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2006 09 05 RDALey 44Qdja Redevelopment Agency agendas are available on the City' web page @ www.la-quinta.org REDEVELOPMENT AGENCY AGENDA CITY COUNCIL CHAMBERS 78-495 Calle Tampico La Quinta, California 92253 Regular Meeting TUESDAY, SEPTEMBER 5, 2006 - 2:00 P.M. Beginning Resolution No. RA 2006-010 CALL TO ORDER Roll Call: Agency Board Members: Adolph, Henderson, Kirk, Sniff, and Chairman Osborne PUBLIC COMMENT At this time, members of the public may address the Redevelopment Agency on any matter not listed on the agenda. Please complete a "request to speak" form and limit your comments to three minutes. Please watch the timing device on the podium. CLOSED SESSION NOTE: Time permitting the Redevelopment Agency Board may conduct Closed Session discussions during the dinner recess. In addition, persons identified as negotiating parties are not invited into the Closed Session meeting when acquisition of real property is considered. Redevelopment Agency Agenda September 5, 2006 1 . CONFERENCE WITH THE AGENCY'S REAL PROPERTY NEGOTIATOR, DOUGLAS R. EVANS, PURSUANT TO GOVERNMENT CODE SECTION 54956.8 CONCERNING POTENTIAL TERMS AND CONDITIONS OF ACQUISITION AND/OR DISPOSITION OF REAL PROPERTY IDENTIFIED AS: APN 609-040-005, 609-040-007, AND 609-040-023. PROPERTY OWNERS/NEGOTIATORS: MIKE SOLLENBERGER, AND THE TESTA FAMILY PARTNERSHIP 2. CONFERENCE WITH THE AGENCY'S REAL PROPERTY NEGOTIATOR, DOUGLAS R. EVANS, PURSUANT TO GOVERNMENT CODE SECTION 54956.8 CONCERNING POTENTIAL TERMS AND CONDITIONS OF ACQUISITION AND/OR DISPOSITION OF REAL PROPERTY LOCATED NORTHEAST OF THE INTERSECTION OF ADAMS STREET AND AVENUE 48 (APN 649-030-069). PROPERTY OWNER/NEGOTIATOR: SANTA ROSA DEVELOPMENT, INC., MICHAEL SHOVLIN 3. CONFERENCE WITH THE AGENCY'S REAL PROPERTY NEGOTIATOR, DOUGLAS R. EVANS, PURSUANT TO GOVERNMENT CODE SECTION 54956.8 CONCERNING POTENTIAL TERMS AND CONDITIONS OF ACQUISITION AND/OR DISPOSITION OF REAL PROPERTY LOCATED AT 78-990 MILES AVENUE (APN 604-032-022). PROPERTY OWNER/NEGOTIATOR: SOUTHERN CALIFORNIA HOUSING DEVELOPMENT CORPORATION, ALFREDO IZMAJTOVICH 4. CONFERENCE WITH AGENCY'S REAL PROPERTY NEGOTIATOR, THOMAS P. GENOVESE, PURSUANT TO GOVERNMENT CODE SECTION 54956.8 CONCERNING POTENTIAL TERMS AND CONDITIONS OF ACQUISITION AND/OR DISPOSITION OF A PORTION OF 525 +/- ACRES LOCATED AT THE SOUTHWEST CORNER OF AVENUE 52 AND JEFFERSON STREET. PROPERTY OWNER/NEGOTIATOR: THEODORE LENNON, DDC DESERT DEVELOPMENT, INC. 5. CONFERENCE WITH THE AGENCY'S REAL PROPERTY NEGOTIATOR, DOUGLAS R. EVANS, PURSUANT TO GOVERNMENT CODE SECTION 54956.8 CONCERNING POTENTIAL TERMS AND CONDITIONS OF ACQUISITION AND/OR DISPOSITION OF REAL PROPERTY LOCATED AT THE NORTHWEST CORNER OF FRED WARING DRIVE AND PALM ROYALE. PROPERTY OWNER/NEGOTIATOR: THE ROBERT MAYER CORPORATION, ROBERT L. MAYER, JR. RECESS TO CLOSED SESSION RECONVENE AT 3:00 P.M. PUBLIC COMMENT At this time members of the public may address the Agency Board on items that appear within the Consent Calendar or matters that are not listed on the agenda. Please complete a "request to speak" form and limit your comments to three minutes. When you are called to speak, please come forward and state your name for the record. Please watch the timing device on the podium. Redevelopment Agency Agenda 2 September 5, 2006 For all Agency Business Session matters or Public Hearings on the agenda, a completed "request to speak" form should be filed with the City Clerk prior to the Agency beginning consideration of that item. CONFIRMATION OF AGENDA APPROVAL OF MINUTES 1 . APPROVAL OF MINUTES OF AUGUST 1, 2006. CONSENT CALENDAR NOTE: Consent Calendar items are considered to be routine in nature and will be approved by one motion. 1 . APPROVAL OF DEMAND REGISTERS DATED ; AUGUST 15 AND SEPTEMBER 5, 2006. 2. ADOPTION OF A RESOLUTION MAKING CERTAIN FINDINGS PURSUANT TO HEALTH AND SAFETY CODE SECTION 33445(a) FOR THE SilverRock RESORT ON -SITE AND OFF -SITE NATIVE AND PERIMETER AREA ENHANCEMENTS, PROJECT NO. 2002-07 0. 3. ACCEPTANCE OF SilverRock RESORT PERIMETER PARKWAY AND ENTRY ROAD LANDSCAPING, PROJECT NO. 2002-07G. 4. ADOPTION OF A RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY AND THE TESTA FAMILY LIMITED PARTNERSHIP FOR THE PURCHASE OF 7.5 ACRES OF VACANT LAND LOCATED ON THE EAST SIDE OF WASHINGTON STREET SOUTH OF HIDDEN RIVER (APN: 609-040-005 (POR)), AND THE APPROPRIATION OF FUNDS. 5. ADOPTION OF A RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY AND FRANK R. GOODMAN & ASSOCIATES FOR THE PURCHASE OF A 73-UNIT APARTMENT COMPLEX (WASHINGTON STREET APARTMENTS) AND 4.35 ACRES OF PROPERTY LOCATED AT 42-800 WASHINGTON STREET (APN: 609-040-007 & 609-040- 023). 6. APPROVAL OF A FINANCING AGREEMENT BETWEEN THE CITY OF LA QUINTA AND THE LA QUINTA REDEVELOPMENT AGENCY FOR THE WASHINGTON STREET LAND ACQUISITIONS. Redevelopment Agency Agenda 3 September 5, 2006 BUSINESS SESSION - NONE STUDY SESSION - NONE CHAIR AND BOARD MEMBERS' ITEMS - NONE PUBLIC HEARINGS - NONE ADJOURNMENT Adjourn to a regularly scheduled meeting of the Redevelopment Agency to be held on September 19, 2006 commencing with closed session at 2:00 p.m. and open session at 3:00 p.m. in the City Council Chambers, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING I, Deborah H. Powell, Interim City Clerk of the City of La Quinta, do hereby declare that the foregoing agenda for the La Quinta Redevelopment Agency meeting of September 5, 2006, was posted on the outside entry to the Council Chamber at 78-495 Calle Tampico and on the bulletin boards at 51-321 Avenida Bermudas and 78-630 Highway 1 1 1, on September 1, 2006. DATED: September 1, 2006 -.4- PC) A- A.) L-� DEBORAH H. POWELL, Interim City Clerk City of La Quinta, California Redevelopment Agency Agenda 4 September 5, 2006 0 5 G� OF 9w COUNCIL/RDA MEETING DATE: August 15, 2006 ITEM TITLE: Demand Register Dated August 15, 2006 RECOMMENDATION: It is recommended the Redevelopment Agency Board: AGENDA CATEGORY: CONSENT CALENDAR STUDY SESSION PUBLIC HEARING Receive and File the Demand Register Dated August 15, 2006 of which $151,087.70 represents Redevelopment Agency Expenditures. PLEASE SEE CONSENT CALENDAR ITEM NUMBER 1 ON CITY COUNCIL AGENDA La,�`� c 0 ��,,��.► 4 iucws�oxn*m 44 S OF T 9� COUNCIL/RDA MEETING DATE: September 05, 2006 ITEM TITLE: Demand Register Dated September 05, 2006 RECOMMENDATION: It is recommended the Redevelopment Agency Board: AGENDA CATEGORY: CONSENT CALENDAR STUDY SESSION PUBLIC HEARING Receive and File the Demand Register Dated Sept. 05, 2006 of which $1,002,208.34 represents Redevelopment Agency Expenditures. PLEASE SEE CONSENT CALENDAR ITEM NUMBER 1 ON CITY COUNCIL AGENDA l.' .. D 0 V COUNCIL/RDA MEETING DATE: September 5, 2006 ITEM TITLE: Adoption of a Resolution Making Certain Findings Pursuant to Health and Safety Code Section 33445(a) for the SilverRock Resort On -Site and Off - Site Native and Perimeter Area Enhancements, Project No. 2002-07 0 RECOMMENDATION: AGENDA CATEGORY: BUSINESS SESSION: CONSENT CALENDAR: 420 STUDY SESSION: PUBLIC HEARING: Adopt a Resolution making certain findings pursuant to Health and Safety Code Section 33445(a) for the SilverRock Resort On -Site and Off -Site Native and Perimeter Area Enhancements, Project No. 2002-07 0. FISCAL IMPLICATIONS: The following represents the approved project funding and additional funding sources: Fund Available RDA 1 reserves for economic development $1,178,295 BACKGROUND AND OVERVIEW: On August 1, 2006, the Redevelopment Agency appropriated $1,178,295 from RDA Project Area No. 1, and awarded the contract to the lowest qualified bidder, Sierra Landscape, for the SilverRock Resort On -Site and Off -site Native and Perimeter Area Enhancements, which included construction, design, inspection, administration and contingency. The attached resolution sets forth the necessary findings for those expenditures. It is a procedural requirement that certain findings are made pursuant to Health and Safety Code Section 33445(a). ti 7 FINDINGS AND ALTERNATIVES: The alternatives available to the Agency include: 1. Adopt a Resolution making certain findings pursuant to Health and Safety Code Section 33445(a) for the SilverRock Resort On -Site and Off -Site Native and Perimeter Area Enhancements, Project No. 2002-07 0; or 2. Do not adopt a Resolution making certain findings pursuant to Health and Safety Code Section 33445(a) for the SilverRock Resort On -Site and Off -Site Native and Perimeter Area Enhancements, Project No. 2002-07 0; or 3. Provide staff with alternative direction. Respectfully submitted, T. othy R na s n, P.E. Public Wo Di for/City Engineer Approved for submission by: Thomas P. Genovese, Executive Director RESOLUTION NO. RA 2006- A RESOLUTION OF THE LA QUINTA REDEVELOPMENT AGENCY OF THE CITY OF LA QUINTA, CALIFORNIA, MAKING CERTAIN FINDINGS PURSUANT TO HEALTH AND SAFETY CODE SECTIONS 33445(a) WHEREAS, the La Quinta Redevelopment Agency ("Agency") is a public body, corporate and politic, organized and existing under the California Community Redevelopment Law (Health & Safety Code 33000 et seq.); and WHEREAS, the California Community Redevelopment Law, at Health and Safety Code Section 33445, requires before the Agency may pay for the cost of publicly owned improvements, the Agency and City Council must adopt a resolution making certain findings; and WHEREAS, on August 1, 2006, the Agency approved the SilverRock Resort On -Site and Off -Site Native and Perimeter Area Enhancements, Project No. 2002-07 0. NOW, THEREFORE, BE IT RESOLVED, by the La Quinta Redevelopment Agency, as follows: SECTION 1. The above recitations are true and correct and are adopted as findings of the Agency Board. SECTION 2. The Agency Board hereby authorizes Agency funding up to $1,178,295 to be utilized for the SilverRock Resort On -Site and Off -Site Native and Perimeter Area Enhancements. SECTION 3. Pursuant to Health and Safety Code 33445(a), the Agency finds and determines that: A. The improvements included in Project No. 2002-07 0 will be located within the Project Area and thus will provide recreational facilities and opportunities for the residents, businesses, property owners, and others located within the Project Area, as well as the City at -large. B. That no other reasonable means of financing the buildings, facilities, structures, landscape and other improvements are available to the community other than Agency funding. ,_ .. 009 Resolution No. RA 2006- PN 2002-07 0 SRR Enhancements Adopted: September 5, 2006 Page 3 C. The improvements included in Project No. 2002-07 0 will assist in the elimination of one or more blighting conditions inside and around the perimeter of the Project Area, and are consistent with the Agency's Implementation Plan adopted pursuant to Health and Safety Code Section 33490. PASSED, APPROVED and ADOPTED at a regular meeting of the La Quinta Redevelopment Agency held on this 5th day of September, 2006, by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: THOMAS P. GENOVESE, Executive Director La Quinta Redevelopment Agency, La Quinta, California ATTEST: DEBORAH H. POWELL, Interim Agency Secretary City of La Quinta, California (City Seal) APPROVED AS TO FORM:. M. KATHERINE JENSON, Agency Counsel City of La Quinta, California /'^mot• 04SepOZ OFTKF9 COUNCIL/RDA MEETING DATE: September 5, 2006 AGENDA CATEGORY: BUSINESS SESSION: ITEM TITLE: Acceptance of the SilverRock Resort Perimeter Parkway and Entry Road Landscaping, CONSENT CALENDAR: Project No. 2002-07G STUDY SESSION: PUBLIC HEARING: RECOMMENDATION: Acceptance of SilverRock Resort Perimeter Parkway and Entry Road Landscaping, Project No. 2002-07G, Agenda Item No. 3, is being continued until the September 19, 2006 meeting. 01, Sep OPTS COUNCIL/RDA MEETING DATE: September 5, 2006 ITEM TITLE: Adoption of a Resolution of the Redevelopment Agency Approving a Purchase and Sale Agreement by and Between the Redevelopment Agency and the Testa Family Limited Partnership to Purchase 7.5 Acres of Vacant Land Located on the East Side of Washington Street South of Hidden River (APN: 609- 040-005 (POR)) and Appropriation of Funds RECOMMENDATION: AGENDA CATEGORY: BUSINESS SESSION: CONSENT CALENDAR: STUDY SESSION: PUBLIC HEARING: Adopt a Resolution of the Redevelopment Agency approving a Purchase and Sale Agreement (Attachment 1) to utilize $3,300,000 from available Low- and Moderate - Income Housing Funds of Project Area No. 1 (Account No. 245-9001-703.74-01) and appropriate an additional $1,800,000 from available Low- and Moderate -Income Housing Funds of Project Area No. 1 (Account No. 245-0000-290.00-00) reserves for a total cost of $5,100,000 to underwrite acquisition, due diligence studies, closing costs, repayment of a General Fund loan, and authorize the Agency Executive Director to execute all necessary agreements and documents to complete the purchase. FISCAL IMPLICATIONS: Purchasing this property will result in the expenditure of up to $3,300,000 of available Low- and Moderate -Income Housing Funds from Project Area No. 1, which had $7,000,000 budgeted for land in FY 06/07, and an appropriation of an additional $1,800,000 of available Low- and Moderate -Income Housing reserve funds from Project Area No. 1 . BACKGROUND AND OVERVIEW: In May 2005, the Third Five -Year Implementation Plan outlined the mandate for the Agency to facilitate the development or preservation of 871 affordable units within the next ten years. This requirement has led Agency staff to identify opportunities, both within the Agency's Redevelopment Project Areas and the greater community. With a limited number of opportunities available inside the Project Areas, staff looked to the unincorporated areas adjacent to the City. In December 2005, Agency staff presented two properties for consideration; both of these properties are outside the existing City limits and present challenges. Bruce Cathcart of La Quinta Palms Realty represents the owners. With direction from the Agency Board, staff has commissioned real property appraisals, researched annexation and Project Area Amendment options, and submitted purchase offers to the owners. In April 2005, staff began acquisition discussions and started into the negotiations and formalization of Purchase and Sale Agreements. These properties present a series of challenges and constraints; staff has researched and recommended strategies for overcoming these as outlined below: 1 . The properties are outside of the City and housing funds cannot be used to purchase such properties. Recommendation: Create a General Fund loan advance to secure the properties and perform due diligence studies while the annexation of subject properties takes place. A condition of closing escrow is the successful annexation, at which time housing funds and repayment of the General Fund loan advance can occur. 2. The City would need to file an annexation application with LAFCO. Recommendation: The necessary steps have been researched and initial steps taken to file an annexation application once the Agreements are approved. 3. The properties do not fall within a Redevelopment Project Area, thereby reducing by half the credits received per eventual developed or preserved credit. Recommendation: The necessary steps have been researched and funds have been budgeted to undertakeamending the Project Area No. 2 Redevelopment Plan to include these properties within the Project Area. The attached Purchase and Sale Agreement is the first of two that staff will be requesting the Agency Board consider. This Agreement involves 7.5 acres of vacant land located on the east side of Washington Street south of Hidden River (Attachment 2). A summary of the Agreement is as follows: • Sales price is $5,044,000. • Deposit of $50,000 with $25,000 being released to the owner in 30 days. • Buyer reimburses 50% of owners cost of processing a parcel map. • Escrow Fees are split equally. • Annexation is a requirement to close. The outside closing date is February 28, 2007 or approximately 175 days (Escrow Period). The budget to complete this transaction is as follows: • Sales price $5,044,000 • Due diligence studies 10,000 • Escrow fees 8,000 • Parcel Map split 10,000 • General Fund loan interest 3,000 • Contingency 25,000 • TOTAL $5,100,000 If this Agreement is approved it will also be necessary to approve a Finance Agreement which is scheduled for Agency Board and Council approval at this meeting. In addition, Agency staff will open escrow, start the due diligence studies, and begin the annexation process. FINDINGS AND ALTERNATIVES: The alternatives available to the Agency Board include: 1 . Adopt a Resolution of the Redevelopment Agency approving a Purchase and Sale Agreement of $3,300,000 from available Low- and Moderate -Income Housing Funds of Project Area No. 1 (Account No. 245-9001-703.74-01) and appropriate an additional $1,800,000 from available Low- and Moderate -Income Housing Funds of Project Area No. 1 reserves (Account No. 245-0000-290.00- 00) to underwrite acquisition, due diligence studies, closing costs, repayment of a General Fund loan, and authorize the Agency Executive Director to execute all necessary agreements and documents to complete the purchase; or 2. Do not Adopt a Resolution of the Redevelopment Agency approving a Purchase and Sale Agreement; or 3. Provide staff with alternative direction. Respectfully submitted, ' X )aMA - Douglas R. tevelopment ns Community Director Approved for submission by: Thomas P. Genovese, Executive Director Attachments: 1 . Purchase and Sale Agreement 2. Location map RESOLUTION RDA NO. A RESOLUTION OF THE LA QUINTA REDEVELOPMENT AGENCY APPROVING AN AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS BY AND BETWEEN THE LA QUINTA REDEVELOPMENT AGENCY AND THE TESTA FAMILY LIMITED PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP, FOR THE AGENCY'S PURCHASE OF APPROXIMATELY 7.5 ACRES OF REAL PROPERTY FOR AFFORDABLE HOUSING PURPOSES TESTA FAMILY LIMITED PARTNERSHIP PURCHASE AND SALE AGREEMENT WHEREAS, the . La Quinta Redevelopment Agency ("Agency") is a public body, corporate and politic, organized and existing under the California Community Redevelopment Law (Health & Safety Code Section 33000, et seq.) ("CRL"); and WHEREAS, pursuant to the CRL, the City Council of the City of La Quinta ("City" or "City Council," as applicable) approved and adopted the Redevelopment Plan ("Redevelopment Plan") for Project Area No. 2 ("Project Area"), on May 16, 1989, by Ordinance No. 139; and WHEREAS, a fundamental purpose of the CRL is to expand the supply of low- and moderate -income housing (Health & Saf. Code, § 33071); and WHEREAS, the Agency staff has negotiated an Agreement for Purchase and Sale and Escrow Instructions ("Agreement") with The Testa Family Limited Partnership, a California limited partnership ("Seller"), for the Agency's purchase of approximately 7.5 acres of real property located on the east side of Washington Street south of Hidden Valley Road in the Bermuda Dunes neighborhood, in unincorporated territory in the County of Riverside (the "Property"), for Five Million Forty -Four Thousand Dollars ($5,044,000); and WHEREAS, one of the conditions to the closing under the Agreement is that the City has completed annexation proceedings for the Property, and that such annexation has occurred, will occur simultaneously with the closing, or is imminent; and PURCHASE AND SALE, concurrently with the consideration of this Agreement, the Agency Board is considering a Financing Agreement by and between the Agency and the City that provides for the City to loan funds to the Resolution RDA No. 2006- Testa Family Limited Partnership Purchase and Sale Agreement Adopted: September 5, 2006 Agency to pay for all costs incurred by the Agency pursuant to the Agreement prior to the City's annexation of the Property into City limits (the "Financing Agreement"); and WHEREAS, the Agreement provides the Agency with a due diligence period during which the Agency will (i) perform tests and inspections of the Property, and (ii) process the annexation of the Property into the City; and WHEREAS, subsequent to the City's annexation of the Property into the City and the Agency's acquisition of the Property, the Agency Board contemplates commencing the necessary actions to amend the Redevelopment Plan to include the Property in the Project Area; and WHEREAS, the Agreement is in accordance with the Redevelopment Plan and is of benefit to the Project Area and the City of La Quinta. NOW, THEREFORE, BE IT RESOLVED BY THE LA QUINTA REDEVELOPMENT AGENCY AS FOLLOWS: Section 1. That the above recitals are true and correct and incorporated herein. Section 2. The Agreement, a copy of which is on file with the Agency Secretary, is hereby approved, subject to the Agency's and City Council's approval of the Financing Agreement. The Agency Executive Director and Agency Counsel are hereby authorized and directed to make final modifications to the Agreement that are consistent with the substantive terms of the Agreement approved hereby, and the Agency Executive Director is authorized to thereafter sign the Agreement on behalf of the Agency. Section 3. The Agency Executive Director is authorized and directed, on behalf of the Agency, to (i) sign such other and further documents, including but not limited to escrow instructions that require the Agency's signature, and (ii) take such other and further actions, as may be necessary and proper to carry out the terms of the Agreement. PASSED, APPROVED, AND ADOPTED at a regular meeting of the La Quinta Redevelopment Agency held this 5th day of September, 2006, by the following vote: Resolution RDA No. 2006- Testa Family Limited Partnership Purchase and Sale Agreement Adopted: September 5, 2006 AYES: NOES: ABSENT: ABSTAIN: LEE OSBORNE, Agency Chair City of La Quinta, California ATTEST: DEBORAH H. POWELL, Interim Agency Secretary City of La Quinta, California APPROVED AS TO FORM: M. KATHERINE JENSON, Agency Counsel City of La Quinta, California G17 ATTACHMENT 1 PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS by and between TESTA FAMILY LIMITED PARTNERSHIP California limited partnership "Seller" and LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic "Buyer" TABLE OF CONTENTS Page 1. PROPERTY...................................................................................................................... I 1.1 Improvements.......................................................................................................2 2. PURCHASE PRICE.........................................................................................................2 2.1 Amount.................................................................................................................2 2.2 Payment of Purchase Price....................................................................................2 3. Intentionally Deleted......................................................................................................... 3 4. ESCROW..........................................................................................................................3 4.1 Opening of Escrow...............................................................................................3 4.2 Escrow Instructions...............................................................................................3 5. DUE DILIGENCE PERIOD.............................................................................................3 5.1 Title Matters..........................................................................................................3 5.2 Physical and Environmental Condition................................................................4 5.3 Environmental Documentation............................................................................. 6 6. CLOSE OF ESCROW......................................................................................................6 6.1 Close of Escrow; Closing Date.............................................................................6 6.2 Recordation; Release of Funds and Documents ................................................... 7 7. DELIVERY OF DOCUMENTS REQUIRED FROM BUYER AND SELLER.............7 7.1 Buyer's Obligations.............................................................................................. 7 7.2 Seller's Obligations...............................................................................................7 8. TITLE INSURANCE POLICY........................................................................................8 8.1 Title Policy.............................................................:.............................................. 8 8.2 Payment for Title Policy....................................................................................... 8 9. REAL PROPERTY TAXES AND ASSESSMENTS......................................................8 10. CONDITIONS PRECEDENT TO CLOSING.................................................................8 10.1 Conditions Precedent to Buyer's Obligations.......................................................8 10.2 Conditions Precedent to Seller's Obligations....................................................... 9 11. POSSESSION.................................................................................................................10 12. ALLOCATION OF COSTS...........................................................................................10 12.1 Buyer's Costs......................................................................................................10 12.2 Seller's Costs......................................................................................................10 2156/015610-0047 709670.06 a08/29/06 V J Page 13. CONDEMNATION........................................................................................................11 15. COVENANTS OF SELLER........................................................................................... I I 16. MISCELLANEOUS.......................................................................................................12 16.1 Assignment.........................................................................................................12 16.2 Notices................................................................................................................12 16.3 Fair Meaning.......................................................................................................12 16.4 Headings.............................................................................................................12 16.5 Choice of Laws; Litigation Matters....................................................................13 16.6 Nonliability of Buyer Officials...........................................................................13 16.7 Gender; Number..................................................................................................13 16.8 Survival...............................................................................................................13 16.9 Time of Essence..................................................................................................13 16.10 Waiver or Modification.......................................................................................13 16.11 Broker's Fees......................................................................................................13 16.12 Duplicate Originals.............................................................................................14 16.13 Severability.........................................................................................................14 16.14 Exhibits...............................................................................................................14 16.15 Seller's Representation and Warranties..............................................................14 16.16 Authority.............................................................................................................15 16.17 Eminent Domain.................................................................................................15 16.18 Parcel Map for Real Property.............................................................................15 16.19 Seller Processing of Further Subdivision............................................................16 16.20 Annexation of Real Property..............................................................................16 16.21 Entire Agreement; Amendment..........................................................................16 16.22 Disclosures..........................................................................................................17 16.23 DEFAULT OF BUYER; LIQUIDATED DAMAGES......................................17 EXHIBITS Exhibit A Legal Description of 15.13 Acre Property Exhibit B Legal Description of Real Property Exhibit C Form of Grant Deed Exhibit D Form of Affidavit of Non -Foreign Entity Exhibit E Bill of Sale Exhibit F Escrow Instructions Exhibit G Special Escrow Instructions 2156/015610-0047 709670.06 a08/29/06 AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS THIS AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS ("Agreement") is made and entered into as of September 5, 2006 ("Effective Date") by and between THE TESTA FAMILY LIMITED PARTNERSHIP, a California limited partnership ("Seller") and the LA QUINTA REDEVELOPMENT AGENCY, a public body corporate and politic ("Buyer"). RECITALS: A. Seller is the owner of approximately 15.13 acres of real property located in unincorporated territory in the County of Riverside, State of California, which real property is located on the east side of Washington Street south of Hidden Valley road in the Bermuda Dunes neighborhood, is identified for assessment purposes as APN 609-040-005 and is more particularly described in the legal description attached hereto as Exhibit "A" (the "15.13 Acre Property"). B. Subject to the terms and conditions in this Agreement, Seller shall process a parcel map to subdivide the 15.13 Acre Property so that two parcels are created, consisting of (i) a 7.5 acre parcel created on the western half of the 15.13 Acre Property as more particularly described and depicted in the legal description attached hereto as Exhibit `B" (the " Real Property"), and (ii) the remaining portion of the 15.13 Acre Property that is not included in the Real Property, which shall be termed the "Remainder Property." C. Subject to the terms and conditions in this Agreement, Buyer shall apply for and process the annexation of the Real Property into the City of La Quinta. D. Buyer desires to purchase the Property (as that term is defined below) from Seller, and Seller desires to sell the Property to Buyer, on the terms and conditions set forth herein. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing recitals and mutual covenants herein contained, the parties hereto agree as follows: 1. PROPERTY. Subject to all of the terms, conditions and provisions of this Agreement, and for the consideration herein set forth, Seller hereby agrees to sell to Buyer and Buyer hereby agrees to purchase from Seller the Real Property and Seller hereby agrees to sell and Buyer hereby agrees to buy the following: 2156/015610-0047 709670.06 a08/29/06 t^1 1.1 Improvements. Seller's interest in and to the Improvements and all tenements, hereditaments and appurtenances thereto, subject to the Permitted Exceptions (as that term is defined in Section 8.1); The Real Property and the Improvements are hereinafter collectively referred to as the "Property." 2. PURCHASE PRICE. 2.1 Amount. The purchase price which Seller agrees to accept and Buyer agrees to pay for the Property is the sum of FIVE MILLION FORTY-FOUR THOUSAND DOLLARS ($5,044,000.00) ("Purchase Price"). 2.2 Payment of Purchase Price. 2.2.1 Within five (5) days after the "Opening of Escrow" Buyer shall deposit with "Escrow Holder" (as those terms are defined in Section 4.1) in "Good Funds" (as used in this Agreement, the term "Good Funds" shall mean a confirmed wire transfer of immediately available funds, cashier's or certified check drawn on or issued by the office of a financial institution located in Riverside County, or cash) the sum of FIFTY THOUSAND DOLLARS ($50,000.00) as a good faith deposit (the "Deposit"). The Deposit shall be placed into an interest bearing account and all interest accruing thereon shall be for the sole benefit of the Buyer. If Buyer elects (or is deemed to have elected) to terminate this Agreement on or before the end of the Due Diligence Period (defined in Section 5) then Buyer shall be entitled to a full refund of the Deposit along with all interest earned thereon, less the Release Amount (defined below) that is actually released to Seller. Thirty (30) days after the Opening of Escrow Buyer agrees and hereby instructs Escrow Holder to release to Seller the sum of TWENTY FIVE THOUSAND DOLLARS ($25,000.00) from the Deposit (the "Release Amount"), which Release Amount shall be credited against the Purchase Price and shall be nonrefundable, subject to Seller's performance of its obligations hereunder and such other provisions of this Agreement as expressly provide for a return of the Release Amount to Buyer. Except as provided by Sections 5.3 (relating to payments to extend the Agreement resulting from Environmental Documentation), 16.18 (relating to reimbursement for the Parcel Map) and 16.20 (relating to payments to extend the Agreement resulting from annexation), the remainder of the Deposit shall be credited against the Purchase Price and shall not be released to Seller prior to the Close of Escrow. If Escrow does not close due to Seller's default under this Agreement or does not close due to the failure to satisfy or waive Buyer's Conditions to Closing in Section 10.1, then the Deposit and all interest earned thereon shall be returned to Buyer in addition to any other rights Buyer may have in law or in equity. 2.2.2 On or before 5:00 p.m. on the business day preceding the "Closing Date" (as that term is defined in Section 6.1) or such earlier time as required by "Escrow Holder" in order to close "Escrow" (as those terms are defined in Section 4.1) on the Closing Date, Buyer shall deposit with Escrow Holder in Good Funds the Purchase Price, less the Deposit, and such additional funds as may be required to meet Buyer's portion of closing costs as herewith provided. 2156/015610-0047 709670.06 a08/29/06 -2- 2 42; 3. Intentionally Deleted. 4. ESCROW. 4.1 Opening of Escrow. Closing of the sale of the Property shall take place through an escrow ("Escrow") to be established within three (3) business days after the execution of this Agreement by the parties hereto with Four Seasons Escrow, Inc. ("Escrow Holder"), at its office located at 47-350 Washington Avenue, Suite 101, La Quinta, California 92253. The opening of the Escrow (the "Opening of Escrow") shall be deemed to be the date that a fully executed copy of this Agreement is delivered to the Escrow Holder. Escrow Holder is instructed to notify Buyer and Seller in writing of the date of the Opening of Escrow. 4.2 Escrow Instructions. This Agreement, once deposited in Escrow, shall constitute the joint escrow instructions of Buyer and Seller to Escrow Holder. Additionally, if Escrow Holder so requires, Buyer and Seller agree to execute the form of escrow instructions that Escrow Holder customarily requires in real property escrows administered by it. In the event of any conflict or inconsistency between Escrow Holder's standard instructions and the provisions of this Agreement, the provisions of this Agreement shall supersede and be controlling. The parties additionally agree to the Escrow Holder's standard terms, a copy of which is attached hereto as Exhibit F and to the additional supplemental instructions contained in.Exhibit G. 5. DUE DILIGENCE PERIOD. As used herein, the term "Due Diligence Period" shall refer to a period of time to expire upon the date that is ninety (90) days after the Effective Date. Buyer's obligation to consummate the transactions contemplated by this Agreement is subject to and conditioned upon Buyer's approval, deemed approval or waiver of the right to approve of the following contingencies set forth in this Section 5: 5.1 Title Matters. Buyer shall obtain a preliminary title report prepared by Old Republic Title Company ("Title Company"), located at 25240 Hancock Avenue, Suite 330, Murrieta, California 92562, describing the state of title of the Property together with copies of all underlying documents and a map of plotted easements (collectively, the "Preliminary Title Report"). Buyer may, at its sole cost and expense, obtain a current survey of the Property (the "Survey"). Notwithstanding anything herein to the contrary, Seller shall be obligated to remove all monetary encumbrances against the Property excluding non -delinquent real property taxes (except as otherwise provided for in Section 9 below). Buyer shall notify Seller in writing of any objections Buyer may have to title exceptions contained in the Preliminary Title Report or matters shown on the Survey (if Buyer has obtained) no later than the date which is thirty (30) days after the later of (i) its receipt of the Preliminary Title Report or (ii) its receipt of the Survey ("Buyer's Objection Notice"). Buyer's approval or disapproval of the matters set forth in the Preliminary Title Report (and the Survey, if applicable) may be granted or withheld in Buyer's sole and absolute discretion. Buyer's failure to provide Seller with a Buyer's Objection Notice within said period shall constitute Buyer's approval of all exceptions to title shown on the Preliminary Title Report and all matters shown on the Survey (if Buyer has obtained). Seller shall have a period of ten (10) days after receipt of Buyer's Objection Notice in which to deliver written notice to Buyer ("Seller's Notice") of Seller's election to either (i) agree to remove the objectionable items on the Preliminary Title Report or Survey prior to the Close of Escrow, or (ii) decline to remove any such title exceptions or Survey matters and terminate Escrow and the 2156/015610-0047 r 709670.06 a08/29/06 -3 V` 023 obligations of Buyer and Seller to purchase and sell the Property under this Agreement. Seller's failure to provide Buyer with Seller's Notice within said period shall constitute Seller's election to remove the objectionable items on the Preliminary Title Report. If Seller notifies Buyer of its election to terminate rather than remove the objectionable items on the Preliminary Title Report or Survey, Buyer shall have the right, by written notice delivered to Seller within ten (10) days after Buyer's receipt of Seller's Notice, to agree to accept the Property subject to the objectionable items, in which event Seller's election to terminate shall be of no effect, and Buyer shall take title at the Close of Escrow subject to such objectionable items without any adjustment to or credit against the Purchase Price. All exceptions to title shown on the Preliminary Title Report, other than those which Seller may agree to remove pursuant to this Section 5.1, shall be deemed to have been approved by Buyer unless Seller is notified otherwise in writing. Upon the issuance of any amendment or supplement to the Preliminary Title Report which adds additional exceptions, including any survey exceptions, the foregoing right of review and approval shall also apply to said amendment or supplement. The process set forth above for Buyer's review and Seller's response shall apply to any review and response with respect to any amendment or supplement to the Preliminary Title Report, and the Closing shall be extended for such period as is necessary to allow for that review and response process to be completed. 5.2 Physical and Environmental Condition. Buyer shall have access to the Property, as described in this Section 5.2, in order to permit Buyer or its directors, engineers, analysts, officers, employees, agents, contractors, representatives, attorneys or advisors (collectively, the "Buyer Representatives") to investigate the Property. 5.2.1 During the Due Diligence Period, Seller shall permit Buyer and Buyer Representatives, at the sole cost and expense of Buyer, to conduct physical inspections of the Property, including the site work, soil, subsurface soils, drainage, seismic and other geological and topographical matters, location of asbestos, toxic substances, hazardous materials or wastes, if any, and any other investigations as Buyer deems prudent with respect to the physical condition of the Property in order to determine the Property's suitability for Buyer's intended development. Such investigations may be made by Buyer and/or Buyer Representatives during any normal business hours. Seller shall cooperate to assist Buyer in completing such inspections and special investigations at no cost or expense to Seller. Such inspections and investigations shall be conducted only upon no less than twenty-four (24) hours' written or telephonic notice to Seller and shall be conducted at such times and in such a manner as to minimize any disruption to the Property. Seller shall have the right, but not the obligation, to accompany Buyer during such investigations and/or inspections. Buyer agrees to provide Seller a copy of all reports and investigation summaries, provided that any significant cost for such copies shall be paid by Seller. 5.2.2 As a condition to any such entry, Buyer shall (i) conduct all work or studies in a diligent, expeditious and safe manner and not cause any dangerous or hazardous conditions to occur on the Property during or after such investigation; (ii) comply with all applicable laws and governmental regulations; (iii) keep the Property free and clear of all materialmen's liens, lis pendens and other liens arising out of the entry and work performed under this paragraph; (iv) maintain or assure maintenance of workers' compensation insurance 2156/015610-0047 709670.06 a08/29/06 -4- (or state approved self-insurance) on all persons entering the property in the amounts required by the State of California; (v) have procured and have in effect an all-risk public liability insurance policy meeting the following requirements: (1) the insurance shall be written on a per occurrence and not claims -made basis; (2) the amount of insurance shall be a combined single limit of not less than Two Million Dollars ($2,000,000.00) with a deductible or self -insured retention amount of not more than One Hundred Thousand Dollars ($100,000); (3) the policy shall name or be endorsed to Seller as an additional insured; (4) the insurance shall not contain any special limitations on the scope of protection afforded to Seller; (5) the policy shall not be canceled by the insurer or Buyer unless there is a minimum of thirty (30) days prior written notice to Seller; (6) the insurer shall waive subrogation rights against the Seller; and (7) the insurance shall be primary insurance and not contributory with any insurance any of Seller may have; and (8) the insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer's liability; and (vi) following Buyer's entry, repair any and all damage to the Property caused by such inspections or investigations in a timely manner. 5.2.3 Buyer shall promptly pay and discharge all demands for payment relating to Buyer's entry on and investigation of the Property and take all other steps to avoid the assertion of claims of lien against the Property. In the event a claim of lien is recorded by reason of Buyer's entry on the Property, Buyer, within twenty (20) days of such recordation, shall either (i) record or deliver a surety bond sufficient to release such claim or lien in accordance with applicable law; or (ii) provide Seller with such other assurance as Seller may require for the payment of the claim or lien. Seller may elect to record and post notices of non -responsibility from time to time on and about the Property. Buyer hereby agrees to indemnify and hold Seller harmless from and against any and all losses, damages, liens, liabilities, claims and causes of action which Seller may suffer or incur as a consequence of Buyer's entry on the Property prior to Closing; provided, however, that Buyer shall not indemnify and hold Seller harmless for claims (i) resulting from the negligence or misconduct of Seller or (ii) relating to pre-existing conditions merely discovered by Buyer (e.g., latent environmental contamination or Hazardous Materials). 5.2.4 Prior to expiration of the Due Diligence Period, Buyer shall notify Seller in writing (i) of Buyer's election to terminate the Escrow and this Agreement, if Buyer disapproves of the physical or environmental conditions of the Property and, as a result, does not wish to proceed with purchasing the Property ("Buyer's Termination Notice"), or (ii) of any objections Buyer may have (the "Disapproved Property Matters") to any physical or environmental conditions of the Property ("Buyer's Property Objection Notice"). Buyer's approval or disapproval of the physical and environmental conditions of the Property may be granted or withheld in Buyer's sole and absolute discretion. In the event Buyer terminates this Agreement pursuant to this Section, Buyer and Seller shall be relieved of all further liability under this Agreement, except that Buyer shall be entitled to the return of the Deposit, less the Release Amount if actually released to Seller pursuant to Section 2.2.1. Buyer's failure to provide Seller with a Buyer's Termination Notice or a Buyer's Property Objection Notice prior to the expiration of the Due Diligence Period shall constitute Buyer's approval of the condition of the Property. If Buyer provides to Seller Buyer's Property Objection Notice, Seller shall have a period of ten (10) days after receipt of Buyer's Property Objection Notice in which to deliver written notice to Buyer ("Seller's Response") of Seller's election to either (i) agree to remove the 2156/015610-0047 709670.06 a08/29/06 —5— i� \: 0 ti 5 Disapproved Property Matters prior to the Close of Escrow, or (ii) decline to remove the Disapproved Property Matters and terminate Escrow and the obligations of Buyer and Seller to purchase and sell the Property under this Agreement. Seller's failure to provide Buyer with Seller's Response within said period shall constitute Seller's election not to remove the Disapproved Property Matters prior to the Close of Escrow. If Seller is deemed to have elected not to remove the Disapproved Property Matters, or if Seller notifies Buyer of its election to terminate rather than remove the Disapproved Property Matters, Buyer shall have the right, by written notice delivered to Seller within ten (10) days after (i) Buyer's receipt of Seller's Response, or (ii) the date Seller is deemed to have elected not to remove the Disapproved Property Matters, as applicable, to agree to accept the Property subject to the Disapproved Property Matters, in which event Seller's election, or deemed election, to terminate shall be of no effect, and Buyer shall take title at the Close of Escrow subject to such Disapproved Property Matters without any adjustment to or credit against the Purchase Price. Buyer's inspections and investigations of the Property shall be conducted upon the terms and conditions set forth in this Agreement. 5.3 Environmental Documentation. During the Due Diligence Period, Buyer may prepare and circulate, as required, all documentation necessary to evaluate the potential environmental impacts of Buyer's acquisition of the Property (the `Environmental Documentation"), in accordance with the requirements of the California Environmental Quality Act (California Public Resources Code Section 21000 et seq. ("CEQA"); provided, however, that if Buyer diligently prepares and commences circulation, as required, of the Environmental Documentation, and additional time beyond the Due Diligence Period and Outside Closing Date is necessary for completion and certification by Buyer's Board thereof of the Environmental Documentation, then the Due Diligence Period and Outside Closing Date shall be automatically extended solely for the purpose of completion and certification of the Environmental Documentation (but not for other investigations or inspections) until Buyer completes, with continued due diligence, the same. If the Close of Escrow not occur by the Outside Closing Date due to the Environmental Documentation being incomplete, then Buyer may extend the Close of Escrow for thirty (30) day periods for the purpose of completing Environmental Documentation by providing written notice of such extension to Seller and Escrow Holder; provided, however, that upon Buyer's notice of such an extension(s), Buyer shall concurrently instruct Escrow Holder to release to Seller the sum of FIVE THOUSAND DOLLARS ($5,000.00) from the Deposit for each thirty (30) day extension. Deposit funds released pursuant to this section shall not be credited against the Purchase Price and shall be considered nonrefundable, except that if Seller defaults under this Agreement then the reimbursement amount shall be immediately returned to Buyer. Unless otherwise agreed to in writing by both parties, the number of extensions pursuant to this section shall be limited to six (6). 6. CLOSE OF ESCROW. 6.1 Close of Escrow; Closing Date. Provided that all of the conditions of this Agreement precedent to the "Close of Escrow" (as hereinafter defined) as set forth in Section 10 below have been satisfied (or waived by the appropriate party) prior to or on the Closing Date, the Closing of this transaction for the sale and purchase of the Property shall take place on or before February 28, 2007 ("Outside Closing Date"). Notwithstanding the foregoing, if Buyer and Seller agree to advance the Closing, and so long as all of "Buyer's Conditions to Closing" 2156/015610-0047 709670.06 a08/29/06 /� and all of "Seller's Conditions to Closing" (as those terms are defined in Section 10) have been satisfied (or waived by the appropriate party), Seller and Buyer may elect to authorize the Closing before the Outside Closing Date. The terms "Close of Escrow", "Closing Date" and the "Closing" are used herein to mean the time Seller's grant deed conveying fee title to the Property to Buyer is recorded in the Official Records of the Office of the County Recorder of Riverside ("Official Records"). If Escrow is not in a condition to close by the Outside Closing Date (or if the Outside Closing Date is not extended as provided in this Agreement), either party not then in default hereunder may, upon five (5) days advance written notice to the other party and Escrow Holder, elect to terminate this Agreement and the Escrow. No such termination shall release either party then in default from liability for such default. If neither party so elects to terminate this Agreement and the Escrow, Escrow Holder shall close the Escrow as soon as possible. 6.2 Recordation; Release of Funds and Documents. 6.2.1 Escrow Holder is directed, on the Closing Date, to record in the Official Records, the following documents in the order listed: (i) the grant deed (in the form attached hereto as Exhibit "C") transferring title to the Property to Buyer ("Grant Deed"); and (ii) such other and further documents as may be directed jointly by Buyer and Seller. 6.2.2 Upon the Closing, Escrow Holder shall deliver (i) the Purchase Price, less any amount to pay property taxes and/or assessments allocable to Seller pursuant to Section 9, and (ii) conformed copies of all recorded documents to both Buyer and Seller. 7. DELIVERY OF DOCUMENTS REQUIRED FROM BUYER AND SELLER. 7.1 Buyer's Obligations. Buyer agrees that on or before 5:00 p.m. of the last business day immediately preceding the Closing Date, Buyer shall deposit or cause to be deposited with Escrow Holder the following: (a) the Purchase Price, less the Deposit (but not including portions of the Deposit released pursuant to Sections 2.2, 5.3, 16.18 and 16.20); and (b) any and all additional funds, instruments or other documents required from Buyer (executed and acknowledged where appropriate) as may be reasonably necessary in order for the Escrow Holder to comply with the terms of this Agreement. 7.2 Seller's Obligations. Seller agrees that on or before 5:00 p.m. of the last business day immediately preceding the Closing Date, Seller shall deposit or cause to be deposited with Escrow Holder each of the following: (a) the executed and acknowledged Grant Deed, subject only to the Permitted Exceptions (defined hereafter); (b) a Certificate of Non -Foreign Status (the "Non -Foreign Affidavit") executed and acknowledged by Seller in the form attached hereto as Exhibit "D"; and 2156/015610-0047 709670.06 a08/29/06 —7 �; �l $2. 7 (c) all other funds, items, and instruments required from Seller (executed and acknowledged where appropriate) as may be reasonably necessary in order for Escrow Holder to comply with the provisions of this Agreement. 8. TITLE INSURANCE POLICY. 8.1 Title Policy. At the Closing Date, the Title Company, as insurer, shall issue a CLTA owner's standard coverage policy of title insurance ("Title Policy"), in favor of Buyer, as insured, with liability in the amount of the Purchase Price, subject to the following (the "Permitted Exceptions"): (d) non -delinquent real property taxes, subject to Seller's obligations to pay certain taxes pursuant to Section 9 below; (e) covenants, conditions, restrictions and reservations of record that do not interfere with the Buyer's proposed use of the Property, as determined in the sole and absolute discretion of Buyer; (f) easements or rights -of -way over the Property for public or quasi -public utility or public street purposes; (g) title exceptions approved or deemed approved by Buyer pursuant to Section 5.1 above; (h) any other exceptions approved by Buyer; and (i) the standard printed conditions and exceptions contained in the CLTA standard owner's policy of title insurance regularly issued by the Title Company. . 8.2 Payment for Title Policy. Seller shall be responsible for the charges for the Title Policy with coverage up to the amount of the Purchase Price. Buyer shall pay any additional coverage or endorsements it requests. Buyer may, at its election and expense, request an ALTA extended policy of title insurance. Buyer shall also pay for the Survey, if applicable. 9. REAL PROPERTY TAXES AND ASSESSMENTS. Upon Buyer's acquisition of fee title to the Property, the Property will be exempt from the payment of property taxes due to Buyer's status as a public agency. Seller shall be responsible for paying (through Escrow at Closing) all real and personal property taxes and assessments which are of record as of the Closing Date and/or have accrued against the Property prior to (and including) the Closing Date (notwithstanding whether such taxes and/or assessments are due and payable as of the Closing Date). Seller shall be responsible for paying for all real or personal property taxes or assessments assessed against the Property after the Closing for any period prior to the Closing. 10. CONDITIONS PRECEDENT TO CLOSING. 10.1 Conditions Precedent to Buyer's Obligations. The obligations of Buyer under this Agreement to purchase the Property and close the Escrow shall be subject to the satisfaction or 2156/015610-0047 709670.06 a08/29/06 -8- signed written waiver by Buyer of each and all of the following conditions precedent (collectively, "Buyer's Conditions to Closing"): (a) on the Closing Date, the Title Company shall be irrevocably committed to issue the Title Policy pursuant to Section 8 above insuring fee title to the Property as being vested in Buyer, subject only to the Permitted Exceptions; (b) the Parcel Map (defined in Section 16.18) shall be recorded and the Property shall constitute a legally subdivided parcel; (c) the Real Property shall be annexed into the City of La Quinta pursuant to Section 16.19 (or such annexation shall be imminent as determined in Buyer's sole discretion) and no judicial challenges shall have been presented or filed against the Local Agency Formation Commission or the City of La Quinta's actions in connection with the annexation; (d) Escrow Holder holds all instruments and funds required for the Closing and will deliver to Buyer the instruments and funds, if any, accruing to Buyer pursuant to this Agreement; (e) except as otherwise permitted by this Agreement, all representations and warranties by the Seller in this Agreement shall be true on and as of the Closing Date as though made at that time and all covenants of Seller pursuant to this Agreement shall have been fulfilled by the Closing Date; (f) Seller is not in material default of any term or condition of this Agreement; (g) as of the Closing Date, no judicial or administrative challenges have been presented or filed against the Agency or the City of La Quinta's actions in connection with developing the Real Property as an affordable housing project, including, without limitation, any challenge to environmental approvals or financing methods; and In the event that any of Buyer's Conditions to Closing are not satisfied, deemed satisfied, or waived in a writing signed by Buyer prior to the expiration of the applicable period for satisfaction or waiver, Buyer may terminate this Agreement. 10.2 Conditions Precedent to Seller's Obligations. The obligations of Seller under this Agreement shall be subject to the satisfaction or signed written waiver by Seller of each and all of the following conditions precedent ("Seller's Conditions to Closing"): (a) Escrow Holder holds the Purchase Price and all other instruments and funds required for the Closing and will deliver to Seller the instruments and funds, including but not limited to the Purchase Price (less Seller's closing costs) accruing to Seller pursuant to this Agreement; (b) The Parcel Map (defined in Section 16.18) shall be recorded and the Property and the Remainder Property shall constitute legally subdivided parcels; 2156/015610-0047 709670.06 a08/29/06 (c) except as otherwise permitted by this Agreement, all representations and warranties by the Buyer in this Agreement shall be true on and as of the Closing Date as though made at that time and all covenants of Buyer pursuant to this Agreement shall have been fulfilled by the Closing Date; and (d) Buyer is not in material default of any term or condition of this Agreement. In the event that any of Seller's Conditions to Closing are not satisfied, deemed satisfied, or waived in a writing signed by Seller prior to the expiration of the applicable period for satisfaction or waiver, Seller may terminate this Agreement. 11. POSSESSION. Exclusive possession of the Property shall be delivered by Seller to Buyer on the Closing Date. 1.2. ALLOCATION OF COSTS. 12.1 Buyer's Costs. Buyer shall pay the following costs: (a) fifty percent (50%) of Escrow Holder's escrow fee; (b) Buyer's own attorney's fees incurred in connection with this Agreement and the transactions contemplated hereby; (c) fifty percent (50%) of all the charges for recording the Grant Deed, if any; (d) the premium difference between the ALTA extended policy of title insurance and the CLTA standard coverage policy of title insurance if Buyer requests an extended policy; and (e) any additional title insurance coverages Seller is not required to pay for plus any title endorsements requested by Buyer. 12.2 Seller's Costs. Seller shall pay: (a) fifty percent (50%) of the Escrow Holder's escrow fee; (b) Seller's own attorney's fees in connection with this Agreement and the transactions contemplated hereby; (c) (d) and (e) this Agreement. 2156/015610-0047 709670.06 a08/29/06 Any documentary transfer taxes associated with the conveyance; fifty percent (50%) of all the charges for recording the Grant Deed, if any; the premium for the Title Policy that Seller is required to pay pursuant to -10- 13. CONDEMNATION. In the event that, prior to the Close of Escrow, any governmental entity (other than the City) shall commence any proceedings of or leading to eminent domain or similar type proceedings to take all or any portion of the Property, Buyer or Seller shall promptly meet and confer in good faith to evaluate the effect of such action on the purposes of this Agreement. 14. Intentionally Deleted. This preambulatory paragraph has been deleted. 14.1 For purposes of this Agreement, the term "Hazardous Materials" shall mean (1) hazardous wastes, hazardous materials, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases, including, but not limited to, substances deemed as "hazardous wastes," "hazardous materials," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. § 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. § 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1802; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 9601, et seq.; the Clean Water Act ("CWA"), 33 U.S.C. § 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300 et seq.; the Clean Air Act ("CAA"), 42 U.S.C. § 7401 et seq.; the Hazardous Waste Control Law, California Health and Safety Code § 25025 et seq., the Carpenter -Presley -Tanner Hazardous Substance Account Act, California Health and Safety Code, Division 20, Chapter 6.8, the Hazardous Materials Release Response Plans and Inventory Act, California Health and Safety Code, Division 20, Chapter 6.95, The Underground Storage of Hazardous Substances Act, California Health and Safety Code, Division 20, Chapter 6.7, the Porter -Cologne Act, California Water Code § 13050 et seq. and in any permits, licenses, approvals, plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar federal, state or local laws, regulations, rules or ordinances now or hereafter in effect relating to environmental matters (collectively the "Environmental Laws"); and (ii) any other substances, constituents or wastes subject to any applicable federal, state or local law, regulation, ordinance or common law doctrine, including any Environmental Law, now or hereafter in effect, including, but not limited to, (A) petroleum, (B) refined petroleum products, (C) waste oil, (D) waste aviation or motor vehicle fuel, (E) asbestos, (F) lead in water, paint or elsewhere, (G) radon, (H) polychlorinated biphenyls (PCB's) and (I) urea formaldehyde. 15. COVENANTS OF SELLER. Seller agrees that during the period between the Effective Date of this Agreement and the Closing Date: (a) Seller shall maintain the Property in not less than the state of repair as that existing on the Effective Date (excepting ordinary wear and tear); (b) Seller shall not convey, grant, lease, assign, mortgage, hypothecate, encumber, or otherwise transfer (on or off record) the Property or any interest therein; (c) Prior to Closing, Seller shall maintain Seller's existing insurance, if any, on the Property; and 2156/015610-0047 709670.06 a08/29/06 -11- (d) Prior to the Closing, Seller shall not alter the physical condition of the Property or introduce or release, or permit the introduction or release, of any Hazardous Materials in, from, under, or on the Property. 16. MISCELLANEOUS. 16.1 Assignment. This Agreement shall be binding upon and shall inure to the benefit of Buyer and Seller and their respective heirs, personal representatives, successors and assigns. Seller may not assign or otherwise transfer this Agreement or any interest or right hereunder or under the Escrow without the prior written consent and approval of the Buyer, which consent and approval may be withheld in the Buyer's sole and absolute discretion. No provision of this Agreement is intended nor shall in any way be construed to benefit any party not a signatory hereto or to create a third party beneficiary relationship. 16.2 Notices. All notices under this Agreement shall be effective upon personal delivery, via facsimile so long as the sender receives confirmation of successful transmission from the sending machine, or three (3) business days after deposit in the United States mail, registered, certified, postage fully prepaid and addressed to the respective parties as set forth below or as to such other address as the parties may from time to time designate in writing: To Seller: Testa Family Limited Partnership Attn: Donald Testa, General Partner 3552 Running Tide Circle Huntington Beach, California 92649-2514 Telephone: (714) 846-9130 Facsimile: (714) 846-7595 Email dtesta@pol.net To Buyer: City of La Quinta 78-495 Calle Tampico La Quinta, CA 92253 Attn: City Manager Telephone: (760) 777-7100 Facsimile No.: (760) 777-7101 Copy to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, California 92628-1950 Attn: M. Katherine Jenson, Esq. Telephone: (714) 641-5100 Facsimile No.: (714) 546-9035 16.3 Fair Meaning. This Agreement shall be construed according to its fair meaning and as if prepared by both parties hereto. 16.4 Headings. The headings at the beginning of each numbered Section of this Agreement are solely for the convenience of the parties hereto and are not a part of this Agreement. 2156/015610-0047 709670.06 a08/29/06 -12- 16.5 Choice of Laws,• Litigation Matters. This Agreement shall be governed by the internal laws of the State of California and any question arising hereunder shall be construed or determined according to such law. The Municipal and Superior Courts of the State of California in and for the County of Riverside, or such other appropriate court in such county, shall have exclusive jurisdiction of any litigation between the parties concerning this Agreement. Service of process on Buyer shall be made in accordance with California law. Service of process on Seller shall be made in any manner permitted by California law and shall be effective whether served inside or outside California. 16.6 Nonliability of Buyer Officials. No officer, official, member, employee, agent, or representatives of Buyer shall be liable for any amounts due hereunder, and no judgment or execution thereon entered in any action hereon shall be personally enforced against any such officer, official, member, employee, agent, or representative. 16.7 Gender; Number. As used in this Agreement, masculine, feminine, and neuter gender and the singular or plural number shall be deemed to include the others wherever and whenever the context so dictates. 16.8 Survival. This Agreement and all covenants to be performed after the Closing, and, except as otherwise set forth herein, all representations and warranties contained herein, shall survive the Closing Date and shall remain a binding contract between the parties hereto. 16.9 Time of Essence. Time is of the essence of this Agreement and of each and every term and provision hereof, it being understood that the parties hereto have specifically negotiated the dates for the completion of each obligation herein. 16.10 Waiver or Modification. A waiver of a provision hereof, or modification of any provision herein contained, shall be effective only if said waiver or modification is in writing, and signed by both Buyer and Seller. No waiver of any breach or default by any party hereto shall be considered to be a waiver of any breach or default unless expressly provided herein or in the waiver. 16.11 Broker's Fees. La Quinta Palms Real Estate Co. Inc., a California corporation and California Licensed Real Estate Brokerage, DBA La Quinta Palms Realty, is acting as Agent ("Agent") for both the Buyer and Seller in the transaction contemplated by this Agreement and is being compensated solely by the Seller under a separate commission agreement. The Seller agrees to indemnify and hold the Buyer free and harmless from and against any and all liability, loss, costs, or expense (including court costs and reasonable attorney's fees) in any manner connected with Seller's commission agreement with Agent. Seller and Buyer represent and warrant to the other that neither Buyer nor Seller has employed any other broker and/or finder to represent its interest in this transaction. Each party agrees to indemnify and hold the other free and harmless from and against any and all liability, loss, cost, or expense (including court costs and reasonable attorney's fees) in any manner connected with a claim asserted by any individual or entity other than Agent for any commission or finder's fee in connection with the conveyance of the Property arising out of agreements by the indemnifying party to pay any commission or finder's fee. 2156/015610-0047 -13 709670.06 a08/29/06 l.1 J J 16.12 Duplicate Originals. This Agreement may be executed in any number of duplicate originals, all of which shall be of equal legal force and effect. 16.13 Severability. If any term, covenant or condition of this Agreement or the application thereof to any person, entity, or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant, or condition to persons, entities, or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16.14 Exhibits. The following exhibits are attached hereto and incorporated herein by this reference: Exhibit "A", Legal Description of 15.13 Acre Property Exhibit `B" Legal Description of Real Property Exhibit "C" Grant Deed Exhibit "D" Non -Foreign Affidavit Exhibit "E" Intentionally Deleted Exhibit "F" Escrow Instructions Exhibit "G" Special Escrow Instructions 16.15 Seller's Representation and Warranties. As of the Effective Date and again as of the Close of Escrow, Seller hereby makes the following covenants, representations and warranties, which representations and warranties shall survive the Closing: 16.15.1 Seller is the fee title owner of the Real Property. 16.15.2 As of the Effective Date, there are no pending or existing leases, leasehold interests, tenancies, occupancies, licenses, license agreements, rental agreements, use agreements, right of entry agreements, or any other type of agreement granting any person, firm, or entity any right to possess or use, the Property, or any portion thereof (collectively, "Property Agreement"), and that any prior Property Agreements have either expired as of their own terms or have not been renewed due to the failure of Seller and the other contracting entity to reach terms acceptable to both parties. 16.15.3 Neither the execution of this Agreement nor the performance by Seller of each of the terms hereof constitutes or shall constitute a default or violation by Seller under any contract, loan, note, deed of trust, or other agreement, obligation or covenant to which Seller is a party or to which Seller is bound. 16.15.4 Seller is not a party to any bankruptcy, insolvency or receivership proceeding of any kind, whether voluntary or involuntary. 16.15.5 Seller has not entered into any other agreements with any other party to sell or convey the Property or any portion thereof. 16.15.6 There are no Hazardous Materials situated on, under or about the Property (including any groundwater contamination). 2156/015610-0047 709670.06 a08/29/06 -14- 16.15.7 Seller is not a party to any lawsuit, litigation or other legal or administrative proceeding affecting the Property or Seller's ability to perform its obligations hereunder nor has any such matter been threatened. In the event that, during the term of this Agreement, a change in circumstance should occur which would cause any of Seller's above representations and warranties to be materially inaccurate if they were made as of that date, Seller shall advise Buyer in writing of such change in circumstance within ten (10) days from the date upon which Seller discovers such material inaccuracy. Notwithstanding anything to the contrary set forth elsewhere in this Agreement, Buyer shall have the right, within ten (10) business days from receipt of such notification from Seller to notify Seller of Buyer's election to terminate this Agreement and obtain a return of the Deposit. 16.16 Authority. The person(s) executing this Agreement on behalf of each of the parties hereto represent and warrant that (i) such party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of said party, (iii) by so executing this Agreement such party is formally bound to the provisions of this Agreement, and (iv) the entering into this Agreement does not violate any provision of any other agreement to which such party is bound. 16.17 Eminent Domain. Buyer and the City of La Quinta have the power of eminent domain within certain jurisdictional limits of the City of La Quinta. In the event Seller had determined not to sell the Real Property to Buyer, staff would have recommended to the Board of Directors of Buyer or to the City Council of the City of La Quinta that upon annexation of the Real Property into the City of La Quinta Buyer and/or the City of La Quinta, after providing notice to Seller and holding a hearing as required by applicable law, consider adopting a resolution of necessity and thereafter commencing proceedings to acquire the Real Property by the exercise of its power of eminent domain. It is the intent of Seller to have this acquisition completed as a tax deferred exchange pursuant to Sections 1031 or 1033 of the Internal Revenue Code of 1*986, as amended, and Section 18662 of the California Revenue and Taxation Code. Notwithstanding the foregoing, Buyer makes no representation, warranty, or guaranty to Seller or to any other person, firm, or entity concerning the tax treatment by any taxing authority, including but not limited to, the Internal Revenue Service, of the conveyance of the Real Property to Buyer, including the tax treatment and tax consequences of an acquisition under the threat of condemnation. Seller acknowledges that Buyer is not providing tax advice to Seller or to any person, firm, or entity and Seller further acknowledges and agrees that Seller must consult Seller's own tax advisor concerning the tax treatment, tax implications, and tax consequences of the sale of the Real Property to Buyer. 16.18 Parcel Map for Real Property. Seller shall, at its sole cost and expense (subject to the reimbursement provision in this section), process a parcel map or lot line adjustment to create the Real Property as a separate legal parcel in compliance with the California Subdivision Map Act ("Parcel Map") provided that such Parcel Map shall also establish access to the Remainder Property through the Bermuda Dunes Country Club. Buyer shall reimburse Seller for one half of the actual cost and expense of processing the Parcel Map, which reimbursement shall be made within ten (10) days of the date that the Parcel Map is recorded; provided, however, that Buyer's reimbursement obligation under this section shall not exceed a usual, customary and reasonable 2156/015610-0047 709670.06a08/29/06 -15- ', r fee for engineering and costs associated with processing a Parcel Map. The Buyer shall approve (in advance) the engineering bids/contracts associated with processing of the Parcel Map. Seller shall keep accurate records of actual costs and expenses incurred in processing and approving the Parcel Map and such records shall be provided to Buyer at the time Seller seeks reimbursement. Buyer's reimbursement shall be made by releasing funds from the Deposit, which release shall only occur upon presentation to Escrow Holder of a written notice signed by both Seller and Buyer instructing Escrow Holder to release the reimbursement amount from Escrow. Deposit funds released to pay reimbursements pursuant to this section shall not be credited against the Purchase Price and shall be considered nonrefundable, except that if Seller defaults under this Agreement then the reimbursement amount shall be immediately returned to Buyer. 16.19 Seller Processing of Further Subdivision. Seller shall have the right to process and seek approval of a subdivision map for the Remainder Property and may do so simultaneously with the processing of the Parcel Map for the Real Property; provided, however, that Seller's processing of a subdivision map for the Remainder Property shall (i) be a separate application from the Parcel Map, (ii) at Seller's sole cost and expense, and (iii) such processing and approval shall not be a condition to nor delay the Close of Escrow and the sale of the Property contemplated by this Agreement. No costs or expenses incurred in connection with the subdivision map for the Remainder Parcel shall be reimbursed by Buyer and such costs shall not be included in the reimbursement amount described in Section 16.18. 16.20 Annexation of Real Property. Buyer or the City of La Quinta, at Buyer's or the City's sole cost and expense, shall apply for and process annexation of the Real Property into the City of La Quinta. Annexation of the Real Property (or a decision that annexation is imminent as determined in Buyer's sole discretion) shall be a condition precedent to Buyer's obligation to Close Escrow. Seller shall use best efforts to cooperate with Buyer and.its agents, consultants, representatives and employees in connection with the annexation, including without limitation, the prompt execution of all applicable documents, at no cost or expense to Seller. Seller hereby irrevocably grants to Buyer the exclusive right to act on behalf of Seller for the purpose of obtaining annexation. If the Close of Escrow not occur by the Outside Closing Date due to the annexation process being incomplete, then Buyer may extend the Close of Escrow for thirty (30) day periods for the purpose of completing annexation by providing written notice of such extension to Seller and Escrow Holder; provided, however, that upon Buyer's notice of such an extension(s), Buyer shall concurrently instruct Escrow Holder to release to Seller the sum of FIVE THOUSAND DOLLARS ($5,000.00) from the Deposit for each thirty (30) day extension. Deposit funds released pursuant to this section shall not be credited against the Purchase Price and shall be considered nonrefundable, except that if Seller defaults under this Agreement then the reimbursement amount shall be immediately returned to Buyer. Unless otherwise agreed to in writing by both parties, the number of extensions pursuant to this section shall be limited to six (6) 16.21 Entire Agreement; Amendment. Except as set forth above, this Agreement and the exhibits incorporated herein contain the entire agreement of Buyer and Seller with respect to the matters contained herein, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provisions of this Agreement may be amended or modified in any manner whatsoever except by an agreement in writing signed by duly authorized officers or representatives of each of the parties hereto. 2156/015610-0047 709670.06 a08/29/06 -16- O 16.22 Disclosures. Donald Testa is a licensed California real estate broker and a licensed California attorney acting as a principal. 16.23 DEFAULT OF BUYER; LIQUIDATED DAMAGES. IF THE CLOSE OF ESCROW DOES NOT OCCUR DUE TO BUYER'S DEFAULT UNDER THIS AGREEMENT, THEN AND IN SUCH EVENT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, BUYER AND SELLER AGREE THAT SELLER WILL INCUR DAMAGES BY REASON OF SUCH DEFAULT BY BUYER, WHICH DAMAGES SHALL BE IMPRACTICAL AND EXTREMELY DIFFICULT, IF NOT IMPOSSIBLE, TO ASCERTAIN. BUYER AND SELLER, IN A REASONABLE EFFORT TO ASCERTAIN WHAT SELLER'S DAMAGES WOULD BE IN THE EVENT OF SUCH DEFAULT BY BUYER, HAVE AGREED BY PLACING THEIR INITIALS BELOW THAT THE DEPOSIT (AND ALL INTEREST EARNED THEREON) SHALL BE DEEMED TO CONSTITUTE A REASONABLE ESTIMATE OF SELLER'S DAMAGES UNDER THE PROVISIONS OF SECTION 1671 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. IN THE EVENT OF AND FOR SUCH DEFAULT BY BUYER, SELLER SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT AND TO RETAIN THE DEPOSITS WHICH HAVE PREVIOUSLY BEEN DELIVERED BY BUYER PLUS ALL INTEREST THEREON AS LIQUIDATED DAMAGES AND AS SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST BUYER WITH THE EXCEPTION OF THE INDEMNITY PROVISIONS CONTAINED IN SECTION 5.2.3. SELLER SHALL HAVE NO RIGHT TO AN ACTION FOR SPECIFIC PERFORMANCE OF ANY PROVISIONS OF THIS AGREEMENT. IN CONSIDERATION OF THE PAYMENT OF LIQUIDATED DAMAGES, SELLER WILL BE DEEMED TO HAVE WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR IN EQUITY INCLUDING ANY RIGHTS SELLER MAY HAVE PURSUANT TO SECTION 1680 OR SECTION 3389 OF THE CALIFORNIA CIVIL CODE RELATING TO BUYER'S DEFAULT RESULTING IN ESCROW NOT CLOSING AS PROVIDED UNDER THIS AGREEMENT. BY INITIALING THIS PROVISION IN THE SPACES BELOW, SELLER AND BUYER EACH SPECIFICALLY AFFIRM THEIR RESPECTIVE AGREEMENTS CONTAINED IN THIS SECTION AND AGREE THAT SUCH SUM IS A REASONABLE SUM CONSIDERING THE CIRCUMSTANCES AS THEY EXIST ON THE DATE OF THIS AGREEMENT. Z?r SELLER'S INITIALS BUYER'S INITIALS [END -- SIGNATURE PAGE FOLLOWS] 2156/015610-0047 709670.06 a08/29/06 - 17- J IN WITNESS WHEREOF, Buyer and Seller each hereby represents that it has read this Agreement, understands it, and hereby executes this Agreement to be effective as of the day and year first written above. SELLER: The Testa Family Limited Partnership, a California limited partnership By: T anab Uet>& Its: General Partner By: Its: BUYER: LA QUINTA REDEVELOPMENT AGENCY, a public body corporate and politic IM ATTEST: JUNE GREEK, Agency Secretary APPROVED AS TO FORM: RUTAN & TUCKER, LLP M. KATHERINE JENSON, Agency Counsel Thomas P. Genovese, Executive Director [end of signatures] 2156/015610-0047 „x 709670.06a08/29/06 -18- „ � `j V Four Seasons Escrow, Inc., agrees to act as Escrow Holder in accordance with the terms of this Agreement that are applicable to it. Four Seasons Escrow, Inc. By: _ Name: Its: 2156/015610-0047 709670.06 a08/29/06 -19- EXHIBIT "A" LEGAL DESCRIPTION OF 15.13 ACRE PROPERTY APN: 609-040-005 That portion of the South half of the South half of the Northwest quarter of Section 18, Township 5 South, Range 7 East, San Bernardino Base and Meridian, described as follows: Beginning at the Southwest corner of the Northwest quarter of said Section 18; Thence North 0° 04' 5 1 " East on the Westerly line of said section, 133.69 feet; Thence North 89' 21' 21" East 370.03 feet; Thence North 0° 04' 5 1 " East 130.01 feet; Thence North 89' 2l' 21" East 2315.95 feet, more or less, to the Easterly line of the Northwest quarter of said section; Thence South 0°, 00' 3 9 " West on said Easterly line of the Northwest quarter of said section, 265.2 feet, more or less, to the Southeast corner of the Northwest quarter of said section; Thence South 89' 23' 25" West of the Southerly line of said Northwest quarter 2686.39 feet to the Point of Beginning. Except therefrom the Westerly 40 feet lying within Washington Street as acquired by the County of Riverside by order of the Board of Supervisors recorded April 17, 1959, in Book 2454, Page 65 of Official Records of Riverside County, California, and by deed recorded September 29, 1964 in Book 3813, Page 263 of Official Records of Riverside County, California. 2156/015610.0047 C; 709670.06 a08/29/06 kJ ' EXHIBIT "B" LEGAL DESCRIPTION/DEPICTION OF REAL PROPERTY (To be replaced with new APN no. and Legal Description following parcel split.) 7.5 Acres of the Western Portion of EXHIBIT "A" (This description will be revised and updated with a full legal description upon recordation of the Parcel Map as provided by Section 16.18) -. _ 11 PAT2C eI TAP (After At►prc�ximate Parcel split) 1p=ier A�Jpruiea! t;onrpnuJ- ��i:tn! r)c$CPi. (��YijjProlip C 2156/015610-0047 709670.06 a08/29/06 EXHIBIT "C" FORM OF GRANT DEED [SEE ATTACHED] ! 2156/015610-0047 !! 709670.06 a08/29/06 1 • i 4 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: LA QUINTA REDEVELOPMENT AGENCY 78-495 Calle Tampico La Quinta, CA 92253 Attn: Executive Director SPACE ABOVE THIS LINE FOR RECORDER'S USE (Exempt from Recordation Fee per Gov. Code § 6103) GRANT DEED FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, THE TESTA FAMILY LIMITED PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP, hereby grant to the LA QUINTA REDEVELOPMENT AGENCY, a public body corporate and politic, that certain real property located in the City of La Quinta, County of Riverside, State of California, legally described on Attachment No. 1, which is attached hereto, and incorporated herein by this reference, subject to all matters of record. Dated: 52007 GRANTOR: The Testa Family Limited Partnership, a California limited partnership By: Its: By: Its: 2156/015610-0047 709670.06 a08/29/06 643 STATE OF CALIFORNIA COUNTY OF On personally appeared ss before me, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] STATE OF CALIFORNIA ) ss COUNTY OF ) On , before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] 2156/015610-0047 709670.06 a08/29/06 -2- G ATTACHMENT NO. 1 LEGAL DESCRIPTION OF REAL PROPERTY (To be replaced with new APN no. and Legal Description following parcel split.) 7.5 Acres of the Western Portion of EXHIBIT "A" (This description will be revised and updated with a full legal description upon recordation of the Parcel Map as provided by Section 16.18) 7096/0.0610-0047 8/29/ Attachment 1 to Grant Deed `' 0 `� 709670.06 a08/29/06 x CERTIFICATE OF ACCEPTANCE - THIS IS TO CERTIFY that the interest in real property conveyed by a Grant Deed dated from The Testa Family Limited Partnership, a California limited partnership, to the La Quinta Redevelopment Agency, a public body corporate and politic ("Agency"), is hereby accepted by the Agency by the signature of the undersigned agent on behalf of the Agency pursuant to the authority conferred upon him by the Resolution No. 2006- adopted on , 2006, and that the Agency, as the Grantee, by its said duly authorized agent, hereby consents to the recordation thereof. DATED: LA QUINTA REDEVELOPMENT AGENCY, public body corporate and politic By: Name: Thomas P. Genovese Executive Director, La Quinta Redevelopment Agency I HEREBY ATTEST to the authenticity of the foregoing signature and to the said adoption of the said Resolution of his general authority to so act and certify that said authority has not been revoked by any subsequent Resolution or order of the Agency. DATED: June S. Greek, Agency Clerk, La Quinta Redevelopment Agency 6/0610-0047 709670.0.06 a08/29/06 4 Attachment 1 to Grant Deed ` '� (�i 709t 0 EXHIBIT "D" AFFIDAVIT OF NON -FOREIGN ENTITY TO: LA QUINTA REDEVELOPMENT AGENCY ("Buyer") The Internal Revenue Code of 1954 ("Code") (26 U.S.C. Sections 1445, 7701) provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform the transferee that withholding of tax is not required upon transfer of that certain U.S. real property interest described in Exhibit "A" to the Agreement for Purchase and Sale and Escrow Instructions dated , 2006, and incorporated herein by reference ("Property"), that the undersigned ("Seller") hereby certifies the following: 1. Seller is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); and 2. The U.S. taxpayer identification number for Seller is 33-0682703; and 3. The address for mailing purposes of Seller is: 3552 RunningTide Circle, Huntington Beach, CA 92649-2514; and 4. Seller understands that this certification may be disclosed to the Internal Revenue Service by Buyer and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury, I declare that I have examined this Certification and to the best of my knowledge and belief, it is true, correct, and complete, and I further declare that I have authority to sign this document on behalf of Seller. Dated: , 2007 SELLER: The Testa Family Limited Partnership, a California limited partnership By: Its: By: Its: 2156/015610-0047 709670.06 a08/29/06 General Partner 047 EXHIBIT "E" Intentionally Deleted 2156/015610-0047 709670.06 a08/29/06 EXHIBIT "F" ESCROW INSTRUCTIONS [TO BE INSERTED ONCE RECEIVED FROM ESCROW CO] 2156/015610-0047 709670.06 a08/29/06 649 EXHIBIT "G" SPECIAL ESCROW INSTRUCTIONS PRORATIONS AND/OR ADJUSTMENTS: Escrow Holder is authorized and instructed to prorate and/or make adjustments on the following items as of the close of escrow date: TAXES ON REAL PROPERTY: Prorate taxes, including all tax bill items, except taxes on personal property not conveyed through this escrow, based on the current year's taxes, except between July lst and the date you are furnished current taxes, based on immediate preceding year's taxes. In each case use the figures furnished you by the title company, without liability on your part as to their correctness. Owner to pay prior to delinquency, supplemental tax bills, and any taxes on personal property not being sold herein, which taxes are a lien on the real property being conveyed and you are not to be concerned herewith. Refund, if any, from the Riverside County Tax Collector, for refund of taxes buyer is being debited for herein, is to be handled outside of escrow. Four Seasons Escrow, its officers and employees are relieved of all responsibility and liability in connection therewith. 2156/015610-0047 709670.06 a08/29/06 _ 1 _ w 1 �: �r 116 u pL ,� - rJvo � „x BYRpN 7 3. ss •dip, VA " K 't; • . A z. .f. •. Y x x UWA � Ii+ e. Ak 40 0 e �i lifts 0 O Qum& OF AGENDA CATEGORY: COUNCIL/RDA MEETING DATE: September 5, 2006 BUSINESS SESSION: ITEM TITLE: Adoption of a Resolution of the Redevelopment Agency Approving a Purchase and Sale CONSENT CALENDAR: , Agreement by and Between the Redevelopment Agency STUDY SESSION: and Frank R. Goodman & Associates to Purchase a 73- Unit Apartment Complex (Washington Street PUBLIC HEARING: Apartments) and 4.35 Acres of Property Located at 42- 800 Washington Street (APN: 609-040-007 & 609-040- 023) RECOMMENDATION: Adopt a Resolution of the Redevelopment Agency approving a Purchase and Sale Agreement (Attachment 1) and utilize existing appropriated funds in the amount of $3,700,000 from available Low- and Moderate -Income Housing Funds for Project Area No. 1 (Account No. 245-9001-703.74-01) to underwrite acquisition, due diligence studies, closing costs, repayment of a General Fund loan, and authorize the Agency Executive Director to execute all necessary agreements and documents to complete the purchase. FISCAL IMPLICATIONS: Purchasing this property will result in the expenditure of up to $3,700,000 of the available $7,000,000 approved in the FY 06/07 budget from Project Area No. 1 Low - and Moderate -Income Housing Funds. BACKGROUND AND OVERVIEW: In May 2005, the third Five -Year Implementation Plan outlined the mandate for the Agency to facilitate the development or preservation of 871 affordable units within the next ten years. This requirement has led Agency staff to identify opportunities, both within the Agency's Redevelopment Project Areas and the greater community. With a limited number of opportunities available inside of the Project Areas, staff looked to the unincorporated areas adjacent to the City. In December 2005 Agency staff presented two properties for consideration; both of these properties are outside of the existing City limits and present challenges. Bruce Cathcart of La Quinta Palms Realty represents the owners. With direction from the 052 Agency Board, staff has commissioned real property appraisals, researched annexation and Project Area Amendment options, and submitted purchase offers to the owners. In April 2005 staff began acquisition discussions and started into the negotiations and formalization of Purchase and Sale Agreements. These properties present a series of challenges and constraints; staff has researched and defined strategies for overcoming these as outlined below: 1 . The properties are outside of the City and housing funds cannot be used to purchase such properties. Recommendation: Create a General Fund loan advance to secure the properties and perform due diligence studies while the annexation of subject properties takes place. A condition of closing escrow is the successful annexation, at which time housing funds and repayment of the General Fund loan advance can occur. 2. The City would need to file an annexation application with LAFCO. Recommendation: The necessary steps have been researched and initial steps commenced to file an annexation application if an Agreement is approved. 3. The properties do not fall within a Project Area, thereby reducing by half the credits received per eventual developed or preserved credit. Recommendation: The necessary steps have been researched and funds have been budgeted to undertake amending the Project Area No. 2 Redevelopment Plan to include these properties within the Project Area. The attached Purchase and Sale Agreement is the second of two that staff is requesting the Agency Board consider at this meeting. This Agreement involves a 73- unit apartment complex that is rented to very low- and low-income senior and disabled households- (Attachment 2). It is adjacent to the Testa parcel which will need to be annexed prior to, or concurrently with this parcel. A summary of the Agreement is as follows: • Sales price is $6,120,000. • The deposit is $50,000 with $10,000 being released to the owner in 30 days. • An assumable USDA note with deed restrictions. o As of August 1 the balance was $822,622. o Current rate is close to 1 % and fully amortizes at term's end. o Remaining term roughly 26 years. o Assumption fees paid for by buyer if applicable. ., 653 • An assumable Provident Savings Bank Loan with a large prepayment penalty. o August 1 balance was $1,696,000. o Fixed rate of 8.36% with a balloon payment at term's end. o Remaining term roughly 16 years. o Assumption fees paid for by buyer if applicable. • Purchase and closing of adjacent property (Testa Parcel). • Annexation is a requirement to close (paid for by buyer). • Escrow Fees are split equally. • Escrow period is 180 days. The budget to complete this transaction is as follows: • Sales price $6,120,000 • Estimated assumable notes (2,450,000) • Due diligence studies $9,000 • Escrow fees 8,000 • General Fund loan interest 3,000 • Contingency 10,000 • TOTAL $3,700,000 The $3,700,000 required to purchase this project is based on the Agency assuming the existing indebtedness. The USDA deed restrictions limit the owner's annual profit to $35,000 and a study of the existing loan rates, terms and prepayment penalties provide no financial advantage to support paying off the existing loans. This debt service is already budgeted into the operations and expenses of this project and is supported by the net operating income. If this Agreement is approved, it will also be necessary to approve a Finance Agreement which is scheduled for Agency Board and Council approval at this meeting. In addition, Agency staff will open escrow, start the due diligence studies, and begin the annexation process. FINDINGS AND ALTERNATIVES: The alternatives available to the Agency Board include: 1 . Adopt a Resolution of the Redevelopment Agency approving a Purchase and Sale Agreement and utilizing $3,700,000 from available Low- and Moderate - Income Housing Funds of Project Area No. 1 (Account No. 245-9001-703.74- 01) to underwrite acquisition, due diligence studies, closing costs, repayment of a General Fund loan, and authorize the Agency Executive Director to execute all necessary agreements and documents to complete the purchase; or 2. Do not Adopt a Resolution of the Redevelopment Agency approving a Purchase and Sale Agreement; or 6 4 3. Provide staff with alternative direction. Respectful1r submitted, Douglas R. vans Communify Development Director Approved for submission by: Thomas P. Genovese, Executive Director Attachments: 1. Purchase and Sale Agreement 2. Location map . UJrJ RESOLUTION RDA NO. A RESOLUTION OF THE LA QUINTA REDEVELOPMENT AGENCY APPROVING A PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS BY AND BETWEEN THE AGENCY AND FRANK R. GOODMAN AND ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP, FOR THE AGENCY'S PURCHASE OF AN EXISTING AFFORDABLE HOUSING DEVELOPMENT FRANK R. GOODMAN AND ASSOCIATES PURCHASE AND SALE AGREEMENT WHEREAS, the La Quinta Redevelopment Agency ("Agency") is a public body, corporate and politic, organized and existing under the California Community Redevelopment Law (Health & Safety Code Section 33000, et seq.) ("CRL"); and WHEREAS, pursuant to the CRL, the City Council of the City of La Quinta ("City" or "City Council," as applicable) approved and adopted the Redevelopment Plan ("Redevelopment Plan") for Project Area No. 2 ("Project Area"), on May 16, 1989, by Ordinance No. 139; and WHEREAS, a fundamental purpose of the CRL is to expand the supply of low- and moderate -income housing (Health & Saf. Code, § 33071); and WHEREAS, the Agency staff has negotiated a Purchase and Sale Agreement and Escrow Instructions ("Agreement") with Frank R. Goodman and Associates, a California limited partnership ("Seller"), for the Agency's purchase of an existing 73-unit affordable housing apartment complex, commonly known as the Washington Street Apartments (the "Project"), located at 42-800 Washington Street, in unincorporated territory in the County of Riverside, State of California (the "Property"), for Six Million One Hundred Twenty Thousand Dollars ($6,120,000) (the "Purchase Price"); and WHEREAS, the Project is covenanted for occupancy by low income persons who are either senior citizens or handicapped persons for 26 additional years; and WHEREAS, the Project is encumbered with a loan from the United States of America, acting through the Farmer's Home Administration, United States Department of Agriculture ("USDA"), as holder, in the original principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "USDA Loan"), and a loan from Provident Savings Bank ("Provident"), as holder, in the original principal 656 Resolution RDA No. 2006- Frank R. Goodman and Associates Purchase and Sale Agreement Adopted: September 5, 2006 amount of One Million Six Hundred Ninety -Six Thousand Dollars ($1,696,000) ("Provident Loan"). The outstanding amount of the USDA Loan is approximately Eight Hundred Twenty -Two Thousand Six Hundred Twenty -Two Dollars ($822,622), and the outstanding amount of the Provident Loan is approximately One Million Six Hundred Seventeen Thousand Five Hundred Dollars ($1,617,500). The Purchase Price is all-inclusive, and includes the Agency assuming the USDA Loan and the Provident Loan; and WHEREAS, concurrently with the consideration of this Agreement, the Agency Board is considering (i) an Agreement for Purchase and Sale and Escrow Instructions by and between the Agency and The Testa Family Limited Partnership (the "Testa Agreement") for the Agency's purchase of certain adjacent real property that is also located in the unincorporated territory in the County of Riverside (the "Testa Property"), and (ii) a Financing Agreement by and between the Agency and the City that provides for the City to loan funds to the Agency to pay for all costs incurred by the Agency pursuant to the Agreement prior to the City's annexation of the Property into City limits (the "Financing Agreement"); and WHEREAS, the conditions to the closing under the Agreement include (i) that the closing under the Testa Agreement will occur simultaneously, and (ii) that the, City has completed annexation proceedings for the Property and the Testa Property, and that such annexation has occurred, will occur simultaneously with the closing, or is imminent; and WHEREAS, the Agreement requires the Seller to provide the Agency with various documentation pertaining to the Project and Property, including a "rent roll" and information regarding the income status of the tenants, and provides the Agency with a due diligence period during which the Agency will (i) inspect the Project and Property and the information and documentation provided by the Seller, (ii) negotiate the Agency's assumption of the USDA Loan and Provident Loan, and (iii) process the annexation of the Property and the Testa Property into the City; and WHEREAS, subsequent to the City's annexation of the Property and the Testa Property into the City and the Agency's acquisition of said properties, the Agency Board contemplates commencing the necessary actions to amend the Redevelopment Plan to include the Property and the Testa Property in the Project Area; and 0 57 Resolution RDA No. 2006- Frank R. Goodman and Associates Purchase and Sale Agreement Adopted: September 5, 2006 WHEREAS, the Agency has determined that, pursuant to Health and Safety Code Section 33334.4, the Agency's expenditure of Low and Moderate Income Housing Funds over the ten-year period set forth in the Agency's housing implementation plan will assist housing for persons of low income and housing for persons of very low income in at least the same proportion as the total number of housing units needed for each of those income groups bears to the total number of units needed for persons of moderate, low, and very low income within the City as those needs have been determined for the City pursuant to Section 65584 of the Government Code; and WHEREAS, the Agreement is in accordance with the Redevelopment Plan and is of benefit to the Project Area and the City of La Quinta. NOW, THEREFORE, BE IT RESOLVED BY THE LA QUINTA REDEVELOPMENT AGENCY AS FOLLOWS: Section 1. That the above recitals are true and correct and incorporated herein. Section 2. The Agreement, a copy of which is on file with the Agency Secretary, is hereby approved, subject to (i) the Agency's approval of the Testa Agreement and (ii) the Agency's and City Council's approval of the Financing Agreement. The Agency Executive Director and Agency Counsel are hereby authorized and directed to make final modifications to the Agreement that are consistent with the substantive terms of the Agreement approved hereby, and the Agency Executive Director is authorized to thereafter sign said Agreement on behalf of the Agency. Section 3. The Agency Executive Director is authorized and directed, on behalf of the Agency, to (i) sign such other and further documents, including but not limited to escrow instructions that require the Agency's signature, and (ii) take such other and further actions, as may be necessary and proper to carry out the terms of the Agreement. PASSED, APPROVED, AND ADOPTED at a regular meeting of the La Quinta Redevelopment Agency held this 5th day of September, 2006, by the following vote: Resolution RDA No. 2006- Frank R. Goodman and Associates Purchase and Sale Agreement Adopted: September 5, 2006 EX I NOES: ABSENT: ABSTAIN: LEE OSBORNE, Agency Chair City of La Quinta, California ATTEST: DEBORAH H. POWELL, Interim Agency Secretary City of La Quinta, California APPROVED AS TO FORM: M. KATHERINE JENSON, Agency Counsel City of La Quinta, California 659 PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS by and between FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership "Seller" and LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic "Buyer" 882/015610-0047 715407.04 a08/30/06 TABLE OF CONTENTS Page ARTICLE 1 AGREEMENT TO PURCHASE.......................................................................... I 1.1 The Property..........................................................................................................1 1.2 Purchase Price.......................................................................................................2 1.3 Payment of Purchase Price....................................................................................2 ARTICLE2 ESCROW..............................................................................................................4 2.1 Closing..................................................................................................................4 2.2 Escrow Instructions...............................................................................................4 2.3 Conveyance of Title..............................................................................................4 2.4 Additional Closing Obligations of Seller.............................................................. 5 2.5 Closing Obligations of Buyer............................................................................... 7 2.6 Delivery of Documents by Escrow Holder...........................................................7 2.7 Recordation........................................................................................................... 7 ARTICLE 3 INSPECTIONS AND REVIEW............................................................................8 3.1 Due Diligence Items............................................................................................. 8 3.2 Environmental/Physical Property Condition Due Diligence ................................ 9 3.3 Financial/Operational Condition Due Diligence Period; New Indebtedness; Buyer's Equity.............................................................................10 3.4 Preliminary Title Report .....................................................................................10 3.5 Survey.................................................................................................................11 3.6 Pest Control Report .............................................................................................12 3.7 USDA Matters....................................................................................................12 3.8 Buyer Affordability Covenant Condition...........................................................13 3.9 Books and Records.............................................................................................13 ARTICLE 4 CONDITIONS TO AGREEMENT....................................................................14 4.1 Buyer's Conditions Precedent.............................................................................14 4.2 Seller's Condition Precedent...............................................................................15 4.3 Satisfaction of Conditions...................................................................................15 4.4 Waiver.................................................................................................................15 4.5 Termination.........................................................................................................15 4.6 Condition of Property.........................................................................................16 ARTICLE 5 PRORATIONS, CLOSING COSTS, POSSESSION AND DEPOSITS ............ 16 5.1 Proration of Taxes...............................................................................................16 5.2 Rents, Other Income and Operating Expenses...................................................17 5.3 Laundry Lease.....................................................................................................17 5.4 Deposits...............................................................................................................17 5.5 Utilities................................................................................................................17 5.6 Maintenance Contracts........................................................................................17 5.7 Insurance.............................................................................................................18 5.8 Impounds; Working Capital Accounts; Capital Reserve Accounts ....................18 5.9 Possession...........................................................................................................18 882/015610-0047 715407.04 a08/30/06 _1_ Page 5.10 Closing Costs......................................................................................................18 5.11 Closing Statement...............................................................................................18 5.12 Breach by Seller or Buyer...................................................................................18 5.13 LIQUIDATED DAMAGES...............................................................................19 ARTICLE 6 REPRESENTATIONS AND WARRANTIES...................................................19 6.1 Warranties and Representations by Seller..........................................................19 6.2 Representations of Authority..............................................................................25 6.3 Covenants of Seller.............................................................................................25 ARTICLE 7 DAMAGE, DESTRUCTION AND CONDEMNATION..................................27 7.1 Risk of Physical Loss..........................................................................................27 7.2 Condemnation by Unrelated Governmental Entity.............................................27 7.3 Eminent Domain Authority.................................................................................27 ARTICLE 8 ANNEXATION OF REAL PROPERTY INTO CITY......................................28 ARTICLE9 MISCELLANEOUS...........................................................................................28 9.1 Attorneys' Fees................................................................................................... 28 9.2 Notices................................................................................................................ 28 9.3 Entire Agreement; Interpretation........................................................................ 29 9.4 Successors........................................................................................................... 29 9.5 Assignment.........................................................................................................29 9.6 Choice of Laws................................................................................................... 30 9.7 Headings............................................................................................................. 30 9.8 Survival...............................................................................................................30 9.9 Time.................................................................................................................... 30 9.10 Counterparts........................................................................................................30 9.11 Brokerage Commissions..................................................................................... 30 9.12 Information Report ..............................................................................................30 9.13 Nonliability of Buyer Officials...........................................................................31 9.14 Buyer's Delegation of Authority........................................................................ 31 9.15 Incorporation....................................................................................................... 31 EXHIBITS A Legal Description of Real Property B List of Personal Property C Grant Deed D Warranty Bill of Sale E Assignment of Leases F Non -Foreign Affidavit G Assignment of Contracts, Permits, Intangible Personal Property, Warranties and Guaranties 882/015610-0047 715407.04 a08/30/06 -11- Page H Schedule of All Labor, Service, Employment, Supply, Maintenance, and Brokerage Leasing Contracts I Certificate of Seller Regarding Representations and Warranties J Notice to Tenants K Lead -Based Paint Disclosure and Acknowledgment L Pending or Threatened Claims, Allegations or Lawsuits 882/015610-0047 715407.04 a08/30/06 -111- PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS This PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS ("Agreement") is made as of this day of , 2006 ("Effective Date"), by and between FRANK R. GOODMAN & ASSOCIATES, a California limited partnership (the "Seller"), and LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic (the "Buyer"). RECITALS A. Seller is the owner of that certain real property (the "Real Property") located at 42-800 Washington Street, in unincorporated territory in the County of Riverside, State of California, legally described on Exhibit "A", which Real Property is improved with an apartment complex commonly known as the Washington Street Apartments consisting of 73 apartment units. B. Subject to the terms and conditions in this Agreement, Buyer intends to apply for and process the annexation of the Property into the City of La Quinta. C. Buyer wishes to purchase and Seller wishes to sell the Real Property and any improvements and appurtenances owned by Seller, including, as applicable, the buildings, parking areas, improvements and fixtures, roads, streets, parking areas, curbs, sidewalks, landscaping, recreation facilities, sewers and other utilities now or hereafter located thereon (the "Improvements"), on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants, promises and undertakings set forth herein, Buyer and Seller hereby agree as follows: ARTICLE 1 AGREEMENT TO PURCHASE 1.1 The Property. Subject to all of the terms, conditions and provisions of this Agreement, and for the consideration herein set forth, Seller hereby agrees to sell and Buyer hereby agrees to buy the following, to the extent owned by and in the possession or control of Seller: (a) Seller's fee estate in and to the Real Property, together with the Improvements, including all right, title and interest of the Seller in and to any land lying in the bed of any existing or proposed highway, street, road, avenue or alley abutting or adjoining the Real Property and all right, title and interests of the Seller in and to any strips or gores of land adjoining the Real Property, including the right to any unpaid award for damage by reason of any condemnation proceedings or change of grade of any highway, street, road or avenue, and all tenements, hereditaments and appurtenances thereto. (b) All furniture, personal property, machinery, apparatus and equipment owned by Seller and currently used in the operation, repair and maintenance of the G4 882/015610-0047 715407.04 a08/30/06 Improvements located upon the Real Property. The furniture, personal property, machinery, apparatus and equipment to be conveyed (the "Personal Property") are listed in the inventory attached as Exhibit `B"; (c) All signs, logos, trade names, trademarks or styles relating to the Real Property owned by Seller (specifically including the name "Washington Street Apartments") and all other intangible property owned or hereafter to be acquired by Seller in connection with the Real Property, Improvements and Personal Property including, but not limited to, licenses, use, occupancy and operating permits, brochures, manuals, lists of prospective tenants, advertising materials and assignable telephone numbers), warranties and guaranties in effect, all plans, specifications, including, without limitation, all working drawings and "as -built" drawings, approvals, reports and studies ("Intangible Personal Property"); (d) All labor, service, supply, property management, insurance, brokerage leasing and maintenance contracts relating to the Improvements or the Real Property which are to be assumed by Buyer pursuant to Section 3.1(a) below ("Contracts"); and (e) All leases of the Real Property or the Improvements disclosed in the Certified Rent Roll (as hereinafter defined) ("Tenant Leases") and all lease deposits, prepaid rentals and whatever rights of any kind or nature related thereto. The Real Property, Improvements, Personal Property, Intangible Personal Property, Contracts, Tenant Leases and all other property described in Sections (a) through (e) above are hereinafter collectively referred to as the "Property." 1.2 Purchase Price. The purchase price which Seller agrees to accept and Buyer agrees to pay for the Property is SIX MILLION ONE HUNDRED TWENTY THOUSAND DOLLARS ($6,120,000), which includes the amount of the Existing Indebtedness as defined in Section 1.3(b) ("Purchase Price"). 1.3 Payment of Purchase Price. (a) Deposit. (i) Within three (3) business days following the execution of this Agreement and opening of the Escrow, Buyer shall deposit into Escrow (as hereinafter defined) the sum of FIFTY THOUSAND DOLLARS ($50,000) (the "Deposit"). Immediately upon deposit thereof by Buyer, the Deposit shall be deposited by Escrow Holder (as hereinafter defined) in an interest -bearing account with interest thereon to accrue for the benefit of Buyer. (ii) If Buyer elects (or is deemed to have elected) to terminate this Agreement on or before the end of the last to expire of the due diligence periods described in Sections 3.2, 3.3, 3.4, 3.7, and 3.8, then Buyer shall be entitled to a full refund of the Deposit along with all interest earned thereon, less the "Release Amount" (as defined below) that has actually been released to Seller. Thirty (30) days after the opening of the Escrow, Buyer agrees and hereby instructs Escrow r r 882/015610-0047 -2- U �} 715407.04 a08/30/06 Holder to release to Seller the sum of TEN THOUSAND DOLLARS ($10,000.00) from the Deposit (the "Release Amount"), which Release Amount shall be nonrefundable, subject to Seller's performance of its obligations hereunder and such other provisions of this Agreement as expressly provide for a return of the Release Amount to Buyer. (iii) The term "Deposit" shall hereafter be deemed to refer to, collectively, the Deposit and all interest earned thereon. Except as provided by Article 8 (relating to payments to extend the Agreement resulting from annexation), upon the Close of Escrow, the Deposit (including the Release Amount) shall be applied as a credit to the Purchase Price. In the event of any of Buyer's conditions precedent to close described in Section 4.1 are not satisfied or waived by Buyer during the times and in such manner as provided therein or should Seller default in its obligations hereunder, then the Deposit shall be returned to Buyer, less the portion of Escrow Holder's reasonable escrow cancellation fees, if any, allocable to Buyer. (b) Assumption of Existing Indebtedness. Buyer shall have the right to assume, on terms and conditions acceptable to Buyer in its sole and absolute discretion, the outstanding indebtedness ("Existing Indebtedness") represented by (i) that certain Promissory Note dated , executed by Seller, as maker, in favor of the United States of America, acting through the Farmer's Home Administration, United States Department of Agriculture ("USDA"), as holder, in the original principal amount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) ("USDA Note"), which USDA Note is secured by that certain Deed of Trust dated November 18, 1980, executed by Seller, as trustor, in favor of USDA, as beneficiary, recorded November 21, 1980, as Instrument No. 218151, in the Official Records of Riverside County, California ("USDA 2"d Deed of Trust"); and/or (ii) that certain dated , executed by Seller, as maker, in favor of Provident Savings Bank ("Provident"), as holder, in the original principal amount of ONE MILLION SIX HUNDRED NINETY-SIX THOUSAND DOLLARS ($1,696,000) ("Provident Note"), which Provident Note is secured by that certain Deed of Trust dated July 19, 2001, executed by Seller, as Trustor, in favor of Provident, as beneficiary, recorded August 3, 2001, as Instrument No. 3387200, in the Official Records of Riverside County, California ("Provident 1st Deed of Trust"). The USDA has subordinated the USDA 2°d Deed of Trust to the Provident 1st Deed of Trust. Seller represents and warrants that the portion of the Existing Indebtedness currently outstanding under the USDA Note is approximately EIGHT HUNDRED TWENTY- TWO THOUSAND SIX HUNDRED TWENTY-TWO DOLLARS ($822,622); and the portion of the Existing Indebtedness currently outstanding under the Provident Note is ONE MILLION SIX HUNDRED SEVENTEEN THOUSAND FIVE HUNDRED DOLLARS ($1,617,500). Anything in this Section 1.3(b) to the contrary notwithstanding, if Buyer elects (with lender approval) to assume the Provident 1st Deed of Trust, Buyer shall pay any and all assumption fees and/or similar charges in connection therewith, and if Buyer elects to pay off and/or refinance the Provident 1st Deed of Trust, Buyer shall pay any and all 882/015610-0047 715407.04 a08/30/06 -3- prepayment penalties and/or similar fees and/or charges in connection therewith. If Buyer elects (with lender approval) to assume the USDA 2°d Deed of Trust, Buyer shall pay any and all assumption fees and/or similar charges incurred in connection therewith. If Buyer endeavors to obtain a replacement of the USDA 2"d Deed of trust, Buyer shall have full responsibility in that regard and shall pay any and all costs in connection therewith. (c) Balance of Purchase Price. The Purchase Price, less the sum of (i) the Deposit and (ii) the amount of the Existing Indebtedness assumed by Buyer pursuant to subparagraph (b) above, shall be deposited by Buyer with Escrow Holder, at least one (1) business day before the Closing Date. ARTICLE 2 ESCROW 2.1 Closing. Closing of the sale of the Property shall take place through an escrow ("Escrow") to be established with Four Seasons Escrow ("Escrow Holder") at its office located at 47350 Washington Street, Suite 101, La Quinta, California 92253, Attention: Malia Monroe, Telephone No.: (760) 564-4044, Facsimile No.: (760) . The "Closing Date" shall be on or before the date that is one hundred eighty (180) days after "Opening of Escrow" date (as defined in the next sentence). Escrow shall be deemed open upon delivery of a fully executed copy of this Agreement to Escrow Holder ("Opening of Escrow"). Escrow Holder shall immediately notify Buyer and Seller of the date of Opening of Escrow and the Escrow Number. The terms "Close of Escrow" and "Closing" shall mean the date the Grant Deed (hereafter defined) is filed for record in the Official Records of Riverside County, California. 2.2 Escrow Instructions. Articles 1, 2, 3, 4, 5 and 8 also constitute escrow instructions to Escrow Holder. Additionally, Buyer and Seller agree to execute any form of escrow instructions as the Escrow Holder customarily requires as escrow holder in real property escrows administered by it. In the event of a conflict between any such additional terms and provisions of this Agreement, this Agreement shall supersede and be controlling. Upon any termination of this Agreement or cancellation of the Escrow, Escrow Holder shall forthwith return all monies and documents, less only Escrow Holder's reasonable cancellation fees and expenses, as set forth herein. Except as otherwise provided herein, the termination of Escrow and this Agreement and/or the return of deposited funds or documents shall not constitute a waiver, release or discharge of any breach or default that has occurred in the performance of either party's obligations, agreements, covenants, representations or warranties contained herein, including payment of liquidated damages pursuant to Section 5.13 if payable under that section. 2.3 Conveyance of Title. On or before 12:00 noon on the business day preceding the Closing Date, Seller shall deliver to Escrow Holder a Grant Deed ("Grant Deed") in the form of attached Exhibit "C", which Grant Deed shall convey all of Seller's interest in fee title to the Real Property and Improvements to Buyer. Escrow Holder shall be instructed to record such Grant Deed in the Official Records of Riverside County, California, if and when Escrow Holder holds the instruments and funds accruing to Buyer and Seller as set forth herein and can obtain for Buyer an ALTA owner's extended coverage policy of title insurance ("Title Policy") issued by Old Republic Title Company ("Title Company") with liability in an amount equal to the 11 882/015610-0047 067 6 7 715407.04 a08/30/06 -4- Purchase Price (i.e., the sum of $6,120,000 (plus the amount of the New Indebtedness, and the amount of the Buyer Equity [see Section 3.3], if any), together with such endorsements to the policy as may be reasonably requested by Buyer, showing the Real Property vested in Buyer (or Buyer's assignee or nominee) free and clear of options, rights of first refusal or other purchase rights, lis pendens and monetary liens and/or encumbrances and subject only to: (a) Non -delinquent real property taxes; (b) The USDA 2"d Deed of Trust (or such replacement deed of trust from USDA) subordinated to the deed of trust securing the New Indebtedness (if applicable); (c) The Provident 1st Deed of trust, unless paid off per the last paragraph of Section 1.3(b). (d) Non -monetary title exceptions approved by Buyer pursuant to Section[s] 3.4 and 3.5 below; and (e) Title exceptions, if any, resulting from documents being recorded or delivered through Escrow. 2.4 Additional Closing Obligations of Seller. On or before 12:00 noon on the business day preceding the Closing Date (unless indicated otherwise), Seller shall deliver to Escrow Holder (unless indicated to be delivered directly to Buyer) copies of the following documents and other items: (a) Two (2) duplicate original copies of a Warranty Bill of Sale conveying the Personal Property to Buyer ("Bill of Sale") in the form attached as Exhibit "D", duly executed by Seller; (b) Two (2) duplicate originals of an Assignment of Tenant Leases assigning the Tenant Leases, security deposits and other rights by Seller to Buyer (the "Assignment of Tenant Leases") in the form attached as Exhibit "E", duly executed by Seller; (c) All of the original Tenant Leases including any amendments, modifications, letter agreements and correspondence relating thereto (to be delivered to Buyer at the Property at the Close of Escrow); (d) A Rent Roll (as hereinafter defined) certified by Seller as true and correct ("Certified Rent Roll"), dated no earlier than three (3) days prior to the Closing Date; (e) A Certificate of Non -Foreign Status (the "Non -Foreign Affidavit") executed by Seller in the form attached as Exhibit "F" and a California Franchise Tax Board Form 590-RE executed by Seller; (f) Originals, if available, and copies if originals are unavailable, of all Contracts which Buyer elects to assume pursuant to Section 3.1(a) hereof (to be delivered to Buyer at the Property at the Close of Escrow); 882/015610-0047 715407.04 a08/30/06 -5- (g) Originals or, if unavailable, copies of all Intangible Personal Property which Seller has in its possession and/or control (to be delivered to Buyer at the Property at the Close of Escrow); (h) Two (2) duplicate originals of an assignment to Buyer of Seller's right, title and interest in and to (i) all Contracts which Buyer has elected to assume pursuant to Section 3.1(a) below; and (ii) all Intangible Personal Property, which assignment shall be in the form attached as Exhibit "G" ("Assignment of Contracts"), duly executed by Seller; (i) All soils, seismic, geologic, drainage, toxic waste and environmental reports, surveys, "as -built" plans and specifications, working drawings, grading plans, elevations and similar information with respect to the Real Property heretofore obtained by Seller which Seller has in its possession and/or control to the extent that originals of such items have not been delivered previously by Seller to Buyer pursuant to Section 3.1 below (to be delivered to Buyer at the Property at the Close of Escrow); 0) The Certificate regarding Representations and Warranties described in Section 6.1(b), duly executed by Seller in the form attached as Exhibit "I" hereto; (k) Two (2) duplicate originals of a notice to the tenants under the Tenant Leases of the transfer of title and assumption by Buyer of the landlord's obligations under the Tenant Leases in the form attached as Exhibit "J" hereto ("Notice to Tenants"); (1) Two (2) duplicate originals of the Closing Statement described in Section 5.11, prepared by Escrow Holder and duly executed by Seller; (m) All keys to the Improvements which Seller or Seller's agents have in their possession, which keys shall include all "master" keys and apartment unit keys in the possession of Seller or its agents or representative, which keys shall be properly tagged for identification (to be delivered to Buyer at the Property upon Close of Escrow); (n) A report to be ordered and obtained by Escrow Holder prepared by Title Company or a search firm approved by Buyer of all UCC liens filed in the California Secretary of State's Office against the Property, Seller and the general partners of Seller to be delivered to Buyer at least five (5) days prior to the Closing Date; (o) Evidence of the existence, organization and authority of Seller and of the authority of persons executing documents on behalf of Seller, reasonably satisfactory to Seller's legal counsel, Escrow Holder, and Title Company; (p) Any other documents, instruments, funds and records required to be delivered to Buyer under the terms of this Agreement which have not been previously delivered; and (q) Originals of all Existing Loan Documents (as defined in Section 3.1(o)), to the extent Seller has such originals. 882/015610-0047 715407.04 a08/30/06 -6- 2.5 Closing Obligations of Buhr. On or before 12:00 noon on the business day preceding the Closing Date, Buyer shall deliver to Escrow Holder copies of the following documents and other items: (a) Two (2) duplicate originals of the Assignment of Tenant Leases (Exhibit "E"), duly executed by Buyer; (b) Two (2) duplicate originals of the Assignment of Contracts (Exhibit "G"), duly executed by Buyer; (c) Two (2) duplicate originals of the Closing Statement, prepared by Escrow Holder and duly executed by Buyer; (d) One (1) certified copy of the Resolution of Buyer's governing board authorizing Buyer to enter into this Agreement and the authority of persons executing documents on behalf of Buyer, reasonably satisfactory to Seller, the Escrow Holder and the Title Company; and (e) Any other documents, instruments or funds required to be delivered by Buyer under the terms of this Agreement or are otherwise required by Escrow Holder or Title Company in order to close Escrow which have not previously been delivered. 2.6 Delivery of Documents by Escrow Holder. On the Close of Escrow, Escrow Holder shall deliver to Buyer (with copies to Seller as applicable) all of the items listed in Section 2.4 above which were delivered by Seller to Escrow, except that Escrow Holder shall be instructed to record the original Grant Deed in the Official Records of Riverside County, California upon Close of Escrow and to deliver a conformed copy of the Grant Deed to Buyer after recordation thereof and Escrow Holder shall only deliver to Buyer one duplicate original of the documents submitted as duplicate originals. Escrow Holder shall deliver the cash portion of the Purchase Price in the amount determined by Escrow Holder, less costs, expenses and prorations chargeable to Seller hereunder, to Seller by wire transfer as provided in written instructions to be furnished to Escrow Holder by Seller prior to the Close of Escrow, together with one duplicate original of all of the items listed in Section 2.4 and Section 2.5 above submitted as duplicate originals on the Close of Escrow and a conformed copy of the Grant Deed. 2.7 Recordation. At the Close of Escrow, the following documents and instruments shall be recorded in the following order: (a) reconveyance of the USDA 2nd Deed of Trust if a replacement deed of trust is to be recorded or if Buyer elects (with lender approval) to pay off the USDA 2nd Deed of Trust at the Closing; (b) reconveyance of the Provident I" Deed of Trust if a replacement deed of trust is to be recorded or if Buyer elects (with lender approval) to pay off the Provident 1st Deed of Trust at the Closing; (c) the Grant Deed; (d) the deed(s) of trust securing the New Indebtedness (if any); (e) deed of trust securing a new USDA deed of trust, if such be entered into by Buyer; (f) subordination agreement between Buyer and USDA providing for the subordination of the USDA Deed of Trust, or any replacement USDA deed of trust, to the deed of trust securing the New Indebtedness; (g) assignment agreement, if any, by and between Buyer and USDA; and (h) such other instruments as directed by Buyer. WE 882/015610-0047 715407.04 a08/30/06 -7_ ARTICLE 3 INSPECTIONS AND REVIEW 3.1 Due Diligence Items. Within five (5) business days after the execution of this Agreement, Seller shall deliver true, correct and complete copies or originals of the following documents and items (collectively, "Due Diligence Items") to Buyer: (a) All Contracts, which Contracts are listed on Exhibit "H" attached hereto, and any and all amendments thereto, provided that such Contracts shall affect the Property following the Close of Escrow, and all leases, which leases are listed on Exhibit " B" attached hereto and any and all amendments thereto, provided that such leases shall affect the Property following the Close of Escrow. Buyer shall, not later than the later of (i) ninety (90) days after full and complete delivery of all of the Contracts and Tenant Leases to Buyer, or (ii) thirty (30) days prior to the Close of Escrow, advise Seller in writing of the Contracts listed on Exhibit "H" and the leases listed on Exhibit "B" which Buyer elects to assume. (b) All certificates of occupancy, licenses, and permits pertaining to the Property in the possession of Seller or Seller's agents or representatives. (c) Seller's standard form of lease ("Form Lease") used for the Property. (d) A current rent roll of the Property ("Rent Roll"), in the form of an estoppel, identifying and listing in detail by tenant or vacant area, as applicable, (i) tenant name, square footage, monthly rent, deposits, all concessions (financial and other), lease term, defaults (financial or otherwise), and lease obligations of Seller, if any; and (ii) to the extent Seller is not legally prohibited from providing, all legal matters relating to the Tenant Leases. The Rent Roll shall be in one or more reports in the form customarily used by Seller; provided such reports contain all of the information described above. During the pendency of Escrow, Seller shall provide Buyer an updated Rent Roll on or before the fifteenth (15th) day of each month. (e) Copies of all asbestos, lead -based paint, soils, seismic, geologic, drainage, toxic waste, engineering, environmental and similar type reports and surveys (including, but not limited to, any Phase I or Phase II Environmental Site Assessments), ALTA surveys, building grading plans, drawings (including "as -built" plans and specifications), schematics, blueprints and working drawings for the Property or any major capital improvements thereto, zoning ordinances, conditional use permits and correspondence relating thereto, business licenses, and CC&Rs within Seller's possession or control. (f) A report ("Pest Control Report") dated not earlier than sixty (60) days prior to the date of this Agreement from a licensed pest control operator approved by Buyer stating that such operator has inspected the Improvements for evidence of termites, dryrot, fungi and other wood destroying pests and organisms. If no infestation or infection by wood destroying pests or organisms is found, the Pest Control Report shall include a written "Certification" as provided in California Business and Professions Code Section 8519(a) that on the date of inspection "no evidence of active infestation or 882/015610-0047 715407.04 a08/30/06 -8- `, infection was found." Notwithstanding anything herein to the contrary, Seller shall have twenty (20) days after execution of this Agreement to deliver the Pest Control Report to Buyer. (g) Copies of the operating, income, expense and capital expenditure records for the Property for calendar years 2002, 2003, 2004, 2005, and the latest available for calendar year 2006, including statements of current working capital accounts and capital reserve (i.e., capital replacement reserve accounts). (h) Notices of violations, including, but not limited to, zoning ordinances, building codes, fire codes, CC&Rs or other agreements affecting the Property to the extent in the possession and control of Seller. (i) Disclosure of any legal matters affecting the Property or the collection of rents or deposits to the extent in the possession and control of Seller. 0) A schedule of rental rates and occupancy percentages by year covering the calendar years 2005 and 2006 to date. (k) An aging of accounts receivable and current staffing schedules. (1) A lead -based paint disclosure and acknowledgement in the form attached hereto as Exhibit "K". (m) A copy of real property tax and assessment bills for the Property for the 2005-06 fiscal years. (n) Copies of all current insurance policies and premiums, and the same covering for the preceding two (2) calendar years. (o) Copies of the USDA Note, the USDA Deed of Trust, the Provident Note, the Provident Deed of Trust, and all other documents creating, evidencing, securing or otherwise relating to the Existing Indebtedness and all amendments, modifications, renewals and extensions thereof ("Existing Loan Documents"). (p) To the extent Seller can reasonably obtain same Estoppel certificates from each Tenant certifying to the monthly amount of rent paid by such Tenant to Seller the "Estoppel Certificates"), to be provided to Buyer within thirty (30) days after the execution of this Agreement. 3.2 Environmental/Physical Property Condition Due Diligence. For a period of ninety (90) days, which may be extended by Buyer for an additional period of thirty (30) days if Buyer determines that a "Phase II" environmental assessment is necessary, after the Opening of Escrow (the "Environmental/Physical Property Condition Due Diligence Period"), Buyer shall have the right to examine, inspect and investigate the Property and, at Buyer's sole and absolute discretion, to determine whether the physical and environmental condition of the Property is acceptable to Buyer. Seller shall permit Buyer, its engineers, analysts, contractors, lenders and agents to conduct physical inspections of the Property, including the structural, 882/015610-0047 � 715407.04 a08/30/06 -9- U72. electrical and mechanical aspects of the Improvements, the interiors of all buildings, supports, site work, foundations, soil, subsurface soils, drainage, seismic and other geological and topographical matters, location of asbestos, toxic substances, hazardous materials or wastes, if any, and any other investigations as Buyer deems prudent with respect to the physical condition of the Property. Such investigations may be made by Buyer and/or its agents during any normal business hours. Buyer shall also have the right to investigate all matters relating to the zoning, use and compliance with other applicable laws which relate to the use and occupancy of the Property. Seller shall reasonably cooperate to assist Buyer in completing such inspections and special investigations. Such physical inspections and investigations of the Property shall be conducted only upon no less than twenty-four (24) hours' notice to Seller and shall be conducted at such times and in such a manner as to minimize any disruption to tenants upon the Property. Seller shall have the right, but not the obligation, to accompany Buyer during such investigations and/or inspections but shall not interfere therewith. Buyer shall repair any and all damage to the Property or to any tenants' property caused by such inspections or investigations in a timely manner and shall indemnify and defend the Seller from and against any liability arising from Buyer's physical inspection hereunder. Buyer shall notify Seller and Escrow Holder in writing ("Buyer's Environmental/Physical Property Condition Due Diligence Notice") on or before the expiration of the Environmental/Physical Property Condition Due Diligence Period of Buyer's approval or disapproval of the Due Diligence Items provided under Section 3.1 above, the condition of the Property, and Buyer's investigations with respect thereto. Buyer's failure to deliver Buyer's Environmental/Physical Property Condition Due Diligence Notice on or before the expiration of the Environmental/Physical Property Condition Due Diligence Period shall be conclusively deemed Buyer's disapproval thereof. 3.3 Financial/Operational Condition Due Diligence Period; New Indebtedness; Buyer's Equity. For a period of ninety (90) days after the Opening of Escrow ("Buyer's Financial/Operational Condition Due Diligence Period"), Buyer shall have the right to determine, in its sole and absolute discretion and at no cost to Seller, the financial and operational feasibility of the affordable rental development on the Property. Such Due Diligence Items shall include but not be limited to (a) Buyer's review of the Rent Roll, Tenant Leases, Contracts, the copies of the financial, operational, contractual, and legal records and disclosures to be provided by Seller under Section 3.1; (b) review of arrangements with the County of Riverside Housing Authority including Section 8 support; (c) the possibility of securing new financing for the Agency's acquisition, operations, working capital, reserves, and related matters, with such financing (subject to lender approval) to be in superior position to the Existing Indebtedness (the "New Indebtedness"); and (d) the amount, if any, Buyer determines will be necessary to invest in the Property as equity ("Buyer's Equity"). Buyer shall notify Seller and Escrow Holder in writing of Buyer's approval or disapproval of such Due Diligence Items ("Buyer's Financial/Operational Condition Due Diligence Notice"). Buyer's failure to deliver Buyer's Financial/Operational Condition Due Diligence Notice on or before the expiration of Buyer's Financial/Operational Condition Due Diligence Period shall be conclusively deemed to be Buyer's disapproval thereof. 3.4 Preliminary Title Report. Within five (5) days following the Opening of Escrow, or as soon thereafter as feasible, Escrow Holder shall deliver to Buyer a preliminary title report or title commitment for an ALTA extended coverage policy of title insurance issued by Title Company dated not earlier than the date of Opening of Escrow, describing the state of title of the 882/015610-0047 ( 3 715407.04 a08/30/06 -10- Property, together with copies of all exceptions specified therein and with all easements plotted in color (collectively, the "Preliminary Title Report"). Within ninety (90) days after receipt of the Preliminary Title Report or within one hundred twenty (120) days after Opening of Escrow if Buyer elects to obtain a survey (see Section 3.5) ("Title Due Diligence Period"), Buyer shall notify Seller in writing ("Buyer's Title Objection Notice") of any objections Buyer may have to title exceptions contained in the Preliminary Title Report (and/or survey if applicable). Seller shall have a period of ten (10) days after receipt of Buyer's Title Objection Notice in which to deliver written notice to Buyer ("Seller's Title Notice") of Seller's election to either (i) agree to remove the objectionable items prior to the Close of Escrow, or (ii) decline to remove any such title exceptions and terminate the Escrow and this Agreement; provided, however, that with the exception of the Existing Indebtedness, Seller shall be required to remove all monetary liens and encumbrances created by or as a result of Seller's activities, suffered by Seller or assumed by Seller. Other than the Existing Indebtedness, Seller shall be responsible for all yield maintenance, prepayment penalties and/or any other similar fees and charges required by any lender to remove existing financing encumbrances and Seller shall have no right to decline to remove same pursuant to the foregoing. If Seller notifies Buyer of its election to terminate Escrow rather than remove the objectionable items, Buyer shall have the right, by written notice delivered to Seller within five (5) days after Buyer's receipt of Seller's Title Notice, to agree to accept the Property subject to the objectionable items, in which event Seller's election to terminate the Escrow shall be of no effect, and Buyer shall take title at the Close of Escrow subject to such objectionable items. Upon the issuance of any amendment or supplement to the Preliminary Title Report which adds additional exceptions (including, but not limited to, adding additional exceptions for matters shown on the Survey [as hereinafter defined]), the foregoing right of review and approval shall also apply to said amendment or supplement (provided that the period for Buyer to review such amendment or supplement shall be the later of the expiration of the Title Due Diligence Period or ten (10) days from receipt of the amendment or supplement) and Escrow shall be deemed extended by the amount of time necessary to allow such review and approval in the time and manner set forth above; provided, however, that in no event shall the Close of Escrow be extended as a result of such delay for more than thirty (30) days. 3.5 Surve . Buyer may obtain a survey of the Property, at Buyer's cost, prepared by a land surveyor duly licensed by the State of California and in compliance with ALTA/ACSM standards ("Survey") or an update to an existing Survey prepared for or on behalf of Seller, in a form acceptable to the Title Company for the deletion of the standard survey exception in the Title Policy relating to boundaries, without the addition of further exceptions unless the same are acceptable to Buyer in its sole and absolute discretion. Buyer shall have until the end of the Title Due Diligence Period to examine the Survey and to notify Seller in writing of any objections Buyer has to the Survey ("Buyer's Survey Objection Notice"). Seller shall have a period of ten (10) days after receipt of Buyer's Survey Objection Notice in which to deliver written notice to Buyer ("Seller's Survey Notice") of Seller's election to either (1) agree to remove the objectionable items prior to the Close of Escrow or (2) decline to remove such items and terminate the Escrow and this Agreement. If Seller notifies Buyer of its intention to not remove the objectionable items and terminate the Escrow and this Agreement, Buyer shall have the right, by written notice delivered to Seller within five (5) days after Buyer's receipt of Seller's Survey Notice, to agree to accept the Property subject to the objectionable items, in which event, Seller's election to terminate the Escrow shall be of no effect, and Buyer shall accept the Property on the 882/015610-0047 715407.04 a08/30/06 -11- Close of Escrow subject to such objectionable items. Prior to the Closing, the Survey shall be recertified to Buyer, Title Company, and Buyer's lender(s) of the New Indebtedness (if any). 3.6 Pest Control Report. Buyer shall have until the expiration of the Environ- mental/Physical Property Condition Due Diligence Period to approve the Pest Control Report. In the event the Pest Control Report indicates that corrective work should be performed, Buyer shall notify Seller in writing of the nature and extent of corrective work required by Buyer ("Pest -Control Notice"). Seller shall have ten (10) days after receipt of Buyer's Pest -Control Notice in which to deliver written notice to Buyer ("Seller's Pest Notice") of Seller's election to either (i) agree to make necessary modifications or repairs as required by Buyer, or (ii) terminate this Agreement by giving written notice thereof to Escrow Holder and Buyer unless the cost of performing the corrective work is TEN THOUSAND DOLLARS ($10,000.00) or less, in which event Seller shall perform the corrective work. If the cost of performing the corrective work exceeds TEN THOUSAND DOLLARS ($10,000), and Seller notifies Buyer of its election to terminate this Agreement rather than repair or modify the disapproved items, Buyer shall have the right by written notice delivered to Seller within three (3) days after Buyer's receipt of Seller's notice to terminate this Agreement, to agree to accept the Property subject to the disapproved items, in which event Seller's election to terminate the Agreement shall be of no effect. The failure of Buyer to deliver the Pest -Control Notice to Seller in a timely manner shall be conclusively deemed to be Buyer's disapproval of the Pest Control Report. 3.7 USDA Matters. For a period of ninety (90) days after the date Buyer obtains from Seller copies of the Existing Loan Documents ("USDA Condition Due Diligence Period"), Buyer shall have the right, at no cost to Seller, to retain a certified inspector (the "Compliance Inspector") for purposes of performing a capital needs assessment of the property to determine if the property is in compliance with all of USDA's requirements pertaining to the Seller's operation of the Property, as required under the Existing Loan Documents (collectively, the "USDA Requirements"). In the event the Compliance Inspector determines that the Property is not currently compliant with all of the USDA Requirements, Buyer shall notify Seller in writing of the nature and extent of the corrective work required ("USDA Compliance Notice"). Seller shall have ten (10) days after receipt of Buyer's USDA Compliance Notice in which to deliver written notice to Buyer ("Seller's USDA Response Notice") of Seller's election to either (i) agree to make necessary corrections and modifications as determined necessary by the Compliance Inspector, or (ii) terminate this Agreement and the Escrow by giving written notice thereof to Escrow Holder and Buyer. If Seller notifies Buyer of its election to terminate this Agreement and the Escrow rather than make the necessary corrections, Buyer shall have the right by written notice delivered to Seller within three (3) days after Buyer's receipt of Seller's USDA Notice Response to terminate this Agreement and the Escrow, to agree to accept the Property subject to the non -compliant items, in which event Seller's election to terminate this Agreement and the Escrow shall be of no effect. The failure of Buyer to deliver the USDA Compliance Notice to Seller in a timely manner shall be conclusively deemed to be Buyer's disapproval of the Property's compliance with the USDA Requirements. During the USDA Condition Due Diligence Period, Buyer shall also have the right, at no cost to Seller, to review, and to negotiate an assignment and assumption of, the Existing Indebtedness and the USDA Requirements with the USDA and/or with Provident, and other terms and conditions, all as acceptable to Buyer in Buyer's sole and absolute discretion 882/015610-0047 V f J 715407.04 a08/30/06 -1 (collectively, the "USDA Assumption Agreements"). Such other terms and conditions may include modification of the existing affordability restrictions, additional financing from USDA, modification of the terms of the Existing Indebtedness and USDA Restrictions, and subordination of the Existing Indebtedness to the New Indebtedness (if any). In the event Buyer is unable to negotiate the USDA Assumption Agreements on terms, acceptable to Buyer in Buyer's sole and absolute discretion, Buyer shall deliver written notice to Seller terminating this Agreement. If Buyer negotiates the USDA Assumption Agreements, on terms satisfactory to Buyer, in Buyer's sole and absolute discretion, the USDA Condition Due Diligence Period shall be extended for an additional thirty (30) days to allow Buyer's governing board and the USDA to effect approval of the USDA Assumption Agreements prior to the Closing Date. The foregoing notwithstanding, Buyer's contacts with USDA shall constitute negotiations only and any modifications or proposed modifications shall be in no way binding upon Seller unless and until Close of Escrow occurs in the manner provided herein, and be at no cost or liability to Seller (and Buyer shall defend, indemnify and hold Seller free and harmless with respect to same). 3.8 Buyer Affordability Covenant Condition. For a period of ninety (90) days after the date Buyer receives the Estoppel Certificates from Seller ("Buyer's Affordability Covenant Condition Due Diligence Period"), Buyer may review the Estoppel Certificates for purposes of determining the Property's compliance with the affordability covenants Buyer intends to record against the Real Property at Close of Escrow ("Buyer's Affordability Covenants"). Buyer shall notify Seller and Escrow Holder in writing of Buyer's satisfaction of such Due Diligence Items ("Buyer's Affordability Covenant Condition Due Diligence Notice"). Buyer's failure to deliver Buyer's Affordability Covenant Condition Due Diligence Notice on or before the expiration of Buyer's Affordability Covenant Due Diligence Period shall be conclusively deemed to be Buyer's dissatisfaction thereof. 3.9 Books and Records. For a period of ninety (90) days after opening of Escrow, Buyer shall be afforded full opportunity by Seller to examine all books and records which relate to the Property for calendar years 2005 and 2006 to -date in the possession of Seller and/or Seller's agents or employees, including the reasonable right to make copies of such books and records. Such right shall extend to all operating books of account, copies of all Tenant Leases and all amendments thereto, rental applications and any other agreements, correspondence or other documents relating to the Tenant Leases, tenant files, rent rolls, operating statements, budgets, accounting support for bills, inventories of Personal Property, service contracts, management contracts, maintenance contracts, warranties, general ledgers, journals, vendor files, bank statements, invoices, operating manuals, maintenance records (including replacements of carpeting and appliances), utility bills, marketing data (including brochures), historical occupancy reports, traffic reports of tenant activities, rental histories, leasing floor plans and any summaries of such items. The foregoing notwithstanding, Seller shall have no obligation to provide information relating to tenants which Seller is legally prohibited from providing. 882/015610-0047 715407.04 a08/30/06 -13 - ARTICLE 4 CONDITIONS TO AGREEMENT 4.1 Buyer's Conditions Precedent. Buyer's obligation to purchase the Property shall be conditioned upon the fulfillment of the following conditions precedent, all of which shall be satisfied or waived in writing in Buyer's sole and absolute discretion pursuant to Section 4.4 below prior to the Close of Escrow except as indicated otherwise: (a) The due performance by Seller of each and every undertaking and agreement to be performed by Seller hereunder, and the truth of each representation and warranty made in this Agreement. (b) Buyer's approval of the contents of all Due Diligence Items set forth in Section 3.1. (c) Buyer's approval of the physical and environmental condition of the Property pursuant to Section 3.2. (d) Buyer's approval of the financial and operational feasibility of the affordable rental development on the Property pursuant to Section 3.3. (e) Buyer's approval of the Preliminary Title Report and the Survey (if applicable) within the time periods specified in Sections 3.4 and 3.5. (f) Buyer's approval of the contents of the Pest Control Report as provided in Section 3.6. (g) Buyer's determination that the Property is compliant with all of the USDA Restrictions and Buyer's negotiation of the USDA Assumption Agreements, in a form satisfactory to Buyer, pursuant to Section 3.7. (h) Buyer's determination that the Property qualifies with the Buyer's Affordability Covenants pursuant to Section 3.8. (i) Buyer's approval of any notice of change in representation or warranty given by Seller pursuant to Subsection 6.1(b) hereof and of the Certificate regarding Representations and Warranties to be given by Seller at the Closing pursuant to Subsection 6.1(b) hereof, on or before the Closing Date. 0) Title Company has committed to issue the Title Policy in the form described in Section 2.3. (k) There shall not have occurred at any time on or before the Closing Date the making by Seller of any general assignment for the benefit of creditors, or the filing against Seller of a petition to have Seller adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, or the appointment of a trustee or receiver to take possession of substantially all of the interest of Seller in the Property, or the attachment, execution or judicial seizure of substantially all the assets 882/015610-0047 G 715407.04 a08/30/06 -14- of Seller or the interests of Seller in the Property or any legal proceeding in which Seller is adjudicated as being, or stipulates to being, insolvent or unable to pay its debts as they come due. (1) Pursuant to Article 8 hereof, the Real Property shall, concurrently with the Closing, be annexed into the City of La Quinta (or such annexation shall be imminent as determined by Buyer in Buyer's sole discretion) and no judicial challenges shall have been presented or filed against the Local Agency Formation Commission or the City of La Quinta's actions in connection with said annexation. Buyer shall use reasonable commercial efforts to expeditiously and in good faith satisfy this condition. (m) Buyer shall have entered into with the Testa Family Limited Partnership ("Testa"), the fee owner of that certain real property located to the south of the Real Property and identified as APN 609-040-065 (the "Testa Property"), an agreement to purchase from Testa the Testa Property (the "Testa Agreement"), and the closing under the Testa Agreement shall have occurred or shall occur concurrently with the Closing hereunder. Buyer shall use reasonable commercial efforts to expeditiously and in good faith satisfy this condition. 4.2 Seller's Condition Precedent. Seller's obligation to convey the Property to Buyer shall be conditioned upon the satisfaction or written waiver in writing, in whole or in part, by Seller of the following condition precedent: (a) The due performance by Buyer of each and every undertaking and agreement to be performed by Buyer hereunder. 4.3 Satisfaction of Conditions. Where satisfaction of any of the foregoing conditions requires action by Buyer or Seller, each party shall use its diligent best efforts, in good faith, and at its own cost, to satisfy such condition. Where satisfaction of any of the foregoing conditions requires the approval of a party, such approval shall be in such party's sole and absolute discretion. 4.4 Waiver. Buyer may at any time or times, at its election, waive any of the conditions set forth in Section 4.1 above to its obligations hereunder, but any such waiver shall be effective only if contained in a writing signed by Buyer and delivered to Seller. Seller may at any time or times, at its election, waive the condition set forth in Section 4.2 above to its obligations hereunder, but any such waiver shall be effective only if contained in a writing signed by Seller and delivered to Buyer. 4.5 Termination. In the event each of the conditions set forth in Section 4.1 is not fulfilled within the time provided in Section 4.1 or waived by Buyer pursuant to Section 4.4, Buyer may, at its option, terminate this Agreement and the Escrow opened hereunder, thereby releasing the parties from further obligations hereunder, and (i) all documents delivered by Buyer to Seller or Escrow Holder shall be returned to Buyer, (ii) all documents delivered by Seller to Buyer or Escrow Holder and all documents created by or for Buyer during the due diligence periods herein returned to Seller, and (iii) the Deposit and all accrued and unpaid interest thereon, and all other funds deposited by or on behalf of Buyer, less Buyer's share of Escrow 882/015610-0047 1 V 73 715407.04 a08/30/06 -15- cancellation charges, shall be returned to Buyer. In the event that the condition set forth in Section 4.2 is not fulfilled or waived prior to the Closing Date, Seller may, at its option, terminate this Agreement and the Escrow opened hereunder, thereby releasing the parties from further obligations hereunder, and (a) all documents delivered by Seller to Buyer or Escrow Holder shall be returned immediately to Seller, and (b) the Deposit and accrued and unpaid interest thereon, less any Release Amount which has actually been released to Seller, and all other funds deposited by of on behalf of Buyer, less the portion of Escrow Holder's reasonable escrow cancellation fee (if any) allocable to Buyer, shall be returned to Buyer. Nothing in this Section 4.5 shall be construed as releasing any party from liability for any default of its obligations hereunder or breach of its representations and warranties under this Agreement occurring prior to the termination of this Agreement and/or the Escrow to be opened hereunder, including payment of Liquidated Damages pursuant to Section 5.13. 4.6 Condition of Property. Except to the extent otherwise specifically provided herein, including, without limitation, as set forth in Article 6 hereof, Buyer acknowledges, agrees, represents and warrants that (i) prior to expiration of the due diligence periods referenced herein, Buyer, its agents, employees and/or consultants will have made a full and complete physical inspection and investigation of the Property and all aspects thereof, including, without limitation, all laws, ordinances, regulations, entitlements and appurtenances applicable thereto; (ii) if Buyer proceeds to Close of Escrow, Buyer shall be relying on such inspection and investigation by Buyer, and Buyer's own independent evaluation of same, and Buyer shall accept the Property in the condition that existed on the Effective Date of this Agreement, subject to all laws, statutes, ordinances, regulations, entitlements and appurtenances applicable thereto; (iii) Seller has made no warranty, representation, guarantee or covenant, oral or written, with respect to the Property, its condition or its suitability for Buyer's purposes or any other purposes; and (iv) if Buyer proceeds to Close of Escrow, Buyer shall be purchasing the Property "AS -IS" and "WITH ALL FAULTS". ARTICLE 5 PRORATIONS CLOSING COSTS, POSSESSION AND DEPOSITS 5.1 Proration of Taxes. Real and personal property taxes for the Property shall be prorated by the parties to the Closing Date on the basis of a three hundred sixty-five (365) day year; provided, however, that notwithstanding the foregoing, Seller is responsible for payment through Escrow of all such taxes through June 30 of the current fiscal year whether or not the same shall be due prior to the Close of Escrow. Buyer shall, at Closing and through Escrow, reimburse Seller for the portion of such real and personal property taxes pro -rated for the period from Closing Date to June 30 of the current fiscal year. All tax prorations shall be based upon the latest available tax statement. If the tax statements for the fiscal tax year during which Escrow closes do not become available until after the Close of Escrow, then the rates and assessed values of the previous year, with known changes, shall be used, and the parties shall re - prorate said taxes outside of Escrow following the Close of Escrow when such tax statements become available. Seller shall be responsible for and shall pay or reimburse Buyer upon demand for any real or personal property taxes payable following the Close of Escrow applicable to any period of time prior to the Close of Escrow as a result of any change in the tax assessment by reason of reassessment, changes in use of the Property, changes in ownership, errors by the 882/015610-0047 715407.04 a08/30/06 —16— �) Assessor or otherwise. Any special assessment affecting the Property shall be prorated as of Close of Escrow and thereafter assumed by Buyer. 5.2 Rents Other Income and Operating Expenses. Prepaid Contracts assumed by Buyer, rents (exclusive of Delinquent Rents (as hereinafter defined)), rent concessions, all revenues under all space leases, coin -operated laundry machines, licenses, security agreements and all other fees and miscellaneous income arising out of the operation of the Property shall be prorated as of the Close of Escrow. If, as of the Close of Escrow, any rent is in arrears ("Delinquent Rent") for the calendar month in which the Closing occurs but not for prior periods, then the first rent collected by Buyer shall be deemed to be attributable to the calendar month in which the Closing occurred and it shall be prorated between Buyer and Seller as of the Close of Escrow. If Delinquent Rent is in arrears for a period prior to the calendar month in which the Closing occurs, then rents collected by Buyer shall first be applied to current rent and then to Delinquent Rent. Buyer shall deliver to Seller its pro rata share of Delinquent Rent within ten (10) days of Buyer's receipt of that Delinquent Rent. Buyer covenants and agrees that after the Closing, it will use reasonable efforts to attempt to collect and deliver to Seller all rights and other payments that were due and payable under the Tenant Leases prior to the Closing. Actual and reasonable third -party costs incurred in collecting rents owed to Seller shall be deducted from rents payable to Seller (on a pro rata basis to the extent such costs are also incurred to collect rents payable to Buyer). After the Closing, Seller shall not pursue any tenant for Delinquent Rent. This Section shall survive the Closing and delivery and recording of the Grant Deed. 5.3 Laundry Lease. Seller represents and warrants to Buyer that there is no laundry lease applicable to the Property. Seller shall be entitled to collect all the coins in the laundry machines on the Property up to the Close of Escrow, and Buyer shall be entitled to the all coins in the laundry machines and all proceeds from the operation of such laundry facilities after the Close of Escrow. 5.4 Deposits. All security deposits and other tenant deposits and prepaid rents shall be credited to Buyer at the Closing. 5.5 Utilities. Seller shall use its reasonable best efforts to have utility meters read as of the date that Escrow closes and shall be responsible for all utility services to the Property until the Close of Escrow. In the event Seller is unable to have the utility meters read as of the Close of Escrow, Buyer and Seller shall jointly prepare and deposit an estimated utility statement based upon the average daily usage over the six (6) month period preceding the Close of Escrow and Escrow Holder shall initially prorate utilities based upon such estimated utility statements and the parties shall subsequently prorate utilities based upon the actual utility usage upon receipt of such utility statements. 5.6 Maintenance Contracts. Seller shall be responsible for payment of all maintenance services, such as janitorial services, landscape services, guard services, and similar services to the Close of Escrow, and shall maintain all plumbing, heating, electrical and other systems on the Property in good working order until the Close of Escrow. Buyer shall be responsible for such services thereafter and for any such contracts which it elects to assume. All contracts for such services shall be terminated by the Close of Escrow unless assumed by Buyer. 882/015610-0047 715407.04 a08/30/06 -1 _ Buyer will advise Seller of Buyer's decisions in this regard as expeditiously as possible after Opening of Escrow. 5.7 Insurance. Seller shall cause its policies of insurance for the Property (other than those elected to be assumed by Buyer pursuant to Subsection 3.1(a) above) to be terminated effective immediately after the Close of Escrow and Buyer shall be responsible for obtaining its own insurance. 5.8 Impounds; Working Cgpital Accounts; Capital Reserve Accounts. Seller shall be entitled, at Closing, to all amounts held in lender impound accounts for taxes, insurance, and similar items, and shall further be entitled to all moniesheld in accounts for working capital and for capital reserves. Seller shall provide copies of records of such accounts to Buyer pursuant to Section 3.1. Buyer acknowledges that Buyer will have to replace amounts in such accounts. 5.9 Possession. Subject to the rights of tenants in possession, Buyer shall be entitled to possession of the Property on the Close of Escrow. 5.10 Closing Costs. (a) Seller shall pay (i) the cost for the cost of a CLTA Title Policy; (ii) the cost for all endorsements reasonably requested by Buyer to remove disapproved items shown on the Preliminary Title Report or Survey pursuant to Sections 3.4 and 3.5 above, (iii) any documentary or other transfer taxes payable on account of the conveyance of the Property, and (iv) one-half (1/2) of the escrow fees charged by Escrow Holder in connection with the closing of this transaction. (b) Buyer shall pay (i) the cost for requested endorsements to the extent such endorsements are unrelated to removal of any disapproved items shown on the Preliminary Title Report or Survey which are disapproved by Buyer pursuant to Sections 3.4 and 3.5 above, (ii) the cost of recording any deeds, (iii) one-half (1/2) of the escrow fees charged by Escrow Holder in connection with the closing of this transaction, (iv) any costs associated with any New Indebtedness, and (v) any costs associated with an ALTA Title Policy. (c) Any other expenses or closing costs in connection with this transaction shall be apportioned in the manner customary in Riverside County, California. 5.11 Closing Statement. No later than three (3) business days prior to the Closing Date, Escrow Holder shall prepare for approval by Buyer and Seller a closing statement ("Closing Statement") on Escrow Holder's standard form indicating, among other things, Escrow Holder's estimate of all Closing costs and prorations made pursuant to this Agreement. Buyer and Seller shall assist Escrow Holder in determining the amount of all prorations. 5.12 Breach by Seller or Buyer. In the event that Seller breaches its obligations under this Agreement and as a result of such breach Buyer terminates this Agreement, the Deposit, including any Release Amounts that have been actually released to Seller, shall be immediately returned to Buyer and Buyer shall have all rights and remedies for such breach available at law or in equity. Seller and Buyer hereby acknowledge and agree that the Property, given its 882/015610-0047 6 9 1 715407.04 a08/30/06 -18 - location, entitlements, density, size, condition, access, proximity to other amenities and other factors, is unique, and, therefore, each of the parties shall be entitled to the remedy of specific performance in the event of a breach by the other party. Buyer shall have the right to record a lis pendens against the Real Property in connection with an action by Buyer to specifically enforce this Agreement; provided, however, that nothing herein shall preclude Seller from seeking to expunge such lis pendens pursuant to applicable judicial procedures. 5.13 LIQUIDATED DAMAGES. IN THE EVENT THAT BUYER BREACHES ITS OBLIGATIONS UNDER THIS AGREEMENT, THE DAMAGES THAT SELLER WILL INCUR BY REASON THEREOF ARE AND WILL BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTABLISH. BUYER AND SELLER, IN A REASONABLE EFFORT TO ASCERTAIN WHAT SELLER'S DAMAGES WOULD BE IN THE EVENT OF SUCH A DEFAULT BY BUYER, HAVE AGREED THAT SUCH DAMAGES SHALL BE IN AN AMOUNT EQUAL TO THE AMOUNT OF THE DEPOSIT (EXCLUDING INTEREST EARNED THEREON) AND THAT SUCH DEPOSIT (EXCLUDING INTEREST EARNED THEREON) SHALL BE DELIVERED TO SELLER UPON SUCH DEFAULT BY BUYER, WITHOUT THE NECESSITY OF AN INSTRUCTION BY BUYER, AND RETAINED BY SELLER AS LIQUIDATED DAMAGES, WHICH DAMAGES SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY AT LAW OR IN EQUITY IN THE EVENT OF AND FOR SUCH DEFAULT BY BUYER WITHOUT LIMITING THE FOREGOING PROVISIONS OF THIS PARAGRAPH, SELLER WAIVES ANY AND ALL RIGHTS WHICH SELLER OTHERWISE WOULD HAVE HAD UNDER CALIFORNIA CIVIL CODE SECTION 3389 TO SPECIFICALLY ENFORCE THIS AGREEMENT. SELLER AND BUYER ACKNOWLEDGE AND AGREE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS PARAGRAPH AND BY THEIR INITIALS AGREE TO BE BOUND BY ITS TERMS. Buyer's Initials Seller's Initials ARTICLE 6 REPRESENTATIONS AND WARRANTIES 6.1 Warranties and Representations b Smeller. (a) Seller hereby makes the following representations and warranties, which are based upon and limited to the current actual knowledge of Michael Sollenberger, with no further duty of inquiry or investigation, and acknowledges that the execution of this Agreement by Buyer has been made and the acquisition by Buyer of the Property will have been made in material reliance by Buyer on such representations and warranties (which shall survive and be effective only for a period of 12 months after the Closing): (i) Warranties True. Each and every undertaking and obligation of the Seller under this Agreement shall be performed by the Seller timely when due; 882/015610-0047 U 82 715407.04 a08/30/06 -19- and that all representations and warranties of the Seller under this Agreement and its exhibits shall be true at the Closing as though they were made at the time of Closing. (ii) Title. Seller is now, and at all times between the date hereof and Closing, inclusive, will be, the owner (either of record or beneficially) of (and Buyer will acquire hereunder) the entire right, title and interest in and to the Property to effectively vest in the Buyer good and marketable fee simple title to the Property, in the title condition acceptable to Buyer in Buyer's sole discretion pursuant to the terms of Section 3.4. (iii) No Infrin eg ment. The use by Buyer of any name, trademark, trade style or trade name assigned to Buyer hereunder will not infringe upon any copyright or any United States or State trademark existing on the Closing Date, or constitute unfair competition or actionable appropriation of rights with respect to any other person, business or entity. (iv) Zoning and Use. The housing development on the Real Property complied with all zoning and building codes at the time it was constructed and thereafter with respect to any remodeling, repairs, or reconstruction, if any, and (b) there is no existing or proposed or contemplated eminent domain proceeding that would affect the Real Property in any way whatsoever. (v) Governmental Inspection. There is no ruling, ordinance, regulation or statute that requires any governmental agency to inspect the Property and/or issue any documents affecting the continued occupancy and specifications of the apartment project as a result of the sale of the Property to Buyer. (vi) UCC Financing Statement. As of the Closing Date, no portion of the Property will be affected by any financing statements, except with respect to the Existing Indebtedness and those which will be terminated at the Closing. (vii) No Litigation. There are no pending or, to the best of Seller's knowledge, threatened claims, allegations or lawsuits of any kind, whether for personal injury, property damage, landlord -tenant disputes, property taxes or otherwise, that could materially and adversely affect the operation or value of the Property or prohibit the sale thereof, nor to the best of Seller's knowledge, is there any governmental investigation of any type or nature pending or threatened against or relating to the Property or the transactions contemplated hereby; and Seller will hold Buyer harmless from all liability, loss, cost and expense resulting from claims arising or becoming applicable during or as a result of Seller's ownership of the Property. (viii) Insurance Indemnifications. Seller has not received notices by any insurance company which has issued a policy with respect to any portion of 882/015610-0047 683� 715407.04 a08/30/06 -20- the Property, or by any board of fire underwriters, or from any governmental authority, of zoning, building, fire or health code violations in respect to the Property. (ix) Enforceability of Agreement. The person executing any instruments for or on behalf of the Seller was fully authorized to act on behalf of Seller and that the Agreement is valid and enforceable against Seller in accordance with its terms and each instrument to be executed by Seller pursuant hereto or in connection therewith will, when executed, be valid and enforceable against Seller in accordance with its terms. No approval, consent, order or authorization of, or designation, registration or declaration with, any governmental authority, including, but not limited to, subdivision approval, is required in connection with the valid execution and delivery of and compliance with this Agreement by Seller. (x) Rent Roll. The Rent Roll and Certified Rent Roll delivered to Buyer contain a complete and correct list of all Tenant Leases. Except as set forth in the Rent Roll, each Tenant Lease is on the Form Lease and is valid and existing and in full force and effect, has not been amended, modified or supplemented, and the tenant, licensee or occupant thereunder is in actual possession. (xi) Rental Concessions. Except as set forth on the Rent Roll and the Certified Rent Roll, no tenant, under any of the Tenant Leases is, or as of the Closing will be, entitled to any free rent, concessions, allowances, rebates or refunds and no tenant under any of the Tenant Leases has, or as of the Closing will have, prepaid any rent or other charges for more than one month in advance. (xii) Leasing Commissions. As of the Closing, no brokerage or leasing commissions or other compensation will be due or payable to anyone with respect to or on account of any of the Tenant Leases. (xiii) Service Contracts. Except as set forth on the list of Contracts attached hereto as Exhibit "H", there is no agreement, in writing or otherwise, between the Seller and any other person or persons for service, supply, maintenance, management or the operation of the Property or any portion of the business conducted thereon or thereat, which is not cancelable upon thirty (30) days' notice, without payment of any penalty or premium. (xiv) Hazardous Materials or Substances. The Property has not at any time been used for the purposes of storing, manufacturing, releasing or dumping Hazardous Materials or Substances, except for normal quantities of Hazardous Materials or Substances utilized in connection with the construction and normal maintenance and operation of the Property in compliance with all Environmental Laws (as hereinafter defined) and so-called household Hazardous Materials utilized by tenants of the Property. No underground storage tanks, pipelines or clarifiers have been or are located on the Property. "Hazardous Materials or "Substances" shall mean (1) hazardous wastes, hazardous materials, hazardous 882/015610-0047 084 715407.04 a08/30/06 -21- substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases, including, but not limited to, substances deemed as "hazardous wastes," "hazardous materials," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. § 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. § 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1802; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 9601, et seq.; the Clean Water Act ("CWA"), 33 U.S.C. § 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300 et seq.; the Clean Air Act ("CAA"), 42 U.S.C. § 7401 et seq.; the Hazardous Waste Control Law, California Health and Safety Code § 25025 et seq., the Carpenter -Presley - Tanner Hazardous Substance Account Act, California Health and Safety Code, Division 20, Chapter 6.8, the Hazardous Materials Release Response Plans and Inventory Act, California Health and Safety Code, Division 20, Chapter 6.95, The Underground Storage of Hazardous Substances Act, California Health and Safety Code, Division 20, Chapter 6.7, the Porter -Cologne Act, California Water Code § 13050 et seq. and in any permits, licenses, approvals, plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar federal, state or local laws, regulations, rules or ordinances now or hereafter in effect relating to environmental matters (collectively the "Environmental Laws"); and (ii) any other substances, constituents or wastes subject to any applicable federal, state or local law, regulation, ordinance or common law doctrine, including any Environmental Law, now or hereafter in effect, including, but not limited to, (A) petroleum, (B) refined petroleum products, (C) waste oil, (D) waste aviation or motor vehicle fuel, (E) asbestos, (F) lead in water, paint or elsewhere, (G) radon, (H) polychlorinated biphenyls (PCB's) and (I) ureaformaldehyde. (xv) Black Mold. Seller has no knowledge of, and has received no notices with respect to, mold or fungi, or the levels of mold or fungi, including, but not limited to, penicillium/aspergillus and stachybotrys chartarum, located within the improvements on the Property. (xvi) Financial Statements. The financial statements delivered to Buyer present fairly the financial condition of the Property at such date and the result of its operations for the period then ended. With respect to the Property, there are no material liabilities or obligations of Seller, whether accrued, absolute, contingent or otherwise, which arose out of or relate to any transaction of Seller on or prior to the Effective Date of this Agreement, which are not specifically disclosed as liabilities or obligations on such financial statements and there are no material liabilities or obligations of Seller with respect to the Property occurring since the Effective Date of this Agreement other than liabilities or obligations incurred in the normal course of business of Seller. 882/015610-0047 715407.04 a08/30/06 -22- (xvii) Condition of Improvements. As of the Closing Date, the Improvements (which term as used in this Agreement includes sewer and water and all parts of the Property, including, without limitation, plumbing, heating, air conditioning, electric systems and the roof) are in good working order and repair. (xviii) Structural Defects. There are no structural defects in any of the Improvements. (xix) Property Fully Taxed. Except as may be shown on a tax bill or other statement from the tax assessor, the Property and all parts thereof were fully assessed for general tax purposes and there has not been (other than low income housing benefits), at any time, a tax break, concession or adjustment (in the condition factor, assessed valuation or otherwise) given or applied, and that no portion of the Property is, or as of the Closing will be subject to or affected by special assessments, whether or not . a lien thereon. Seller has not received any notice or information of any contemplated increase of the assessments affecting the Property. (xx) Adequacy of Utilities. As of the Closing Date, the water supply and water purity, the sewer, the sewage and waste disposal systems and all of the utility services now servicing the Property are sufficient for the operation of the Property. (xxi) Compliance with Laws. Seller has not received any notices from any governmental authority of zoning, building, environmental protection, clean air, pollution, fire or health code violations with respect to the Property, or violations pertaining to the use and occupancy of the Property, including, without limitation, discrimination on any prohibited basis. (xxii) Employees. Except as may be set forth in Section 6.3(i), with reference to the Property no employees of Seller are under contracts which are not terminable as of the Closing Date. There are no employee benefit plans in effect and there are no unfunded liabilities with respect to employee fringe benefits. (xxiii) Recapture Agreements. There are no obligations burdening the Property created by any so called "recapture agreement' involving refund for sewer or water extension or other improvement to any sewer or water systems, oversizing utility, lighting or like expense or charge for work or services done upon or relating to the Property which will bind the Buyer or the Property from and after the Closing. (xxiv) Special Studies Zone. The Property is not located within either a designated earthquake fault zone pursuant to California Public Resources Code § 2621.9 or a designated area that is particularly susceptible to ground shaking, liquefaction, landslides or other ground failure during an earthquake pursuant to California Public Resources Code § 2694, except as provided in a Commercial 882/015610-0047 -23- " U 715407.04 a08/30/06 Property Disclosure Statement to be expeditiously obtained by Escrow Holder (at Seller's cost) and provided to Buyer and Seller. (xxv) Existing Indebtedness. There are no written or oral agreements, understandings, or commitments relating to the Existing Indebtedness other than the Existing Loan Documents delivered to Buyer pursuant to Section 3.1. There is no uncured default by Seller or, to the best of Seller's knowledge, the lender under the Existing Indebtedness and no event has occurred which with notice, the passage of time, or both, would constitute an event of default by Seller or, to the best of Seller's knowledge, by lender under the Existing Indebtedness. (b) If Seller becomes aware of any act or circumstance which would change or render incorrect, in whole or in part, any representation or warranty made by Seller under this Agreement, whether as of the date given or any time thereafter through the Closing Date and whether or not such representation or warranty was based upon Seller's knowledge and/or belief as of a certain date, Seller will give immediate written notice of such changed fact or circumstance to Buyer, but such notice shall not release Seller of its liabilities or obligations with respect thereto. Seller shall issue the Certificate regarding Representations and Warranties in the form attached hereto as Exhibit "I" at the Closing Date stating that all the representations and warranties contained in this Section 6.1 are true and correct as of said date, or setting forth in detail which of such matters are not true and correct. (c) All representations and warranties contained in Subsection (a) of this Section 6.1 made in writing by Seller in connection with the transactions herein provided for shall be true and correct on the date hereof and on the Closing Date, which representations and warranties shall survive the Closing for a period of one year. (d) Seller shall indemnify Buyer against and hold Buyer harmless from any and all loss, damage, liability or expense, including court costs and reasonable attorneys' fees, which Buyer may reasonably incur or sustain either prior to or following the Closing Date by reason of or in connection with (i) any breach of Seller's representations and/or warranties contained herein; (ii) any and all obligations, liabilities, claims, accounts, demands, liens or encumbrances, whether direct, contingent or consequential, and no matter how arising, in any way related to or arising from any act, conduct, omission, contract, agreement or commitment of Seller or in any way relating to or arising from the construction, completion, sale, use or occupancy of the Property prior to the Closing Date, and (iii) the existence on the Property, as of the Close of Escrow, of any Hazardous Materials or Substances (as defined in above) placed on the Property by Seller or Seller's employees, agents, or representatives, but excluding any such Hazardous Materials or Substances placed on the Property in the control of any tenant without the knowledge of Seller. Buyer shall notify Seller within fifteen (15) days in the event any claim is made against it for which Seller shall have agreed to indemnify Buyer as set forth in this Agreement, and Seller shall thereupon undertake to defend and hold Buyer free and harmless therefrom. Should Seller fail to discharge or undertake to defend against any such liability, then Buyer may settle the same, and Seller's liability to Buyer shall be conclusively established by such settlement, the amount of such liability 882/015610-0047 A 715407.04 a08/30/06 -24- shall include both the settlement consideration and the reasonable costs, attorneys' fees and expenses necessarily incurred by the Buyer in effecting such settlement. 6.2 Representations of Authority. Each party hereby represents to the other that this Agreement has been duly executed by it or its duly authorized officers, partners or agents and constitutes a valid, binding and enforceable obligation of such party. 6.3 Covenants of Seller. During the pendency of Escrow, Seller covenants and agrees as follows: (a) Insurance. Seller will keep all Property conveyed hereunder fully insured against all usual risks and will maintain in effect all insurance policies now maintained on the same, up to and including the Closing Date. (b) Performance Under Tenant Leases. From and after receipt of the Rent Roll by Buyer until the Closing Date, Seller agrees that it will continue to perform all of its obligations as landlord under all of such Tenant Leases and shall, immediately upon obtaining knowledge of a change in facts or circumstances which renders any information contained on the Rent Roll inaccurate, promptly notify Buyer of said facts or circumstances. (c) Further Tenancies. Between the date of the execution of this Agreement and the Closing Date, without the prior written consent of the Buyer, none of the Tenant Leases will be amended to reduce the rents or other charges thereunder or will be renewed for rents or other charges which are less than those payable prior to such renewal; and no new Tenant Lease or extension to an existing Tenant Lease will be made unless it is on the Form Lease for a term of not more than six (6) months and at rent not less than that charged for similar apartments. (d) Operation and Condition Pending Closing. Between the date of this Agreement and the Closing Date, Seller will continue to manage, operate and maintain the Property in the same manner as existed prior to the execution of this Agreement. (e) Condition of Property. The Improvements and Personal Property (including, but not limited to, that set forth on the list of Personal Property attached hereto as Exhibit `B") shall on the day of the Closing be in such good condition and repair as required in order to lease to tenants. On the Closing Date, all vacant apartments (if any) shall be in a "Rent Ready Condition." "Rent Ready Condition" shall mean that all vacant apartments have been thoroughly cleaned, recently painted (within a reasonable time prior to the Closing Date) and that all apartments contain the following: (1) refrigerator -freezer unit in working condition; (2) garbage disposal, stove and oven in working condition; (3) plumbing, heating, air conditioning, and electrical systems in working order and the roof in good condition and repair; (4) floors fully covered with a combination of tile or linoleum and carpeting, all of which shall be in average or better condition; and (5) blinds and/or drapes on all windows in average or better condition. If any vacant apartment is not in a "Rent Ready Condition," or if any appliance or other item listed above is missing or not in working order as of the Closing Date, Seller agrees 882/015610-0047 715407.04 a08/30/06 -25- to reimburse Buyer for the reasonable repair costs of the same, and if missing or not repairable, shall pay for the cost of replacing same. Subsequent to the Closing Date, the burden of proving that the apartments were not in a Rent Ready Condition as of the Closing Date shall be on the Buyer. (f) Required Repairs. Seller shall, prior to the Close of Escrow, perform such repairs or retrofitting to the Property required by any local ordinance or regulation applicable to the Property; notwithstanding the foregoing, if the cost of such repairs or retrofitting is reasonably expected to exceed Ten Thousand Dollars ($10,000), the parties shall meet and confer, in good faith, to determine an equitable method of allocating such excess costs. If the parties are unable to reach agreement, then either party may terminate this Agreement, by providing written notice thereof to the other party. (g) Existing Indebtedness. Seller shall cooperate with Buyer in submitting applications and other information to USDA and Provident in connection with the assumption of the Existing Indebtedness. During the pendency of Escrow, Seller will continue to perform all obligations under the Existing Loan Documents, including making all scheduled principal and interest payments. (h) Transfer of Property. Seller will not transfer any interest in the Property to Seller's partners or to any other person or entity and no ownership interests in Seller will be transferred prior to the Close of Escrow. (i) Property Management Agreements. During the Financial/Operational Due Diligence Period (see Section 3.3), Buyer shall consider, in its sole discretion, retaining the current managing agent, Joan Berndt and the on -Site manager Cyndee Taylor. Buyer shall notify Seller in writing as part of Buyer's Financial/Operational Condition Due Diligence Notice (see Section 3.3) whether Buyer wishes to retain Cyndee Taylor as on - Site manager and/or Joan Berndt as Managing Agent, and, if Buyer wishes to retain Cyndee Taylor and/or Joan Berndt, on what terms and conditions. Seller shall terminate as of the Closing any and all property management agreements affecting the Property (including but not limited to the agreements with Cyndee Taylor and Joan Berndt if and to the extent applicable pursuant to Buyer's notice) and Seller shall also terminate any existing lease (whether written, oral or otherwise) on the Property between Seller and any employee of the existing property management firm or Seller (including but not limited to Cyndee Taylor if and to the extent applicable pursuant to Buyer's notice), and assure that the subject apartment is vacated effective as of the Closing Date. Seller shall be solely responsible for the payment of any and all wages, salaries, vacation and/or sick leave compensation, pension or profit sharing benefits and other benefits, and any other benefits or compensation inuring to the benefit of any and all employees of Seller, any affiliate or agent, employed at the Property through the Closing Date, and all such employees shall, at Seller's cost and expense, be terminated or otherwise employed by Seller effective as of the Closing Date. Seller shall further indemnify, defend, and hold Buyer harmless from any relocation benefits or assistance to which any on -site or resident manager, including but not limited to Cyndee Taylor, may be entitled resulting from the acquisition by Buyer, a public entity. 882/015610-0047 715407.04 a08/30/06 -26- ARTICLE 7 DAMAGE, DESTRUCTION AND CONDEMNATION 7.1 Risk of Physical Loss. Prior to Seller's delivery of possession of the Property to Buyer at the Closing, the risk of loss or damage to the Property shall remain upon Seller. If the Property suffers damages as a result of any casualty prior to the Closing, then Seller shall give written notice thereof to Buyer promptly after the occurrence of the casualty. Buyer can elect to either (i) require Seller to repair and restore same, in which event, the Closing Date will be extended until such date as may be reasonably required to complete the repair and restoration, in which case, Seller shall retain all insurance proceeds [provided that in no event will the Closing be extended for more than one hundred twenty (120) days]; or (ii) accept the Property in its damaged condition, together with an assignment of Seller's insurance proceeds and a credit against the Purchase Price for the amount of any deductible (and Seller hereby agrees that it shall not sell or compromise any insurance claim affecting the Property without Buyer's prior written consent); provided, however, that if as result of any casualty, (i) any single stand-alone structure on the Property sustains damage in excess of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) of the replacement cost of such structure or (ii) fifteen (15) or more apartments are rendered uninhabitable for thirty (30) or more consecutive days (regardless of the replacement costs for such apartments), then Buyer can elect to either: (i) require Seller to repair and restore same, in which event, the Closing Date will be extended until such date as may be reasonably required to complete the repair or restoration, in which case, Seller shall retain all insurance proceeds (provided that in no event will the Closing be extended more than ninety (90) days); (ii) accept the Property in its damaged condition, together with an assignment of Seller's insurance proceeds and a credit against said Purchase Price for the amount of any deductible (and Seller hereby agrees that it shall not settle or compromise any insurance claim affecting the Property without Buyer's prior written consent); or (iii) terminate this Agreement upon notice to Seller served within twenty (20) business days of such casualty. 7.2 Condemnation by Unrelated Governmental Entity. In the event that, prior to the Close of Escrow, any governmental entity shall commence any actions of eminent domain or similar type proceedings to take any portion of the Property, Seller shall give prompt written notice thereof to Buyer, and Buyer shall have the option either to (i) elect not to acquire the Property, or (ii) complete the acquisition of the Property, in which case Buyer shall be entitled to all the proceeds of such taking (and Seller hereby agrees that it shall not settle or compromise the proceedings without Buyer's prior written consent). Buyer represents that it currently has no knowledge of the pendency of any such action, other than as contemplated herein. 7.3 Eminent Domain Authority. Buyer and the City of La Quinta have the power of eminent domain within certain jurisdictional limits of the City of La Quinta. In the event Seller had determined not to sell the Property to Buyer, staff would have recommended to the Board of Directors of Buyer or to the City Council of the City of La Quinta that upon annexation of the Property into the City of La Quinta Buyer and/or the City of La Quinta, after providing notice to Seller and holding a hearing as required by applicable law, consider adopting a resolution of necessity and thereafter commencing proceedings to acquire the Property by the exercise of its power of eminent domain. Notwithstanding the foregoing, Buyer makes no representation, warranty, or guaranty to Seller or to any other person, firm, or entity concerning the tax treatment by any taxing authority, including but not limited to, the Internal Revenue Service, of �90 882/015610-0047 715407.04 a08/30/06 -27- the conveyance of the Property to Buyer, including the tax treatment and tax consequences of an acquisition under the threat of condemnation. Seller acknowledges that Buyer is not providing tax advice to Seller or to any person, firm, or entity and Seller further acknowledges and agrees that Seller must consult Seller's own tax advisor concerning the tax treatment, tax implications, and tax consequences of the sale of the Property to Buyer. ARTICLE 8 ANNEXATION OF REAL PROPERTY INTO CITY During the due diligence periods described in Sections 3.2, 3.3, 3.4, 3.7, and 3.8, Buyer or the City of La Quinta, at Buyer's or the City's sole cost and expense, shall apply for and commence proceedings to annex the Real Property into the City of La Quinta. Annexation of the Real Property (or a decision that annexation is imminent as determined in Buyer's and Seller's sole discretion) shall be a condition precedent to Buyer's and Seller's obligation to Close Escrow. Seller shall use reasonable efforts to cooperate with Buyer and its agents, consultants, representatives and employees in connection with the annexation, including without limitation, the prompt execution of all applicable documents, at no cost or expense to Seller. If the Close of Escrow does not occur by the Closing Date due to the annexation process being incomplete, then Buyer may extend the Close of Escrow for thirty (30) day periods for the purpose of completing annexation by providing written notice of such extension to Seller and Escrow Holder; provided, however, that upon Buyer's notice of such an extension(s), Buyer shall concurrently instruct Escrow Holder to release to Seller the sum of FIVE THOUSAND DOLLARS ($5,000.00) from the Deposit, as an additional Release Amount, for each thirty (30) day extension. Notwithstanding anything herein to the contrary, Deposit funds released pursuant to this section shall not be credited against the Purchase Price and shall be considered nonrefundable, except that if Seller defaults under this Agreement then such Release Amount shall be immediately returned to Buyer. ARTICLE 9 MISCELLANEOUS 9.1 Attorneys' Fees. In the event of any action between Buyer and Seller seeking enforcement of any of the terms and conditions to this Agreement, or otherwise in connection with the Property, the prevailing party in such action, whether by fixed judgment or settlement, shall be entitled to recover, in addition to damages, injunctive or other relief, its actual costs and expenses, including, but not limited to, actual attorneys' fees, court costs and expert witness fees. Such costs shall include attorneys' fees, costs and expenses incurred in (a) post judgment motions, (b) contempt proceedings, (c) garnishment, levy and debtor and third -party examination, (d) discovery, and (e) bankruptcy litigation. 9.2 Notices. All notices under this Agreement shall be delivered by (i) personal delivery, (ii) reputable same -day or overnight courier service (e.g., Federal Express) that provides a receipt showing date and time of delivery, or (iii) United States mail, registered or certified, return receipt requested, postage fully prepaid. Notices personally delivered or delivered by courier shall be effective upon receipt. Mailed notices shall be effective upon the earlier of actual receipt or three (3) business days following deposit with the United States Postal System. Notice shall be directed to the parties as follows: 691 882/015610-0047 715407.04 a08/30/06 -28- To Seller: Frank R. Goodman and Associates c/o Kittredge Sollenberger LLC. GP P.O. Box 272469 2032 Caribou Drive, Suite 102 Fort Collins, CO. 80525 Attn: Mike Sollenberger Telephone No.: (970) 226-8775 With Copy to: Ealy, Hemphill, Blasdel & Oleson, LLP 777 E. Tahquitz Canyon Way, Suite 328 Palm Springs, CA. 92262 Attn: W. Curt Ealy Telephone No.: (760) 320-5977 To Buyer: La Quinta Redevelopment Agency 78-495 Calle Tampico La Quinta, CA 92253 Attn: Executive Director Telephone No.: (760) 777-7000 With Copy to: Rutan & Tucker, LLP 611 Anton Boulevard, Suite 1400 Costa Mesa, CA 92626 Attn: M. Katherine Jenson, Esq. Telephone No.: (714) 641-3437 or to such other address as the parties may from time to time designate in writing. 9.3 Entire Agreement; Interpretation. This Agreement and the exhibits, attachments, and items incorporated herein contain all the agreements of the parties hereto with respect to the matters contained herein; and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provisions of this Agreement may be amended or modified in any manner whatsoever except by an agreement in writing signed by duly authorized officers or representatives of each of the parties hereto. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of this Agreement or any other rule of construction that might otherwise apply. 9.4 Successors. The terms, covenants and conditions of this Agreement shall be binding upon and shall inure to the benefit of the heirs, executors, administrators and assigns of the respective parties hereto. 9.5 Assignm8nt. Seller may not assign this Agreement without the prior written consent of Buyer, which consent may be withheld in Buyer's sole and absolute discretion. Subject to Seller's prior written consent which shall not be unreasonably withheld, Buyer may transfer and. assign at any time the rights and obligations of Buyer under this Agreement, in 092 882/015610-0047 715407.04 a08/30/06 -29- which event, such transferee and assignee shall be entitled to the benefit of and may enforce Seller's covenants, representations and warranties hereunder. Upon any such assignment, the assignor's liabilities and obligations hereunder or under any instruments, documents or agreements made pursuant thereto shall be binding upon such assignee, and the assignor shall be relieved therefrom. 9.6 Choice of Laws. This Agreement shall be governed by the internal laws of the State of California without regard to conflicts of law principles. 9.7 Headings. Headings at the beginning of each numbered Article and Section of this Agreement are solely for the convenience of the parties and are not a part of this Agreement. 9.8 Survival. This Agreement and all covenants, representations and warranties contained herein shall survive the close of this transaction and this Agreement shall remain a binding contract between the parties hereto. 9.9 Time. Time is of the essence of this Agreement, it being understood that each date set forth herein and the obligations of the parties to be satisfied by such date have been the subject of specific negotiation by the parties. 9.10 Counterparts. This Agreement may be signed by the parties in different counterparts and the signature pages combined to create a document binding on all parties. 9.11 Brokerage Commissions. La Quinta Palms Real Estate Co. Inc., a California corporation and California Licensed Real Estate Brokerage, DBA La Quinta Palms Realty, is acting as Agent ("Agent") for both the Buyer and Seller in the transaction contemplated by this Agreement and is being compensated solely by the Seller under a separate commission agreement. The Seller agrees to indemnify and hold the Buyer harmless from and against any and all liability, loss, costs, damages, or expense (including court costs and reasonable attorney's fees) in any manner connected with Seller's commission agreement with Agent. Each party represents and warrants that neither party has retained any other brokers or finders to represent its interests in connection with this transaction. Each party agrees to indemnify and hold the other harmless from and against all liabilities, loss, costs, damages and expenses, including, without limitation, reasonable attorneys' fees, resulting from any claims or fees or commissions, based upon agreements by it, if any, to pay any broker's commission and/or finder's fee. 9.12 Information Report. Escrow Holder shall file and Buyer and Seller agree to cooperate with Escrow Holder and with each other in completing any report ("Information Report") and/or other information required to be delivered to the Internal Revenue Service pursuant to Internal Revenue Code Section 6045(e) regarding the real estate sales transaction contemplated by this Agreement, including, without limitation, Internal Revenue Service Form 1099-B as such may be hereinafter modified or amended by the Internal Revenue Service, or as may be required pursuant to any regulation now or hereinafter promulgated by the Treasury Department with respect thereto. Buyer and Seller also agree that Buyer and Seller, their respective employees and attorneys, and Escrow Holder and its employees may disclose to the Internal Revenue Service, whether pursuant to such Information Report or otherwise, any information regarding this Agreement or the transaction contemplated herein as such party (19 3 882/015610-0047 715407.04 a08/30/06 -30- reasonably deems to be required to be disclosed to the Internal Revenue Service by such party pursuant to Internal Revenue Code Section 6045(e), and further agree that neither Buyer nor Seller shall seek to hold any such party liable for the disclosure to the Internal Revenue Service of any such information. 9.13 Nonliability of Buyer Officials. No officer, official, member, employee, agent, or representative of Buyer shall be personally liable to Seller, or any successor in interest thereto, in the event of any default or breach by Buyer or for any amount which may become due to Seller or its successors, or on any obligations under the terms of this Agreement. 9.14 Buyer's Delegation of Authority. Buyer's Executive Director is hereby delegated by Buyer to have the authority, but not the obligation, to approve and execute, on behalf of Buyer, documents to implement this Agreement including the Exhibits hereto requiring Buyer's signature, subordination agreements, escrow instructions, and other documents that are commercially reasonably necessary to implement this transaction as contemplated in this Agreement. All amendments to this Agreement, except amendments that alter the basic business terms, may be approved by Buyer's Executive Director on behalf of Buyer. In addition, Buyer's Executive Director shall have the authority, on behalf of Buyer, to approve extensions of time, including times for Seller's performance of its obligations under this Agreement, for a cumulative period of up to one (1) year. 9.15 Incorporation. Exhibits "A", `B", "C", "D", "E", "F", "G", "H", 641"3 "J", and "K", each as attached to this Agreement, is incorporated herein and made a part hereof. [end —signature page and exhibits follow] 694 882/015610-0047 715407.04 a08/30/06 -31- IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the date first above written. Date: Date: ATTEST: Agency Secretary APPROVED AS TO FORM: RUTAN & TUCKER, LLP Agency Attorney "SELLER" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner By: Its: By: Its: "BUYER" LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic Bv: Thomas P. Genovese, Executive Director 882/015610-0047 � 095 715407.04 a08/30/06 -32- ACCEPTANCE BY ESCROW HOLDER The undersigned hereby acknowledges that it has received originally executed counterparts or a fully executed original of the foregoing Purchase and Sale Agreement and Escrow Instructions and agrees to act as Escrow Holder thereunder and to be bound by and perform the terms thereof as such terms apply to Escrow Holder. Dated: 92006 FOUR SEASONS ESCROW LIM Malia Monroe, Escrow Holder G90 882/015610-0047 715407.04 ao8/30/06 -33- EXHIBIT "A" LEGAL DESCRIPTION OF REAL PROPERTY THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE, DESCRIBED AS FOLLOWS: Parcel 1, together with the West 11 feet of Parcel 2 of Parcel Map No. 12323, in the County of Riverside, State of California, as per map recorded in Book 56, page(s) 27 and 28, of Parcel Maps, in the office of the County Recorder of said County. APN: 609-040-007 609-040-023 EXHIBIT "A„ V 97 TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS EXHIBIT `B" LIST OF PERSONAL PROPERTY Individual Apartments (72 Tenants + Manager) 72 - 40 gallon water heaters 1 - 83 gallon water heater 73 Refrigerators 73 air conditioning units 73 gas stoves 1 GE washer (mgr) 1 GE dryer (mgr) On -Site Office 1 office desk 1 - 4 drawer filing cabinet 1 - 2 drawer filing cabinet 1 Cannon copier 1 HP Laser et 1200 printer 1 Brother fax machine 1 Dell Computer + monitor/keyboard 2 office guest chairs 1 office chair w/wheels 1 shredder 1 Cannon calculator 1 AT&T answering machine 1 V-tech phone Miscellaneous office supplies Laundry Rooms 1 - 40 gallon water heater 2 - 100 gallon water heaters 1 swamp cooler 8 Maytag coin operated top loading washers 8 Maytag coin operated dryers 1 Maytag coin operated front loading washer 1 Maytag coin operated front loading dryer Common Area/Grounds 2 outdoor benches 3 plastic chairs 4 picnic tables 2 cigarette ash cans Recreation Room 1 air conditioning unit EXHIBIT `B" 1 1 O TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS I Refrigerator 4 round tables 16 club chairs 1 computer desk 1 E-machine computer + monitor/keyboard 1 Xerox printer 2 office guest chairs 1 RCA flat screen T.V. 1 large wooden clock 2 easy chairs 2 sofas 1 stereo 6 conference room chairs 2 coffee tables 1 microwave 1 coffee maker 1 supply cabinet Workshop/Garage Storage 1 swamp cooler 1 portable swamp cooler 1 portable air conditioning unit 1 Hampton Bay window A/C unit 1 Porter 25 gallon air compressor with hose (135 PSI) 3 Rainbird sprinkler controls 1 Refrigerator (used for parts) Miscellaneous tools & maintenance inventory 2 air conditioning units in stock for emergency installation use EXHIBIT `B" TO PURCHASE AND SALE AGREEMENT 882/015610-0047 715407.04 a08/30/06 AND ESCROW INSTRUCTIONS RECORDING REQUESTED BY AND: WHEN RECORDED MAIL TO: La Quinta Redevelopment Agency 78-495 Calle Tampico La Quinta, CA 92253 Attn: Executive Director MAIL TAX STATEMENTS TO: La Quinta Redevelopment Agency 78-495 Calle Tampico La Quinta, CA 92253 Attn: Executive Director EXHIBIT "C" GRANT DEED Space above this line for Recorder's Use Exempt from Recordation Fee per Gov. Code § 27383 DOCUMENTARY TRANSFER TAX $0.00 [PUBLIC ENTITY TRANSFEREE] .... Computed on the consideration or value of property conveyed; OR .... Computed on the consideration or value less liens or encumbrances remaining at time of sale. Signature of Declarant or Agent determining tax — Firm Name GRANT DEED Order No. Escrow No. Loan No. FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership, hereby grants to the LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic, the real property in the County of Riverside, State of California, described on Attachment No. 1 attached hereto and incorporated herein by reference (the "Property"). [continued on following page] EXHIBIT "C" TO PURCHASE AND SALE AGREEMENT AND O O ESCROW INSTRUCTIONS 882/015610-0047 715407.04 a08/30/06 Page 1 of 4 The Property conveyed hereby is subject to (i) non -delinquent general and special real property taxes; and (ii) matters of record. Date: Date: "SELLER" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner By: Its: By: Its: EXHIBIT "C„ TO PURCHASE AND SALE AGREEMENT AND 101 882/015610-0047 ESCROW INSTRUCTIONS 715407.04 a08/30/06 Page 2 of 4 STATE OF CALIFORNIA COUNTY OF On appeared _ before me, personally personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. [SEAL] STATE OF CALIFORNIA COUNTY OF On appeared _ Notary Public ss. before me, personally personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] EXHIBIT "C" TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS 882/015610-0047 715407.04 a08/30/06 Page 3 of 4 CERTIFICATE OF ACCEPTANCE This Certificate of Acceptance is to certify that the interest in real property conveyed by the grant deed dated , from FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership ("Grantor"), to the LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic ("Grantee"), is hereby accepted by order of the LA QUINTA REDEVELOPMENT AGENCY pursuant to authority conferred on by Resolution No. 2002-12 adopted by the Grantee's Board of Directors on June 18, 2002, and Grantee hereby consents to recordation thereof by its duly authorized officer. Dated: , 200_ "GRANTEE" LA QUINTA REDEVELOPMENT AGENCY By: Thomas P. Genovese, Executive Director STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF LA QUINTA On , 200_, before me, personally appeared THOMAS P. GENOVESE, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signatures(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature [SEAL] EXHIBIT "C" TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 ESCROW INSTRUCTIONS 103 715407.04 a08/30/06 Page 4 of 4 ATTACHMENT NO. 1 TO GRANT DEED LEGAL DESCRIPTION OF REAL PROPERTY THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE, CITY OF LA QUINTA, AND DESCRIBED AS FOLLOWS: Parcel 1, together with the West 11 feet of Parcel 2 of Parcel Map No. 12323, in the County of Riverside, State of California, as per map recorded in Book 56, page(s) 27 and 28, of Parcel Maps, in the office of the County Recorder of said County. APN: 609-040-007 609-040-023 ATTACHMENT NO. 1 v v 715 0 7.04a 8/3 TO GRANT DEED 715407.04 a08/30/06 EXHIBIT "D" WARRANTY BILL OF SALE For good and valuable consideration, the receipt of which is hereby acknowledged, FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership ("Seller"), does hereby sell, transfer and convey to LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic ("Buyer"), all personal property of Seller described in Schedule No. 2 attached hereto which is located on and used in the operation, repair and maintenance of the real property described in Schedule No. I attached hereto, which personal property Seller warrants to be free and clear of all encumbrances. Seller does hereby covenant with Buyer that Seller is the lawful owner of such personal property, free and clear of all liens, encumbrances, security agreements and financing statements, that such personal property is owned and not leased by Seller and that Seller has good right to sell the same as aforesaid and will warrant and defend the title thereto unto Buyer, its successors and assigns, against the claims and demands of all persons. Dated this day of , 200_ "SELLER" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership Date: By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner Date: By: Its: By: Its: EXHIBIT "D" 882/015610-0047 TO PURCHASE AND SALE AGREEMENT AND n 5 715407.04 a08/30/06 ESCROW INSTRUCTIONS SCHEDULE NO. 1 LEGAL DESCRIPTION OF REAL PROPERTY THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE, CITY OF LA QUINTA, AND DESCRIBED AS FOLLOWS: Parcel 1, together with the West 11 feet of Parcel 2 of Parcel Map No. 12323, in the County of Riverside, State of California, as per map recorded in Book 56, page(s) 27 and 28, of Parcel Maps, in the office of the County Recorder of said County. APN: 609-040-007 609-040-023 106 882/015610-0047 SCHEDULE NO. 1 715407.04 a08/30/06 TO WARRANTY BILL OF SALE SCHEDULE NO. 2 LIST OF PERSONAL PROPERTY Individual Apartments (72 Tenants + Manager) 72 - 40 gallon water heaters 1 - 83 gallon water heater 73 Refrigerators 73 air conditioning units 73 gas stoves 1 GE washer (mgr) 1 GE dryer (mgr) On -Site Office 1 office desk 1 - 4 drawer filing cabinet 1 - 2 drawer filing cabinet 1 Cannon copier I HP Laser et 1200 printer 1 Brother fax machine 1 Dell Computer + monitor/keyboard 2 office guest chairs 1 office chair w/wheels 1 shredder I Cannon calculator I AT&T answering machine 1 V-tech phone Miscellaneous office supplies Laundry Rooms 1 - 40 gallon water heater 2 - 100 gallon water heaters 1 swamp cooler 8 Maytag coin operated top loading washers 8 Maytag coin operated dryers 1 Maytag coin operated front loading washer 1 Maytag coin operated front loading dryer Common Area/Grounds 2 outdoor benches 3 plastic chairs 4 picnic tables 2 cigarette ash cans Recreation Room 1 air conditioning unit 882/015610-0047 SCHEDULE NO. 2 715407.04 a08/30/06 TO WARRANTY BILL OF SALE 1 Refrigerator 4 round tables 16 club chairs 1 computer desk 1 E-machine computer + monitor/keyboard 1 Xerox printer 2 office guest chairs 1 RCA flat screen T.V. 1 large wooden clock 2 easy chairs 2 sofas 1 stereo 6 conference room chairs 2 coffee tables 1 microwave 1 coffee maker 1 supply cabinet Workshop/Gars eg Storage 1 swamp cooler 1 portable swamp cooler 1 portable air conditioning unit 1 Hampton Bay window A/C unit 1 Porter 25 gallon air compressor with hose (135 PSI) 3 Rainbird sprinkler controls 1 Refrigerator (used for parts) Miscellaneous tools & maintenance inventory 2 air conditioning units in stock for emergency installation use EXHIBIT "B" " 1108 882/015610-0047 715407.04 a08/30/06 TO WARRANTY BILL OF SALE EXHIBIT "E" ASSIGNMENT OF TENANT LEASES This ASSIGNMENT OF TENANT LEASES ("Assignment") is made as of , 200_9 by and between FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership ("Assignor"), and LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic ("Assignee"). RECITALS: A. Concurrently with the delivery of this Assignment, Assignor has conveyed to Assignee and Assignee has acquired from Assignor a fee simple estate in and to certain real property, located in the County of Riverside, State of California, more particularly described in Appendix No. I attached hereto (the "Real Property") pursuant to that certain Purchase and Sale Agreement and Escrow Instructions dated , 2006 (the "Purchase Agreement"). B. Pursuant to the Purchase Agreement, Assignor is to assign to Assignee and Assignee is to assume certain rights and obligations under those certain leases affecting the Property as amended or modified (collectively, the "Tenant Leases"), which Tenant Leases are more particularly described in Appendix No. 2 attached hereto and incorporated herein by this reference. NOW, THEREFORE, Assignor and Assignee agree as follows: ARTICLE I ASSIGNMENT OF TENANT LEASES 1.1 Assignment. Assignor hereby assigns to Assignee all of Assignor's right, title and interest in and to all Tenant Leases affecting the Property as of the Effective Date, including, but not limited to, all security and other deposits and prepaid rents paid thereunder (hereafter defined). 1.2 Assumption. Assignee hereby accepts the foregoing assignment, assumes the Tenant Leases and agrees to timely keep, perform and discharge all of the obligations of the lessor under the Tenant Leases that accrue from and after the Effective Date hereof. 1.3 Indemnification. Assignor shall indemnify, protect, defend and hold Assignee harmless from all losses, damages, claims, liabilities, demands, costs, offset rights and expenses, including, without limitation, attorneys' fees arising out of any failure of Assignor to keep, perform and discharge all of the obligations of lessor under the Tenant Leases prior to the Effective Date. Assignee shall indemnify, protect, defend and hold Assignor harmless from all losses, demands, damages, claims, liabilities, demands, costs, expenses and offset rights, including, without limitation, attorneys' fees arising out of any failure of Assignee to so keep, EXHIBIT "E" J TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 ESCROW INSTRUCTIONS 715407.04 a08/30/06 Page 1 of 3 perform and discharge all of the obligations of the lessor under the Tenant Leases that accrue from and after the Effective Date. 1.4 Effective Date. The "Effective Date" of this Assignment shall be the date that Assignee acquires the Real Property. 1.5 Consistency with Purchase Agreement. Nothing in this Assignment shall be construed to modify or limit any provisions of the Purchase Agreement and in the event of any inconsistency between this Assignment and the Purchase Agreement, the Purchase Agreement shall control. ARTICLE II MISCELLANEOUS 2.1 Attorneys' Fees. In the event of any action between Assignor and Assignee seeking enforcement of any of the terms and conditions to this Assignment, the prevailing party in such action, whether by fixed judgment or settlement, shall be entitled to recover, in addition to damages, injunctive or other relief, its actual costs and expenses, including, but not limited to, actual attorneys' fees, court costs and expert witness fees. Such costs shall include attorneys' fees, costs and expenses incurred in (a) post judgment motions, (b) contempt proceedings, (c) garnishment, levy and debtor and third -party examination, (d) discovery, and (e) bankruptcy litigation. 2.2 Inurement. This Assignment shall inure to the benefit of Assignor and Assignee, and their respective heirs, assigns and successors in interest. 2.3 Counterparts. This Assignment may be signed by the parties in different counterparts and the signature pages combined to create a document binding on all parties. 2.4 Governing Law. This Assignment shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflicts of law. [end — signatures on next page] EXHIBIT 6'E'9 TO PURCHASE AND SALE AGREEMENT AND 110 ESCROW INSTRUCTIONS 882/015610-0047 715407.04 a08/30/06 Page 2 of 3 IN WITNESS WHEREOF, the parties have executed this Assignment as of the day and year first above written to be effective as of the Effective Date defined in Paragraph 1.4 hereof. Date: Date: ATTEST: Agency Secretary APPROVED AS TO FORM: RUTAN & TUCKER, LLP I0 Agency Attorney "ASSIGNOR" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner By: Its: By: Its: "ASSIGNEE" LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic Thomas P. Genovese, Executive Director EXHIBIT "E" TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 ESCROW INSTRUCTIONS 715407.04 a08/30/06 Page 3 of 3 APPENDIX NO. 1 LEGAL DESCRIPTION OF REAL PROPERTY THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE, CITY OF LA QUINTA, AND DESCRIBED AS FOLLOWS: Parcel 1, together with the West 11 feet of Parcel 2 of Parcel Map No. 12323, in the County of Riverside, State of California, as per map recorded in Book 56, page(s) 27 and 28, of Parcel Maps, in the office of the County Recorder of said County. APN: 609-040-007 609-040-023 112 APPENDIX NO. 1 882/015610-0047 715407.04 a08/30/06 TO ASSIGNMENT OF LEASES APPENDIX NO. 2 SCHEDULE OF TENANT LEASES Seller shall prepare a list of the Tenant Leases affecting the Real Property including any amendments or modifications thereto and all security and other deposits and prepaid rents thereunder. Such list shall be inserted as Appendix No. 2 to the Assignment prior to its execution. APPENDIX NO.2 113 882/015610-0047 715407.04 a08/30/06 TO ASSIGNMENT OF LEASES EXHIBIT "F" NON -FOREIGN AFFIDAVIT Section 1445 of the Internal Revenue Code provides that the transferee of an interest in real property located in the United States must withhold tax if the transferor is a foreign person. To inform Buyer, LA QUINTA REDEVELOPMENT AGENCY ("Transferee"), that withholding of tax is not required upon the sale by FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership ("Transferor"), of its fee simple interest in that certain real property sold pursuant to the Purchase and Sale Agreement and Escrow Instructions dated , 2006, which real property is described in Attachment No. 1, attached hereto and made a part hereof, the undersigned hereby certifies the following: 1. The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and the income tax regulations promulgated thereunder); 2. The Transferor's United States Taxpayer Identification Number is 3. The Transferor's office address is 3091 Old Post Lane, Auburn, CA 95603; and 4. The Internal Revenue Service has not issued any notice with respect to Transferor or listed Transferor as a person whose affidavit may not be relied upon for purposes of Section 1445 of the Internal Revenue Code. The Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment or both. [continued on next page] EXHIBIT "F" 114 TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS Under penalty of perjury, I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I am the General Partner of Transferor and that I have authority to sign this document on behalf of the Transferor. "ASSIGNOR" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership Date: By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner Date: By: Its: By: Its: EXHIBIT "F" 115 TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS ATTACHMENT NO. 1 LEGAL DESCRIPTION OF REAL PROPERTY THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE, CITY OF LA QUINTA, AND DESCRIBED AS FOLLOWS: Parcel 1, together with the West 11 feet of Parcel 2 of Parcel Map No. 12323, in the County of Riverside, State of California, as per map recorded in Book 56, page(s) 27 and 28, of Parcel Maps, in the office of the County Recorder of said County. APN: 609-040-007 609-040-023 lIOn 882/015610-0047 ATTACHMENT NO. 1 715407.04 a08/30/06 TO NON -FOREIGN AFFIDAVIT EXHIBIT "G" ASSIGNMENT OF CONTRACTS PERMITS, INTANGIBLE PERSONAL PROPERTY, WARRANTIES AND GUARANTIES This ASSIGNMENT OF CONTRACTS, PERMITS, INTANGIBLE PERSONAL PROPERTY, WARRANTIES AND GUARANTIES ("Assignment") is made and entered into this day of , 200_, by and between FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership ("Assignor"), and LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic ("Assignee"). RECITALS: This Assignment is made with reference to the following facts and intentions of the parties: A. - Concurrently with the delivery of this Assignment, Assignor has conveyed to Assignee and Assignee has acquired from Assignor a fee simple estate in and to certain real property located in the County of Riverside, State of California, more particularly described in Schedule No. 1 attached hereto (the "Real Property") pursuant to that certain Purchase and Sale Agreement and Escrow Instructions dated , 2006 (the "Purchase Agreement'). B. Assignor, in connection with the orderly operation of the Real Property, has entered into certain labor service, supply maintenance, landscape, property management, leasing, insurance and other contracts, copies of which have been given to and approved by Assignee. In accordance with the terms and conditions of the Purchase Agreement, Assignor has agreed to assign to Assignee and Assignee has agreed to accept the assignment of all contracts which Assignee elects to assume. A schedule of all such contracts Assignee has elected to assume are attached hereto as Schedule No. 2 (collectively, "Contracts"). C. Assignor is the owner of or holder of certain permits, licenses, plans and specifications and certificates of occupancy relating to the Real Property (collectively, "Permits") including but not limited to those permits, licenses, plans and specifications and certificates of occupancy set forth in the schedule attached hereto as Schedule No. 3. D. Assignor is the owner and possessor of certain trade names, logos, signs, trademarks, styles, telephone listings and numbers, manuals, lists of prospective tenants, advertising materials, all plans and specifications, specifications relating to the improvements and fixtures located on the Real Property, including all working drawings and "as -built' drawings and all reports and studies relating to the Property (as defined in the Purchase Agreement') and similar items included within, related to or otherwise pertaining to the Property (collectively, "Intangible Personal Property"), including but not limited to the Intangible Personal Property set forth in the schedule attached hereto as Schedule No. 4. EXHIBIT "G" TO PURCHASE AND SALE AGREEMENT AND 117 882/015610-0047 ESCROW INSTRUCTIONS 715407.04 a08/30/06 Page 1 of 4 E. Assignor is the owner or holder of certain warranties and guaranties now in effect with respect to the Property (collectively, "Warranties and Guaranties"), including, but not limited to, the warranties and guaranties listed in the schedule set forth in Schedule No. 5 attached hereto. F. Pursuant to the terms of the Purchase Agreement, Assignor has agreed to assign to Assignee all of its right, title and interest in and to the Contracts, Permits, Intangible Personal Property and Warranties and Guaranties. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the parties agree as follows: ARTICLE I ASSIGNMENT OF CONTRACTS, PERMITS, INTANGIBLE PERSONAL PROPERTY, WARRANTIES AND GUARANTIES 1.1 Assignment of Contracts. Assignor hereby assigns, transfers and conveys to Assignee all of Assignor's right, title and interest in and to all of the Contracts set forth in Schedule No. 2, and Assignee accepts and agrees to assume the obligations of Assignor under the Contracts occurring after the Effective Date (as hereinafter defined). 1.2 Assignment of Permits Intangible Personal Property, Warranties and Guaranties. As of the Effective Date, Assignor hereby assigns to Assignee all of Assignor's right, title and interest in and to all Permits, Intangible Personal Property and Warranties and Guaranties relating to the Real Property, including, without limitation, those Permits, Intangible Personal Property and Warranties and Guaranties described in Schedule Nos. 3, 4, and 5, respectively. As of the Effective Date, Assignee hereby accepts the foregoing assignment of any and all Permits, Intangible Personal Property and Warranties and Guaranties now in effect with respect to the Property. 1.3 No Liability, Indemnification. This Assignment and its acceptance by Assignee shall not impose any liability on Assignee for any default by Assignor under the Contracts, Permits, Intangible Personal Property, and Warranties and Guaranties occurring prior to the Effective Date. Assignor shall indemnify, protect, defend and hold Assignee harmless from any and all losses, demands, damages, claims, liabilities, costs and expenses, including, but not limited to, attorneys' fees arising out of or in connection with any default by Assignor under the Contracts, Permits, Intangible Personal Property, and Warranties and Guarantees occurring prior to the Effective Date. Assignee shall indemnify, protect, defend and hold Assignor harmless from any and all losses, damages, claims, liabilities, costs and expenses including, without limitation, attorneys' fees, arising out of or in connection with any default by Assignee under the Contracts, Permits, Intangible Personal Property, and Warranties and Guarantees that occurs after the Effective Date. EXHIBIT "G" TO PURCHASE AND SALE AGREEMENT AND tt ESCROW INSTRUCTIONS L 882/015610-0047 715407.04 a08/30/06 Page 2 of 4 1.4 Effective Date. The "Effective Date" of this Assignment shall be the date that Assignee acquires fee simple interest in and to the Real Property described in Schedule No. 1 attached hereto pursuant to the Purchase Agreement. 1.5 Consistency with Purchase Agreement. Nothing in this Assignment shall be construed to modify or limit any provisions in the Purchase Agreement and in the event of any inconsistency between this Assignment and the Purchase Agreement, the latter shall govern and control. ARTICLE II MISCELLANEOUS 2.1 Attorneys' Fees. In the event of any action between Assignor and Assignee seeking enforcement of any of the terms and conditions to this Assignment, the prevailing party in such action, whether by fixed judgment or settlement, shall be entitled to recover, in addition to damages, injunctive or other relief, its actual costs and expenses, including, but not limited to, actual attorneys' fees, court costs and expert witness fees. Such costs shall include attorneys' fees, costs and expenses incurred in (a) post judgment motions, (b) contempt proceedings, (c) garnishment, levy and debtor and third -party examination, (d) discovery, and (e) bankruptcy litigation. 2.2 Inurement. This Assignment shall inure to the benefit of Assignor and Assignee, and their respective heirs, assigns and successors in interest. 2.3 Counterparts. This Assignment may be signed by the parties in different counterparts and the signature pages combined to create a document binding on all parties. 2.4 Governing Law. This Assignment shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflicts of law. [end — signature page follows] EXHIBIT "G" TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS 882/015610-0047 715407.04 a08/30/06 Page 3 of 4 IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the date first above written to be effective as of the Effective Date. Date: Date: ATTEST: Agency Secretary APPROVED AS TO FORM: RUTAN & TUCKER, LLP IM Agency Attorney "ASSIGNOR" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner By: Its: By: Its: "ASSIGNEE" LA QUINTA REDEVELOPMENT AGENCY, a public body, corporate and politic By: Thomas P. Genovese, Executive Director EXHIBIT "G" TO PURCHASE AND SALE AGREEMENT AND r� ESCROW INSTRUCTIONS 882/015610-0047 715407.04 a08/30/06 Page 4 of 4 SCHEDULE NO. 1 LEGAL DESCRIPTION OF REAL PROPERTY THAT CERTAIN REAL PROPERTY SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE, CITY OF LA QUINTA, AND DESCRIBED AS FOLLOWS: Parcel 1, together with the West 11 feet of Parcel 2 of Parcel Map No. 12323, in the County of Riverside, State of California, as per map recorded in Book 56, page(s) 27 and 28, of Parcel Maps, in the office of the County Recorder of said County. APN: 609-040-007 609-040-023 88e/015610-0047 SCHEDULE NO. 1 715407.04 a08/30/06 TO ASSIGNMENT OF CONTRACTS SCHEDULE NO. 2 SCHEDULE OF CONTRACTS ASSIGNED Prior to execution of this document, Assignor shall provide a list of all Contracts and, from that list, Assignee shall prepare and insert a schedule of all of the Contracts it elects to assume pursuant to this Assignment prior to execution of this Assignment. 4 102 SCHEDULE NO.2 715 0 7.04 a003 TO ASSIGNMENT OF CONTRACTS 715407.04 a08/30/06 SCHEDULE NO. 3 SCHEDULE OF PERMITS, LICENSES AND CERTIFICATES OF OCCUPANCY A list of any and all permits, licenses and certificates of occupancy in Assignor's possession issued or obtained for the Property, or any part thereof, shall be prepared by Assignor and approved by Assignee and inserted herein prior to the execution of this Assignment. 882/015610-0047 SCHEDULE NO. 3 715407.04 a08/30/06 TO ASSIGNMENT OF CONTRACTS SCHEDULE NO. 4 SCHEDULE OF INTANGIBLE PERSONAL PROPERTY A list of any and all Intangible Personal Property included within the Property shall be prepared by Assignor and approved by Assignee and inserted herein prior to execution of this Assignment. SCHEDULE NO.4 882/015610-0047 715407.04 a08/30/06 TO ASSIGNMENT OF CONTRACTS SCHEDULE NO. 5 SCHEDULE OF WARRANTIES AND GUARANTIES Prior to execution of the Assignment, Assignor shall prepare a list to be approved by Assignee of any and all warranties and guaranties then in effect with respect to the Property conveyed to Assignee. 882/015610-0047 SCHEDULE NO. 5 715407.04 a08/30/06 TO ASSIGNMENT OF CONTRACTS EXHIBIT "H" SCHEDULE OF ALL LABOR SERVICE EMPLOYMENT, SUPPLY, MAINTENANCE AND BROKERAGE LEASING CONTRACTS There are no contracts for labor, service, employment, supply, maintenance or brokerage leasing contracts. There are vendors and contractors that have provided services on a monthly basis for years, however, they are not under contract. Ins EXHIBIT "H„ TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS EXHIBIT "I" CERTIFICATE OF SELLER REGARDING REPRESENTATIONS AND WARRANTIES FRANK R. GOODMAN AND ASSOCIATES ("Seller") has entered into a Purchase and Sale Agreement and Escrow Instructions (the "Agreement") dated , 2006 with LA QUINTA REDEVELOPMENT AGENCY ("Buyer"), for the purchase and sale of that certain real property as described in Exhibit "A" attached to the Agreement. Pursuant to Section 6.1(b) of the Agreement, Seller hereby certifies to Buyer that all representations and warranties made by Seller pursuant to Section 6.1 of the Agreement are true and correct as of the Close of Escrow excepting those matters which are set forth in detail in Schedule No. I attached hereto and incorporated herein by this reference. All representations and warranties made by Seller shall survive the Close of Escrow. "SELLER" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership Date: By:. Kittredge Sollenberger, LLC, a California limited liability company It: General Partner Date: By: Its: By: Its: EXHIBIT "I" 1: TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS SCHEDULE NO. 1 EXCEPTIONS FROM SELLER'S REPRESENTATIONS AND WARRANTIES 882/015610-0047 SCHEDULE NO. 1 715407.04 a08/30/06 TO CERTIFICATE OF SELLER EXHIBIT "J" NOTICE TO TENANTS TO: All Tenants of WASHINGTON STREET APARTMENTS ("Apartments") Please be advised that the Apartments has, on the date hereof, been sold by the undersigned Seller to La Quinta Redevelopment Agency. All future rent payments should be made to the new owner at: La Quinta Redevelopment Agency 78-495 Calle Tampico La Quinta, CA 92253 Attn: Finance Department Your security deposit in the amount of $ has been assigned to the new owner who will be responsible for complying with the provisions of the California Civil Code with respect to return of the deposit. If you have any questions, notify: Dated: , 200_ Date: Date: "SELLER" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner By: Its: By: Its: jng EXHIBIT "J" TO PURCHASE AND SALE AGRAEEMENT 882/015610-0047 715407.04 a08/30/06 AND ESCROW INSTRUCTIONS EXHIBIT "K' LEAD -BASED PAINT DISCLOSURE AND ACKNOWLEDGMENT LEAD WARNING STATEMENT: Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead -based paint, paint chips and dust that may place young children at risk of developing lead poisoning. Lead can pose health hazards if not taken care of properly. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in pre-1978 residential real property, prior to the sale, is required to: (a) provide the buyer with any information on lead - based paint hazards from risk assessments or inspections in the seller's possession; (b) notify the buyer of any known lead -based paint hazards; and (c) give the buyer a Federally approved pamphlet on lead poisoning prevention. A risk assessment or inspection for possible lead -based paint hazards is recommended prior to purchase. SELLER'S DISCLOSURE (A) Presence of lead -based paint and lead -based paint hazards (check one below): o Known lead -based paint and/or lead -based paint hazards are present in the housing. (Explanation: o Seller has no knowledge of lead -based paint and/or lead -based paint hazards in the housing. (B) Records and reports available to the seller (check one below): o Seller has provided the purchaser with all available records and reports pertaining to lead -based paint and/or lead -based paint hazardous in the housing. (List documents:) 0 882/015610-0047 715407.04 a08/30/06 Seller has no reports or records pertaining to lead -based paint and/or lead -based paint hazards in the housing. EXHIBIT "K" TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS 130 CERTIFICATION OF ACCURACY The undersigned has reviewed the information above and certifies, to the best of its knowledge, that the information provided by the signatory is true and accurate. Date: Date: "SELLER" FRANK R. GOODMAN AND ASSOCIATES, a California limited partnership By: Kittredge Sollenberger, LLC, a California limited liability company It: General Partner By: Its: By: Its: EXHIBIT "K" 131 882/015610-0047 TO PURCHASE AND SALE AGREEMENT AND 715407.04 a08/30/06 ESCROW INSTRUCTIONS EXHIBIT "L" PENDING OR THREATENED CLAIMS, ALLEGATIONS OR LAWSUITS On or before the execution of this Agreement, Seller shall prepare a Schedule of all pending or threatened claims, allegations or lawsuits whether for personal injury, property damage, landlord -tenant disputes, property taxes or otherwise affecting Seller or the Property, shall deliver the Schedule to Buyer who shall approve it, and if approved, thereafter said Schedule shall be inserted herein. EXHIBIT "L" TO PURCHASE AND SALE AGREEMENT AND 882/015610-0047 715407.04 a08/30/06 ESCROW INSTRUCTIONS ATTAU"Mr-'. w :r M � G +' a A • • BYRONA. Wr y # M4 cl W ,Mt +:1t+ T. may. ZULI y • * i `�� x ►. ', •. ;' ,� !R LL jF It Tf �1i�11�."•1. I1`r� Titivl 4 aCP4u&rw COUNCIL/RDA MEETING DATE: September 5, 2006 ITEM TITLE: Approval of a Finance Agreement with the City of La Quinta and the La Quinta Redevelopment Agency for the Washington Street Land Acquisitions. RECOMMENDATION: AGENDA CATEGORY: BUSINESS SESSION: CONSENT CALENDAR: STUDY SESSION: PUBLIC HEARING: Approve a Finance Agreement (Attachment 1) with the City of La Quinta and the La Quinta Redevelopment Agency for funding escrow deposits and due diligence studies of the Washington Street land acquisitions. FISCAL IMPLICATIONS: This Finance Agreement allows for up to $140,000 of General Fund Reserves to be loaned to the Agency for the purpose of funding escrow deposits and due diligence studies for the Washington Street land acquisitions. This loan advance with accrued interest (7% per annum) will be repaid by the Agency after the annexation of the Washington Street properties. If for any reason the annexation does not take place, the Agency will payback all unused portions of this loan including any and all refunded deposits. The remaining balance of the loan would then need to be forgiven. BACKGROUND AND OVERVIEW: The Agency is mandated to facilitate the development or preservation of 871 affordable units within the next ten years. With limited land resources within both Project Areas for affordable housing opportunities, the Agency looked to affordable housing development options within the unincorporated areas contiguous to the City. Two adjacent properties have been identified and Purchase and Sale Agreements are being presented for Agency approval. The first property is improved with a 73-unit apartment complex that is rented to very low- and low- income seniors and handicapped households. The second is a 7.5 acre vacant land parcel (fronting Washington Street) that will be subdivided from a larger 15.13 acre site. Both properties are located just north of the City limits. LAFCO staff has A indicated they would support including these properties in the City's Sphere of Influence with eventual annexation. Since Housing Funds cannot be used to purchase properties outside of the City, a General Fund loan advance is required to secure and study the properties until the annexation process is complete. FINDINGS AND ALTERNATIVES: The alternatives available to the Agency include: 1. Approve a Finance Agreement with the City of La Quinta and the La Quinta Redevelopment Agency for funding escrow deposits and due diligence studies of the Washington Street land acquisitions; or 2. Do not approve a Finance Agreement with the City of La Quinta and the La Quinta Redevelopment Agency for funding escrow deposits and due diligence studies of the Washington Street land acquisitions; or 3. Provide staff with alternative direction. Respectfully submitted, Douglas YKEvans Community Development Director Approved for submission by: Thomas P. Genovese, Executive Director Attachment: 1 . Finance Agreement ATTACHMENT 1 FINANCING AGREEMENT THIS FINANCING AGREEMENT ("Agreement") is made and entered into this day of , 2006, by and between the LA QUINTA REDEVELOPMENT AGENCY, a public body corporate and politic ("Agency"), and the CITY OF LA QUINTA, a charter city and municipal corporation ("City"). RECITALS WHEREAS, Agency is a public body, corporate and politic, organized under the California Community Redevelopment Law (Health & Safety Code § 33000 et seq.); and WHEREAS, City is a municipal corporation and a charter city of the State of California organized and existing under the Constitution of the State of California; and WHEREAS, Agency and City, pursuant to Health and Safety Code Sections 33449 and 33601, are authorized to enter into an agreement to provide for City's loan to Agency to facilitate the increase of affordable housing opportunities through the Washington Street Land acquisition transactions; and WHEREAS, City and Agency mutually desire to enter into this Agreement to set forth their respective obligations with respect to City providing Agency with loan financing in the amount up to One Hundred Forty Thousand Dollars ($140,000) to assist Agency in meeting certain pre -development costs associated with providing affordable housing opportunities in Agency's Project Area No. 2, with such loan funds to be used by the Agency to meet the cost of deposits and due diligence studies for the Washington Street Land acquisition transactions; and WHEREAS, City and Agency acknowledge that the Washington Street Land acquisition transactions involve properties outside the City but which are anticipated to be annexed to the City and that such annexation is a condition to the Agency's close of escrow for its acquisition of such properties (the "Annexation"); and WHEREAS, City and Agency further acknowledge that should such Annexation not occur that City shall forgive and discharge the loan to Agency evidenced by this Agreement and City shall thus incur the costs for any nonrefundable deposits and any due diligence costs expended; and AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter contained, Agency and City agree as follows: Section 1. Recitals Incorporated. The foregoing Recitals are incorporated herein and made a part hereof. Section 2. City Loan; Interest; Use of Loan Principal. City hereby loans to Agency the principal amount of up to One Hundred Forty Thousand Dollars ($140,000) 394/015610-0047 742363.02 a08/31/06 ("Loan Principal") from City General Fund monies ("Loan"). City shall be permitted to designate one or more accounts from which the Loan Principal shall be disbursed to Agency. Interest shall accrue on the outstanding Loan Principal at the rate of seven percent (7%) per annum compounded annually with principal and any unpaid interest due and payable on, or before, October 31, 2007. The parties may extend the foregoing due date by mutual agreement. The Loan Principal shall be used only for the cost of deposits and due diligence studies for the Washington Street Land acquisition transactions. No portion of the Loan Principal shall be used for any purpose not permitted by the California Community Redevelopment Law (Health & Safety Code §§ 33000 et seq. as it exists on the date of this Agreement Section 3. Repayment. The Loan Principal and the accrued interest shall be repaid by Agency on or before the date specified in Section 1. Repayments should be applied first to interest and second to Loan Principal. Repayments shall be made by Agency from any legally available source. The Agency shall be entitled to repay all or part of the Loan Principal and accrued interest at any time, including after annexation of the Washington Street properties, with no other charges, fees, or penalties. There shall be no prepayment penalty. All amounts due under this Agreement shall be payable at the offices of the City. Notwithstanding anything in this Agreement to the contrary, should the Annexation not occur, City shall forgive and discharge the Loan, including accrued interest thereon, and City shall incur the costs for any nonrefundable deposits and any due diligence costs expended by Agency from the Loan Principal. Section 4. Subordination. The repayment of the Loan Principal and accrued interest by Agency shall be junior and subordinate to (i) all Agency tax allocation bonds or other direct long-term indebtedness of Agency, (ii) all pledges by Agency of tax increments for tax allocation bonds or other direct long-term indebtedness of Agency, (iii) Agency financial agreements and other contractual obligations of Agency, (iv) any contingent obligations of Agency, and (v) all statutorily or judicially required or imposed payments, repayments, charges, fees, penalties, judgments, and the like, whether any of the foregoing in clauses (i) through (v) are incurred before or after the date of this Agreement. Section 5. Indebtedness of Agency. The Loan Principal and accrued interest described in this Agreement shall constitute an indebtedness of Agency. Section 6. Non -Recourse Obli ag tion. No officer, official, employee, agent, or representatives of Agency shall be liable for any amounts due hereunder, and no judgment or execution thereon entered in any action hereon shall be personally enforced against any such officer, official, employee, agent, or representative. Section 7. Entire Agreement; Amendments. This Agreement shall constitute the entire agreement of the parties. This Agreement may be amended or modified only by an. agreement in writing signed by the parties. [end — signature page follows] 137 394/015610-0047 742363.02 a08/31/06 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their authorized representatives, as of the date first above written. "AGENCY" LA QUINTA REDEVELOPMENT AGENCY : LEE M. OSBORNE, Chairman ATTEST: DEBORAH H. POWELL, Interim Agency Secretary APPROVED AS TO FORM: M. KATHERINE JENSON, Agency Counsel "CITY" CITY OF LA QUINTA Lo ATTEST: DEBORAH H. POWELL, Interim City Clerk APPROVED AS TO FORM: M. KATHERINE JENSON, City Attorney DON ADOLPH, Mayor 394/015610-0047 742363.02 a08/31/06