintain or to cause to be maintained the following insurance policies and comply with the following obligations (such policies and compliance, collectively, the "Required Insurance"):

12.1.1 Property insurance loss to the Improvements covered by "special form" property insurance policy as available in the insurance market at the date of this Agreement (and against such additional risks of loss as may be customarily covered by such policies after the date of this Agreement), or any equivalent to a "special form" property insurance policy that has been reasonably approved by District (collectively, the "Property Insurance Policy"). The Property Insurance Policy shall cover at least the following perils: building collapse, fire, flood, impact of vehicles and aircraft, lightning, malicious mischief, terrorism, vandalism, water damage, and windstorm. The Property Insurance Policy shall also cover such other insurable perils as, under good insurance practices, other commercial property owners from time to time insure against for property and buildings similar to the Improvements in height, location, nature, type of construction, and use. Each Property Insurance Policy shall cover: (i) additional expense of demolition and increased cost of construction, including, without limitation, increased costs that arise from any changes in laws or other Governmental Requirements with respect to such restoration in a minimum amount of $10,000,000 for each Parcel; (ii) at least 100% of the replacement cost value of the applicable Improvements; (iii) all tenant improvements and betterments that any Ground Lease requires the Ground Lessee to insure (the "Insured Leasehold Property") and (iv) loss of rent insurance on an actual loss sustained basis coveting twelve months. Any Property Insurance Policy shall contain an agreed amount endorsement or a coinsurance waiver and replacement cost value endorsement without reduction for depreciation and shall in no event be less than the replacement cost of the Improvements.

12.1.2 If any of the Improvements are located in an area designated as "flood prone" or a "special flood hazard area" under the regulations for the National

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Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, at least the maximum coverage for the Improvements available under the federal flood insurance plan. Regardless of the flood zone, the minimum amount of coverage required by this subsection for loss caused by floods shall not be that required by an Approved Mortgage. Any insurance required pursuant to the terms of this subsection being hereinafter sometimes referred to as "Flood Insurance."

12.1.3 At all times during which structural construction, repairs or

alterations are being made with respect to the Improvements, builder’s risk insurance for not less than the full completed project insurable value of the Improvements, covering the same risks and otherwise complying with the same requirements as the Property Insurance Policy, to such limits and with such coverage extensions as District may reasonably require (the "Builder’s Risk Insurance"). Any Builder’s Risk Insurance shall be written on a "completed value" form (100% nonreporting) or its equivalent and shall include an endorsement granting permission to occupy. Builder’s Risk Insurance shall cover: (a) the same perils that the Property Insurance Policy must cover; (b) loss of materials, equipment, machinery, and supplies whether on-site, in transit, or stored offsite, or of any temporary structures, hoists, sidewalks, retaining walls, and underground property; (c) soft costs, plans, specifications, blueprints and models; and (d) demolition and increased cost of construction, including increased costs arising from changes in laws or other Governmental Requirements at the time of restoration of the Improvements and coverage for operation of building laws or other Governmental Requirements, all subject to a sublimit satisfactory to District on an actual loss sustained basis.

12.1.4 The following insurance for personal injury, bodily injury,